CASES OF CONSEQUENCE
SIXTH CIRCUIT “Occurrences” (KY)
The U.S. Court of Appeals for the Sixth Circuit has ruled that a governmental entity that suffered a $3.7 million judgment for failing to maintain safe conditions in a public park where a tree limb fell, killing a woman and her baby and badly injuring her infant son could only recover a single $1 million “occurrence” limit from its liability insurer. In Evanston Ins. Co. v. Housing Authority of Somerset, KY, No. 16-6691 (6th Cir. Aug. 15, 2017), the Sixth Circuit held that there was a single “cause” of the claimants’ injuries. The court rejected the insured’s argument that the mother and child had been injured by different branches of the tree, memorably stating that “you can’t cut a plank so many sides that it has one side.”
SEVENTH CIRCUIT Economic Loss Doctrine/”Your Product” Exclusion (WI)
Notwithstanding the Wisconsin Supreme Court’s 2016 Pharmacal ruling that extended the “integrated system analysis” to preclude coverage for claims arising out of the incorporation of the insured’s defective ingredient into a product, the Seventh Circuit has ruled that a Wisconsin District Court erred in applying Pharmacal to defeat coverage for water intrusion claims arising out of defects in the insured’s window products. Whereas the court below had declared that windows do not have any function except in conjunction with the home as a whole, the Seventh Circuit declared In Haley v. Kolbe & Kolbe Millwork Co., No. 16-3563 (7th Cir. Aug. 8, 2017) that unlike the defective pills at issue in Pharmacal, the plaintiffs in this case were seeking damages for the repair and replacement of specific elements of a larger structure. Further, while agreeing that the “your product” exclusion barred coverage for the cost of removing and replacing the actual windows, the court declined to apply it to claims for cracked stucco and other interior damage to the home, rejecting the insurers’ argument that these were materials “furnished in connection with such goods or products.”
EIGHTH CIRCUIT Absolute Pollution Exclusion/Carbon Monoxide (MN)
The Eight Circuit has ruled that an early iteration of the absolute pollution exclusion precluded coverage for claims brought by an individual who suffered carbon monoxide poisoning while fishing on one of the insured’s boats. In contrast to the Minnesota Supreme Court’s 1991 analysis of this language in Board of Regents v. Royal Ins. Co., the Court of Appeals ruled in Travelers Property Cas. Co. of America v. Klick, No. 16-4000 (8th Cir. Aug. 14, 2017) that the release of poisonous fumes inside the boat’s engine compartment was a discharge “into the atmosphere.”
CALIFORNIA “Professional Services” Exclusion
The First Department has rejected efforts by the excess insurer of an energy pipeline company (Kinder Morgan) to obtain equitable subrogation from the excess insurer of a staffing agency that supplied the surveyors whose negligent failure to properly mark an underground petroleum pipeline contributed to a catastrophic explosion. In Energy Ins. Mutual, Ltd. v. ACE American Ins. Co., A140656 (Cal. App. Aug. 10, 2017), the Court of Appeal ruled that the underlying claims were subject to a professional services exclusion in ACE American’s policy. Rejecting EIM’s contention that such exclusions should only apply to claims against “ear piercers and plumbers,” the court declared that “owning and operating a pipeline, including mapping and marking underground installations, are clearly analogous to other skilled services that have been held to be ‘professional services."
Judge Bolden has declined to reconsider and reverse his March 31, 2017 order confirming a “clarified” 2015 arbitration award in favor of Lincoln National. In denying Gen Re’s motion for reconsideration, the District Court ruled in General Re Life Corp. v. Lincoln National Life Ins. Co., No. 15-1860 (D. Conn. July 18, 2017) that no basis existed for reconsidering his finding that Gen Re had failed to provide a basis upon which the FAA allowed him to vacate an award. However, the court also declined Lincoln National’s motion that he confirm Gen Re’s duty to pay $18.4 million, noting that he lacked authority to do so as the award did not order the payment of a sum certain.
ILLINOIS Discovery/Duty to Cooperate
In its latest ruling in the Motorola “clean room” coverage litigation, the Appellate Court has revised its opinion in Motorola Solutions, Inc. v. Zurich Ins. Co., et al., 2017 IL App (1st) 161464 (Ill. App. Ct. June 30, 1997) and has declared that a trial court erred in holding Motorola in “friendly contempt” for failing to turn over documents relating to its early “Clean Room Safety Program” as well as a risk evaluation that it prepared when it decided to sell this division to a third party. Notwithstanding the broad right of insurers to obtain privileged communications recognized by the Illinois Supreme Court in Waste Management, the First Department ruled that a more limited rule applied where the documents in question were created years prior to the filing of the law suits for which the insured is seeking coverage and do not involve the insured’s duty to cooperate. Justice Lampkin dissented, asserting that the insurer’s right to this discovery was compelled by Motorola’s duty to cooperate and the common interest doctrine.
OREGON Declaratory Relief/Attorney’s Fees
The Oregon Supreme Court has ruled in Spearman v. Progressive Classic Ins. Co., SC063995 (Or. June 22, 2017) that the safe harbor provisions of ORS 742.061(3) that immunize an insurer from awards of attorney’s fees in UM cases if the insurer has accepted coverage for the insured’s claim and has agreed to binding arbitration with respect to the “damages due the insured” protected an auto insurer that had questioned the nature and extent of the claimant’s injuries as well as the reasonable and necessity of the plaintiff’s medical expenses.
OTHER DEVELOPMENTS OF NOTE
* * * Lawyers, Drugs and Money * * *
South Carolina has become the latest governmental entity to sue a pharmaceutical company, seeking reimbursement from OxyContin manufacturer Purdue Pharma LLP for increased health expenses due to the opioid crisis.
* * * Cyber * * *
Nationwide Mutual has agreed to pay $5.5 million to a consortium of 32 states attorney-generals for misconduct arising out of a 2012 incident in which hackers stole personal information belonging to over a million policyholders.
* * * New Coverage Litigation * * *
The venerable Greenbrier resort is back in court, alleging in Greenbrier Hotel Corp. v. American Ins. Co., No. 17-3782 (D. W. Va.) that ACE American, Allied World, Ironshore, and other insurers have wrongfully failed to reimburse it for losses due to torrential 2016 rainstorms that disrupted a PGA event that it was scheduled to host.
Hartford Fire has filed suit in Seattle, seeking a ruling in Hartford Fire Ins. Co. v. Leeper, No. 17-1195 (W.D. Wash.) that it does not owe coverage for allegations that an employee who formerly worked for Columbia Sportswear hacked into Columbia’s computer system for years after going to work for a competitor.
* * * IBNR Dept. * * *
Madonna has filed suit in New York seeking to enjoin a former friend and Gotta Have It Collectibles, Inc., from selling underwear and other personal memorabilia that were sent to her by the late Tupa Shakur.
* * * Must See CLE * * *
DRI Cybersecurity and Data Privacy Seminar (Chicago): September 6-7, 2017
EECMA “Mega-Sites” Superfund Claims Conference (Philadelphia): September 7, 2017
DRI Annual Meeting (Chicago): October 4-8, 2017
FETTI Annual Claims Conference (Chicago): October 4-6, 2017
DRI Northeast Insurance Industry Claims Conference (Hartford): November 2, 2017
2017 FDCC Insurance Industry Institute (New York City): November 9-10, 2017
DRI Insurance Coverage and Practice Symposium (New York City): December 6-8