Sep 8 2017

MM Insurance News 9/8/17

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NOTEWORTHY NEW RULINGS

SECOND CIRCUIT Property Insurance (NY)

The Second Circuit has issued a summary order in Laptop Plaza, Inc. v. Starr Indemnity & Liability Co., No. 16-3223 (2d Cir. Sept. 1, 2017) that goods stolen from the insured’s storage trailer were not covered pursuant to a provision in its policy insured loss of property “while temporarily detained in warehouses.” In holding that a trailer is not a “warehouse,” the Court of Appeals sagely observed that a trailer is not a building and is designed for the transportation, not storage, of property.

SEVENTH CIRCUIT Reinsurance (IL)

The Seventh Circuit has ruled in Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado, No. 16-3499 (7th Cir. Aug. 7, 2017) that an Illinois District Court was correct in declaring that 215 ILCS 5/206, which deals with credits and set-offs for insolvent insurers, did not free the liquidator of an insolvent company from its contractual duty to provide reinsurers with regular accountings, nor did it allow the Liquidator to submit a net bill for sums due after fifteen years of silence. Under the circumstances, the Seventh Circuit agreed that Pine Top’s suit was untimely.

EIGHTH CIRCUIT Garage/Med Pay/Jurisdiction (SD)

Even though the claimant only sought $5000 in medical payments from a dealership’s auto insurer, the Eighth Circuit has ruled that she was able to satisfy the $75,000 threshold for federal diversity jurisdiction based upon damages that might be awarded for bad faith, deceit and attorney’s fees. The court went on to rule in favor of Travelers, however, declaring in Peterson v. The Travelers Ind. Co., No. 16-1146 (8th Cir. Aug. 15, 2017) that the addition of an Auto Medical Pay Endorsement did not create med pay coverage for this claim where it was listed on the policy’s Declarations Page as an optional coverage and no “auto symbol” was placed next to it.

CALIFORNIA Environmental/Excess/Exhaustion

The Court of Appeal has ruled in Montrose Chemical Corp. v. Superior Court, B272387 (Cal. App. Aug. 31, 2017) that an insurer may not “electively stack” its environmental liability losses to access excess insurance in any year where it has exhausted all of the underlying policies but still has low layer excess coverage available to it in other years. The Second District rejected Montrose's claim that "elective stacking" was dictated by the California Supreme Court's Continental opinion, declaring that the issue in this case was "not whether an insured can access policies written for different policy years (it can) but the order or sequence in which it may or must do so." Unlike the Superior Court, however, the Court of Appeals declined to adopt “horizontal exhaustion” as a general principle. As the 113 excess policies at issue had various different types of relevant provisions, the court declared that "the sequence in which policies may be accessed must be decided on a policy-by-policy basis, taking into account the relevant provisions of each policy."

CONNECTICUT Crumbling Foundation Claims

The welter of crumbling foundation claims that are clogging the courts of Connecticut have begun to spawn conflicting rulings on bad faith and coverage defenses. During the past week alone:

  • Adams v. Allstate Insurance Company, No. 16-1360 (D. Conn. Aug. 29, 2017), Judge Arterton granted Allstate's motion to dismiss ruled that the crumbling foundation claims were not the result of a "sudden and accidental" physical loss as the underlying allegations indicated that the chemical reaction was occurring progressively.
  • Agosti v. Merrimack Mutual Fire Ins. Co., No. 16-1686 (D. Conn. Aug. 28, 2017). Judge Underhill granted Allstate's motion to dismiss on the basis that the insureds had not presented any facts to suggest that a "collapse" had occurred. The court declared that the term "collapse" standing alone was ambiguous in light of the Supreme Court's ruling in Beach but that this particular policy additionally required that the entire structure had collapsed, which had not occurred here.
  • Roberts v. Liberty Mutual Fire Ins. Co., No. 13-435 (D. Conn. Aug. 28, 2017). Judge Underhill granted summary judgment to Liberty Mutual with respect to the insured's CUTPA/CUIPA claims but found issues of fact with respect to whether a "collapse" had occurred owing to questions with respect to whether the property had suffered "substantial impairment of structural integrity."
  • Sirois v. USAA Cas. Ins. Co., No. 16‑1172 (D. Conn. Aug. 29, 2017), Judge Shea denied USAA's motion to dismiss, finding that the “sudden” requirement for a collapse was ambiguous where the term was used on its own not in conjunction with “accident” as was the case with the pollution exclusion that the Supreme Court held had a temporal meaning in Buell.

ILLINOIS Subrogation

The Appellate Court has affirmed a surety's malpractice suit against a law firm in light of the surety's failure to name its insurers as co-plaintiffs. In affirming the lower court's dismissal of the malpractice action, the First District ruled in Developers Surety and Indemnity Company v. Lipinski, 2017 IL App (1st) 152658 (Ill. App Ct Aug. 22, 2017) that Section 2‑403(c) of the Illinois Code applied in light of the fact that the surety had been reimbursed for the entire amount of the loss that it paid pursuant to various reinsurance agreements.

MAINE Auto/UM/”Caused by Accident”

The Maine Supreme Judicial Court has ruled in Allocca v. Rourke Insurance Company of Maine, 2017 ME 186 (Me. Aug. 29, 2017) that an automobile insurer was not obligated to pay UM benefits for an incident in which the insured was fatally shot while operating a vehicle that an assailant, operating another vehicle, had forced onto a median strip on an interstate highway. As the UM provisions of the policy only covered injury "caused by accident," the court ruled that there was no coverage as Asti's murder was not accidental.

NEW YORK Coverage B/”Advertisement”

A federal district court has ruled in Standard General L.P. v. Travelers Indemnity Company of Connecticut, 2017 WL 3601181 (S.D.N.Y. Aug. 18, 2017) that defamatory statements that the insured allegedly made concerning the plaintiff’s termination did not trigger Coverage B since the statements were not published in the insured’s “advertisement.” Whereas the insured had argued that its statements were a form of advertising since they were meant to reassure investors that the plaintiff’s departure would not affect the business, the court declared that the statements were informational in nature and did not concern the insured’s “goods, products or services.”

PENNSYLVANIA Reinsurance

In a lengthy but unpublished opinion, the Superior Court has ruled in Century Ind. Co. v. OneBeacon Ins. Co., J-AO2O13-17 (Pa. Super. Sept. 1, 2017) that a reinsurer’s duty to reimburse its cedent for large asbestos settlement payments was not capped by the amounts of “reinsurance accepted” on various facultative certificates. The intermediate appellate court distinguished the Second Circuit’s ruling in Bellefonte Re on the grounds that the facultative certificates issued to INA and PEIC lacked the "subject to" clause that the Second Circuit had relied on in capping the reinsurance exposure for loss and expenses.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

Despite a modest increase in reinsurers’ earning in the second quarter of 2017 and an improvement in the median combined ratio to 92.6 percent from 95.7 percent, Moody’s predicts that earnings will decline overall during 2017 owing to poor results in the First Quarter and anticipated loss payouts from Hurricane Harvey.

A new report predicts that Munich Re and Swiss Re will be among the reinsurers most heavily impacted by Hurricane Harvey.

* * * Hurricane Harvey * * *

A new storm is brewing in Texas with respect to the scope and impact of House Bill 1774 that took effect last Friday and limits the right of Texas policy holders to sue for damage due to claims involving "forces of nature."

Moody’s Analytics now predicts that the economic loss from Hurricane Harvey may range between $81 billion and $108 billion. Industry insiders predict that insured losses from Hurricane Harvey could top $15 billion. Although insured property losses may be comparatively low due to the fact that only one in five residents of Houston bothered to purchase flood insurance, auto insurers may not be so lucky. It is estimated that a million cars are a total loss in the wake of last week’s catastrophic flooding.

* * * Across the Bar * * *

The Seventh Circuit’s Richard Posner, a titan of the federal judiciary and a true scholar of insurance law, has announced plans to retire after 38 years on the bench.

Weeks ahead of Liner LLP’s scheduled merger with DLA Piper, coverage headliner Kirk Pasich has departed with his practice group and set up shop on his own.

* * * New Coverage Litigation * * *

Lloyds has filed a counter-claim in the coverage suit brought against it by Kanye West, alleging in Very Good Touring, Inc. v. Cathedral Syndicate 2010, C.A. No. 17-5693 (C.D. Cal.) that any rights to coverage that the pop star might have had for losses resulting from the cancellation of an upcoming concert tour were voided by his violation of contractual stipulations about the use of drugs and alcohol.

* * * Summer Reading * * *

The latest issue of DRI’s For the Defense features an excellent analysis of the intellectual property challenge presented by the growing plague of “knock off” products by counterfeiters and, in particular, its impact on sporting goods and the golf club industry.

* * * IBNR Dept. * * *

A South Carolina couple have repotedly filed suit against Amazon seeking medical monitoring costs on behalf of a class of all people who purchased “eclipse” dark glasses that proved to be defective and could result in eye damage to consumers. 

* * * 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

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