Sep 29 2017

MM Insurance News 9/29/17

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NOTEWORTHY NEW RULINGS

FIRST CIRCUIT Environmental/Admiralty Law (MA)

The U.S. Court of Appeals for the First Circuit has ruled that a Massachusetts District Court erred in dismissing a marine insurer’s negligence claims against the United States to recoup sums that it paid for the cost of cleaning up that spilled from a vessel belonging to the Military Sealift Command. In Ironshore Specialty Ins. Co. v. United States, No. 16-1589 (1st Cir. Sept. 15, 2017), the First Circuit ruled that the Oil Pollution Act of 1990 did not foreclose negligence claims pursuant to general admiralty and maritime law.

SECOND CIRCUIT “Carrier for Hire” (NY)

The Second Circuit has issued a summary order in Warehouse Wines & Spirits, Inc. v. Travelers Prop. Cas. Co., No. 16-2611 (2d Cir. Sept. 21, 2017) affirming a New York District Court’s summary declaration that a “dishonest acts” exclusion did not bar coverage for a claim arising out of the theft of goods that were being stored at the insured’s warehouse. As the goods were due to be shipped from the insured’s warehouse, the Second Circuit agreed that this loss fell within the “carrier for hire” exception to the dishonest acts exclusion.

CONNECTICUT Auto/”Arising out of”/Consortium Claims

The Connecticut Court of Appeals has ruled that a loss of consortium claim “arose out of” a spouse’s bodily injury claim and is therefore subject to au auto policy’s $300,000 limit for bodily injuries sustained in an auto accident. In Amica Mut. Ins. Co. v. Piquette, No. AC 38446 (Conn. App. Sept. 19, 2017), the court ruled that this issue was controlled by the state Supreme Court’s 1987 opinion in Izzo v. Colonial Penn, despite the insured’s argument that Izzo had relied on “because of” not “arising out of.” The Appeals Court ruled that there was no “meaningful” difference between these terms and that both are meant to encompass losses that “flow from” or are “derivative” of something else.

ILLINOIS Declaratory Relief/Jurisdiction

The Illinois Supreme Court has ruled that the courts of Illinois lacked personal jurisdiction to hear an insurance coverage dispute arising out of an Indiana insured’s property loss in Michigan. In keeping with the U.S. Supreme Court’s 2014 opinion in Daimler USA In Aspen America Ins. Co. v. Interstate Warehousing, Inc., 2017 IL 121281 (Ill. Sept. 21, 2017), the court refused to find that the insured’s ownership of a warehouse in Joliet was sufficient to satisfy the minimally necessary contacts to support a finding of general jurisdiction.

MASSACHUSETTS Allocation/Defense Costs/Coverage B

The Supreme Judicial Court of Massachusetts announced on September 15 that it will accept direct appellate review of Holyoke Mut. Ins. Co. v. Vibram USA, Inc., SJC 12401, in which a Superior Court judge both ruled that trademark and privacy disputes involving the unauthorized use of a famed marathoner’s name for a running shoe did not trigger coverage did not involve an invasion of privacy or use of an “advertising idea” under Coverage B and that the prevailing insurers, despite having been found not to owe any duty to defend, had no right to recoup defense costs that they had paid in the interim.

NEBRASKA Policy Cancellation

The Nebraska Supreme Court has ruled that a trial court erred in granting summary judgment to an auto insurer, declaring in Barnes v. American Standard Ins. Co. of Wisconsin, 297 Neb. 331 (Neb. July 28, 2017) that the evidence was conflicting as to whether the insurer had sent its notice of cancellation by certified mail thirty days or more in advance of the proposed date of cancellation as required by Section. 44-516.

PENNSYLVANIA Bad Faith

The state Supreme Court has refused to require malice as an element of Pennsylvania bad faith statute. In Rancosky v. Washington National Ins. Co., J-27-2017 (Pa. Sept. 28, 2017), the court ruled that proof of an insurer’s self-interest or ill will is not a required element of a statutory bad faith under Section 8371. In light of the legislative history of Section 8371 and the fact that it was in response to the Supreme Court’s refusal in D’Ambrosio to create a common law cause of action for bad faith, the court found that the reference to “bad faith” in Section 8371 did not require proof of subjective intent. As a result, the court declared that “in order to prevail in a bad faith insurance claim pursuant to Section 8371, a plaintiff must demonstrate, by clear and convincing evidence, (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew or recklessly disregarded its lack of a reasonable basis in denying the claim. We further hold that proof of the insurer’s subjective motive of self-interest or ill-will, while perhaps probative of the second prong of the above test, is not a necessary prerequisite to succeeding in a bad faith claim. Rather, proof of the insurer’s knowledge or reckless disregard for its lack of reasonable basis in denying the claim is sufficient for demonstrating bad faith under the second prong” of Section 8371. Two justice submitted separate concurring opinions.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

Lloyd’s reported last week that its pre-tax profits for the first half of 2017 were 1.2 billion pounds, down slightly from 1.46 billion the year before.

Texas Governor Greg Abbott announced last week that Kent Sullivan will be the state’s new Insurance Commissioner.

* * * Cyber * * *

Europol reported this week that ransomware is now the common type of cybercrime.

* * * Hurricanes * * *

Chubb estimates that its pre-tax losses due to Hurricanes Harvey and Irma may total $1.6 billion, net of reinsurance. Lloyd’s is predicting that its losses from Harvey and Irma will exceed $4.5 billion.

The Texas Department of Insurance has directed all admitted and surplus lines insurance to submit data to it concerning Hurricane Harvey losses in 60 state counties that suffering flooding and wind damage during the storm.

* * * New Coverage Litigation * * *

Nautilus Insurance has filed suit in Florida, seeking a declaration in Nautilus Ins. Co. v. Critical Path Construction Services, No. 17-23467 (S.D. Fla.) that it does not owe coverage for allegations that the insured demolition contractor caused a release of carbon monoxide fumes.

* * * IBNR Dept. * * *

A clothing manufacturer has sued K-Mart and Sears in federal court in New Jersey seeking trademark damages for the retailer’s sale of a knock-off version of the “Totally Ghoul” life-size banana costume.

* * * Must See CLE * * *

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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