Oct 6 2017

MM Insurance News 10/6/17

active case links

CASES OF CONSEQUENCE

CALIFORNIA Environmental/Pre-Judgment Interest

In the latest chapter of the State of California’s long-running campaign to squeeze funds for the Stringfellow Superfund site from the insurance industry, the Court of Appeal has ruled in State of California v. Continental Ins. Co., No. E064518 (Cal. App. Sept. 29, 2017) that a trial court did not err in finding that CNA was obliged to pay pre-judgment interest on its $12 million policy limits back to 1998 for an additional $13.9 million.

CONNECTICUT HO/”Business Activities” Exclusion

Judge Chatigny has ruled in Allstate Ins. Co. v. Statlender, No. 16-294 (D. Conn. Sept. 17, 2017) that a “business activities” in a homeowner’s exclusion precluded any duty to defend a tenant’s allegation that she was exposed to “toxic mold” while living in an apartment unit in the insured’s building. Although the claimant argued that the exclusion should not apply because she might have been exposed to mold while visiting the building preliminary to becoming a tenant, the District Court found that any such visits were related to her interest in becoming a tenant and therefore an excluded “activity of any kind engaged in for economic gain.”

CONNECTICUT Crumbling Foundation Claims

In the latest “crumbling foundation” rulings, Judge Bolden has granted a property insurer’s motion to dismiss, ruling in Valls v. Allstate Ins. Co., No. 16-1310 (D. Conn. Sept. 27, 2017) that the “progressive deterioration” of the insured’s concrete foundation as not a “sudden and accidental” loss as required by the policy. Similarly, Judge Shea ruled in Carlson v. Allstate Ins. Co., No. 15-1045 (D. Conn. Sept. 27, 2017) that any structural impairment of the insured’s foundation was not a covered “collapse” because it was not a “sudden and accidental” direct physical loss to the property. Having found a lack of coverage, the courts also dismissed the insureds’ bad faith claims.

ILLINOIS Auto/UM/”Physical Contact”

The Appellate Court has ruled that a spouse who observed his wife being injured in a hit and run accident but who was not himself struck by the vehicle was not entitled to recover uninsured motorist benefits. In Allstate Fire and Casualty Ins. Co. v. Bochenek, 2017 IL. App (1st) 170277 (Ill. App. Ct. Sept. 29, 2017), the First District point out that Allstate’s UM policy language explicitly require that a claimant suffer bodily injury "arising out of physical contact" with an uninsured vehicle.

MASSACHUSETTS D&O/EPL

Judge Richard Stearns has ruled in The Talbots v. AIG Specialty Ins. Co., No. 17-1107 (D. Conn. Sept. 29, 2017) that allegations by employees that the clothing retailer violated the California Labor Code by illegally deducting their wages and failing to give them proper meal and rest breaks failed to trigger AIG’s D&O policy in light of an exclusion for claims “based upon or attributable to an employment of any individual” or “any employment practice.” Further, the District Court refused to find that AIG’s EPL coverage applied as none of these claims involved the enumerated “employment practices” for which coverage applied.

NEW HAMPSHIRE Excess/"Professional Services" Exclusion

The New Hampshire Supreme Court has ruled that a trial court in refusing to find that a “health care professional services” exclusion in a GL policy did not preclude coverage against a staffing agency and the Exeter Hospital for Hepatitis C claims arising out of the illegal misconduct of a laboratory technician supplied to the Exeter Hospital by the staffing company. In Massachusetts Bay Ins. Co. v. American Health Care Services Assoc., No. 2016-0390 (N.H. Sept. 28, 2017), the court refused to find that the exclusion was limited to health care services rendered by the named insured or was rendered ambiguous by the separation of insureds clause in the policy. Further, while finding that the Arch umbrella policy was no broader than the primary CGL coverage with respect to the rights of the additional insured Exeter Hospital, the court reach a contrary conclusion with respect to the rights of the named insured staffing company. The court also refused to find that the staffing company’s rights were negated by operation of exclusions for “abuse or molestation” or for dishonest acts.

NEW YORK First Party/Business Interruption Losses

The Appellate Division has ruled that business interruption losses suffered by a utility after its Long Island turbine unit was taken out of service were covered, even though there was evidence of prior damage to the turbine. In National Union Fire Ins. Co. of Pittsburgh, Pa. v. TransCanada Energy USA, Inc., 2017 NY Slip Op 06513 (App. Div. Sept. 19, 2017), the First Department found that nothing in the policy excluded coverage for physical loss or damage originating before the policy was issued. Further, the Appellate Division refused to give effect to a policy exclusion for payments awarded for attaining or exceeding production levels.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

Nine years after the United States invested nearly $200 million dollars to save AIG from financial collapse, the federal Financial Stability Oversight Council voted 6-3 last week to remove AIG from the government’s list of financial institutions that require particularly onerous financial scrutiny because they are deemed to be “too big to fail.”

Business Insurance reports that Aon has sued Willis Towers Watson, alleging that its incoming CFO Michael Burwell breached his fiduciary duties to Aon by taking his new job and misappropriated trade secrets acquired from consulting for Aon.

* * * Cyber * * *

A new survey conducted by Hartford Steam Boiler reports that half of all U.S. businesses have been hacked during the past year. According to HSB, of the businesses that had been hacked, 38% incurred costs up to $50,000; ten percent paid between $100,000 and $250,000 and 7% more than $250,000.

Europol reported this week that ransomware is now the common type of cybercrime. The City of Chicago is the latest public entity to sue Equifax.

* * * Hurricanes * * *

Cat modeler Karen Clark & Company estimates that insurance and reinsurance losses in the Caribbean and Puerto Rico from Hurricane Maria will reach $30 billion. Meanwhile, RMS puts its estimate of insured losses at $15-30 billion out of a total loss of $30-60 billion. On the other hand, AIR Worldwide that Hurricane Maria may have caused up to $85 billion in insured losses, mostly in Puerto Rico.

* * * 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

active case links

Back to Resources