Oct 27 2017

MM Insurance News 10/27/17

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NOTEWORTHY NEW RULINGS

ALABAMA Auto/UIM/Waiver

The Alabama Supreme Court has ruled in Travelers Ind. Co. of Connecticut v. Worthington, 1150370 (Ala. Oct. 13, 2017) that an auto insurer was precluded from claiming that its insured had violated the terms of its UIM coverage by settling with a tortfeasor on the eve of trial without the insurer’s consent. Although Travelers’ policy required consent, the court emphasized that Travelers had not claimed at the time that the insured’s actions constituted a forfeiture of coverage and had indeed argued to the jury at the close of the trial that UIM coverage existed and that all that was at issue was the amount of damages recoverable.

FLORIDA Declaratory Relief/Attorney’s Fees

The Florida Supreme Court has ruled 4-2 that the District Court of Appeals erred in finding that trial courts may only apply a contingency fee multiplier to an award of attorney’s fees to a prevailing party in “rare” and “exceptional” circumstances. In Joyce v. Federated National Ins. Co., No. SC16-103 (Fla. Oct. 19, 2017), the Supreme Court declared that contingency fee multipliers held to ensure that lawyers who take on difficult cases are adequately compensated, nor was there evidence that such arrangements encouraged non-meritorious claims. Writing in dissent, Justice Canady (joined by Justice Lawson) argued that the facts in this particular case did not warrant the use of a multiplier.

LOUISIANA Punitive Damages

The Louisiana Supreme Court has ruled in Warren v. Shelter Mut. Ins. Co., No. 2016-C-1647 (La. Oct. 18, 2017) that a jury’s award of $23 million in a wrongful death case in which only $125,000 was awarded in punitive damages violated the due process guarantees of the U.S. Constitution. While rejecting the defendant’s argument that admiralty law limited punitive damages to a 1:1 recovery, the Supreme Court nonetheless found that the total compensatory damages in this case (taking earlier settlements into account) were over $2 million and that an award of $4.3 million in punitive damages met the constitutional guideposts of BMW and Campbell.

NEW JERSEY Trigger of Coverage/"Post-Manifestation"

The Appellate Division has ruled in Air Master & Cooling, Inc. v. Selective Insurance Company of America, No. A-5415-15T3 (App. Div. Oct. 10, 2017) that a trial court did not err in applying a continuous trigger of coverage to water intrusion that allegedly resulted from the insured contractor's negligent construction of a condo building. The court ruled that although the use of the continuous trigger doctrine is "most readily justified" in the context of progressive bodily injury claims such as mesothelioma, New Jersey law clearly supports its application to cases of progressively developing property damage. The Appellate Division ruled, however, that the end date for a continuous trigger is the point in time when the particular damage at issue becomes known to the parties, rejecting the insured’s argument that coverage should continue until such time as it becomes known that the damage is attributable to the conduct of the insured. The court ruled that this sort of tolling argument made sense in the context of the statute of limitations but had no application to the applicable trigger of coverage for such claims.

WEST VIRGINIA Employer’s Liability/”Stop Gap” Coverage

The West Virginia Supreme Court has ruled in First Mercury Insurance Company, Inc. v. Russell, No. 16-0596 (W.Va Oct. 19, 2017) that a "Stop Gap--Employer's Liability Coverage" endorsement to a CGL policy that expressly provided coverage for bodily injury to employees but excluded statutory deliberate intent claims was ambiguous as being internally inconsistent with other provisions of the policy. The court took note of the fact that the term "stop gap" has an express meaning under West Virginia law and that the use of the term "stop gap" in the heading of the endorsement was inconsistent with the language in the text of the endorsement itself that limited coverage to bodily injury "by accident" or "by disease." As "stop gap" coverage necessarily implies deliberate intent claims, the court ruled the endorsement was ambiguous insofar as it then sought to exclude coverage for such claims.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * *

Michigan-based Meadowbrook Insurance has changed its named to “AmeriTrust Group, Inc.” Travelers remained in the black in the third quarter of 2017, despite catastrophic losses that reduced net quarterly income to $293 million from $716 million in 2016.

Thomas Leonardi, who formerly served as the Connecticut Commissioner of Insurance, is joining AIG as its new Executive Vice-President for Government Affairs, Public Policy and Communications.

* * * Hurricanes * * *

Swiss Re reported last week that its exposure from recent hurricanes and earthquakes may result in a pre-tax loss of $3.6 billion net of reinsurance. Meanwhile, Zurich estimates pre-tax hurricane losses exceed $700 million. Filings with the Florida Office of Insurance Regulation disclose that over 23,000 Irma claims have been filed seeking over $5 billion.

* * * California on Fire * * *

The California Insurance Commission reported last week that 7000 buildings had burned this month, resulting in an insured loss exceeding $1 billion. Meanwhile, Moody’s predicted last week that insured fire losses could exceed $ billion.

* * * MM in the Field * * *

Boston partner Michael Aylward presented a paper on Third Party Litigation Financing at the American College of Coverage and Extra-Contractual Counsel’s annual academic symposium on October 19 at the University of Michigan Law School in Ann Arbor, Michigan.

* * * Restating the Law * * *

DRI has issued an eight page letter to the Executive Director of the American Law Institute expressing concern that several provisions in the current version of the Restatement of Law, Liability Insurance are inconsistent with the common law and could have an pernicious impact on the ability of insurers and defense counsel to protect policyholders.

* * * Talc * * *

Following on the heels of its appellate victory in Missouri last week, J&J scored another success in Los Angeles this week when a Superior Court judge tossed out a $417 million talc verdict as being excessive and as not being supported by adequate evidence to link the plaintiff’s ovarian cancer to J&J’s actions.

* * * Appellate Update * * *

The New Jersey Supreme Court heard oral argument this week in Travelers’ appeal against a lower court’s ruling that the insured had no duty to contribute to the cost of defending against asbestos law suits involving Honewell.

* * * Across the Bar * * *

Sedgwick LLP’s troubles continued last week as its Bermuda office defected to London-based Kennedys.

* * * MM in the News * * *

Thirty Morrison Mahoney lawyers were designed as “Super Lawyers” this year.

* * * Must See CLE * * *

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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