Nov 10 2017

MM Insurance News 11/10/17

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Judge Shea has granted State Farm’s motion to dismiss common law and statutory bad faith claims against it arising out of its denial of a homeowner's ice dam claim. In State Farm Fire & Cas. Co. v. Calzone, No. 17-0518 (D. Conn. Oct. 31, 2017), the District Court took note of the insured’s failure to file an Opposition to the Motion, despite having had months to do so, and further found that the facts alleged in the Complaint were insufficient to support a finding that State Farm’s violated the covenant of good faith and fair dealing or warranted recovery under CUIPA.

ILLINOIS Pollution Exclusion/”Products Hazard”

A federal district has ruled in Velsicol Chemical, LLC v. Westchester Fire Ins. Co., No. 15-2534 (N.D. Ill. Sept. 7, 2017) that a pollution exclusion in an excess liability policy did not preclude coverage for various environmental liability claims in light of evidence presented by the insured that some of these releases were caused by its handling of products and therefore fell within an exception to the exclusion for damage arising out “the handling or use of or the existence of any condition in . . . of goods or products manufactured, sold, handled, or distributed by the named insured . . .” Further, the court found that the discharges might have been “sudden and accidental” in light of the limited meaning that Illinois courts have accorded to that term and that, in any event, Velsicol had presented evidence that these spills were accidental and not the result of routine business practices.

ILLINOIS Business Risk Exclusions

Despite the fact that a commercial herbicide applicator had coverage for herbicide operations, as required by Illinois law, the Appellate Court has ruled that damage to customers’ lawns occasioned by an employee’s inadvertent inclusion of harmful defoliants in the mixture sprayed on the lawns is excluded from coverage by Exclusions J.5 and 6 as involving property damage to that particular part of real property on which the insured was performing operations or for the cost of restoring property that was damaged due to the insured’s negligent performance of operations. In granting Florists Mutual’s motion to dismiss, the court ruled in Demeester’s Flower Shop and Greenhouse v. Florists Mut. Ins. Co., 2017 IL App (2d) 161001 (Ill. App. Oct. 26, 2017) that the application of these exclusions was not contrary to the insurance requirements of the Illinois Pesticide Act, as the Act is intended to protect persons who suffer injury because of pesticide applications and does not protect those who cause such injuries.

MASSACHUSETTS “Other Insurance”/Excess

The Supreme Court of Massachusetts ruled two automobile liability policies containing conflicting "excess" provisions must each contribute to a loss despite the excess insurer’s argument that its language should trump the “coincidental excess” provision in a primary policy. In Great Divide Ins. Co. v. Lexington Insurance Company, SJC-12164 (Mass. Nov. 1, 2017), the SJC rejected Lexington's argument that the Great Divide policy was not a "true excess" policy as it provided primary insurance except in circumstances such as this where the loss involved a non‑owned vehicle. While acknowledging that a majority of courts in other states have held that a primary policy with an "other insurance" clause is essentially a primary policy and therefore it must be exhausted before a "true excess" policy is triggered, the SJC ruled that its interpretation of the policies reflected the actual language and not the perceived intent of the parties. As a result, the court ruled that the Great Divide policy clearly covered the same level of excess risk for non-owned vehicles" as does the "excess" provision in the Lexington policy and that both policies therefore apply.

MISSOURI Environmental/Absolute Pollution Exclusion

The Missouri Supreme Court, which heretofore had never considered the scope and effect of a pollution exclusion, has ruled that a trial court erred in declaring that an absolute pollution exclusion was ambiguous as applied to suits by neighboring property owners who alleged injuries due to toxic emissions from the insured’s lead smelting operations. In Doe Run Resources Corp. v. American Guarantee & Liability Ins. Co., No. SC96107 (Mo. October 31, 2017), the Supreme Court declined to follow the Court of Appeal’s analysis in Hocker Oil, in which gasoline was held not to be a pollutant because it had commercial value and was not specifically identified in the exclusion. Instead, the Supreme Court followed the view of the Eighth Circuit in a related case involving Doe Run, declaring that materials that irritate or contaminate are clearly “pollutants” whether they are specifically enumerated in the exclusion or are an essential part of the insured’s business.


* * * Inside the Insurance Industry * * *

Governor Charlie Baker has named Gary Anderson to serve as the new Massachusetts insurance commissioner. Anderson succeeds MM alum Dan Judson, who left the post last February to take over the Massachusetts Workers Compensation Rating and Inspection Bureau. Swiss Re has named Jason Richards as its new head of Casualty Reinsurance. Richards presently directs the Company’s P&C business management division. He will be succeeded in that role by Nicola Parton.

Swiss Re reported last week that recent hurricanes and cat claims caused it to suffer a net loss of $468 million for the first nine months of 2017, compared to net income of $3.0 billion in the same period of 2016. Catastrophic losses did less damage to Allstate, which reported a net profit of $637 million, up 30% from the year before. Meanwhile, AIG posted a $1.7 billion loss, compared to income of $462 million in the third quarter of 2016.

The cost of insurance for properties damaged during recent U.S. fires and hurricanes could rise by as much as 25% during 2018 according to a new Towers Watson report.

Farmers has sued the Automobile Club of Michigan and several former employees seeking damages for alleged theft of trade secrets and unfair competitiion.

* * * News from the Firm * * * 

In recent months, Morrison Mahoney has made key additions to its fraud and SIU group. Doug McInnis and Mary Kate Williams have joined our Boston office to work with Joe Flanagan and John Graceffa. Bob Stern and Rick Montana are also heading up a group in our New York office that advises insurers on the detection and prosecution of medical fraud and kickback schemes and staged accidents

* * * Must See CLE * * *

DRI Insurance Coverage and Practice Symposium (New York City): December 6-8

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