Nov 24 2017

MM Insurance News 11/24/17

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CASES OF CONSEQUENCE

FIRST CIRCUIT Tripartite Relationship/Duty to Defend (MA)

A tripartite dispute that began in state court, was removed to the U.S. District Court, appealed to a federal court of appeals, certified to a state supreme court and then remanded to the federal court of appeals has finally ended. Following on the Massachusetts Supreme Judicial Court’s ruling earlier this year that a liability insurer’s duty to defend does not encompass the cost of prosecuting a counter-claim, the First Circuit has ruled on remand that the existence of the counter-claim did not create a conflict of interest that allowed the insured to substitute its own chosen defense counsel at the insurer’s expense. In Mount Vernon Fire Ins. Co. v. VisionAid, Inc., No. 15-1351 (1st Cir. Nov. 15, 2017), the First Circuit affirmed the principle that defense counsel represents both the insured and the insurer but declared that in this case the parties had a shared interest in having the counterclaim succeed and that, in any event, it would not have been possible for the insurer to diminish the counterclaim. In the final analysis, the court declared that there was nothing “unworkable or schizophrenic” about having two lawyers handling the two different pieces of this case. The court also made brief reference to the state Appeals Court’s new ruling in One Beacon v. Celanese Corp., observing that it agreed with the Appeals Court that a mere disagreement about trial tactics did not give rise to a right to independent counsel.

FIRST CIRCUIT Constitutional Law/Waiver (PR)

The First Circuit also ruled in Best Auto Repair Shop, Inc. v. Universal Insurance Group, No. 16-1549 (1st Cir. Nov. 16, 2017) that a lower court did not err in dismissing a body shop’s claim that various insurers discriminated against his business by refusing to pay for insured repairs due to his ethnicity.

EIGHTH CIRCUIT First Party/”Actual Cash Value” (MO)

The U.S. Court of Appeals for the Eighth Circuit has ruled in Aziz v. Allstate Ins. Co., No. 16-3888 (8th Cir. Nov. 16, 2017) that a Missouri District Court did not err in granting judgment to a fire insurer for refusing to pay the “actual cash value” of the damage to the insured’s home where the homeowner failed to present any evidence at trial concerning the value of the insured property before the fire. As the insured had not recovered any contractual damages, the Eighth Circuit further found that the court did not err in dismissing the insured’s “vexatious refusal to pay” claim.

CALIFORNIA Construction Litigation/Additional Insureds

The California Court of Appeal has ruled that construction defect claims brought on behalf of various homeowners arose out of the operations of the insured subcontractors and therefore triggered additional insured coverage for the general contractor. In McMillin Mgt. Services v. Financial Pacific Ins. Co., D069814 (Cal. App. Nov. 14, 2017), the Fourth Department rejected Lexington’s argument that the owner’s legal rights did not accrue until they acquired title and therefore did not occur contemporaneously with the subcontractor’s construction work. The Court of Appeal declined to find that coverage was limited to liability that accrued during the policy period; rather coverage extended to all claims “arising out of” such operations.

NEW HAMPSHIRE First Party/Mold/"Faulty Workmanship"

The New Hampshire Supreme Court has ruled that a trial court did not err in refusing to require a homeowner’s insurer to provide coverage for additional living expenses arising out of mold contamination. In Russell v. NGM Ins, Co., No. 2016-0540 (N.H. Nov. 17, 2017), the court declared that the coverage provided by the policy’s mold endorsement did not apply in light of an exclusion of “faulty workmanship.”

NORTH DAKOTA Consent Judgments

The North Dakota Supreme Court has ruled that a trial court erred in granting judgment to a tort claimant on her Miller-Shugart settlement, declaring that issues of fact remained with respect to the impact of liquor liability and assault and battery exclusions on the plaintiff’s garnishment claim against a bar’s liability insurer. In Forsman v. Blues, Brews and Bar-B-Ques, 2017 ND 16 (N.D. Nov. 16, 2017), the Supreme Court declared that Miller-Shugart agreements preclude an insurer from re-litigating the liability of its insured, they are not determinative of coverage defenses.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

While bemoaning low premiums that could be charged in 2017, Swiss Re’s Chief Economist Kurt Karl has predicted that reinsurers will fare better in 2018 as markets return to “fair pricing.”

Markel announced last week that it had completed its $919 million acquisition of State National Companies.

Insurance Journal reported last week that China’s Ping An Insurance Group is now second only to Berkshire Hathaway in market value.

Ironshore, Inc. has designed Toby Smith to succeed John O’Brien as head of its environmental claims division.

* * * Sexual Torts * * *

Twenty-First Century Fox has reportedly agreed to pay $90 million to resolve sexual harassment claims involving its Fox News Channel. The coverage implications of the settlement remain to be seen.

Dr. Joseph Nassar pled guilty this week to molesting young women during the time that he ministered to the Michigan State and U.S. Olympic women’s gymnastics teams.

* * * Stormy Weather * * *

A.M. Best reports that recent cat losses caused U.S. property and casualty insurers to suffer a net underwriting loss of $20 billion in the third quarter of 2017 compared to $2.3 billion a year ago.

Bermuda reinsurers will reportedly receive 30% of the insured losses from Hurricanes Harvey, Irma and Maria.

* * * Cyber * * *

Uber disclosed this week that hackers stole the personal data of 57 million customers last year. Uber reportedly paid a $100,000 ransom to get its data back.

* * * Lawyers, Guns and Money * * *

Several hundred victims of the October 1 mass shooting incident at the Mandalay Bay resort in Las Vegas filed suit in California last week against the hotel and its owners, as well as the country music festival and the shooter’s estate.

* * * 9/11 * * *

Nearly two decades after the twin towers fell, an undisclosed group of insurers have agreed to pay $95 million to settle Larry Silverstein’s claim that American and United Airlines were to blame for allowing the terror attacks of 9/11 to occur. Silverstein had earlier claimed $3.5 billion in damages.

* * * Across the Bar * * *

The Sedgwick law firm, which until recently played a major role on behalf of insurance companies in coverage litigation throughout the United States, announced this week that it will close its doors in January 2018.

* * * Must See CLE * * *

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

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