CASES OF CONSEQUENCE
UNITED KINGDOM Reinsurance/Arbitration
The High Court of Justice has ruled in a 9/11 reinsurance dispute between Tonicstar and Allianz Insurance that the arbitrator proposed by Allianz does not meet the requirement set forth in the standard 1997 ILU Agreement that arbitrators have no less “than ten years’ experience of insurance or reinsurance as persons engaged in the industry itself or as lawyers or other professional advisers.” In this case, Mr. Justice Teare found that the QC nominated by Allianz (Alistair Schaff) had considerably more than ten years of experience with respect to insurance or reinsurance law but that a 2000 UK precedent construing the clause in question required that party-appointed arbitrators actually have experience in the “business” of insurance and not just through the representation of insurers.
FOURTH CIRCUIT E&O/Trigger of Coverage (VA)
The Fourth Circuit has issued an unpublished affirmance in Minnesota Lawyers Mutual Ins. Co. v. Protostorm, Inc., No. 16-1835 (4th Cir. Nov. 27, 2017) affirming a Virginia District Court’s ruling that a law firm client that obtained a judgment against the firm based upon counsel’s failure to prosecute a patent claim was restricted to $5 million in light of language in the policy applying a lower limit to losses arising out of acts, errors or omissions that occurred before 2006.
FIFTH CIRCUIT Commercial Crime/”Ownership”/Loss (TX)
The U.S. Court of Appeals for the Fifth Circuit has ruled that a Texas District Court did not err in refusing to find coverage under a commercial crime policy for funds that the insured lost after investing them in a Ponzi scheme. In Cooper Industries, Ltd. v. National Union Fire Insurance Company of Pittsburgh, PA., No. 16-20539 (5th Cir. Nov 20, 2017) that the crime policy did not apply because the insured did not “own” these funds at the time that it was defrauded. The Fifth Circuit refused to find that the policy extended coverage to instances of “beneficial ownership.” Further, the court ruled that Cooper had not suffered a covered “loss” when it loaned the funds because it gave up legal ownership when it made the loan.
CALIFORNIA Arbitration/”Reverse Preemption”
In a complex case involving the interrelationship of the Federal Arbitration Act, the McCarran-Ferguson Act and a state statute in Nebraska prohibition the arbitration of insurance disputes, the Court of Appeal has ruled that the Nebraska statute was a state law enacted for the purpose of regulating the business of insurance and therefore reversely preempted the FAA. Further, the Second District declared in Citizens of Humanity v. Applied Underwriters, B276601 (Cal. App. Nov. 22, 2017) that the issue of whether the policy’s arbitration agreement was arbitrable was an issue for the court to decide and not the arbitrators.
The Superior Court has ruled in Erie Ins. Exchange v. Moore, 2017 PA Super 372 (Pa. Super. Ct. Nov. 22, 2017) that a trial court erred in declaring that a homeowner’s insurer did not owe coverage for injuries suffered while the claimant was trying to take a gun away from the insured. The court ruled that the underlying allegations supported a finding that the plaintiff’s injuries occurred accidentally as the result of the insured’s reckless discharge of his pistol in the course of an altercation over the control of the gun.
PENNSYLVANIA Auto/UIM/Statute of Limitations
The Pennsylvania Supreme Court has ruled that lower courts erred in declaring that the 4‑year limitations period for bringing UM/UIM claims runs from the date that the insured learns that he or she had been involved in an accident with an uninsured or underinsured vehicle. Instead, the court ruled in Erie Insurance Exchange v. Bristol, J-45-2017 (Pa. Nov 22, 2017) that the limitations period for such claims does not begin to run until the insured's carrier denies coverage or refuses to arbitrate the insured’s claim. UTAH Bad Faith/”Fairly Debatable” The Utah Supreme Court has ruled in Fire Insurance Exchange v. Oltmanns, 2017 UT 81 (Utah Nov 21, 2017) that a homeowner's insurer did not act in bad faith in bringing an action for declaratory relief to dispute whether an AquaTrax personal watercraft was an excluded "jet ski" under its policy. Even though the insurer had been found to owe coverage, the court ruled that the insurer’s position was “fairly debatable.” The majority’s opinion was joined by an unusual “concurrence” from Justice Durham that joined in the result on an alternative basis (that the insured had waived its rights to see bad faith fees) but that set forth a comprehensive new theory of bad faith that would support recovery for similar claims in future cases. In particular, Justice Durham argued that Utah should recognize a higher standard of care amounting to a fiduciary obligation on the part of liability and should abandon the "fairly debatable" defense to bad faith. The majority opinion took the unusual step of harshly criticizing the concurrence as ignoring established precedents and as proposing legal remedies that had not been briefed by the parties and that should not be adopted until they had been properly critiqued in an adversary proceeding.
OTHER DEVELOPMENTS OF NOTE
* * * Inside the Insurance Industry * * *
Chubb has entered into a ten year strategic partnership with PICC, China’s largest property and casualty insurer.
A.M. Best reports that U.S. property/casualty insurers posted a $20 billion loss through the first three quarters of 2017 compared to a mere $2.3 billion in 2016. Fitch has concluded that recent disasters will not require downgrading its financial ratings for any insurers but that these losses will make 2017 one of the costliest catastrophe loss years in U.S. history.
Swiss Re’s new “Global insurance review 2017, and outlook 2018/19” predicts that recent natural catastrophes will lead to a hardening of insurance pricing in the near future.
* * * Emerging Markets * * *
P2P start up Lemonade Insurance has reported that the 400 business that signed up for coverage that when it launched its Application Programming Interface (API) comprised real estate and property management firms (43%); financial services companies (23%); e-commerce companies (21%) and home security enterprises (8%).
* * * Across the Bar * * *
Goldberg Segalla stalwart Dan Gerber has left with several other partners from the firm to start a firm of their own: Gerber Ciano Kelly Brady, LLP.
* * * Must See CLE * * *
DRI Insurance Coverage and Practice Symposium (New York City): December 6-8