Dec 8 2017

MM Insurance News 12/8/17

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NOTEWORTHY NEW RULINGS

CALIFORNIA Environmental/Excess/Exhaustion

The California Supreme Court announced last week that it would grant Montrose Chemical’s petition for further review of the Court of Appeal’s ruling that Montrose could not selectively stack its policies to access excess coverage for environmental liability claims arising out of discharges of the pesticide DDT.

CALIFORNIA Arbitration

The California Court of Appeal has ruled in State Farm General Ins. Co. v. Watts Regulator Co., B271236 (Cal. App. Nov. 30, 2017) that a valve manufacturer had no right to compel arbitration of subrogated products liability claims brought against it by State Farm where the parties’ agreement to arbitrate had been modified in 2014 to exclude products liability claims.

CONNECTICUT First Party/”Collapse”/Crumbling Foundation Claims

In a ruling that may have momentous implications for a similar putative class action suit pending before him, Judge Victor Bolden has ruled in Lees v. Allstate Ins. Co., No. 15-1050 (D. Conn. Nov. 30, 2017) that the gradual deterioration of a homeowner’s foundation due to impurities in the concrete was not a “collapse.” Unlike earlier policy language that the Connecticut Supreme Court had declared to be ambiguous in Beach, the U.S. District Court ruled here that the addition of language requiring that the loss be “sudden and accidental” precluded coverage for a loss that had occurred gradually. Having found an absence of coverage, Judge Bolden further ruled that there was no basis for the insured’s claim that Allstate had acted in bad faith by failing to conduct a more thorough investigation. The court found that even if he had not ruled for Allstate, Allstate had a “fairly debatable” basis for denying coverage in light of decisions by sister courts finding in favor of insurers on the “collapse” issue.

IDAHO Bad Faith/”Fairly Debatable”

The Idaho Supreme Court has ruled that Farmers did not act in bad faith in denying a motorist’s demand for UIM benefits because it had a “fairly debatable” basis for contesting her claim. In Cedillo v. Farmers Ins. Co. of Idaho, No. 43980 (Idaho Nov. 30, 2017), the court ruled that “fairly debatable” including not only whether a claim was covered but the alleged value of the claim. Chief Judge Burdick filed a dissenting opinion, arguing that the majority had erred in failing to consider Cedillo’s argument that the trial court had improperly excluded various exhibits, notwithstanding the plaintiff’s failure to show how she had been prejudiced by the exclusion of this evidence.

NEW JERSEY First Party/Sewerage Back-Up

The Appellate Division has issued a per curiam opinion in Shree Riddhi Siddhi Hospitality, LLC v. Scottsdale Ins. Co., A-5210-15T2 (App. Div. Nov. 29, 2017), declaring that damage to the insured’s home from a sewerage back-up was excluded as involving “damage caused by water or water-borne material that backed up through sewers or drains.” The court refused to find ambiguity based on provisions in other parts of the policy.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

American International Group has hired former Berkshire Hathaway and Lloyd’s of London executive Tom Bolt the new Chief Underwriting Officer for its General Insurance unit.

* * * California Burning * * *

KBW estimates that the new wildfires in Ventura County could add $2 billion to the already staggering fire damage that California has suffered this year.

* * * New Coverage Litigation * * *

Lloyds have filed a coverage action in Chicago, alleging in Certain Underwriters at Lloyds, London v. Doe, No. 17-08622 (N.D. Ill.) that allegations that a young woman was sexually assaulted at a horse farm are not covered because her assailant was not "acting within the scope of his duties" when the alleged assault occurred.

* * * Asbestos Update * * *

A new A.M. Best report finds that asbestos loss payouts grew by 9% to $3.2 billion in 2016, exceeding the long-term average of $2.4 billion. However, a 24% year-over-year drop in incurred asbestos losses fueled an overall 17% decline in asbestos and environmental (A&E) incurred losses in 2016. Overall, A.M. Best is maintaining its estimate for net asbestos losses for the U.S. property/casualty (P/C) industry at $100 billion, with net environmental losses estimated at $42 billion.

* * * IBNR Dept. * * *

The “Call of Duty” war game video manufacturer has reportedly brought a trademark infringement action against “Call of Doody”, a small Pennsylvania pet waste removal company.

* * * In the Courts * * *

Judge Bruce Selya, previously known for tongue-twistingly long locutions in his opinions, has now managed to quote seven different Beatles song in affirming a Maine court’s dismissal of a property owner’s FTCA claim against the federal government for damage caused by Asian long-horned beetles.

* * * All I Want for Christmas * * *

Phoenix homeowners will soon have the option of consuming Pinot Gris with their pepperoni as Pizza Hut test markets the idea of allowing customers to add beer and wine to their pizza orders.

* * * MM CLE * * *

Boston partner Michael Aylward will be delivering a paper on problems that arise when insurers and policyholders disagree about whether to settle at DRI’s Insurance Claims Practice symposium in New York City this Friday.

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