Dec 15 2017

MM Insurance News 12/15/17

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CASES OF CONSEQUENCE

SEVENTH CIRCUIT Late Notice (IL)

The U.S. Court of Appeals for the Seventh Circuit has ruled in State Auto Property & Cas. Co. v. Brumit Services, No. 17-1700 (7th Cir. Dec. 12, 2017) that an Illinois District Court erred in excusing a contractor’s 21 month delay in notifying its auto insurer of an incident in which a driver backed into a pedestrian, causing her minor injuries. Despite the insured’s claim that the injuries were so minor that he did not believe it necessary to notify State Auto until suit was filed nearly two years later, the Seventh Circuit ruled that the five Yorkville factors all pointed to a conclusion in this case that 21 months was unreasonably late as a matter of Illinois law. While the injuries might have been minor, the court observed that less severe injuries were no less likely to engender litigation against the insured.

ILLINOIS “Occurrences”/Asbestos

The Appellate Court has affirmed a trial court’s determination that asbestos bodily injury claims brought against the manufacturer of an ash-handling conveyor system for coal plants all arose out of a single “occurrence.” In rejecting the insured’s claim that each installation was a separate “occurrence,” thus triggering the Travelers policies’ higher aggregate limit, the First District declared in United Conveyor Corp. v. Allstate Ins. Co., 2017 IL App (1st) 1162314 (Ill. App. Ct. Dec. 5, 2017) that the “single, unitary cause” of the claims against United Conveyor was its manufacture of products containing asbestos, even though each conveyor was modified slightly to meet the needs of customers. The court also vacated a confidentiality order that had been provisionally granted in January placing the entire appellate record under seal, declaring that it could find nothing confidential or damaging to the insured based on product designs and records from decades ago.

ILLINOIS Declaratory Relief/Indispensable Parties

A federal district court has declined to dismiss a DJ due to the insured’s failure to name an indispensable party. Although Travelers had argued that Velsicol needed to be a party to a dispute involving coverage claims arising out of toxic tort exposure to products containing PCBs owing to the fact that Velsicol was obliged to indemnify Travelers for any such claims pursuant to an earlier settlement Judge Gettleman ruled in Magnetek, Inc. v. Travelers Ind. Co., No. 17-3173 (N.D. Ill. Dec. 7, 2017) that as Velsicol was not a party to these insurance contracts and had no contractual relationship with Magnetek, the dispute between Magnetek and Travelers could be adjudged without involving Velsicol. In any event, if Velsicol concluded that it needed to be involved in the case, it was free to intervene and would not destroy diversity jurisdiction.

MASSACHUSETTS Bad Faith/Consent to Settle

The Appeals Court has affirmed a lower court’s ruling that a professional liability insurer was fully within its rights when it settled a med mal verdict over the objections of its insured. In an unpublished opinion construing New Hampshire law, the court ruled in Johnson v. ProSelect Ins. Co., No. 17-P-109 (Mass. App. Ct. Dec. 12, 2017) that there was no viable claim for breach of the duty of good faith and fair dealing implied in the insurance contract because the policy language gave ProSelect the right to settle the case postverdict without Johnson's consent. The court declared that “While Johnson correctly asserts that New Hampshire recognizes an implied covenant of good faith and fair dealing in all contracts, including insurance policies, it has not recognized a breach of the implied covenant where a party merely exercises a right expressly granted under an enforceable contract.” Under the circumstances, the court found that the insurer was permitted to settle after the verdict and was not required to take an appeal. MM’s Tory Weigand argued the appeal for ProSelect.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

  • John Dacey will succeed David Cole as Swiss Re’s chief financial officer effective March 31, 2018.
  • Jeff Harrold is retiring as CEO of Michigan-based Auto Owners Insurance Company.
  • Stephanie Bush will be replacing Ray Sprague as head of personal lines at The Hartford.
  • Fitch Ratings predicts that recent wildfire and hurricane cat losses will cause reinsurers to suffer an underwriting loss for the year.

* * * California Burning * * *

Artemis reports that the wildfires raging through Southern California have destroyed 1200 homes and damaged hundreds more. Attorneys representing insureds are reporting that most policyholders are significantly underinsured, reigniting a long-simmer dispute in California about the merits of replacement cost coverage and how insurers should communicate with policyholders about property insurance limits.

* * * Cyber * * *

AIG is rolling out a new model for evaluating a prospective policyholder’s likely cyber risk. The new model evaluates cyber risk in relation to the ten most common cyber-attack patterns as applied to eleven common technology platforms. In conjunction with the new model, AIG is launching CyberMatics that, with the help of consultants CrowdStrike and Darktrace, will help to verify data from insureds and increase confidence in the quality of cyber-underwriting.

* * * New Coverage Litigation * * *

Catlin Indemnity has sued an Illinois municipality in federal court in Chicago, seeking a declaration in Catlin Ind. Co. v. Village of Crestwood, No. 17-8891 (N.D. Ill.) that claims against the town arising out of its allegedly illegal use of a red-light camera are subject to an exclusion for “law enforcement activities.” A putative class of motorists has sued the Village, seeking to recoup $3 million in fines resulting from 56,000 tickets generated by the hidden camera.

* * * Across the Bar * * *

Kennedys have spirited away five former Mayer Brown partners (David Chadwick, Ingrid Hobbs, Tim McCaw, Andrew McGahey and Andrew Westlake) to augment its insurance practice in London and Dublin.

The dispute between national insurance defense powerhouse Goldberg Segalla and a breakaway group of partners has reportedly moved into state court in New York.

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