Dec 29 2017

MM Insurance News 12/29/17

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CASES OF CONSEQUENCE

SEVENTH CIRCUIT Environmental/”Claims in Process” (IN)

The Seventh Circuit has ruled in Atlantic Cas. Ins. Co. v. Garcia, No. 17-1224 (7th Cir. Dec. 22, 2017) that an Indiana District Court did not err in granting summary judgment to a CGL insurer for the cost of investigating and remediating oil and solvent contamination due to dry cleaning operations prior to the time that the insured had acquired the property in 2004. Notwithstanding the insured’s argument that the Montrose “claims in process” language in the CGL insuring agreement did not apply because they were unaware of earlier pollution and pre-2004 state environmental claims investigations, the Seventh Circuit found that the language turned on whether property damage had begun before the policy and not whether the insured knew that a claim was pending against it.

CALIFORNIA EIL/Restitution/Unjust Enrichment

The Second District has ruled in Santa Clara County Waste Water Co. v. Allied World National Assur. Co., B279679 (Cal. App. Dec. 20, 2017) that an EIL insurer was entitled to a pre-judgment attachment on its insured’s assets to guarantee repayment of $2.5 million that it had advanced on its insured’s behalf in light of compelling evidence that the insured’s pollution claims were subject to a “non-compliance” exclusion due to the insured’s violation of California statutes by illegally storing chemical wastes and knowingly discharging wastewater that it knew to be hazardous. The Court of Appeal ruled that Allied World would likely prevail on its implied contractual claim against the County on the theory that the insured was unjustly enriched by the $2.5 million that the insurer had paid pursuant to a mediation agreement between the parties.

CONNECTICUT "Business Pursuits" Exclusion/Punitive Damages

The Connecticut Supreme Court has ruled in Nationwide Mut. Ins. Co. v. Pasiak, SC 19618 (Conn. Dec. 19, 2017) that the Appeals Court erred in declaring that an employee’s false imprisonment claims against her employer were subject to a “business pursuits” exclusion in the employer’s personal umbrella policy. While agreeing with the intermediate appellate court that the requisite standard could be met if the imprisonment was a function of or facilitated by the employer-employee relationship, the Supreme Court found that the factual record was inadequate to make this determination and ordered that the case be remanded for further findings. Further, the court ruled that Nationwide could not prevail on the basis of exclusions for “abuse” or worker’s compensation. Finally, the Supreme Court refused to find that public policy precludes insurers from having to indemnify their policyholders for punitive damage awards. The court distinguished its 1992 opinion in Bodner as turning on the purpose of UIM coverage and emphasized the fact that this particular policy specifically insured intentional acts such as false imprisonment. The court declared that: “It is not seemly for insurance companies to collect premiums for risks which they voluntarily undertake, and for which they actively advertise in competition with other companies, and then when a loss arises to say ‘It is against public policy for us to pay this award.’’’

ILLINOIS Auto/UM/”Physical Contact”

The Appellate Court has ruled in Allstate Ins. Co. v. Bochenek, 2017 IL App (1st) 170277 (Ill. App. Dec. 12, 2017) that a pedestrian who suffered emotional distress and PTSD after seeing his wife and child being struck by a hit and run driver had no right to recover UM benefits from his auto insurer because he himself had not been physically contacted by the car.

MARYLAND Choice of Laws/Pollution Exclusions/Public Policy

On a certified question from a federal district court, the Maryland Court of Appeals has ruled in Brownlee v. Liberty Mut. Ins. Co., No. 1 (Md. Dec. 18, 2017) that the public policy of Maryland would not be violated by applying Georgia law to the issue of whether an absolute pollution exclusion in a policy issued in Georgia to the Salvation Army precludes coverage for lead paint claims involving property owned by the insured in Baltimore. The court ruled that Maryland’s principle of lex loci contractus required the application of Georgia law and that the mere fact that the Georgia Supreme Court had adopted a broader view of such exclusions than Maryland courts was not a basis for overthrowing this contractual principle on the grounds of public policy.

NEW YORK Reinsurance

Following a December 13 jury verdict in favor of Utica Mutual, a federal court has entered a final judgment in a long-running asbestos reinsurance dispute. In Utica Mut. Ins. Co. v. Fireman’s Fund Ins. Co., No. 09-853 (N.D.N.Y. Dec. 15, 2017), Judge Hurd added over $29 million in interest to the jury’s $35 million verdict for amounts that the cedent had sought arising out of underlying asbestos claims paid pursuant to 1967-73 primary and excess policies issued to Goulds Pumps.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

Standard & Poor’s is forecasting modest rate growth (0%- and 5%) for reinsurers in 2018. Nevertheless, S&P opined that “Reinsurers will continue to benefit from robust capital adequacy and strong enterprise risk management capabilities. These strengths should help reinsurers navigate some of the difficult market conditions during the next 12 months and the impact of recent natural catastrophe losses.” Michael Conway has been appointed to serve as Colorado’s interim Insurance Commissioner.

* * * California Burning * * *

California Insurance Commissioner Dave Jones has enjoined property insurers to be lenient in their record keeping demands for policyholders who claim to have suffered loss as the result of recent wildfires and not to demand a detailed home inventory.

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