Feb 1 2018

MM Insurance News 2/3/18

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EIGHTH CIRCUIT      Business Risk Exclusions (MO)

The Eighth Circuit has affirmed a Missouri District Court's declaration that an electrical contractor was not entitled to coverage for damage that resulted to a transformer while the insured was performing operations on it. Despite the insured’s argument that the damaged part of the transformer was not the part that the insured was working on, the court upheld the applicability of Exclusion J(6), ruling in Electric Power Systems, Int’l v. Zurich American Ins. Co., No. 16-3927 (8th Cir. Jan. 26, 2018) that the work of disconnecting the bushing from the lead cable and core and coil was the first step in disassembling the bushing which was an integral part of the job that the insured had been hired to do.

EIGHTH CIRCUIT       “Property Damage” (IA)

The Eighth Circuit has ruled in Decker Plastics Corp. v. West Bend Mutual Insurance Company, No. 17-1319 (8th Cir. Jan. 29, 2018) that an Iowa District Court was correct in finding that sums that the insured paid to a customer to reimburse it for plastic bags that suffered UV damage in the sunlight, causing shreds of plastic to comingle with landscaping materials, did not involve property damage" because the landscaping materials had not suffered any "physical injury." While observing that the question was "not free from doubt," the Eighth Circuit opined that the mere incorporation or mixing of the plastic shreds into the customer's product had not physically injured it so as to constitute property damage."


On remand from the Florida Supreme Court, the Eleventh Circuit has ruled in Altman Contractors Inc. v. Crum & Forster Specialty Ins. Co., No. 15-12816 (11th Cir. Jan. 26, 2018) the Eleventh Circuit has remanded to a Florida District Court the question of whether Crum and Forster consented to its insured’s participation in the Chapter 558 process so as to bring this alternative dispute resolution within the scope of the policy's definition of "suit."

CALIFORNIA        Conflicts of Interest/Disqualification of Counsel

The California Court of Appeal has ruled in California Self-Insurers' Security Fund v. Superior Court, G054981 (Cal. App. Jan. 26, 2018) that a trial court erred in declaring that the Nixon Peabody firm should be automatically disqualified from suing various insurers that had formerly been represented by a lawyer who subsequently came to work for the firm for a few months. Under these circumstances, the Fourth District Appeal ruled that automatic disqualification was an unduly severe remedy and that it was appropriate to permit the law firm to present evidence to show that the confidential information was not shared with any other members of the firm before the attorney's departure. The court declared that “individual assessment of the facts, rather than automatic disqualification, is a modern rule that better reflects the current realities of law firm life in the 21st Century."

ILLINOIS       Employee Exclusion Endorsements

The Illinois Appellate Court has ruled in Vivify Construction, LLC v. Nautilus Insuranc Company, 2017 IL App. (1st) 170192 (Ill. App. Ct. Jan. 24, 2018) that a customized endorsement to a CGL policy that expanded the definition of "employee" to include injuries to employees of the insured’s subcontractor was unambiguous, notwithstanding the insured’s argument that it conflicted with the "separation of insureds" provision. Further, the appellate court ruled that it was inappropriate for a court to look outside the scope of the policy itself to find ambiguity where the operative terms of the policy were themselves facially unambiguous.

ILLINOIS       Independent Counsel

The Appellate Court has ruled in Bean Products Inc. v. Scottsdale Insurance Company, 2018 IL App. (1st) 170421 (Ill. App. January 22, 2018) the Illinois Appellate Court that a liability insurer’s reservations of rights with respect to punitive damages did not justify Peppers counsel. The court distinguished Nandorf v. CNA, as involving facts where the punitive claim dominated the case and truly created a potential for mischief by appointed defense counsel, whereas in this case there were no stated amounts for said damages, nor was there any indication that the valuation of damages was disproportionate so as to lessen in the insurer's interest in defending the case. Further, the court refused to find that Scottsdale's "open ended" reservation of rights created an actual conflict of interest.


* * * Inside the Insurance Industry * * *

Aspen Insurance has appointed David Cohen to be its new President and CUO after Stephen Postlewhite departed Aspen following the release of disappointing financial results for the final quarter of 2017.

California Insurance Commissioner Dave Jones has put P/C companies on notice that they must provide coverage for mudslide claims if the burning of hillsides and vegetation by the Thomas Fire and similar blazes were the “efficient proximate cause” of the mudslides.

The International Underwriting Association has issued a new report, concluding that general liability insurance policies must pick up the slack for drone risks that traditional aviation insurance policies are unlikely to cover. Chris Jones, IUA director of legal and market services, said: “The drone market is a classic emerging risk that presents significant underwriting opportunities across a range of insurance classes. This is particularly true for general liability insurers who are expected to provide a significant proportion of policies not covered by the traditional aviation insurance market.”

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