Mar 1 2018

MM Insurance News 03/02/18

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The Second Circuit heard oral argument this week in Medidata Solutions, Inc. v. Federal Ins. Co. on the issue of whether a New York court erred in ruling that Chubb’s commercial crime policy covered funds that the insured lost when it was tricked into wiring them to a bogus overseas account.

ELEVENTH CIRCUIT       Staff Counse/Vicarious Liability (FL)

The Eleventh Circuit has ruled that an auto insurer was not vicariously liable for alleged deficiencies in the defense that staff counsel provided to its insured. Despite the insured’s argument that defense counsel’s failure to take certain measures caused the underlying case not to settle, the court declared in Kapral v. GEICO Ind. Co., No. 17-11511 (11th Cir. Jan. 23, 2018)(unpublished) ruled that a liability insurer is not vicariously liable for the negligence of appointed defense counsel that is “competent and qualified.” The court declined to draw any distinction between an insurer’s claimed vicarious liability for outside counsel and staff counsel in such cases.

CALIFORNIA       Opioids/”Occurrence”/”Damages”

The California Supreme Court announced last week that it has accepted review of the Fourth District’s ruling in Travelers Property Casualty Company of America v. Actavis, Inc., 16 Cal. App. 5th 1026 (2017) that a pharmaceutical manufacturer was not entitled to CGL coverage for contributing to America’s opioid crisis by over-marketing prescription drugs.

COLORADO       “Occurrence”/Breach of Contract

A federal district court has declared that a CGL insurer does not owe coverage for allegations that a commercial lessee breached various covenants in its lease by failing to maintain the premises as promised. In Center. For Excellence in Higher Education, Inc. v. Travelers Property Casualty Company of America, 2018 U.S. Dist. LEXIS 25424 (D. Col. Feb. 16, 2018), Chief Judge Krieger ruled that the insured’s failure to maintain the roof and repair the building’s HVAC system after a storm were not an accidental “occurrence.” Whereas the insured had argued the landlord’s contract claims could just as easily have been pleaded as tort claims for conversion, the court emphasized that the failure to maintain the property was entirely within the insured's control and therefore not accidental.

CONNECTICUT       First Party/Crumbling Foundation Claims

In a decision that may have significant consequences for the multi-carrier Halloran case now pending before him, Judge Bolden has ruled in Hurlburt v. Massachusetts Homeland Ins. Co., No. 17-503 (D. Conn. Feb. 23, 2018) that a chemical reaction caused by impurities in concrete that resulting in “spider cracking” of a home’s foundation was not an “abrupt caving in or falling down” of the insured structure. Having found that the claims were not covered, the District Court also dismissed the insured’s CUIPA/CUTPA claims.

NEBRASKA Expert      Testimony/Daubert/Liability Allocation

A federal district court has refused to preclude expert testimony by a lawyer in a coverage dispute that focuses on the extent to which a railroad’s $6.25 million settlement of a fatal crash was due to the negligence of a contractor for which the railroad can obtain indemnification from the contractor’s insurer. In Union Pacific Railroad v. Colony National Ins. Co., No. 13-84 (D. Neb. Feb. 23, 2018), the court ruled that Attorney Van Dyck could testify with respect to how a reasonable lawyer would allocate liability in a case of this sort but would not be permitted to opine with respect to what the law requires. Similarly, the court stated that he would allow UP’s lawyer expert to testify, notwithstanding his lack of experience in defending railroad cases.

NEW YORK       Environmental Insurance/Duty to Defend/Civil Proceedings

The Fourth Department has ruled in Certified Environmental Services v. Endurance American Ins. Co., 2018 NY Slip op 00764 (App. Div. Feb. 2, 2018) that a criminal indictment of the insured for illegally discharging asbestos fibers into the air in violation of the Clean Air Act was not a “claim” under a pollution legal liability policy issued by American Safety Casualty Company. The Appellate Division rejected the insured’s argument that its “claim “ for coverage was a trigger of coverage, pointing out that the policy insured claims “against” and not “by” the insured. The court also ruled that the Clean Air Act proceedings fell outside the scope of “civil proceedings” that were separately insured under a second pollution liability policy.

OKLAHOMA       DJ Fees

Despite language in 36 O.S.2011 §3629 referring to the insured’s submission of a “proof of loss” and other suggestions that it only applies to first party losses, the Oklahoma Supreme Court has agreed with recent Tenth Circuit authority that the statute should be given a broad reading and entitles insureds to recover fees if they prevail in liability insurance coverage disputes. In J.P. Energy Marketing LLC v. Commerce & Industry Ins. Co., 2018 OK 11 (Okla. Feb. 5, 2018), the state Supreme Court ruled that the proof of loss requirement is satisfied by the insured giving notice of a suit against it and seeking a defense from its insurer.


* * * Inside the Insurance Industry * * *

Despite hurricane losses that caused Berkshire Hathaway to suffer a $3.2 billion pre-tax underwriting loss at the end of 2017, Warren Buffet has boasted in his annual letter to shareholders that the company is financially prepared to weather even a $400 billion mega-cat that might devastate other insurers.

Insurance giant Liberty Mutual ceded $1.234 billion of catastrophe losses to its reinsurance providers after the major catastrophe losses of 2017, which helped the firm to reduce its pre-tax catastrophe loss tally for the year to $3.6 billion.

Liberty Mutual reported that just $17 million of net income for the full-year 2017, as catastrophe losses wiped out much of its profits, down $989 million on the prior year.

Days after Chubb announced that it was cancelling its controversial “Carry Guard” insurance product for gun owners, Lockton stated this week that it would also cease handling NRA-endorsed insurance products.

Recent changes in U.S. tax law have prompted the James River Group to create Carolina Re, a Bermuda-based reinsurer to which it has ceded its internal quota share.

* * * Opioids * * *

U.S. Attorney-General Jeff Sessions announced this week that the federal government will lend its support to public entities that are suing drug manufacturers for allegedly over marketing addictive products.

* * * IBNR Dept. * * *

A new article in Insurance Journal reports on candy manufacturer Hershey Company’s on-going fight with California cannabis products for alleged infringement of its trademarks (e.g. “Jollly Ranchers” meet “Jolly Meds”).

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