Mar 14 2018

MM Insurance News 03/14/18

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FIFTH CIRCUIT Forum Selection Clauses (LA)

The U.S. Court of Appeals for the Fifth Circuit has refused to find that any public policy of Louisiana bars giving effect to a forum selection clause in an insurance policy. In Al Copeland Investments LLC v. First Specialty Ins. Corp., No. 17-30557 (5th Cir. Mar. 9, 2018), the court ruled that Louisiana Revised Statute § 22:868, which provides that “[n]o insurance contract delivered or issued . . . in [Louisiana] . . . shall contain any condition, stipulation, or agreement . . . [d]epriving the courts of [Louisiana] of the jurisdiction of action against the insurer” does not evince a public policy against forum-selection clauses in insurance contracts.

CALIFORNIA First Party/Appraisal

The Second District has ruled in Khorsand v. Liberty Mutual Fire Ins. Co. B280273 (Cal. App. Feb 27, 2018) the trial judge erred under Evidence Code § 703.5 in admitting part of an appraiser's declaration that the insured's offered in opposing confirmation of the award. In an unpublished aspect of decision, the Court of Appeal further rejected the insured's challenges to the confirmation of the award and affirmed the underlying court's judgment confirming the award.

CALIFORNIA Property Insurance/Diminution in Value

The California Court of Appeal has ruled in Doyle v. Fireman's Fund Ins. Co., G054197 (Cal. App. Mar 7 2018) that a homeowner with an expensive habit of collecting valuable vintage wines was not entitled to coverage under the "valuable possessions" provisions of his property insurance policy for a financial loss that he suffered as the result of buying wine that had been fraudulently placed into old bottles but that was not itself vintage. The Fourth Department, cribbing at times from Shakespeare, pointed out that nothing had happened to the covered property as it was as valueless at the time of the insured's purchase as when the fraud was discovered. All that had occurred is a diminution in value which is not itself a covered peril but merely a measure of loss.

COLORADO First Party/Appraisal

The Colorado Supreme Court has granted review of the Court of Appeals’ ruling last summer in Owners Ins. Co. v. Dakota Station II Condominium Assoc. construing what it means to be an “impartial appraiser” in a first party valuation dispute.

ILLINOIS Additional Insureds/”Arising Out of Premises”

The Appellate Court has ruled that a landlord’s liability insurer was obligated to defend claims against a lessee for failing to prevent a gang shooting outside the store’s premises. While ruling that the insurer's failure to defend was not bad faith, the First District ruled in Dominick's Finer Foods v. Indiana Ins. Co., 2018 IL App (1st) 161864 (Ill. App. Ct. Mar. 1, 2018) that language in the policy extending additional insured coverage where liability "arose out of the premises" was not limited to losses occurring due to some defective condition on the premises.

ILLINOIS Auto/UIM/Stacking

The Appellate Court has ruled in Busch v. Country Financial Ins. Co., 2018 IL App (5th) 140621 (Ill. App. Ct. Feb. 22, 2018) that a trial court erred in finding that language in the Country Financial policy precluded stacking of UIM coverages insuring various vehicles was ambiguous.

ILLINOIS Property Insurance/Appraisal/Due Process

The Fifth District has set aside a lower court’s order appointing an appraisal umpire based upon State Farm’s failure to do so. In Witcher v. State Farm Fire & Cas. Co., 2018 IL App. (5th) 17001 (Ill. App. Mar. 6, 2018), the Appellate Court found that the trial court had not had jurisdiction over State Farm at the time it entered the order appointing the appraisal umpire, as no summons had been issued to State Farm nor had it been served the plaintiff's petition for appointment of an appraisal umpire. The court rejected the insured’s contention that such formalities were not required because this was not an action at law and because the appraisal provision did not require formal service of the petition for appointment of an appraisal umpire.

IOWA Property Insurance/Efficient Proximate Cause

The Iowa Court of Appeals has ruled in City of West Liberty v. Employer's Mutual Cas. Co., No. 16‑1972 (Iowa App Mar 7, 2018) a bizarre incident in which a gray squirrel climbed onto lines at electrical substation, causing electric arcing that substantially damaged municipal property was excluded from coverage pursuant to the policy's "electrical current" exclusion. The Court of Appeals rejected the City's argument that even though arcing itself was excluded from coverage, the loss in question had been set in motion by the fortuitous event of the squirrel coming into contact simultaneously with an energized cable and the grounded frame. Writing in dissent, Justice Doyle argued that the approximate cause of this loss was the squirrel's mishap as, but for the squirrel's presence there would have been no arcing and no resulting damage.

NEW YORK Declaratory Relief/Injunctive Remedies

A federal district court has rejected a policyholder’s petition for a preliminary injunction compelling a liability insurer to pay 100% of its fees for the defense of a trademark infringement case. In 360Heroes, Inc. v. Mainstreet American Assur. Co., No. 17-549 (N.D.N.Y. Feb. 21, 2018), Judge D’Agostino ruled that there were issues with respect to the reasonableness of the defense costs and the insured had not shown a likelihood that it would ultimately prevail on the merits.

PENNSYLVANIA Subrogation/Worker’s Comp

The state Supreme Court heard oral argument last week in The Hartford Ins. Group v. Kafumba Kamara, At issue is whether a worker’s compensation insurer may pursue subrogation rights against the third party that caused injury to an insured employee, notwithstanding the legal uncertainty created by the court’s opinion in Liberty Mut. Ins. Co. v. Domtar Paper, 113 A.3d 1230 (Pa. 2015).


* * * Inside the Insurance Industry * * *

The latest Willis Towers Watson (WTW) Commercial Lines Insurance Pricing Survey reports that commercial insurance rates rose by less than 1% in the final quarter of 2017 despite severe catastrophe losses suffered by property insurers.

Zurich North America has reshuffled several leadership positions. Kathleen Savio, Zurich’s new CEO, is being replaced as head of Alternative Markets by David Putz, who is being replaced as head of programs by Greg Massey.

Meanwhile, Great American has hired Betty Shepherd as a division VP of cylber-liability, where she will coordinate product management and development for Great American’s cyber liability products.

The Illinois legislature is giving active consideration to HB 4595, a bill that would create the “Illinois Employers Mutual Insurance Company,” a non-profit entity to underwrite workers compensation insurance for employers in Illinois.

* * * Cyber Claims * * *

Here is the latest newsletter from MM’s cyber-practice group.

Equifax has told investors that its projected liability from a 2017 hack may reach $439 million, of which it hopes to recoup $125 million from its insurers.

* * * Restating the Law * * *

The National Conference of Insurance Legislators has passed a resolution that it has mailed to the chief justices of every state supreme court, criticizing the America Law Institute’s pending Restatement of Law, Liability Insurance as infringing on the rights of the courts and state legislatures to shape the future development of the common law.

* * * Environmental Update * * *

BP, Shell and Sunoco have agreed to pay the State of New Jersey a total of $196.5 million to settle the MTBE law suit that the State originally filed in 2007.

* * * Tort Reform * * *

The American Tort Reformation Association has honored Florida will the leading place on its list of judicial “hell holes.” California, for the first time in many years, tumbled to second place on the ATRA list, followed by the courts of St. Louis, Philadelphia, New Jersey, Illinois (Madison and Cook Counties) and Louisiana. *

* * * Mark Your Calendars * * *

March 17 (Boston): Evacuation Day

March 21-23 (Chicago): DRI Insurance Coverage and Claims Institute

April 8 (Boston): Fenway Park Opening Day

April 25-27 (Orlando): Emerging and Environmental Claims Managers Meeting

May 22 (D.C.) ALI Final Vote on Insurance Restatement

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