May 11 2018

MM Insurance News 05/11/18

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NOTEWORTHY NEW RULINGS

ELEVENTH CIRCUIT Policy Interpretation (FL)

The Eleventh Circuit has ruled in Travelers Property Cas. Co. v. Salt ‘n Blue LLC, No. 17-14235 (11th Cir. May 7, 2018)(unpublished) that a Florida District Court did not err in finding that claims arising out of a fatal diving accident were excluded as being subject to a Diveboat Limitation Endorsement without first considering whether the claims were covered at all as involving the use of the insured vessel. Further, the court refused to find that this endorsement was ambiguous as being in conflicts with other policy terms.

CALIFORNIA Misrepresentations

The California Court of Appeal has ruled in Monterey Ins. Co. v. 1725 Fulton Street, LLC, A149722 (Cal. App. April 18, 2018) that a trial court erred in granting summary judgment against a liability insurer, finding that there were disputed issues of fact as to whether the insurer had waived its right to raise the defense of misrepresentation, notwithstanding evidence at trial that the insurer had failed to take any action after becoming aware of misrepresentations concerning prior claims.

CALIFORNIA Arbitration/Unconscionability

The California Court of Appeal has refused to stay litigation in which a policyholder claimed that worker’s compensation policies were acquired illegally and contained unconscionable terms. In Nielsen Contracting, Inc. v. Applied Underwriters, Inc. D072393 (Cal. App. May 3, 2018), the Fourth District rejected the insurer’s effort to compel arbitration as well as the insurer’s argument that the enforceability of the arbitration clause should be decided by the arbitrator.

CONNECTICUT Crumbling Foundation Claims

Judge Eginton has granted a property insurer’s motion to dismiss in the latest crumbling foundation case. In Enderle v. AMICA Mut. Ins. Co., No. 17-1510 (D. Conn. May 2, 2018), the District Court ruled that the policies’ “collapse” coverage did not apply to “progressive damage to the basement walls where the building is still standing and able to be used for its intended purpose.” The court rejected the insured’s argument that their property had sustained a direct physical loss due to a chemical reaction as AMICA’s policies precluded coverage for a loss caused by “latent defect, deterioration, and cracking.”

FLORIDA Chinese Dry Wall/Fees/”Damages”

Judge Seitz has ruled that the “confession of judgment” doctrine, wherein insureds are entitled to recover their fees for cases that insurers pay after initially disputing them, did not apply to a declaratory judgment action brought by the insured. In Peninsula Developers II v. Westchester Fire Ins. Co., No. 09-23691 (S.D. Fla. April 25, 2018), the District Court declared that the public policy behind the doctrine did not apply where the insurer had defended under a reservation of rights and ultimately paid to settle the case. Further, the court declared that the insured had no right to reimbursement for $381,490 that it had paid towards the settlement as, under California law, the insurer’s obligation to indemnity all sums that the insured is legally obligated to pay as damages only applied to court-ordered judgments.

ILLINOIS Auto/Stacking

The Appellate Division has ruled in Busch v. Country Financial Ins. Co., 2018 IL App (5th) 140621 (Ill. App. April 16, 2018) that a trial court erred in allowing an insured to stack the limits of two auto policies based upon a claimed conflict between the policy’s anti-stacking and “other insurance” clauses.

NEW JERSEY Auto/”Use”/DJ Fees

The Appellate Division has ruled that an auto policy erred in failing to provide a defense to its insured as, even though he was not driving a U-Haul vehicle at the time of the accident, he was still using it as he had hired it and arranged to have a friend drive it to pick up some plants at a local store. However, the court ruled in CURE v. Espinoza, A-4747-15T3 (App. Div. May 2, 2018) that the trial judge erred in awarding over $80,000 in DJ fees to the insured, finding that such awards are improper unless sustained by specific findings of fact and law.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

The New York State Department of Financial Services announced this week that Chubb has agreed to pay a $1.3 million fine for violating state law by underwriting insurance policies through the NRA-endorsed “Carry Guard” program that provided coverage for firearms losses, including self-defense and intentional shooting acts. Meanwhile, the NRA has sued Lockton for breach of contract based upon its decision to drop the “Carry Guard” program after the Parkland school shootings.

Liberty Mutual is marketing a new stream-lined umbrella policy form that is intended to help brokers track the applicable coverages and aggregate limits . At the same time, Liberty Mutual has introduced a Premier Protector – Contractor’s Equipment form that is intended to cover equipment that owned, leased, borrowed or rented, or that can be loaned to others on a blanket basis with no coinsurance.

Shareholder activitist/gadfly Carl Icahn, who became AIG’s third largest shareholder at the end of 2017 and who has consistently pressed management to sell off assets, has announced that he will sell off his interest in AIG.

AIG President and CEO Brian Duperreault has predicted that the Company will have an underwriting profit by the end of 2018 despite sustaining a 20% reduction in its first quarter profit this year. AIG’s general insurance unit reported a combined ratio of 103.8% for the first quarter of 2018, down from 99.8% in 2017.

* * * Across the Bar * * *

Cozen O’Connor has jumpstarted its life insurance group by acquiring 14 lawyers from Drinker Biddle & Reath.

* * * New Coverage Litigation of Note * * *

Harvey Weinstein has filed a counter-claim in the DJ that Chubb filed against him in New York state court in February, alleging that he is entitled to a defense for numerous cases in which women allege that he sexually assaulted them.

* * * Restating the Law * * *

The American Law Institute has responded to the letter from six state Governors that we reported on last week, protesting that the latest draft of the Restatement of Law, Liability Insurance has already addressed the concerns that the Governors had raised in their letter.

* * * IBNR Dept. * * *

The Natural Resources Defense Council has announced plans to sue the City of Newark due to elevated lead levels in municipal water supplies.

* * * New Coverage Litigation of Note* * *

The Karolyi Ranch has filed suit against the U.S. Olympic Committee and USA Gymnastics Inc. in state court in Texas state court alleging that it is entitled to coverage for law suits that have been brought the Ranch by gymnasts who were allegedly molested by former team doctor Larry Nassar.

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