Jun 27 2018

MM Insurance News 6/27/18

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THIRD CIRCUIT Arbitration Clauses (NJ)

The Third Circuit has ruled that a former ACE Vice President's suit against the insurer for allegedly discharging him after he protested the destruction of materials in violation of "litigation hold" notices must be arbitrated. In granting ACE's motion to compel arbitration, the Third Circuit ruled in Ace American Ins. Co. v. Guerriero, No. 17-2893 (3rd Cir. June 20, 2018) that Guerriero had, in fact, signed an "arbitration agreement" on his first day of employment which stated that he would "submit any employment-related legal claims to final and binding neutral third-party arbitration …"

CONNECTICUT Property Insurance/”Collapse”

In contrast to several recent federal district court rulings that have upheld “collapse” provisions in homeowners' policies that require "sudden and accidental" losses in order to trigger coverage, Judge Eginton has ruled in Maki v. Allstate Ins. Co., No. 17-1219 (D. Conn. June 22, 2018) that he could not "preclude the possibility that previously undetectable, structurally devastating cracks that appear in a home's foundation without notice can constitute the sudden collapse of a building structure, in this case caused by hidden decay and defective materials used in construction" and that homeowners should not have to wait for their home to fall to the ground to be eligible for "collapse" coverage. The District Court took note of the fact that another federal judge has recently asked the Connecticut Supreme Court to determine what "substantial impairment of structural integrity" means in a case of this sort. Accordingly, the court denied Allstate's motion to dismiss without prejudice pending the Supreme Court’s answer to the certified question in the Karas. case.

ILLINOIS Auto/UM/”Phantom Vehicles”

On remand from a 2015 Appellate Court ruling declaring that UM coverage requires evidence of an accident involving physical contact with another car, the Illinois Appellate Court has ruled in Cincinnati Insurance Company v. Pritchett, 2018 IL App. (3rd) 170577 (IL. App. Ct. June 12, 2018) that the driver of the insurance trailer truck was not entitled to UM coverage in the absence of any evidence with respect to an unidentified "phantom" vehicle that caused the driver to swerve into the curb and lose control of his vehicle. The appellate court rejected the driver's argument that all that was required was evidence of a second vehicle in the vicinity of the insured vehicle at the time of the accident or that this was probably an issue for arbitration and should not have been decided by the trial court. For instance, the appellate court ruled that the trial court's determination that a second vehicle did not cause the insurance accident, was not against a manifest weight of the evidence.


The Indiana Supreme Court has ruled that a trial court erred in ordering an auto insurer to provide UM coverage to a homeowner’s who was struck by an uninsured vehicle while he was mowing his lawn. Whereas lower courts had found ambiguity in the policy’s UM/UIM coverage for “Others We Protect”, the Supreme Court ruled in Erie Ind. Co. v. Harris, No. 18S-CT-114 (Ind. June 18, 2018) that this language was unambiguous and did not extend coverage to a scheduled driver who was not injured while using a covered vehicle.

MISSOURI Environmental Liability Insurance (KS)

A federal district court has ruled in Sunflower Redevelopment, Inc. v. Illinois Union Ins. Co., No. 15-577 (W.D. Mo. June 25, 2018) that a Pollution Legal Liability policy insured demands that a brownfields developer had received from the State of Kansas pursuant to its agreement to remediate and develop a polluted former munitions production facility. Applying Kansas law, Judge Hays agreed with Sunflower that the PPL policy’s coverage for remediation costs was not pre-conditioned on the assertion of a clean up claim against the insured since it separately covered “claims” and “remediation costs.” In any event, the court declared that letters that the insured had received from the Kansas Department of Health and Environmental directing it to implement a pollution work plan were “claims” under the PLL policy. The court further found that the claims were not asserted prior to Illinois Union’s policy period and thus excluded.

NEW YORK Coverage B/”Software”Exclusion

A federal district court has ruled in BF Advance, LLC v. Sentinel Ins. Co., No. 16‑5931 (E.D.N.Y. March 20, 2018) that a lawsuit in which the plaintiff alleged that the insured had improperly infringed upon the claimant's software, its avatars to introduce web sites to online visitors were outside the amended "personal and advertising injury" coverage provided by Sentinel's "Cyber Flex Coverage” endorsement that extended Coverage B to the offense of "copying in your advertisement or on your web site a person or organization's advertising idea or style of advertisement." Judge Matsumoto declared that the claims were clearly subject to an exclusion for violations of intellectual property rights "arising out of … computer code, software or programming" used to enable web sites. The court rejected the insured's argument that the software exclusion was ambiguous because it did not define "computer code, software or programming." In granting summary judgment for Sentinel and denying coverage for this claim, the District court also declined to consider an "expert opinion" from an individual named Scott Stein, declaring that the software language in the endorsement was unambiguous. In granting Sentinel's motion to strike the Stein Declaration, the court declared that it need not consider this information since only the court should consider whether a contract term is ambiguous.


* * * Inside the Insurance Industry * * *

A new Conning report concludes that U.S. industry reserves are not as problematic as originally expected. “The property-casualty insurance industry’s reserve position improved slightly in 2017,” said Bill Burns of Conning. “The industry continues to carry sufficient reserves, assuming claims settlement patterns continue at the current pace. However, there is a concern that with more robust growth and inflation, settlement patterns may well change, adversely impacting loss reserve adequacy.”

Connecticut Governor Malloy has signed Senate Bill Level 198 which creates a 12‑member task force to study and develop strategies to "develop, expand and improve the insurance industry workforce" in Connecticut. The task force is directed to submit its report to the legislature no later than January 1, 2019.

California Insurance Commissioner David Jones has approved the first Cannabis Business Owners Policy. The new policy form was developed by the AAIS and provides both property and liability insurance coverage for qualifying California dispensaries, storage facilities and marijuana producers.

* * * Bad Faith Developments * * *

The New Jersey State Senate voted on June 7 to approve the New Jersey Insurance Fair Conduct Act (Senate Bill 2144 would create a statutory cause of action against insurers for unreasonably refusing to pay or denying claims for insurance benefits or for any violations of the State Unfair Claims Settlement Practices Act. The bill now proceeds to the New Jersey Assembly for debate and a possible vote.

* * * New Coverage Litigation * * *

Chubb European Group LLC filed coverage litigation Harvey Weinstein in London’s High Court on May 29 seeking a declaration that a personal liability policy that it issued to Weinstein does not cover any of the various claims for sexual assault and harassment suits brought against the former movie tycoon. Chubb already has a similar action pending in state court in New York.

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