Jul 5 2018

MM Insurance News 7/6/18

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FOURTH CIRCUIT  Discovery/Privileges/”At Issue” (SC)

On appeal from a South Carolina District Court’s ruling that a liability insurer must produce attorney-client communications concerning a construction defect claim, the Fourth Circuit has certified a question to the South Carolina Supreme Court, asking In In Re:  Mt. Hawley Ins. Co., No. 18-1401 (4th Cir. June 28, 2018):  “Does South Carolina law support application of the “at issue” exception to the attorney-client privilege such that a party may waive the privilege by denying liability in its answer?”

FIFTH CIRCUIT  “Criminal Acts” Exclusion (TX)

The Fifth Circuit has ruled that a “criminal acts” exclusion precluded any duty to defend allegations that a restaurant operator plied an 18 year old girl with liquor before sexually assaulting her.  Even though the law suit did not specifically describe the insured’s conduct as “criminal,” the court ruled in Century Surety Co. v. Seidel, No. 17-10026 (5th Cir. June 25, 2018) that this fact was implicit in the Complaint’s allegation that she was a minor (serving alcohol to a minor is a Class A misdemeanor in Texas).  The court also refused to find ambiguity based on the fact that the policy separately referred to the violation of liquor liability statutes, noting that this language was contained in an exclusion for liquor liability claims and not a grant of coverage.

ILLINOIS  Auto/Arbitrations/Sanctions

The Appellate Court has ruled in State Farm Mutual Automobile Ins. Co. v. Trujillo, 2018 IL App (1st) 172927 (Ill. App. Ct. June 28, 2018 that the defendant forfeited his right to dispute the result of an arbitration of damages resulting from an automobile collision when he willfully chose not to attend a court-ordered arbitration of his claim.  Under the circumstances, the First District ruled that the trial court's affirmance of the arbitration was a sanction within the trial court's discretion.

MARYLAND  Coverage B/ Right of Private Occupancy”

Allegations that restroom patrons were surreptitiously videotaped by a bar owner have been held to set forth a claim for “invasion of the right of private occupancy” within the scope of Coverage B.   Further, the Court of Special Appeals ruled in Harleysville Preferred Ins. Co. v. Rams Head Savage Mill LLC, No. 2409 (Md. App. June 28, 2018) that the claims were not subject to a "recording and distribution" exclusion.   While therefore declaring that Harleysville had a duty to defend the bar, the court ruled that it was relieved of its duty to defend the bar owner in light of a "criminal acts" exclusion. 

NEW JERSEY  Allocation/Long-Tail/”Unavailavility”

  The New Jersey Supreme Court has ruled that allocation issues arising out of asbestos bodily injury claims must be interpreted in accordance with New Jersey law and therefore preclude any allocation of “unavailable” years of coverage to the insured.  Notwithstanding the fact that the named insured under these policies had been headquartered in Michigan at the time of issuance, the court declared in Continental Ins. Co. v. Honeywell International, Inc., A21–16 (N.J. June 27, 2018) that New Jersey had the more significant interest in this dispute in light of the various Section 188 Restatement factors that it found controlling years ago in Pfizer.    Furthermore, the court rejected arguments by Travelers that it should recognize an equitable exception to the "unavailability doctrine” in cases where corporations continued to manufacture and distribute dangerous products even after insurance became unavailable owing to the known risks associated with such operations and products.  Judge Albin dissented from this latter aspect of the court's ruling, declaring that the majority's ruling gives insureds a "free pass" to market known dangerous products and still obtain insurance coverage for any resulting liabilities.

TEXAS  Liquor Liability Exclusion

A federal district court has ruled in Sentry Select Insurance v. Ruiz, 2018 WL 3046942 (W.D. Tex. June 20, 2018) that an after-work gathering in which three employees of the insured drank a few beers before one caused a fatal accident was a social “function” within the scope of a policy’s coverage for “liquor liability” claims.  The court rejected the insurer’s contention that this coverage should only extend to official office events, such as Christmas parties.  Further, the District Court declined to find that the employee’s injuries were excluded as arising out of and in the course of the claimant’s employment, as the claimant was not performing work-related duties when she was injured.


 ***Inside the Insurance Industry***

Allstate is now marketing a “Milewise” auto insurance product that offers adjusted premiums depending on how much a policyholder drives.  In general, policyholders who drive 25 miles a day or less would save money under the program.

There was a time when teenagers (and their parents!) literally counted the days until they could get a license to drive.  A new report finds, however, that concerns about cost and safety coupled with lifestyle changes and ridesharing alternatives have dramatically reduced and delayed teen licensure.

***New Coverage Litigation***

A Virginia-based engineering and construction firm has sued AIG for refusing to reimburse it for $1.6 million that was stolen from it by cyber-criminals, alleging in Quality Plus Services v. National Union Fire Ins. Co. of Pittsburgh, PA, No. 18-454 (E.D. Va.) that the loss is covered by the policy’s computer fraud and funds transfer provisions.

***Opioid Litigation Update***

The City of Boston has hired the Motley Rice law firm to prosecute its opioid claims against Perdue Pharma.

* * * Across the Bar * * *

Long time insurer nemesis Matt Jacobs is departing Jenner & Block for the greener pastures of Jones Day.

* * * IBNR Dept. * * *

The Natural Resources Defense Council (NRDC) has sued the City of Newark for failing to prevent dangerously high levels of lead in municipal water.

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