Jul 26 2018

MM Insurance News 7/27/2018

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In light of Arkansas’ rigorous requirements for proving bad faith, the Eighth Circuit has ruled in Sims v. State Farm Mut. Ins. Co., No. 17-1333 (8th Cir. July 3, 2018) that an auto insurer did not act dishonestly, maliciously or oppressively in its failure to offer more in response to its insured’s UIM claim or in its failure to conduct a more thorough investigation of the insured’s alleged injuries.

CALIFORNIA  Conflicts of Interest

The Fourth District has ruled in Fluidmaster, Inc. v. Fireman’s Fund Ins. Co., No. GO55468 (Cal. App. June 26, 2018)(unpublished) that a trial court should reconsider its decision to disqualify the Crowell & Moring law firm in light of the factors that the Court of Appeal declared in Kirk v. First American Title Ins. Co., 183 Cal. App. 4th 776 (2010) should apply to cases where law firms are claimed to have a conflict of interest based upon the employment of an associate lawyer who departs the firm during the course of the dispute.

ILLINOIS  Discovery

On remand from an earlier opinion that had revived the insured’s suit against its insurance broker for failing to obtain D&O coverage from Chartis that was as broad as the policy it had formerly obtained from Chubb, the Appellate Division has ruled in Robert J. McCormick Foundation v. Arthur J. Gallagher Risk Management Services, Inc., 2018 IL App (2d) 170939 (Ill. App. Ct.  July 20, 2018) that the “common interest” exception to the attorney-client privilege that the Illinois Supreme Court recognized in Waste Management required the insureds in this case to turn over memoranda that their defense counsel in the underlying securities.

MASSACHUSETTS  Conflicts of Laws/Bad Faith

A federal magistrate has issued a report in Chesebro v. Commerce Ins. Co., No. 17 12074 (D. Mass. July 18, 2018) has issued a report recommending that a homeowner's statutory bad faith claim pursuant to Massachusetts General Law Chapter 93A be dismissed as the insured property in Maine giving rise to the bad faith claims against Commerce are subject to Maine law.  Magistrate Cabell rejected the insured's argument that there was an express designation of Massachusetts law with respect to these claims in light of language on the Commerce web site that the insured used for tendering this first-party claim declaring that the insured's use of the web site was subject to various terms and conditions pursuant to Massachusetts law.  The court observed that the web site was one of many different options whereby an insured could present a claim and did not control the applicable law with respect to the interpretation of the policy or any claimed misconduct on the part of the insurer in its adjustment of this first-party loss.  Using a Restatement analysis, the court ruled that Maine had the most significant relationship with the insured loss.  Bill Schneider of MM represents Commerce in this matter.

NEW JERSEY  Duty to Defend/Mold/Consent Judgments

The Appellate Division has ruled that a Superior Court judge erred in ruling that a clinic’s liability insurer had a duty to defend allegations that a nurse was injured due to exposure to mold and other conditions in the building’s HVAC system.   Despite the fact that Selective’s policy had a mold exclusion with “anti-concurrent” language, the Appellate Division ruled in Wear v. Selective Ins. Co., A-5526-15T1 (App. Div. July 20, 2018) that the trial court’s ruling that Selective owed a defense was in error, not because of the exclusion’s applicability, but because Burd v. Sussex precludes an insurer from having to defend where the claims are in dispute.   Under such circumstances, the duty to defend is transformed into a duty to reimburse if coverage is, in fact, found to apply.  The Appellate Division did rule, however, that a $300,000 consent judgment that Selective’s insured had negotiated to resolve the underlying claim was not enforceable pursuant to Griggs v. Bertram as the parties had colluded to assign the entire loss to non-mold causes to avoid the effect of the exclusion.

NEW YORK  Reinsurance/Follow the Fortunes/Custom and Practice

Despite the absence of any express “follow the fortunes” or “follow the settlements” language in the facultative reinsurance certificates that Munich Re issued to Utica Mutual, Judge Sannes has ruled in Utica Mut. Ins. Co. v. Munich Reinsurance America, Inc.,  No. 12-196 (N.D.N.Y. June 27, 2018) that Utica Mutual will not be barred from presenting evidence that such undertakings may be implied in keeping with the custom and practice of the reinsurance industry.   While denying Munich Re’s motion in limine to preclude Utica Mutual’s custom and practice experts from testifying at trial, District Court rejected Utica Mutual’s contention that it need only prove that these doctrines were a “generally understood” aspect of reinsurance.   Rather, Judge Sannes ruled that New York law required that evidence that these practices were so “fixed and invariable” in the industry as to be an implied term of the parties’ agreement.   The court also denied Munich Re’s effort to preclude expert testimony on the reasonableness of Utica’s coverage determinations and the availability of coverage for DJ expenses as being premature.

PENNSYLVANIA  Procedure/Interlocutory Appeals

The Pennsylvania Supreme Court has ruled 5-2 that it will not agree to hear an insurer’s appeal of a “trigger of coverage” ruling in an environmental liability case until such time as the insured’s counter-claims for breach of contract and declaratory relief are resolved.   Notwithstanding its 2000 opinion in Wickett declaring that interlocutory orders declaring the rights of a party are immediately appealable, the majority found in Pennsylvania Manufacturers Assoc. Ins. Co. v. Johnson Matthey, Inc., No. 24 MAP 2017 (Pa. July 18, 2018)(per curiam) that it lacked jurisdiction to hear PMA’s appeal because the lower court’s order adopting a continuous injury trigger for pollution claims had merely narrowed the dispute between the parties and had not fully resolved their dispute.  Writing in dissent, Chief Judge Saylor declared that Wickett was directly on point and that if the majority intended to overruled Wickett it should say so.

TEXAS  Absolute Pollution Exclusion/”Waste Materials

Applying Texas law, Judge McBride has ruled in Great American Ins. Co. v. Ace American Ins. Co., 2018 WL 3370620 (N.D. Tex. July 10, 2018) that a quarry operator’s discharge of rock “fines” into a nearby stream in violation of the New Jersey Water Pollution Control Act and similar statutes arose out of the discharge of “waste materials and are therefore subject to  absolute pollution exclusions.  While questioning whether there was any conflict between the law of New Jersey and Texas in this case, the ruled that Texas law should apply as that was the location where the policy was issued to the insured’s parent company (U.S. Concrete).  The court ruled that the rock fines had  commercial value did not change the fact they had been discharged as “waste.”


* * * Inside the Insurance Industry * * *

The Florida Property & Casualty Association has challenged a recent Weiss Ratings report that gave ten Florida property insurers a rating of “D” or worse and described them as unprepared for the 2018 hurricane season.

* * * Across the Bar * * *

The exodus from Quinn Emanuel continues.  Eighteen more QE lawyers followed Sheila Birnbaum to Dechert LLP last week.

 * * * Cyber News * * *

 Willis Towers Watson’s 2018 Management Liability report of risks facing Directors and Officers lists cybersecurity claims as the greatest concern of policyholders followed by claims by employees and regulatory and enforcement risks.

* * * Mark Your Calendars * * *

Anderson Kill has scheduled its annual Policyholder Advisor Conference for November 1 at its offices in New York City.

 * * * Opioid Claims * * *

 The State of Kentucky has added Mallinckrodt LLC to its opioid recovery litigation, alleging that it misrepresented the qualities of its pain-killing drugs.

Endo International and Mallinckrodt have sought to deflect liability that they may face in Tennessee opioid litigation by fling third party claims against on-line retailers of drugs, including RX.Cash.Biz.

 * * * Climate Change* * *

The City of Baltimore has sued BP, Chevron, Exxon Mobil and two dozen other energy producers, claiming that they have knowingly damaged the environment by contributing to climate change.

 * * * Asbestos * * *

The kerfuffle following the Trump-Putin summit in Helsinki has obscured the latest alarming news out of the former Soviet Union:  the decision of Russian mining company Uralasbest to market its chrysotile asbestos products with packaging depicting a drawing of President Trump and the slogan “Approved by Donald Trump, 45th President of the United States.”  In a 1997 book, Trump once defended asbestos against a “mob-led conspiracy” to generate more asbestos removal business.

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