Aug 23 2018

MM Insurance News 8/24/18

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FIRST CIRCUIT    Professional Liability  (ME)

The First Circuit has ruled that a malpractice insurer had no duty to defend a law suit in which a doctor’s spouse claimed that the insured had illegally obtained her medical records to harass her.  In Medical Mutual Liability Ins. Co. of Maine v. Burka, No. 17-1872 (1st Cir. Aug. 10, 2018), the First Circuit agreed with the Maine District Court that the doctor’s conduct did not involve the rendering of or failure to render “professional services” since there was no doctor-patient relationship between them.

CONNECTICUT    Sexual Assault Exclusion

Judge Bolden has ruled that a liability insurer was not obliged to pay a $195,000 judgment that a woman obtained against a massage therapist who sexually assaulted her in light of an exclusion for sexual assaults and molestation.  Despite the assignee’s claim that coverage was required for her allegations that the insured’s assault was negligent, the District Court ruled in Wohlforth v. American Cas. Co. of Reading, PA, No. 17-1247 (D. Conn. Aug. 17, 2018) that such a “masquerade” did not avoid the plain effect of the exclusion.  Furthermore, even though the exclusion in question required CNA to defend sexual assault claims until the insured was convicted, the court that no defense was required here as Wohlforth had not asserted a claim until after the massage therapist was convicted of assault.

FLORIDA    Bad Faith

The Fourth District of the Florida District Court of Appeal issued two recent rulings setting aside bad faith verdicts.  In Citizens Property Ins. Corp. v. Mendoza, No. 4-D-16-1302 (Fla. DCA4 July 5, 2018), the court set aside a bad faith verdict against a homeowner’s insurer, finding that the trial court’s jury instructions had focused on the misconduct of the adjuster instead of the scope and effect of a policy exclusion for water intrusion losses.  In Homeowners Choice Property & Cas. Ins. Co. of America v. Kuwas, No. 4-D-17-2383 (Fla. DCA4 July 5, 2018), the court ruled that the insured’s counsel’s repeated statement that the insurer was “playing the odds” in hoping that no claims would be made was improper and grounds for a new trial. 

GEORGIA    “Other Insurance”/Excess/Public Policy

On a certified question from a federal district court, the Georgia Supreme Court has ruled that the conventional rules for interpreting conflicting “other insurance” clauses apply even where one clause is contained in a commercial liability insurance policy and the other is set forth in an “inter-local risk management fund.”  In rejecting the Fund’s argument that commercial insurance must always be exhausted before any publicly fund risk management monies are spent, the Supreme Court ruled in National Cas. Co. v. Georgia School Boards Association, S18Q0757 (Ga. Aug. 14, 2018) that the legislature’s enactment of OCGA § 20-2-990, requiring public schools to protect themselves from liability exposure by either purchasing conventional liability insurance or pooling their risks through inter-local risk management agreements, did not create any public policy requiring courts to deviate from conventional rules of policy interpretation and that, in fact, creating such an exception would violate the “bedrock public policy of freedom of contract.” 

KENTUCKY    “Occurrence”

The Kentucky Supreme Court ruled 4-2 in American Mining Ins. Co. v. Peters Farms, LLC, 2017-SC-66 (Ky. Aug. 26, 2018) that damage that resulted from mining on property that the insured mistakenly believed he was authorized to undertake did not constitute an accidental ”occurrence” under a CGL policy.

NEVADA    Crime Coverage

A federal District Court has ruled in CP Food and Beverage, Inc. v. U.S. Fire Ins. Co., No. 16 2421 (D. Nev. Aug. 6, 2018) the allegations that customers of a Las Vegas strip club were defrauded by club employees who used customer credit cards multiple times for the same bill and charged customers for bottles of alcohol that they were never served, failed to trigger coverage under the insured's crime policy.  Although the policy covered loss or damage to money "resulting directly from theft committed by an employee", Judge Gordon declared that the policy did not apply since there had been no theft of the insured's funds. 


* * * Inside the Insurance Industry * * *

 – QBE North America has sold its personal lines business to Liberty Mutual.

 – John P. Repko is joining AIG as its new chief information officer, replacing Martha Gallo.

 – European insurers, notably Swiss Re and Allianz, may face as much as $685 million in claims arising out of last week’s collapse of the Morandi Bridge in Genoa.

 – Although an influx of capital from ILS continues to depress reinsurance pricing, W.R. Berkley CEO and President Robert Berkley has told investors that while “on the domestic front, property remains very challenging… we continue to be cautiously optimistic that the casualty and professional markets are showing early modest signs of improvement.”

* * * New Coverage Litigation * * *

 St. Paul has filed a new suit in Virginia, alleging in St. Paul Fire & Marine Ins. Co. v. Lumber Liquidators, Inc., No. 18-2820 (E.D. Va.) that its 2010-2015 excess policies do not cover $36 million in settlements that a lumber company paid to resolve claims that its wood flooring products contained formaldehyde.

* * * IBNR Dept. * * *

Bailey Finch of Columbus, Mississippi has sued Pepperidge Farm in the federal district court seeking damages for salmonella that she allegedly contracted after eating Goldfish crackers.  Pepperidge Farm recalled millions of packages of its iconic crackers on July 23.

* * * Across the Bar * * *

Insurer nemesis David Elkind is returning to Anderson Kill after a three year stint at the Lowenstein Sandler firm.

* * * MM in the News * * *

Best’s Lawyers of America has included Boston partner Michael Aylward in its  2018-2019 edition.

* * * Mark Your Calendars * * *

The Environmental and Emerging Claim Manager Association (EECMA) and AIRROC are co-hosting a symposium on the scientific, legal and insurance coverage implications of climate change at the Cira Centre in Philadelphia on September 6.

The American College of Coverage and Extra-Contractual Counsel will be holding its annual legal symposium at the American University law school in Washington, D.C. on October 26.

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