Aug 29 2018

MM Insurance News 8/31/18

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NOTEWORTHY NEW RULINGS

SIXTH CIRCUIT    Property Insurance/Criminal Acts/Marijuana (MI)

The U.S. Court of Appeals for the Sixth Circuit has ruled that a Dishonest or Criminal Acts exclusion precludes coverage for damage to a commercial landlord’s property that was caused by a tenant’s cannabis growing operations.  The court ruled last week in K.V.G. Properties, Inc. v. Westfield Ins. Co., No. 17-1421 (6th Cir. Aug. 21, 2018) that the tenants had committed a criminal act, citing both allegations in the landlord’s civil suit against the tenants and the fact that the tenants had been evicted following a raid by federal agents.

ALABAMA   Late Notice/Construction/”Employee” Exclusion

A federal district court has ruled in Evanston Ins. Co. v. Yeager Painting, LLC, 2018 U.S. Dist. LEXIS 130316 (N.D. Ala. Aug. 3, 2018) that a liability insurer was relieved of any duty to defend a personal injury suit against a contractor by reason of the insured’s seven month delay in notifying Evanston of the action.  Although the insured had given timely notice of the original accident, the court ruled that the insured had not given notice of the ensuing suit “as soon as practicable.”  Under Alabama law, notice must be given within a reasonable time without regard to whether the late notice has prejudiced the insurer’s ability to investigate or defend the case.  In any event, the court found that loss was excluded as involving bodily injury to “any contractor, self-employed contractor, and/or subcontractor, or an “employee”, “leased worker”, “contract worker”, “temporary worker” or “volunteer worker” of same hired by you or on your behalf.”

CONNECTICUT   First Party/Appraisal

A federal district court has ruled in Discuillo v. Allstate Ins. Co., No. 17-234 (D. Conn. Aug. 3, 2018) that a homeowner waived her right to seek appraisal of valuation of her claim given the fact that the insured had participated in discovery in this coverage litigation for a year before demanding appraisal.

ILLINOIS   Rescission/Material Misrepresentation

The Appellate Division has ruled that an insured's failure to disclose the existence of a separate vehicle in his parents' household was not a "material misrepresentation" warranting rescission of the policy pursuant to Section 154 of the Illinois Insurance Code.  As with its earlier opinion in Beltran, the First District declared in Direct Auto Insurance Company v. Koziol, 2018 IL App. (1st) 171931 (Ill. App. Aug. 3, 2018), that the 35 percent increase in premium that would have resulted had the insured been made aware of these facts was not material and that Direct Auto had failed to present any evidence that the existence of this other vehicle increased the risk that it was insuring.  Despite the insured's failure to disclose the existence of another vehicle in his parents' household, the court found that there was no evidence that the insured's parents drove this car nor was there any evidence that he drove their car.  More fundamentally, the court ruled that Direct Auto had not presented evidence that it would not have issued the policy had it been aware of this additional vehicle and that the mere fact that it would have charged some additional premium for this coverage was not a material misrepresentation as contemplated by by Section 15/154 of the Illinois Insurance Code.

MAINE   Expected or Intended

The Maine Supreme Judicial Court has ruled that a trial court erred in declining to find that the insured’s son had not expected to cause bodily injuries when he assaulted a fellow class-mate, punching him repeatedly.  Whereas the trial court had found that the insured had a subjective intent to cause injury but had not anticipated the severity of the injuries suffered, the court declared in Vermont Mut. Ins. Co. v. Ben-Ami, 2018 ME 125 (Me. Aug. 21, 2018) that this pre-meditated assault clearly involved a subjective intent to injure, even if the court refused to agree with Vermont Mutual that an intent to injure should be presumed in cases of this sort.  Two justices signed a concurring opinion asserting that an assault of this sort was inherently injurious and not insurable.

NEW JERSEY    Sexual Abuse/Prior Knowledge Exclusion

A federal court has ruled in Montville Township Board of Education v. Zurich American Ins. Co., No. 16-4466 (D.N.J. Aug. 21, 2018) that a policy’s “abusive acts” endorsement does not cover allegations that a school district covered up a teacher's sexual misconduct and agreed not to tell future employers about his acts, thus allowing the teacher to move to a private school where he molested other students, in light of a prior knowledge exclusion.  Despite the insured's argument that its Board did not have specific knowledge of acts that would meet the definition of "an abusive act" under the policy, Judge McNulty pointed to allegations in the underlying complaint that the insured was on notice of the teacher's inappropriate abusive and sexual conduct with the infant students and failed to report it to local authorities.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

The Hartford Financial Services Group has agreed to buy The Navigators Group for approximately $2.1 billion.

Bermuda-based Aspen Insurance announced this week that it is being taken private by various funds associated with Apollo Global Management, a private equity firm.

* * * New Coverage Litigation * * *

A contractor’s liability insurer is claiming in Phoenix Ins. Co. v. Gallagher Asphalt Construction, No. 18-11687  (D. Mass.) that it does not owe coverage for an $10 million claim involving allegedly defective concrete at a CSXI intermodal rail complex in Worcester, Massachusetts.

* * * MM in the News * * *

MM Boston Partner Grace Garcia is the Massachusetts Bar Association’s new Secretary.  Congratulations, Grace!

* * * Cyber Talk * * *

Here’s the latest newsletter from our cyber-practice group.

Boston MM partners Michael Aylward and Steve Bolotin will be delivering a lecture on liability, risk management and insurance coverage issues arising out of cyber-risks at the IADC’s regional meeting in Boston on September 25.

* * * 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 DRI Insurance Law Committee is presenting a special “boot camp" for young lawyers and claims professionals in Chicago on September 14.

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.  The event is open to all.

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