Sep 6 2018

MM Insurance News 9/7/18

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THIRD CIRCUIT    Procedure/Jurisdiction/Dram Shop Claims (PA)

The Third Circuit has ruled that the statutory exception to the prohibition against resident defenants removing a case to federal court on the basis of diversity jurisdiction if they act before they are "properly joined and served" applies even though defense counsel had previously promised to accept service and then stalled in doing so until removal was completed.  Further, the court ruled in Encompass Insurance Company v. Stone Mansion Restaurant, Inc., No. 17 1479 (3rd Cir. Aug. 22, 2018) that the Pennsylvanie District Court had erred in refusing to allow Encompass to pursue a Dram Shop Act based on an assignment of the claims of motorists who were involved in a fatal crash after drinking at a local country. Whereas the District Court had ruled that the Pennsylvania dram shop statute did not apply to an insurer/assignee, the Third Circuit ruled nothing in Section 4 497 shields liquor licensees from responsibility for contribution among joint tortfeasors for the harm caused to protected third-parties.

DELAWARE     Bad Faith/Property Insurance

A Delaware court ruled in Slaubaugh Farm, Inc. vs. Farm Family Casualty Ins. Co., 2018 WL 3559252 (Del. Super. Ct. July 23, 2018) that a property insurer’s failure to conduct a forensic investigation of the collapse of the insured's poultry house following a heavy snowstorm was not bad faith inasmuch as the insurer had relied on an engineer's report in concluding that the collapse was caused by conditions not covered under Farm Casualty's policy.

ILLINOIS   Bad Faith/Jury Trials

The Appellate Court has ruled in Hana v. Illinois State Medical Inter-Insurance Exchange Mutual Ins. Co., 2018 IL App (1st) 162166 (Ill. App. Aug. 28, 2018) that a multi-million bad faith verdict against a professional liability insurer must be set aside because  the trial judge erroneously failed to seat a 12 person jury as required by the Illinois state Constitution.  The Appellate Court also stated that the trial judge erred in allowing the jury to hear testimony concerning the insurer's settlement discussions as the conduct in question occurred after the verdict had already been rendered.  The First District also ruled that the trial judge had not used the current version of Illinois pattern jury instructions for bad faith claims, which requires that in order for an insurer to be liable for failing to make an offer there must be "a reasonable probability of recovery in excess of policy limits and a reasonable probability of a finding of liability against the insured.”

MISSISSIPPI   Conflicts of Law/Auto

The Mississippi Supreme Court has ruled in Smith v. Church Mut. Ins. Co., No. 201-IA-1060 (Miss. Aug. 2, 2018) that Tennessee law should apply to the issue of whether an auto policy issued in Tennessee and insuring vehicles registered in Tennessee should provide UIM coverage for an accident in Mississippi.  The extent of tort liability, however, including whether recovery may be had for an unborn child who died in the crash, is subject to Mississippi law.

OHIO    Asbestos/Equitable Contribution/Allocation

The Ohio Court of Appeals has ruled that a trial court did not err in concluding that National Union owed contribution to other insurers that had provided coverage for a defendant in numerous asbestos bodily injury claims.  The court ruled in Resco Holdings, LLC v. AIU Insurance Co., 2018-Ohio-2844 (Ohio. App. July 19, 2018) that it was appropriate to assign National Union the same percentage as Travelers was paying under the negotiated cost share agreement since both carriers were on the risk for two years.   National Union had argued that it had not been a party to the agreement and should not be bound by what other parties had negotiated.  The court also rejected National Union’s argument that the trial court had failed to account for the longer period of time that The Hartford and Wausau had been on the risk, observing their earlier policies pre-dated most of the asbestos injuries alleged in the underlying litigation. Finally, the Court of Appeals agreed with the trial court that The Hartford and Wausau could collectively obtain contribution as there is no Ohio law prohibiting a court from allowing multiple insurers from jointly prosecuting a claim for equitable contribution. 

VERMONT    Bad Faith

The Vermont Supreme Court has dismissed an accident victim’s claim that Travelers violated the Insurance Trade Practices Act by failing to make a more generous settlement offer and therefore owes damages pursuant to the state’s Consumer Protection Act.  In Messier v. Bushman, 2018 VT 93 (Vt. Aug. 25, 2018), the court ruled that there is no private right of action for violations of the ITPA, nor was the claimant a “consumer” who could sue under the CPA since the motorist had not purchased anything from Travelers.


 * * * Inside the Insurance Industry * * *

On the eve of a trial that was set to begin in federal court in Illinois this week, State Farm has reportedly agreed to pay $250 million to settle claims in Hale v. State Farm Mut. Auto Ins. Co., No. 12-660 (S.D. Ill.) that State Farm violated RICO by secretly recruiting and funding the campaign of Lloyd Karmeier in 2004 who was decisive vote in the Illinois Supreme Court’s 2005 ruling in Avery v. State Farm to set aside the $1 billion bad faith award against State Farm.

Chief Commercial Officer Vincent Vandendael is the latest high-ranking Lloyd's official to leave.  Vandendael will reportedly assume responsibility as the new CEO of Everest Insurance international in early 2019.

Lloyd’s has given the green light to its syndicates to insure pot businesses north of the border when the Canadian Cannabis Act goes into effect next month.

Bostonians returned from their Labor Day weekend to the shocking news that they are no longer the worst drivers in the U.S.  According to Allstate’s latest survey, the residents of Baltimore now share that dubious distinction.

* * * Restating the Law * * *

DRI is presenting a pair of 90 minute webinars this month analyzing the key provisions of the new ALI Restatement of Law, Liability Insurance.

On September 11, Bill Barker (Dentons), Laura Foggan (Crowell & Moring) and  Doug Richmond (Aon) will provide an overview of this Restatement, focusing on tripartite, claims handling and bad faith issues that it presents. 

On September 25, Mike Aylward (MM), Tom Chaseman (AIG) and Joanne Locke (Liberty Mutual) will address the Restatement’s controversial provisions for policy interpretation as well as substantive coverage issues, such as coverage for intentional acts, long-term claim covers and excess exposures.

The cost of registration for each webinar is $150 for DRI members/$180 for non-members, although there is a $50 discount if you register for both programs.

* * * California Burning * * *

The California legislature voted last Friday to approve legislation that will permit Pacific Gas & Electric to require ratepayers to share costs that it expects to face for causing some of the state’s recent fires.  Governor Jerry Brown is expected to sign it.

* * * Construction Claims * * *

A narrowly divided Supreme Judicial Court of Massachusetts ruled last week 4-3 that the state’s six year statute of repose for construction claims extended to allegations that a building contractor violated the Massachusetts Consumer Protection Act by failing to comply with building code requirements in its renovation of the plaintiff’s home. 

Writing for the majority in Bridgwood v. A.J. Wood Construction, Inc., (Mass. Aug. 29, 2018), Justice Cypher rejected the plaintiff’s argument that 93A liability is sui generis and therefore not subject to the statute’s bar against tort claims against contractors, declaring that the gist of the plaintiff’s action was indistinguishable from action in negligence and “sufficiently tort-like” to be subject to this statute of repose.  

Writing for the dissenters, Chief Justice Gants contended that the claim in this case was timely as having been filed within the four year limitations period from the time when the plaintiffs discovered that their property had been damaged.  Justice Gants also argued that this statute of response could not have been intended to apply to the Consumer Protection Act, since Chapter 93A was not enacted until several years later.

* * * Across the Bar * * *

Best’s Lawyers has named MM partner Brent Tingle as the medical malpractice lawyer of the year in Boston.  In addition to Tingle, Best’s named a dozen other MM partners to this year’s list of outstanding lawyers.

* * * Cyber News * * *

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 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.

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