Sep 20 2018

MM Insurance News 9/21/18

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THIRD CIRCUIT    Bad Faith/Fee Awards (PA)

The Third Circuit has adopted the view of several other circuits that courts are under no duty to ferret out the reasonable amount of fees owed in cases where the claimant’s fee demand is outrageous.  Rather, the court ruled in Clemens v. New York Central Mutual Fire Ins. Co., No. 17-3150 (3d Cir. 2018 12 2018), No. 17-3150 (3d Cir. Sept. 12, 2018) that "where a fee shifting statute provides a court discretion to award attorney's fees, such discretion includes the ability to deny a fee request altogether when, under the circumstances, the amount requested is ‘outrageously excessive.’”  As a result, the Third Circuit tossed out an insured’s claim for $900,000 in attorneys fees for a UIM claim for which the jury had only awarded $100,000 in punitive damages under Section 8371.   Apart from the disproportionate size of the fee claim, the Court of Appeals took note of the fact that it was not supported by contemporaneous time records and that the description of tasks was remarkably non-specific and vague (e.g. "communicate-other").  The court was also skeptical of counsel's claim that she had spent 562 hours for "trial preparation" with no further description of the nature of the work that the attorney allegedly performed.

EIGHTH CIRCUIT    Malicious Prosecution/Intentional Acts Exclusion (CO)

The Eighth Circuit has ruled that a Nebraska District Court erred in ruling that a police officer's evidence tampering was covered as being akin to a claim for “malicious prosecution.”  In Sampson v. St. Paul Fire & Marine Ins. Co., No. 17-1104 (8th Cir. Sept. 11, 2018), the Court of Appeals declared that the court should have found that the officer’s fabrication of evidence to manufacture a murder conviction was subject to a policy exclusion for “criminal, dishonest, fraudulent, or malicious acts.”  The court ruled that evidence tampering is not the same as the tort of malicious prosecution.  Nor did giving effect to this exclusion render illusory the policy’s coverage for intentional torts such as false arrest and malicious prosecution because the policy was intended to cover acts of “general intent” but excluded instances of “specific intent.”  

CALIFORNIA    Rented Property Exclusions

A federal district court has ruled in Nationwide Agribusiness Insurance v. George Perry & Sons, Inc., No. 17 1910 (E.D. Cal. Sept. 5, 2018) that summary judgment cannot enter for the liability insurer of a farmer for the death of millions of bees that had been provided to him to pollinate his crops owing to questions of fact with respect to the applicability of an exclusion for rented property as well as whether the bees were in the farmers’ exclusive "care, custody or control" when they were killed by the application of pesticides nearby.

CONNECTICUT    First Party/Crumbling Foundation Claims

A federal judge has ruled that a homeowner whose foundation is crumbling due to impurities in the concrete used to build it cannot recover, even under policies lacking “abrupt” collapse language.  In Courteau v. Teachers Ins. Co., No. 16-680 (D. Conn. Sept. 5, 2018), Judge Shea ruled that the earlier policies did not apply due to exclusions for “cracking” or for “defects” in materials used to construct the premises.   The court rejected the insured’s argument that “cracking” only applied to natural settling of a home.  Further, the court ruled that there was no “abrupt” collapse under a later policy, nor were the insured unable to occupy the premises. 

KANSAS    Auto/PIP Benefits/Waiver

The Kansas Supreme Court has ruled in McCullough v. Wilson, No. 115, 067 (Kan. 2018) that K.S.A. 40-3113(a)(c) allows an auto insurer to pursue claims against a tortfeasor if a recipient of PIP benefits fails to pursue such a claim with 18 months of his or her accident.  The court ruled that such failure shall operate as an assignment to the insurer of any cause of action which the injured person may have against such tortfeasor for the purpose and to the extent of recovery of damages that are duplicative of the PIP benefits received. 

MICHIGAN     Bad Faith

A federal district court has refused to dismiss an insured’s claim that its liability insurer acted in bad faith in exhausting its policy limits by settling product liability claims against an additional insured, leaving the named insured unprotected for a new group of claims involving allegedly defective artificial knee joints.   In declining to grant judgment on the pleadings to XL, Judge Maloney ruled in Stryker Corp. v. XL Insurance America, Inc., No. 17-66 (W.D. Mich. Aug. 17, 2018) that although issues of bad faith had been mentioned in earlier proceedings, Stryker was not collaterally estopped to bring this new suit against XL since no court had ruled on a bad faith claim to date.  Further, while acknowledging that no Michigan court has ever ruled that it is bad faith to pay to protect one insured while leaving another insured unprotected, the Court declared that such an obligation could be inferred from the implied covenant of good faith and fair dealing.  Accordingly, the court ruled that Stryker could proceed with an argument that XL had acted unreasonably and in breach of its discretionary right to settle.  The court also refused to allow XL to argue that Stryker should not be able to sue it for these sums because excess insurance should have been available to it from TIG but for the fact that, as the Sixth Circuit recently ruled, Stryker waived its right to access this excess coverage due to its failure to obtain TIG's consent before settling. 

SOUTH CAROLINA    Guaranty Associations/Statutory Offsets

The South Carolina Supreme Court has ruled in Buchanan v. South Carolina Property and Casualty Insurance Guaranty Association, No. 27840 (S.C. Sept. 5, 2018) that the provisions of the South Carolina Property and Casualty Insurance  Guaranty Association Act dealing with statutory offsets are ambiguous.  The Supreme Court agreed with the Court of Appeals that settlement amounts be set off from the total amount of an injured party's damages rather than from the $300,000.00 statutory cap.


* * * Inside the Insurance Industry * * *

A new report from Willis Towers Watson finds that pricing for commercial insurance increased 3% during the second quarter of 2018.

* * * Asbestos * * *

Duro Dyne Corporation, a sheet metal manufacturer that had become a target of asbestos claimants, filed for Chapter 11 protection in New Jersey last week.

* * * A Bad Wind * * *

Even as Hurricane Florence moved north from the Carolinas, CoreLogic has predicted that the storm may produce resident and commercial losses of between $3 billion and $5 billion.  S&P Global Ratings predicted that Florence will not have a major impact on reinsurers, observing:  “for losses in the range of $8 billion-$20 billion, we believe Florence will be an earnings event and not a capital event, as the combined earnings for U.S. insurance and the global reinsurance sectors will be sufficient to absorb the total year-to-date natural catastrophe losses.”

* * * Restating the Law * * *

The second of this month’s DRI webinars on the insurance Restatement is scheduled for 1 p.m. Eastern on September 25.  Michael 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.  

Here’s a link to the written materials accompanying the September 25 program.

* * * IBNR Dept. * * *

More than sixty gas explosions rocked communities north of Boston last week, damaging dozens of homes injuring 25 persons, including one fatality, apparently as the result of defective pressure sensors that caused over-pressurization of gas lines in Andover and Lawrence.  Following Thursday’s nearly simultaneous explosion, service was cut off to the area and residents evacuated until gas lines could be cleared.   This is the worst gas explosion since the 2010 incident in San Bruno, California when a PG&E pipeline ruptured, damaging 38 buildings.

* * * Mark Your Calendars * * *

DRI is holding a special one day insurance coverage symposium in Hartford on September 27.  To register, click on this link.  Attendance is free for industry employees.

FETTI is holding its annual claims conference on environmental, toxic tort and related insurance issues in Chicago on September 26-28.

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

Registration is now open for the DRI’s annual Insurance Claims and Practice Symposium at the Sheraton Hotel in New York City on November 27-29.

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