Oct 3 2018

MM Insurance News 10/5/18

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NOTEWORTHY NEW  RULINGS

CALIFORNIA    Auto/Limits/”Loss of Consortium” Claims

The Court of Appeal has ruled that a wife’s claim for loss of consortium is subject to the same “per person” limit as the injuries suffered by her husband in an auto accident.  In keeping with earlier precedents interpreting similar language, the Third District ruled in Jones v. IDS Ins. Co., C084065 (Cal. App. Sept. 25, 2018) that this conclusion was mandated by the policy’s coverage for “damages for bodily injury, including damages for care and loss of services” even though the policy did not expressly refer to the aggregation of consortium claims as such.

CALIFORNIA    Bad Faith

The California Court of Appeal has overturned a lower court’s order enjoining the state Insurance Commissioner from enforcing certain regulations adopted to enforce the state Unfair Insurance Practices Act.  In Pacificare Life & Health Ins. Co. v. Jones, G053914 (Cal. App. Sept. 10, 2018), the Fourth District refused to find that regulations permitting insurers to be sued under Section 790.03(h) for a single unfair act was inconsistent with the text or legislative intent underlying the UIPA.   Notwithstanding “negative commentary” with respect to this issue in the California Supreme Court’s decision in Royal Globe, the Court of Appeal found that Royal Globe had not overruled this aspect of the Supreme Court’s earlier decision in Moradi-Shalal.  In rejecting the insurer’s contention that an “unfair claims settlement practice” must “refer to an insurer’s pattern of conduct, rather than to any individual act. In the context of the UIPA, and section 790.03 specifically,” the Fourth District held that “a prohibited “practice” is an activity that occurs within the insurance industry generally. An insurer engages in such a prohibited “practice” by committing the described act once or more than once.”

CONNECTICUT    Commercial Auto/MCS 90/Late Notice

Judge Shea has rejected an auto insurer’s argument that the MCS 90 endorsement does not create coverage for accidents arising solely out of travel within a given state.  Although the Federal Trade Commission has limited the scope of MCS 90 endorsements to interstate travel and although most courts have interpreted this regulation as being applied on a "trip pass specific" basis,  the court ruled in Veillux v. Progressive Northwestern Ins. Co., No. 16-2116 (D. Conn. Sept. 16, 2018) that state regulators have expanded the scope of the endorsement to include travel within Connecticut for any truck exceeding 18,000 pounds, as in this case.  Further, the court found that there were at least genuine issues of fact precluding a determination that the policy's hired auto coverage endorsement did not apply.  The court also found issues of fact with respect to whether Progressive had received timely notice and that, in any event, Progressive had failed to establish that it had been materially prejudiced as a result of the apparent 14-month delay in receiving notice. 

CONNECTICUT    E&O/”Damages”/Prior Knowledge Exclusion

Judge Shea has granted summary judgment to a professional liability insurer on the basis of a “prior knowledge” exclusion, ruling in Continental Cas. Co. v. Parnoff, No. 17-769 (D. Conn. Sept. 12, 2018) that a dispute over an attorney’s legal fees fell within an express exception to the policy’s grant of coverage for “damages”.

FLORIDA    Cyber/Coverage B/”Publication”

Judge Mendoza has ruled in St. Paul Fire & Marine Ins. Co. v. Rosen Millenium, Inc., No. 17-540 (M.D. Fla. Sept. 28, 2018) that Travelers did not owe coverage for allegations that a security company failed to prevent fraudsters from installing malware in a hotel chain’s claim computer system that resulted in credit card information being stolen.  As with Innovak Int’l, Ins. v. Hanover Ins. Co., 280 F.Supp. 3d 1340 (M.D. Fla. 2017), the District Court ruled that the policy’s coverage for publication of material that invades a person’s right of privacy was not triggered because a third party, and not the insured, had “published” the PPI.

ILLINOIS    First Party/”Water Below the Surface of the Ground”

The Appellate Court has ruled in Central Illinois Compounding, Inc. v. Pharmacists Mutual Ins. Co., 2018 IL. App. (3d) 170809 (Ill. App. Ct. Sept. 6, 2018) that a first party exclusion for loss to the insured premises caused by "water below the surface of the ground" precluded coverage for a flood that resulted from nearby boring operations by a contractor that damaged the water service line a few feet from the insured premises.  The Third District rejected the insured’s argument that this exclusion only applied to water damage that occurred below ground.

The Appellate Court ruled that this construction of the policy was contrary to its grammatical structure, as its text made clear that the exclusion applied to the area where the release of water had originated and was not restricted to loss or damage below the surface of the ground.  The court also rejected the insured's argument that water that seeped up through the foundation of the insured's property was no longer "water below the surface of the ground."

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

Lloyd’s announced this week that it returned to profitability in the first half of 2018, earning $800 million.

Business Insurance reports that attendees at last week’s Specialty Insurance Association’s Annual Marketplace in Atlanta were bullish on the near term prospects for excess and surplus lines insurers.

* * * Data Security * * *

Even as state legislatures and Insurance Departments are moving forward with efforts to set data security requirements for insurers, Congress is taking steps to preempt these efforts with a national standard for data security.  On September 13, the House Committee on Financial Service voted 32-20 to approve the Consumer Information Notification Requirement Act (HR 6743) that would amend Section 507 of the Gramm Leach Bliley Act to instruct federal regulators to implement appropriate standards for domestic insurers and reinsurers.  The bill, which is expect to proceed to the House floor later this year, does not prevent state authorities from implementing regulations of their own but does require that any state rules must be consistent with these federal regulations.    HR 6743 appears to be a response to the growing effort among state insurance regulators to protect consumers and policyholders against cyber-attacks on domestic insurers.   In 2017, the National Association of Insurance Commissioners (NAIC) promulgated an Insurance Data Security Model statute that was modeled in part on New York’s cyber-security regulations. In May 2018, South Carolina became the first state to adopt a cybersecurity law for insurers.

* * * IBNR Dept. * * *

In what may be the first prosecution of a DUI violation against the operator of an electric scooter, a Los Angeles man has been fined $550 and ordered to pay restitution for colliding with a 64-year-old pedestrian on a sidewalk while intoxicated.

* * * New Coverage Litigation * * *

A liability insurer has filed suit in Colorado, alleging in First Mercury Ins. Co. v. Bridge Diagnostics, Inc., No. 18-2429 (D. Colo.) that it does not owe coverage for an engineering company that has been blamed for the fatal collapse of a pedestrian bridge in Miami last year.

A high rise property developer has sued Travelers, alleging in Pittsfield Development LLC v. Travelers Ind. Co., No. 18-6576 (N.D. Ill.) that it was underpaid for property damage due to burst pipes based upon Travelers’ erroneous determination that eight of the nine damaged floors were vacant at the time and therefore could only be covered on a “actual cash value” basis rather than for replacement cost.

* * * Mark Your Calendars * * *

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.

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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