Oct 10 2018

MM Insurance News 10/12/18


TENTH CIRCUIT    E&O/Inter-Related Claims Exclusion (UT)

The Tenth Circuit has ruled in Morden v. XL Specialty Ins. Co., No. 17-4029 (10th Cir. Sept. 10, 2018) that claims that were asserted against a registered investment advisor during the term of XL's financial-services-liability policy were excluded from coverage as involving "inter-related wrongful acts" arising out of similar claims brought by the SEC prior to the issuance of the policy.  The court ruled that the claims brought against the insureds by various clients all shared common characteristics wherein the clients were promised too much, not warned of risks and not informed of conflicts of interest of their advisors who had undisclosed stakes in the ventures.  In finding that the claims by the insured's clients were "inter-related" with the earlier SEC claim, the Tenth Circuit observed that the acts were committed by the same entity against the same victims using the same techniques during the same timeframe. 

CALIFORNIA    Pollution Insurance

A federal district court has ruled in Essex Walnut Owner L.P. v. Aspen Specialty Ins. Co., 2018 U.S. Dist. LEXIS 138276 (N.D. Cal. Aug. 15, 2018) did nto pay for the redesign of a structural support system even though the work was necessitated by soil contamination.  As the court observed, “Although the redesign of the shoring system addressed the instability in the soil that was purportedly due to the debris, the revised shoring system neutralized instability, not contamination of the soil.”

CONNECTICUT    Asbestos/Limits of Coverage/Stub Policies/Statutes of Limitations

In a complex case concerning the claimed coverage obligations of various primary and excess liability insurers for asbestos claims against a pipe manufacturer, Judge Bolden has ruled in First State Ins. Co. v. Ferguson Enterprises, Inc., No. 16-1822 (D. Conn. Sept. 28, 2018) that a sixteen month period issued by Swiss Re and an eleven month umbrella policy issued by American Home only owed a single aggregate limit, rejecting First State’s argument that both insurers an additional limit of coverage for the stub period.  In any event, the District Court ruled that First State’s claims for equitable contribution were untimely whether the applicable statute of limitations was that of California (two years) or Connecticut (one year).

FLORIDA    Liability Insurance/”Prior Knowledge” Exclusion

A Florida judge has ruled in Berkley Assurance Co. v. Expert Group Int’l, Inc.  No. 16-3466 (M.D. Fla. Sept. 27, 2018) a 2015 liability policy did not cover a 2014 Colorado class action suit alleging that the insured had illegally conspired to suppress au pair wages around the country in light of language in the policy confirming that “[a]s of the inception date of this policy, no insured, had any knowledge of any circumstance likely to result in or give rise to a “claim” nor could have reasonably foreseen that a “claim” might likely be made.”  Judge Jung declined to find that the filing of an Amended Complaint during the policy period adding a new claimant was sufficient to avoid this exclusion.

NORTH CAROLINA    E&O/Qui Tam/Fraud Exclusion

A federal district court has ruled in Affinity Living Grp., LLC v. Starstone Specialty Ins. Co., 2018 U.S. Dist. LEXIS 163655 (M.D.N.C. Sept. 25, 2018) that the professional liability insurer of a nursing home operator did not owe coverage for qui tam claims based on the insured’s claimed Medicaid fraud in the operation of various adult care homes.  As the predicate for these claims was dishonest conduct on the part of the insured, the court ruled that coverage was excluded as involving “dishonest, fraudulent, criminal or intentionally malicious act, error or omission by an Insured….”  Further, the court ruled that the claims were subject to an exclusion for any “Claim made by or on behalf of any federal, state or local governmental or regulatory agency or entity, including but not limited to any Claim alleging health care fraud . . . .”

NORTH DAKOTA    Additional Insureds

The Supreme Court of North Dakota has ruled in Borsheim Builders Supply, Inc. v. Manger Insurance, Inc., 2018 ND 18 (N.D. Aug. 25, 2018) that a lower court erred in ruling that a contractor was not entitled to coverage as an additional insured or that coverage was precluded by the CGL policy's "contractual liability" exclusion.


* * * Inside the Insurance Industry * * *

MarketScout reported last week that U.S. commercial property/casualty insurance rates rose 2.5% on average in the third quarter of 2018, led by commercial auto lines (6%) and commercial auto, commercial property and EPL lines (3%).  By contrast, worker’s compensation dropped 3%.

A Florida woman has filed a putative class action against State Farm for robo-calling her despite her “Do Not Call” listing.

* * * Asbestos. * * *

The U.S. Department of Justice is taking a renewed interest in the operation and finances of the asbestos bankruptcy trusts.

* * * On the Road Again * * *

The U.S. Department of Transportation released a new report “Preparing for the Future of Transportation:  Autonomous Vehicles 3.0” last week that is intended to create a blueprint for technical and regulatory innovation for autonomous vehicles.

* * * New Coverage Litigation * * *

Clarendon National has filed a malpractice action against the Goodman McGuffey law firm, claiming that its erroneous coverage advice cost it millions.

* * * Sins of the Fathers * * *

Thomas Emens, who claims to have been sexually abused by a parish priest when he was a boy, has filed a law suit in Los Angeles alleging that all of the Catholic bishops in California and the Archdiocese of Chicago conspired to conceal church records of clergy abuse.                                   

* * * 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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