Nov 2 2018

MM Insurance News 11/2/18


SECOND CIRCUIT    Sandy/Windstorm Coverage  (NY)

The Second Circuit has revived a Superstorm Sandy claim, declaring in Madelaine Chocolate Novelties, Inc. v. Great Northern Insurance Company, No. 17 3396 (2d Cir. Oct 23, 2018) that a New York District Court erred in refusing to find coverage for storm-surge damage to the insured's property owing to its possible conflict with the policy’s windstorm endorsement.  Whereas the New York District Court had ruled that the flood exclusion unambiguously precluded coverage, the Second Circuit concluded that factual questions needed to be resolved with respect to ACC language in the windstorm endorsement conflicted with the flood exclusion.  The Second Circuit declared that the district court may consider permitting discovery into interpretive materials relating to the windstorm endorsement and its relationship with the policy's coverage provisions.

CALIFORNIA    “Property Damage”/Loss of Use

The Fourth District has ruled that a liability insurer owes coverage for a law suit in which a property owner claimed that the insured tenant’s negligence in failing to prevent a shooting on the premises that resulted in local authorities revoking the owner’s ability to operate is as a nightclub.  In Thee Sombrero, Inc. v. Scottsdale Ins. Co., E067505 (Cal. App. Oct. 25, 2018), the Court of Appeal declared that the owner’s inability to use the premises profitably was a “loss of use of tangible property” within the policy’s grant of coverage for “property damage.”   The court ruled that the focus should not be on the loss of entitlement but on the loss of use of property damage that results from the loss of the entitlement.

CONNECTICUT    Yacht Policy/Electrical Arcing

A federal district court has ruled in National Liability and Fire Ins. Co. v. Jablonowski, 2018 WL 4623027(D. Conn. Sept. 26 2018) that a supposed "slow burn" that caused damage and mold to the insured's yacht was not a "fire" within the scope of the policy's first-party coverage.  In light of the uncontroverted testimony of the insurer's expert that the loss was actually due to electrical arcing, Judge Eginton declared that the cause of loss had never evolved to the point of combustion and therefore did not trigger coverage.  Further, the District Court refused to find that the alleged sanding of an interior cabin had not amounted to "vandalism" since there was no evidence of willful or malicious destruction.

CONNECTICUT    First Party/”Collapse”

The putative class action that a few Connecticut homeowners filed nearly three years ago against over a hundred insurers alleging that property insurers conspired to eliminate coverage for crumbling foundation claims got a bit smaller last week when Judge Bolden ordered the dismissal of several insurers who had only issued policies with newer language requiring abrupt “collapses.”  In Halloran v. Harleysville Preferred Mut. Ins. Co., No. 16-133 (D. Conn. Oct. 19, 2018), Judge Bolden declared that older “collapse” forms were ambiguous with respect to timing and rejected any suggestion that Connecticut would imply an “imminent” requirement of collapse as the Washington Supreme Court recently did in Queen Anne Park.   The District Court also declined to dismiss claims based on the insured’s failure to bring suit with the policy’s two year limitation period, declaring that this is an affirmative defense better suited to a motion for summary judgment based upon a fully developed factual record.   The court also declined to strike the plaintiffs’ class allegations, declaring that these arguments could be addressed when the plaintiffs eventually moved to certify the Rule 23 class.   Judge Bolden did rule, however, that no further amendments to the pleadings would be permitted and that the case, having “languished” for nearly three years as the plaintiffs constantly amended and revised their theory of the case, must now go forward with discovery limited to the class claims and a hearing on the issue of class certification.

ILLINOIS    Sexual Abuse/”Any Insured”

The Appellate Court has ruled that a trial judge erred in refusing to find coverage for allegations that day care operator failed to prevent her spouse from abusing a child in her care.   While agreeing that the policy’s exclusion for injuries "intended by, or which may reasonably be expected to result from intentional or criminal acts or omissions of any insured person" would have barred coverage for any claim against the perpetrator, the Second District declared in Allstate Indemnity Company v. Contreras, 2018 IL App. (2d) 170964 (Ill. App. Ct. Sept. 25, 2018) that the intent of one insured could not be imputed to the other.  Further, even though the exclusion applied to "any insured person", the court declined to give it broader effect that similar exclusions for “the insured” in keeping with cases such as Westfield National.


* * * Inside the Insurance Industry * * *

A new “Benchmarks Research” report from Guy Carpenter predicts that the U.S. property and casualty industry is decoupling itself from historical trends and is moving forward in unpredictable ways.

* * * Third Quarter Results * * *

Chubb reported last week that it earned $1.2 billion in the third quarter of 2018 compared to a net loss of $70 million during the same period last year.  The turnaround was due in large part to a substantial improvement in underwriting income, lower than expected cat losses and a combined ratio of 90.9 (compared to 110.8 in 2017).

W.R. Berkley’s net income held steady but its combined ratio improved to 94.8 from 95.6.

* * * On the Road Again * * *

A QuoteWizard survey of the U.S. cities with the most reckless drivers finds that the likelihood of getting a speeding tickets is greatest in Wichita, Omaha, Boise, Portland (Oregon) and Richmond.

A new report from concludes that the cheapest car insurance is sold in Vermont but that Michigan is the most expensive.

* * * Lawyers, Guns and Money * * *

MGM Resorts and the group of lawyers representing the victims of the October 1, 2017 mass shooting at the Mandalay Bay resort in Las Vegas are reportedly about to enter into mediation of their disputes.

* * * IBNR Dept. * * *

EWI reported last week that testing of 30 samples of breakfast that it had tested contained trace amounts of glysophate, the active ingredient in Roundup. The products tested included 10 samples of different types of General Mills' Cheerios and 18 samples of different Quaker brand products, including instant oatmeal, breakfast cereal and snack bars. The highest level of glyphosate found by the lab was 2,837 ppb in Quaker Oatmeal Squares breakfast cereal.

* * * Mark Your Calendars * * *

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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