Nov 8 2018

MM Insurance News 11/9/18


SECOND CIRCUIT    First Party/”Collapse” (CT)

In the first appellate opinion arising out of the notorious Connecticut court "crumbling foundation" crisis, the Second Circuit has issued a summary order in Kim v. State Farm Fire and Casualty Insurance Company, No. 17-2304 (2d Cir. Oct. 5, 2018) that Judge Bryant did not err in finding that the policy excluded collapse caused by the use of defective materials in its construction.  The court concluded that the loss was clearly excluded since it was "directly and immediately caused" by cracking without any other intervening cause.  The court declined to find ambiguity in the meaning of "immediate" notwithstanding the fact that the loss had concededly occurred gradually since the policy in question specifically stated that a loss is not immediate whether it occurs "suddenly or gradually."  As a result, the court declared that "a lay reader could not reasonably rely on the expectation that a gradual resulting collapse is taken out of the exclusion's scope by the "immediately" requirement, when the same sentence specifies that gradual resulting collapse is excluded."

FIFTH CIRCUIT    Contracted for Services Exclusion (TX)

The U.S. Court of Appeals for the Fifth Circuit has ruled in Northfield Insurance Company v. Herrera, No. 17-51080 (Fifth Circuit Oct 24, 2018) that a CGL policy did not provide coverage for bodily injuries suffered by an employee of the company that had hired the insured to service its elevators in light of an exclusion for injuries to "any person who contracted with you or with any insured for services arising out of and in the course of performing duties related to the conduct of your or any insured's business."  In an unpublished opinion, the Fifth Circuit ruled  that whereas a Texas District Court had interpreted this language in the context of earlier subparagraphs that only applied to the insured's employees, the Fifth Circuit ruled instead that the language in question clearly precluded coverage for bodily injury to any employee of any organization that contracted with the named insured.  The court ruled that the phrase "contracted with" could refer to "both "upstream" and "downstream" relationships.  Here, the court ruled that it was reasonable to interpret the language in question as applying to the employees of "upstream contractors" as in this case. 

SIXTH CIRCUIT    Property Insurance/”Newly Acquired” Property (OH)

The Sixth Circuit has affirmed an Ohio District Court’s ruling that a property insurer did not owe coverage for a $1.6 million theft of Iphone from a warehouse that was not listed as a “covered location” and was not “newly acquired” property since the insured had purchased it before the policy was issued.  In an unpublished disposition, the Court of Appeals ruled in Berrylane Trading, Inc. v. Transportation Ins. Co., No. 18-552 (6th Cir. Nov. 2, 2018) that the “newly acquired” property referred to the warehouse, not the I phones that were stored there and that this requirement was not satisfied by the fact that the insured’s lease did not become effective until after the policy went into effect.
SEVENTH CIRCUIT    Defamation (IL)

The U.S. Court of Appeals for the Seventh Circuit has overturned a $27 million defamation award that four former fund managers recovered against Allstate for stating in SEC filings to the effect that they had timed trades to inflate their bonuses.  In Rivera v. Allstate Ins. Co., No. 17-1310 (7th Cir. Oct. 31, 2018), the court ruled that the plaintiffs could only have recovered on a theory of defamation per quod that required proof of special damages and that in this case no evidence had been presented that any employer had declined to hire the plaintiffs because of these allegations.

WISCONSIN    ”Occurrences”

The Wisconsin Supreme Court has ruled in SECURA Insurance, A Mutual Company v. Lyme St. Croix Forest Co., 2018 WI 103 (Wis. Oct. 30, 2018) that a logging company’s liability for damage to numerous parcels of property was subject to the $500,000 “occurrence” limit in a CGL policy’s “Logging and Lumbering Operations” endorsement.   Whereas the Court of Appeals had found that each new damaged parcel was a separate “occurrence,” the Supreme Court ruled that all of the damage was attributable to a single uninterrupted cause and that it was unreasonable to interpret the policy so that coverage depended on the number of property owners affected by a fire event.


* * * Inside the Insurance Industry * * *

EMC has announced that it will not renew existing personal lines policies.  Safeco Insurance has told EMC’s independent agent that it will accept this coverage beginning in 2019.

Willis Towers Watson’s latest earning statement revenue of $1.9 billion in the third quarter of 2018, up 3.0% from the year before.      

Kemper reports that it had a strong third quarter in 2018, earning $92.2 million compared to $62.7 million in 2017. 

Speakers at this week’s PwC Insurance Claims summit in Bermuda predicted that the continuing growth of ILS coupled with emerging technologies will revolutionize the underwriting and handling of insurance and reinsurance over the next decade.

* * * Stormy Weather * * *

State authorities estimate that damage in North Carolina from Hurricane Florence will total $17 billion, of which only about a quarter is believed to be insured.

* * * Cyber News * * *

Here’s  a link to the latest newsletter from MM’s cyber claims group.


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