Nov 14 2018

MM Insurance Law Update 11/16/18


SIXTH CIRCUIT    Property Insurance/Actual Cash Value (KY)

The Sixth Circuit has ruled in Cincinnati Specialty Ins. Co. v. C.F.L.P. 1, LLC, No. 17-6498 (6th Cir. Oct. 31, 2018)(unpublished) that a property policy was written on an “actual cash value” basis and that the insurer’s obligation to pay for hail storm damage was limited to $25,000 and not the $1 million that the insured sought for the cost of replacing all of its siding because it was impossible to find a perfect match for the color.

NINTH CIRCUIT    Additional Insureds/Certificates of Insurance (WA)

The Ninth Circuit has asked the Washington Supreme Court to clarify whether an insurer is bound by an agent’s representations concerning the additional insured rights of a cell phone company where those assurances were set forth in a Certificate of Insurance that expressly states that it is only be issued for informational purposes and does not confer coverage rights on the recipients.  In T-Mobile. USA, Inc. v. Selective Ins. Co. of America, No. 17-35932 (9th Nov. 9, 2018), the court asked the state Supreme Court to answer whether “an insurer bound by representations made by its authorized agent in a certificate of insurance with respect to a party’s status as an additional insured under a policy issued by the insurer, when the certificate includes language disclaiming its authority and ability to expand coverage?”

CALIFORNIA    Qui Tam Claims

The Second District has ruled in Geselowitz v. Allstate Ins. Co., B278637 (Cal. App. Nov. 19, 2018) that the anti-SLAPP statute precluded a personal injury attorney from contending that Allstate engaged in unfair business practices and abuse of process by pursuing discovery in a qui tam claim against him.  The Court of Appeal ruled that Allstate’s alleged misconduct—serving subpoenas in connection with on-going litigation—were clearly acts within the scope of the statute’s protection. 

CONNECTICUT    HO/”Controlled Substance” Exclusion

 A federal district court has ruled that a homeowner’s insurer had no duty to provide coverage for allegations that its insured negligently caused the death of a young woman who overdosed on heroin at a party at the insured’s home.  In Koscinski v. Farm Family Mut. Ins. Co., No. 17-472 (D. Conn. Sept. 28, 2018), Judge Shea ruled that these wrongful death claims were excluded from coverage as arising out of the use of a “controlled substance.”  The District Court rejected the insured’s argument that the insured’s negligent failure to supervise the party was independent of the exclusion or resulted in injury to the decedent independent of her drug overdose.

ILLINOIS    Bad Faith/Property Losses

The Appellate Court has ruled in Charter Properties, Inc. v. Rockford Mut. Ins. Co., 2018 IL App (2d) 170637 (Ill. App. Ct. Nov. 8, 2018) that a jury was justified in holding a property insurer liable for “vexatious” conduct in violation of Section 155 in light of evidence at trial that the insurer’s delay in settling the insured’s collapse claim was unreasonable.

MASSACHUSETTS    Tripartite Relationship

 A judge in the Business Litigation Section has ruled in Crosby Valve, LLC vs. OneBeacon America Ins. Co., No. 12-2705 (Mass. Super. Oct. 31, 2018) that a defendant in mass tort asbestos litigation had no right to insist on its independent choice of defense counsel where its insurers had both agreed to defend without any reservation of rights.  As with the insured in the Appeals Court recent decision OneBeacon America vs. Celanese Corporation, Judge Sanders ruled in this case that the insured had failed to show that either insurer had a conflict of interest or that a conflict arose from the fact that the insurers were only defending some cases and were disputing coverage in cases involving the insured’s parent corporation.

NEBRASKA    Declaratory Relief

The Nebraska Supreme Court has ruled in U.S. Specialty Ins. Co. v. D.S. Avionics, Inc., 301 Neb. 388 (Neb. Oct. 19, 2018) that a trial court erred in granting summary judgment to an aviation insurer concerning the insured’s claim that his plane had suffered a direct physical as the result of being unlawfully detained by a hangar operator where unresolved issues of liability remained to be determined in the underlying legal proceedings between the parties.  Under the circumstances, the court ruled that there was no “justiciable controversy” and that declaratory judgments should not be used to resolve “hypothetical or speculative situations which may never come to pass.”


* * * Inside the Insurance Industry * * *

The Pennsylvania Attorney General has indicted sixty individuals in a statewide probe into insurance fraud.

EK Insurance has begun offering “active shooter” insurance to schools and businesses.

* * * New Coverage Litigation * * *

Sentinel Insurance filed a new DJ in Chicago last week, alleging in Sentinel Ins. Co. v.  ABC Stein LLC, No. 18-7404 (N.D. Ill.) that its CGL policy does not cover allegations that the insured manufactured beer steins resembling the Stanley Cup.

* * * New  Bedside Reading * * *

DRI’s latest issue of the In-House Defense Quarterly features an article by Michael Aylward and Allstate’s Vanita Banks discussing the rise and fall of the ALI Reporters proposed revolutionary reconception of the “plain meaning” principle for insurance policy litigation.

* * * 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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