Nov 23 2018

MM Insurance Law Update 11/23/18

NOTEWORTHY NEW  RULINGS

EIGHTH CIRCUIT    Misrepresentations/Bad Faith (NE)

The U.S. Court of Appeals for the Eighth Circuit has ruled that a federal district court in Nebraska did not err in requiring a homeowner’s insurer to accept coverage for a fire loss, notwithstanding Metropolitan’s claim that the insured had failed to disclose the fact that the property was used in part for business and rental purposes.    In Hayes v. Metropolitan Property & Cas. Co., No. 17-3005 (8th Cir. Nov. 9, 2018), the Eighth Circuit declared that Met had not established that Hayes made any false representations with an intent to deceive, noting the policy application had been prepared by an independent insurance agent and signature stamped by the insured’s sister.   Further, the court also rejected Met’s contention that contractual damages may not be the basis for a bad faith award in Nebraska.

COLORADO    Bad Faith/”Fairly Debatable”

The Colorado Supreme Court has ruled in Schultz v. GEICO Cas. Co., 2018 CO 87 (Colo. Nov. 5, 2018) that GEICO did not have a “fairly debatable” basis for refusing to pay its insured for medical benefits arising out of an auto accident because the medical evidence that GEICO was relying on to raise questions of causation resulted from an independent medical examination that was not performed until 3 years after the accident and 18 months after GEICO’s original denial of coverage.   The Supreme Court declared that whether an insurer’s coverage position was “fairly  debatable” can only be based upon the evidence in existence at the time that the position was adopted.   Under the circumstances, the Supreme Court ruled that GEICO’s coverage position was not “fairly debatable” and that the trial court abused its discretion in ordering the IME over the objection of claimant’s counsel.

CONNECTICUT    Excess Insurance

The Connecticut Court of Appeals has ruled in Gabriel v. Mt. Vernon Fire Ins. Co., AC 40174 (Conn. App. Ct. Nov. 20, 2018) that an umbrella liability insurer could not avoid coverage for a serious auto loss merely because the underlying insurance was only $300,000, rather than $500,000 as the Schedule of Underlying Insurance required.  Rather, the court noted that the Savings Clause in the umbrella policy made clear that the insurer was entitled to a credit for the difference but must pay the loss insofar as it exceeded $500,000.

CONNECTICUT    First Party/”Collapse”

Judge Eginton has ruled in Houlihan v. Safeco Ins. Co. of America, No. 18-184(D. Conn. Nov. 9, 2018) that the insured’s crumbling foundation claim did not involve any abrupt falling down of the property and was there not a “collapse” within the scope of American Commerce’s policy.   Having agreed to dismiss the insured’s claim for breach of contract, the District Court further found that there was no basis for a statutory bad faith claim against ACIC. 

NEW YORK    Conditions/Late Notice

The Appellate Division has ruled that a contractor that waited nine months to alert its liability insurer to a law suit waived its rights to coverage by failing to give notice “as soon as practicable.”  In LaFarge Building  Materials, Inc. v. Harleysville Ins. Co. of New York, 2018 NY Slip Op 07385 (3d Dept. Nov. 1, 2018), the Third Department ruled that the 2008 amendments to Section 3420 took effect after this policy went into effect, nor was the insured’s delay justify by its contention that it did not realize at the time that it might be covered for such claims.

VIRGINIA    Coverage B/"Technology Services"

A federal district court has ruled in Synaptek Corp. v. Sentinel Ins. Co., No. 18-968 (N.D. Va. Nov. 15, 2018) that trademark infringement claims were not covered under a general liability policy that excluded most types of “personal and advertising injury” offenses.  Further, Judge O’Grady ruled that these claims did not involve a claim arising out of "technology services" since the claims involving the insured’s marketing of its own products and services and did not arise out of the performance of services for others, as the policy requires.

OTHER DEVELOPMENTS OF NOTE

* * Inside the Insurance Industry * * *

The Reputation Institute’s latest insurer score card gives top marks to USAA, Met Life, New York Life, Blue Cross Blue Shield and Hanover.

Willis Towers Watson announced this week that Victor Ganzi will succeed James McCann as its new chairman on January 1, 2019.

Allstate has announced that it suffered $202 million in pre-tax catastrophe losses in October.

Nationwide Insurance has announced plans to eliminate 1100 positions — approximately 4% of its work force.

* * * New Coverage Litigation * * *

Lloyd's has sued the Furman Kornfeld law firm in New York for its alleged negligence in advising it to deny coverage to Clyde Hettrick of Dickstein Shapiro for a malpractice claim, a denial that  ultimately resulted in a $64 million judgment against Hettrick and later coverage litigation that cost Lloyd’s more than the limits of its E&O coverage.

* * * California Burning* * *

Catastrophe risk modeler RMS estimates that insured losses from the Camp and Woolsey wildfires could exceed $13 billion.

Pacific Gas & Electric, which is already in financial difficulty and contemplating bankruptcy in the wake of allegations that it was partly to blame for 2017 wildfires in California, now faces a putative class action brought on behalf of the victims of the Camp Fire.

* * *Cyber Update * * *

Here’s the latest newsletter from MM’s cyber-claims practice group.  

* * * Nursing Home Update * * *

The First Circuit has taken the unusual step of denying a motion by a trade association of nursing home plaintiffs’ lawyer to participate as an amicus curiae in Calandro v. Sedgwick Claims Management Services, No. 18-1637  (1st Cir. Oct. 25, 2018), a Massachusetts case involving a TPA’s alleged bad faith in failing to settle.  Sedgwick had argued that this group was only involved in pursuing verdicts against nursing home and had nothing useful to offer as an amici on the issue of good faith claims handling.

* * * IBNR * * *

A newly-divorced woman in LaCoste, Texas celebrated her separation by throwing a party that culminated in the explosion of her wedding dress with an impact that was felt miles away.  I don’t know if this is for IBNR or just a marvelous hypo model for a CPCU course.  

* * * Bedside Reading * * *

Here is a link to the article that Vanita Banks and I have just published in DRI’s In-House Defense Quarterly, discussing the rise and fall of the American Law Institute’s “presumption of plain meaning” approach to the policy interpretation in the ALI’s Restatement of Law, Liability Insurance.

* * * 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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