Nov 29 2018

Insurance Law - 11/30/18


THIRD CIRCUIT    Faulty Workmanship/”Reasonable Expectations” (PA)

The Third Circuit has ruled that a federal magistrate erred in finding that a contractor had a reasonable expectation of coverage for claims arising out of its faulty installation of masonry at the plaintiff’s home.  In Frederick Mut. Ins. Co. v. Hall, No. 17-3477 (3d. Cir. Nov. 8, 2018)(unpublished) that even though the insured had never seen or read the subject policy, he could not have had a reasonable expectation of coverage in light of Pennsylvania law precluding GL coverage for faulty workmanship claim.

FIFTH CIRCUIT    “Occurrences” (TX)

In a dispute between a primary and an excess liability insurer with respect to the number of "accidents" resulting from a chain collision, the Fifth Circuit has declared in Evanston Ins. Co. v. Mid‑Continent Cas. Co., No:  17-20812 (5th Cir. Nov. 19, 2018)  that the proper application of the "cause" test under Texas law focused on "the events that caused the injuries that give rise to the insured's liability, rather than on the number of injurious effects."  Whereas the federal Magistrate had focused on an "immediate cause" of the underlying injuries, the Fifth Circuit declared that it was permissible to look to the "overarching cause" of the several collisions when it was a "proximate, uninterrupted and continuing cause."  As there was no evidence in this case that the  driver ever regained control of his truck or that his negligence was otherwise interrupted between collisions, the court declared that all of the collisions resulted from the same continuous condition and therefore only triggered a single $1 million “accident” limit n the primary policy.

DELAWARE    Limitations Period/Bad Faith

The Delaware Supreme Court has ruled that a trial court erred in awarding bad faith damages against an E&O carrier because the insured failed to bring suit within the requisite three year period for doing so.  In Homeland Insurance Company of New York v. CorVel Corporation, No. 16-2018 (Del. Nov. 20, 2018), the court ruled that the insured’s bad faith claim accrued in 2011, when it was forced to personally fund settlements in the underlying PPO litigation, rather than 2016, when a Louisiana court ruled that there was coverage for these losses.

ILLINOIS    Insurer Insolvency/Liquidated Damages

The Appellate Court has ruled in In re Liquidation of Lumbermens Mutual Casualty Company, 2018 Ill. App. (1st) 171613 (Ill. App. Ct. Nov 16, 2018) at a trial court did not err in rejecting a local Board of Education's claims under a surety policy issued to a contractor that was delayed in completing a school building.   In a lengthy opinion, the First District ruled that the trial court has not abused its discretion in finding that the Board of Education had not established a right to liquidated damages due to the insured's delay in completing these construction contracts.  

ILLINOIS    Attorney-Client Privilege

In the latest case seeking to explain the Illinois Supreme Court’s opinion in Waste Management, the Appellate Court has ruled in Robert R. McCormick Foundation v. Arthur J. Gallagher Risk Management Services Inc., 2018 Ill. App. (2d) 170939 (Ill. App. Ct. Nov. 16, 2018) that the “common interest” exception recognized by the Supreme Court in Waste Management is not limited to disputes between policyholders and insurers and had equal application to this malpractice action against an insurance broker for failing to procure adequate directors and officers insurance coverage.  The Second District ruled, however, that the common interest exception only applies to those matters on which the parties might share liability and not to those matters where the parties are directly opposed to each other, such as the issue of insurance coverage. The Appellate Court also refused to stay the litigation, while recommending that the trial court act with discretion as to discovery that could be taken without prejudicing the rights of the parties in ancillary litigation in New York.  


* * * Calfornia Burning * * *

CoreLogic now estimates that total losses from the Camp Fire will be in the range of $11 to 13 billion.  AM Best has expressed a separate concern that insurers also have an indirect financial exposure from their substantial investment in bonds issued to Pacific Gas and Electric which faces substantial potential liability as the result of various wildfires in California.

* * * Asbestos News* * *

The Supreme Judicial Court of Massachusetts will hear oral argument on December 4 in Stearns v. Metropolitan Life Ins.Co., SJC-12544.  At issue is whether “the Massachusetts statute of repose, Gen. Laws. Ch. 260, § 2B, can be applied to bar personal injury claims arising from diseases with extended latency periods, such as those associated with asbestos exposure, where defendants had knowing control of the instrumentality of injury at the time of exposure.”


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