Dec 13 2018

MM Insurance Law Update 12/14/18

NEW COVERAGE RULINGS

D.C. CIRCUIT    Defense Costs/Hourly Rates/Attorney-Client Privilege

The U.S. Court of Appeals for the D.C. Circuit has ruled that a trial court erred in finding that there was a binding agreement between Fireman’s Fund and the Fulbright Jaworski law firm to charge a reduced hourly rate for an insured’s defense.  In Feld v. Fireman’s Fund Ins. Co., No. 17-7619 (D.C. Cir. Dec. 7, 2018), the court ruled that summary judgment should not have been granted in Fireman’s Fund favor where there were disputed issues of fact with respect to the terms or existence of the alleged agreement.   The D.C. Circuit did rule, however, that the trial court did not err in refusing to require Fireman’s Fund to produce all of its communications with its outside coverage counsel at Rivkin Radler.  The court ruled that merely because the insured had put its counsel  communications at issue by seeking payment of $2.4 million in disputed legal fees did not require a similar conclusion as to the communications between an insurer and its outside counsel, especially as the Rivkin Radler lawyers had not been a party to the original hourly rate discussions.

SECOND CIRCUIT    D&O/Known Circumstances Exclusion (NY)

Even though an SEC inquiry into the insured’s business dealings had begun as an “informal” investigation, the Second Circuit ruled in Patriarch Partners, LLC v. AXIS Ins. Co., No. 17-3022 (2d Cir. Dec. 6, 2018) (unpublished) that it had become serious enough by the time that this D&O policy was issued that it should have been included in a Warranty that AXIS had insisted upon before issuing the policy with respect to facts and circumstances known to the insured that were likely to soon result in a claim.

EIGHTH CIRCUIT    Class Action Claims (AR)

The Eighth Circuit has ruled that an Arkansas District Court did not err in certifying a class of homeowners who were seeking recovery against State Farm for depreciating the costs of labor in calculating the actual cash value of damage to their homes.   Whereas the Eighth Circuit has recently ruled in a similar Missouri case that these issues were too individualized to satisfy Rule 23’s requirement of a common, predominating issue of law, it ruled in Stuart v. State Farm Fire & Cas. Co., No. 16-3784 (8th Cir. Dec. 6, 2018) that Labrier was distinguishable because the State Farm contracts specified how ACV was to be calculated.

CALIFORNIA    Drones/"Aircraft" Exclusion

A federal district court has ruled in Philadelphia Ind. Ins. Co. v. Hollycal Production, Inc., No. 18-768 (C.D. Cal. Dec. 9, 2018) that a CGL policy exclusion for injuries arising out of the use of an “aircraft” precluded coverage for an incident in which a drone that the insured was using to photograph a wedding crashed into a guest.  Further, Judge Anderson ruled that the insurer was entitled to reimbursement for $17,062 that it had paid in defense costs while its DJ was proceeding.

NEW JERSEY    Auto/UM

The New Jersey Supreme Court announced this week that it will grant further review in Felix v. Richards, 2018 WL 3636464 (App. Div. Aug. 1, 2018) in which the Appellate Division ruled that the so-called Deemer statute (N.J.S.A. 17:28-1.4), which requires motorists to maintain insurance with limits of at least $15,000/$30,000 for bodily injury claims, applied to an auto policy that GEICO issued in Florida to a Florida resident who had an accident in New Jersey. 

PENNSYLVANIA    Cyber-Bullying/”Occurrence”

A federal district court has ruled that a homeowner’s insurer must defend a wrongful death action brought by the parents of a teenage girl who committed suicide after receiving repeated vengeful texts from a fellow student.  In State Farm Fire & Cas. Co. v. Motta, No. 18-3956 (E.D. Pa. Dec. 11, 2018), Judge Kearney ruled that although this was a “close” question, the girl’s suicide was an “occurrence” because, even though the insured’s son acted intentionally, her death was not necessarily foreseeable.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

USI Insurance Services is predicting that rates for property and casualty insurance will be relatively flat in 2019, except for areas that are vulnerable to extreme weather events.  According to USI’s 2019 P&C Insurance Market Outlook Report, domestic P/C companies have a $760 million surplus and a combined ratio of 98%, although this is expected to rise slightly by the end of 2018.

In the wake of the State of Washington’s recent settlement with Microsoft for unpaid taxes involving its captive insurer, Insurance Commissioner Mike Kreidler has announced a clemency program that would allow captive insurers that have unlawfully insured any risk in the state in the past 15 years to pay a substantially reduced fine and premium tax penalty.

Travelers has created a $5 million fund to assist policyholders in eastern Connecticut whose homes are in danger of damage due to defective concrete that it causing the homes’ foundations to crack and crumble.

* * * California Burning * * *

Farmers Insurance projects that it will receive over $2 billion in claims arising out of the recent wildfires in California.

* * * New Coverage Litigation * * *

United Educators has filed suit in New York seeking a declaration that it does not owe coverage to the University of Southern California for $215 million that USC has paid to resolve allegations that Dr. George Tyndall sexually abused hundreds of students over the years. 

 

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