Dec 21 2018

MM Insurance Law Update 12/21/18

NOTEWORTHY NEW RULINGS

SECOND CIRCUIT    Bad Faith (NY)

The Second Circuit has issued a summary order in Keller Foundations v. Zurich American Ins. Co., No. 18-1280 (2d Cir. Dec. 7, 2018), affirming a New York District  Court’s ruling that the insured’s parent company, which had also reinsured the underlying contract, had no basis for claiming that Zurich should not have settled construction claims involving its subsidiary.

SEVENTH CIRCUIT     EPL/Defamation  (IN)

Allegations that the insured violated his subscription agreement with DirectTV by showing programming at his restaurant for which he had only paid the cheaper residential rate have been held not to seek recovery for the “wrongful acts” of libel, slander or defamation under an EPL endorsement to a business liavbility policy.  In Martinsville Corral, Inc. v. Society Insurance, No. 18-1945 (7th Cir. Dec. 13, 2018), the Seventh Circuit observed that “there is no reasonable interpretation of the DirecTV complaint where it could arguably fall within the category of libel, slander or defamation. DirecTV’s complaint alleged that MCI damaged DirecTV’s goodwill by showing its programming without paying the correct subscription fee. In DirecTV’s complaints, there are no allegations that MCI made any false, defamatory statement about DirecTV. DirecTV’s actions did not include allegations that MCI made any kind of statement at all.”

TENTH CIRCUIT     Insured/Corporate Officers (OK)

The Tenth Circuit has ruled in State Farm Fire & Cas. Co. v. Telecomm, Inc., No.18-6061 (10th Cir. Dec. 13, 2018) that an intellectual property dispute between two former business partners did not trigger a CGL policy issued to a corporation of which one of the parnters was now an executive officer since there was no allegation that he was working in that capacity or was working on behalf of the insured when he allegedly stole software and interfered with the plaintiff’s data.

CALIFORNIA    Asbestos/Procedure

The California Court of Appeal has ruled that a trial court did not err in granting Fireman’s Fund’s motion set to aside default judgments against an asbestos  defendant.   In Mechling v. Fireman’s Fund Ins. Co., A150132 (Cal. App. Dec. 11, 2018), the First District ruled that even though Fireman’s Fund was given notice of the suits when they were originally filed and refused to defend, it only learned after the default judgments that there was evidence that it had actually insured Associated Insulation.  In ruling that equitable relief should be granted based on extrinsic evidence, the Court of Appeal ruled that Fireman’s Fund clearly had a meritorious basis for challenging the judgment, as its involvement could have challenged the findings of liability or the large judgments awarded.

CONNECTICUT    First Party/Crumbling Foundation Claims

In keeping with the emerging consensus approach among Connecticut’s federal judiciary, Judge Bryant has ruled in Hyde v. Allstate Ins. Co., 2018-31 (D. Conn. Dec. 6, 2018) that a homeowner’s claims against Allstate must be dismissed because the gradual deterioration of the insured home’s concrete foundation was not a “sudden and accidental” collapse.   Further, the District Court ruled that Allstate’s membership in ISO could not support a statutory claim for bad faith under CUIPA/CUTPA because it did not result in any incorrect representation or interpretation of policy terms.

NEVADA    Duty to Defend/Consequential Damages

In response to a certified question from a federal district court inquiry with respect to whether “the liability of an insurer that has breached its duty to defend, but has not acted in bad faith, is capped at the policy limit plus any costs incurred by the insured in mounting a defense,” the Nevada Supreme Court has ruled in Century Surety Co. v. Andrew, No. 73756 (Nev. Dec. 13, 2018) that an insurer that fails to defend is liability for all consequential damages flowing from its breach without regard to policy limits.  Further, the court declared that “good-faith determinations are irrelevant for determining damages upon a breach of this duty.”  The court’s opinion relied in part on the ALI’s new insurance Restatement, making it the first appellate opinion to cite the final text of the RLLI.

NORTH DAKOTA    Agents and Brokers

The North Dakota Supreme Court has sustained a lower court’s ruling that a homeowner could not sue an insurance agent for failing to advise him that an elaborate deck was subject to the lesser coverage for “other structures” because it was attached to a free-standing garage rather the insured’s house.  In Dahms v. Nodak Mut. Ins. Co., No. 2018 ND 63 (N.D. Dec. 6, 2018), the Supreme Court pointed out that the deck had not yet been constructed when the policy was contracted for and that, while there was a long-standing relationship among the parties, the insured had never sought advice about limits of coverage, nor were other “special circumstances” present that might have imposed a higher duty of care on the part of the agent in this case.   Further, the Supreme Court affirmed the lower court’s finding that the damage to the deck was subject to the lower limits in Coverage B as it was not “attached” to the dwelling and thus not within Coverage A:  “The plain language of "attached" renders unpersuasive Plaintiff's claim that the dwelling is connected to the pool via the back patio, the steps, and the pool deck. In essence, Plaintiff asserts that because the house is "connected to" the patio, and the patio is "connected to" the steps, and the steps are "connected to" the pool deck, and the pool deck is "connected to" the pool, by some transitive property, the pool is "attached" to the house and, therefore, Coverage A applies.”

 OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

The Governor of South Carolina has announced that Raymond G. Farmer will continue to serve as the Director of the state’s Insurnace Department, a position that he has held since being appointed in 2012 by then Governor Nikki Haley.  Meanwhile, in Tennessee, Governor-Elect Bill Lee has reappointed Julie Mix McPeak as the state’s Insurance Commissioner.

The U.S. Department of the Treasury announced in a press release last week that intends to enter into a new agreement with the United Kington on Prudential Measures Regarding Insurance and Reinsurance.  In a press release, the Treasury Department stated that this new agreement would, in the post-Brexit world, make “U.S. companies more competitive in domestic and foreign markets and making regulations more efficient, effective, and appropriately tailored.”

* * * The New Asbestos:  Talc? * * *

Reuters has published an intensive examination of internal documents produced by Johnson & Johnson that appear to confirm that J&J was aware as early as 1957 that its baby powder and other talc products might be contaminated with asbestos.

* * * California Burning * * *

The California Insurance Commissioner reports that it has received nearly 40,000 claims from the Camp and Woolsey wildfires for damages exceeding $9 billion.  Moody’s is predicting that claims to insurers may reach $15 billion, although others suggest that this estimate may be conservative.  Allstate, which has a 6% share of the homeowner’s insurance market in California, has already paid $1.2 billion in losses.

Allstate’s stock price has fallen 11% this month in response to catastrophic fire losses in California.

* * * IBNR Dept. * * *

Christmas trees are not only the only thing featuring children’s toys this month.  In New York, Attorney General Barbara Underwood has sued Target and Walmart, alleging that they are selling toys with dangerously toxic lead levels.  Meanwhile, Lego A/S has filed suit in Connecticut, asking a federal court to enjoin Zuru Toys from selling a toy product that consumers may confuse with Lego’s popular Minifigures.

* * * Class Action Claims * * *

The California Court of Appeal has ruled that an aggrieved homeowner who claimed to have suffered injury as the result of the installation of a defective plumbing fixture in her home could not bring a class action under the 2002 California Right to Repair Act.  In Kohler Co. v. Superior Court, B2888935 (Cal. App. Nov. 14, 2018), the Second District concluded that class actions are not allowed under the Act except for the limited purpose of asserting claims that address solely the incorporation into a residence of a defective component, unless that component is a product that is completely manufactured offsite.  In this particular case, the Court of Appeal ruled that because the claim involves allegedly defective products that were completely manufactured offsite, the claim alleged under the Act cannot be litigated as a class action.

 

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