Dec 28 2018

MM Insurance Law Update 12/28/2018

CASES OF CONSEQUENCE

SECOND CIRCUIT    Coverage B/Advertising (NY)

The U.S. Court of Appeals for the Second Circuit has ruled in High Point Design, LLC v. LM Ins. Corp., No. 16-1446 (2d Cir. Dec. 19, 2018) that allegations that the insured infringed a competitor’s design patent by “offering” knock-off goods for sale triggered a duty to defend under Coverage B.  In rejecting Liberty Mutual’s argument that such claims solely sought recovery for trade dress infringement, the Court of Appeals ruled that “offering for sale” could be construed as a form of advertisement so as to bring the trade dress infringement claims within the exception to Coverage B’s exclusion for intellectual property claims.  Further, the court found that even if the allegations in the counter-claim against the insurer failed to put LM on notice of an “advertising injury,” a duty to defend was triggered by discovery that the insured subsequently received concerting its advertisements for the offending Snoozie slipper products.  As a result, the court only required LM to reimburse High Point for costs incurred after the insured provided copies of this discovery to it.  In a concurring opinion, Judge Newman disagreed that “offering for sale” connoted an “advertising” injury but agreed that a duty to defend arose from the point in time that discovery against the insured made clear that its product advertising was at issue.

ALABAMA    Agents E&O/Failure to Procure

The Alabama Supreme Court has ruled in Somnus Mattress Corp. v. Hilson, No. 1170520 (Ala. Dec. 21, 2019) that was not liable for a mattress manufacturer’s failure  to purchase business interruption coverage.  Although the insured denied having any memory of prior conversations in which he had rejected the agent’s advice to buy this coverage due to its cost, the court ruled that a lack of memory of a conversation was not the same as disputing its contents and did not create a disputed issue of facts precluding summary judgment   In any event, the Supreme Court ruled that insurance agents have no affirmative duty to advice policyholders concerning the adequacy of their coverage programs.

CONNECTICUT    Sureties/Performance Bonds/Bad Faith

Even as coverage litigation is proceeding in Connecticut concerning the availability of CGL coverage for the failed development of a minor league baseball stadium in Hartford, a federal district court judge has dismissed the project developer’s contractual and bad faith claims against the project surety.  In Arch Ins. Co. v. Centerplan Construction Co., No. 16-1891 (D. Conn. Dec. 11, 2018), Judge Bryant ruled that Arch had not acted as a volunteer or breached any contractual duties to the developer in agreeing to complete the construction work after the City of Hartford cancelled its agreements with the developer and general contractor.  Further, the court ruled that bad faith claims against Arch must be dismissed, since it was not alleged to have acted with an improper or dishonest purpose in doing so.

NEW YORK    Asbestos/Trigger of Coverage

A state trial court has issued a comprehensive opinion analyzing the availability of primary and excess coverage for the insured’s asbestos liability claims.  Notably, the Onondaga County Supreme Court adopted a continuous “injury in fact” trigger for these claims, ruling in Carrier Corp., et al. v. Travelers Indem. Co, Index No. 2005-EG-7032 (N.Y. Sup. Ct. Nov. 21, 2018) that injury occurs from the first date of exposure to asbestos through death or the filing of suit.   The trial judge distinguished the Appellate Divisions Keasbey opinion because it “involved operations coverage, a non- product claim, and thus…required a more stringent proof of injury in fact than is necessary here, in a products case.”

NORTH CAROLINA    Auto/UIM/Collateral Source Rule

The North Carolina Supreme Court has ruled that a trial court erred in reducing the amount of an accident victim’s recovery against the tortfeasor motorist by the amount of the underinsured motorist’s coverage recovery that he had obtained from his own auto insurer.   Whereas State Farm had argued that the insured should not receive a double recovery for the same injury, the Supreme Court ruled in Hairston v. Harward, No. 416A17 (N.C. Dec. 7, 2018) that UIM benefits are subject to the collateral source rule and therefore should not diminish a tort claimant’s recovery.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

The American Insurance Association and the Property Casualty Insurers Association of America are joining forces effective January 1 and will henceforth be known as the American Property Casualty Insurance Association.

Maria Vullo will end her reign as chief of New York’s Department of Financial Services on February 1, 2019.

The Texas Department of Insurance has issued its biennial report outlining its priorities for the next two years, including requirements for greater transparency with respect to flood coverage and improving claims handling regulation for storm losses.      

The Rhode Island ‎‎Department of Business Regulation has issued Insurance Bulletin Number 2018-17, confirming that insurance contracts executed with block chain technology will be valid and binding in Rhode Island. 

* * * Lawyers, Guns and Money * * *

A group of Lloyd’s underwriters has agreed to a Consent Order with the New York Department of Financial Services to resolve allegations that they violated New York state law by issuing insurance to gun owners in New York state through the Lockton Affinity insurance program for NRA members.  Under the terms of the December 20 Consent Order, Underwriters agreed to pay a $5 million fine and promised not to underwrite similar programs in the future.

* * * New Coverage Litigation of Note * * *

Auto-Owners Insurance has sued Avis in the U.S. District Court in Atlanta, seeking a declaration that it does not owe coverage for a $47 million personal verdict against the rental car company for employing a convicted felon who crashed a stolen car in the course of a high speed car chase.

The Conde Nast publishing company has sued Mutual Insurance in state court in New York, seeking a declaration of coverage for $13.75 million that it has agreed to pay to settle a class action in Michigan in which magazine subscribers claimed that their personal information was sold without their consent.

 

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