Feb 6 2019

Insurance Law – 2/8/2019


SECOND CIRCUIT    First Party/"Collapse" (CT)

The Second Circuit heard argument last week in an appeal that several Connecticut homeowner’s have brought, seeking a reversal of a District Court’s ruling that Allstate does not owe coverage for the gradual deterioration of their foundations due to impurities in the concrete used to construct them.

SECOND CIRCUIT    Late Notice (NY)

In a dispute between an auto and a GL insurer for claims arising out of damage to a customer’s facility arising out of the insured’s delivery of milk that was contaminated with metal filings, the Second Circuit has issued a summary order, affirming a New York District Court’s declaration that the CGL insurer was entitled to recover its settlement payment from the auto insurer. In Harleysville Worcester Ins. Co. v. Agri-Mark, Inc., No. 18-1300 (2d Cir. Feb. 1, 2019), the court rejected Wesco’s argument that it did not receive notice of the claim and further ruled that Wesco had not proved that it was prejudiced by any late notice.

CALIFORNIA    Deductibles/Long-Tail/Stacking

The California Court of Appeal has ruled in Lexington Ins. Co,. v. Timber Ridge Framing, Inc., D073412 (Cal. App. Jan. 31, 2019) that a trial court did not err in ruling that a building contractor was obliged to reimburse its liability insurer for two separate "per claim" deductibles, notwithstanding the insured’s argument that California forbids stacking deductibles in long tail cases. In a lengthy but unpublished opinion, the Fourth Appellate District declared that the Lexington language required the insured to pay separate deductibles, despite the insured’s argument that stacking is not permitted where multiple insurers cover a loss.

FLORIDA    D&O/Securities Sale Exclusion

A federal district court has ruled in Colorado Boxed Beef Co., Inc. v. Evanston Ins. Co., 2019 WL 77376 (M.D. Fla. Jan. 2, 2019) that allegations that various corporate officers made misrepresentations in connection with their purchase of stock shares was excluded from coverage under a management liability policy in light of language in the policy stating that it did not apply to loss ""[b]ased upon, arising out of or in any way involving…the actual, alleged or attempted purchase or sale, or offer or solicitation of an offer to purchase or sell, any debt or equity securities."

IOWA    First Party/"Efficient Proximate Cause"

The Iowa Supreme Court has ruled in City of West Liberty v. Employers Mut. Cas. Co., No. 16-1972 (Iowa Feb. 1, 2019) that ruled that a loss in which a gray squirrel climbed onto lines at electrical substation, causing electric arcing that substantially damaged municipal property, was excluded from coverage pursuant to the policy's "electrical current" exclusion. The Supreme Court of Appeals rejected the City's argument that even though arcing itself was excluded from coverage, coverage was required by the "efficient proximate cause" doctrine. The court ruled that the efficient cause doctrine required two independent causes, one covered and one not, whereas in this case, the squirrel did not cause any damage, except through the electrical arcing.

MONTANA    Consent Judgments

The Montana Supreme Court has ruled in Abbey/Land LLC v. Glacier Construction Partners LLC, 2019 MT 19 (Mont. Jan. 29, 2019) that a $12 million consent judgment was collusive and thus unenforceable. Further, the Supreme Court declared that, as the trial court had found collusion, lit should have dismissed the claims against James River outright and erred in refashioning a remedy for the claimants and allowing them to pursue a demand for $2.4 million. In light of its finding that the underlying parties had "impermissibly colluded to expose Glacier to new liability by amending the parties’ contract to expand the recoverable damages, stipulated to a confessed judgment for damages that attorneys for both parties had at different times criticized as lacking evidentiary basis, and terminated and "shut up" anyone involved in the case who expressed contrary views," the court ruled that the trial court had abused its discretion in failing to dismiss the case outright. The Supreme Court did affirm the lower court’s award of attorney’s fees to James River, declaring that the equitable exception to the American Rule applied in this case.

TEXAS    Bad Faith

The Texas Supreme Court has announced that it will hear two cases against State Farm Lloyds on the Menchacha issue of whether and when policyholders are entitled to statutory damages beyond what they are entitled to contractually.


* * * Inside the Insurance Industry * * *

Aon reported last week that Thomas Fitzgerald, who has served as the CEO of Aon Broking since 2016, is departing.

Georgia’s new Insurance Commissioner James Beck has implemented a new on-line portal for Georgia policyholdesr to file complaints about personal lines carriers.

Munich Re reports that cat claims cost insurers $80 billion in 2018, less than 2017’s results but nearly double the average for the past several decades. 2018 proved to be the fourth costliest year for insurers since 1980.

* * * IBNR Dept. * * *

Reuters reports that Tyson Foods is recalling 36,420 pounds of its "White Meat Panko" chicken nugget products after reports that they contained rubber pellets.

* * * Across the Bar * * *

Long-time Jackson & Campbell partner Tim Dingilian has moved down K Street to set up shop in the D.C. offices of Shipman Goodwin.

* * * New Coverage Litigation of Note * * *

The Associated Press has sued Chubb in the federal court in New York City, alleging that it wrongfully refused to provide coverage for copyright infringement claims against the venerable news organization.


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