Mar 21 2019

MM Insurance Law Update – 3/22/2019

CASES OF CONSEQUENCE

FIRST CIRCUIT    Bad Faith/TPA (MA)

The First Circuit has sustained a lower court's declaration that a TPA did not act in bad faith in failing to settle wrongful death claims a nursing home that went to trial and resulted in a $14 million verdict. In Calandro v. Sedgwick Claims Mgt. Services, Inc., No. 18-1637 (1st Cir. Mar. 18, 2019), the court found that there were questions of fact concerning causation with respect to the death claim and that, although defense counsel had stipulated to liability with respect to the personal injuries suffered by the patient prior to her death, the TPA had made reasonable efforts to settle that aspect of claim.

EIGHTH CIRCUIT    Auto/UIM/Stacking/"Illusory" Coverage (MO)

The Eighth Circuit has rejected an insured’s argument that his auto insurer committed fraud and was unjustly enriched by charging premium for three separate policies for which the insurer subsequently refused to pay UIM benefits in light of anti-stacking language contained therein. In a brief opinion, the Eighth Circuit declared in Country Preferred Insurance Company v. Lee, No. 18-2096 (8th Cir. Mar. 14, 2019) that the insurer’s UIM coverage was not illusory since it extended coverage for non-named, non-family passengers and drivers of the insured's other vehicles.

MASSACHUSETTS   Consent Judgments/Res Judicata

A federal district court has rejected a third-party claimant's effort to resurrect a consent judgment that the First Circuit had earlier ruled was invalid because it failed to impose a legal obligation on the part of the insured to pay a judgment that would be covered by an excess policy. In Salvati v. Fireman's Fund Insurance Company 18-11289 (D. Mass. Mar. 1, 2019) Judge Saylor ruled that the disposition of the original lawsuit against the excess insurer was res judicata with respect to this second suit, rejecting the plaintiff's argument that a new clause that the parties subsequently added in an effort to avoid the effect of the First Circuit's ruling created "new facts" that would avoid issue preclusion in this case.

MASSACHUSETTS   "Occurrence"/Trigger of Coverage

The Massachusetts Appeals Court has ruled in Creamer v. Arbella Insurance Group, No. 18-P-330 (Mass. App. Ct. Mar. 13, 2019) that a homeowner's insurer was obliged to provide coverage for allegations by a property purchaser that the insured had intentionally concealed its knowledge of an oil spill before selling the house. Although Arbella had argued that the claims could not be an "occurrence" in light of the insured’s intentional concealment of the pollution, the court declared that coverage would nonetheless be triggered by the plaintiff’s claim under the Massachusetts Oil and Hazardous Material Act (G.L. c.21E), which is a strict liability statute that can impose liability without regard to the defendant’s state of mind. The Court of Appeals also rejected Arbella’s claim that the suit was solely for economic loss, observing that the complaint sought recovery for cleanup costs on account of property damage. Finally, the court refused to find that the trigger of coverage was the point in time when the plaintiffs purchased the land, declaring that the SJC’s ruling in Tufts made clear that coverage applies as of the date that damage occurs without regard to whether the claimant has legal title to the damaged property at the time.

NEW YORK   Intellectual Property Exclusion

A Federal District Court has ruled in Lepore v. Hartford Fire Insurance Company, No. 16-689 (S.D.N.Y. Mar. 12, 2019) that an intellectual property exclusion in a liability insurance policy precluded any obligation to provide a defense to a competitor's allegations that a fashion designer through allegation violated the terms of a licensing agreement by which Lepore had agreed to permit NL Brand Holdings to use her designs. In granting summary judgment for The Hartford, Judge Failla declared that the IP exclusion extended to other types of claims, including unfair competition, nor was it restricted to claims for "personal and advertising injury." In any event, the District Court concluded that the claims were separately excluded as "arising out of a breach of contract" since they could not have been made "but for" the insured's breach of its licensing agreement with NL.

UTAH    Prior Notice Exclusion/Reimbursement

A federal district court has ruled in Starr Indemnity and Liability Company v. MonaVie, Inc., 14-395 (D. Utah Mar. 15, 2019) that a liability insurer was not obliged to provide coverage for allegations that the insured falsely promoted the health benefit of its fruit juices. The court declared that these claims were subject to a "prior notice" exclusion as involving losses that were based upon or attributable to "the same or essentially the same facts alleged … in any claim which has been reported or in any circumstances at which notice has been given … " Further, the court ruled that MonaVie was required to reimburse Starr for defense costs that had been paid in the interim in light of language in the policy stated "in the event and to the extent that the insured shall not be entitled to a payment of Defense Costs under the terms and conditions of this policy such payments by the insured shall be repaid to the insurer by the insured … "

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

A.M. Best reported last we`ek that the net income of domestic P/C carriers rose $25.2 billion to $61.40 billion in 2018, due in large part to reduced cat losses and better returns on investments.

* * * Crumbling Foundation Claims * * *

Two committees of the Connecticut Legislature heard testimony earlier this week concerning various proposals for remedying crumbling foundations that have plagued homes in eastern Connecticut and for punishing insurance companies that have resisted coverage for such claims.

* * * IBNR Update * * *

Butterball LLC has voluntarily recalled 78 pounds of raw ground turkey after Wisconsin health officials after four reports of salmonella poisoning in Wisconsin.

* * * Mark Your Calendars * * *

DRI Insurance Coverage and Claims Institute
Loews Hotel Chicago
April 3-5, 2019

DRI Insurance Bad Faith Conference
Westin Washington, D.C.
June 5-7, 2019

 

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