Apr 4 2019

MM Insurance Law Update – 4/5/2019

NOTEWORTHY NEW RULINGS

SECOND CIRCUIT    First Party/"Collapse" (CT) 

The Second Circuit has affirmed a Connecticut District Court’s ruling that a homeowner’s insurer did not owe "collapse" coverage for the crumbling foundation of an insured’s home. In Valls v. Allstate Ins. Co., No. 17-3495 (2d Cir. April 2, 2019), the court affirmed Judge Bolden’s finding that the gradual deterioration of the insured’s still standing basement walls was not a "collapse." Whereas the insured had argued that the policy’s "collapse" coverage was ambiguous in light of the Connecticut Supreme Court’s ruling years ago in Beach, the Second Circuit declared that Beach was clearly distinguishable as this Allstate policy defined "collapse" as requiring a sudden loss. Further, even though Judge Bolden has certified some "crumbling foundation" issues to the Connecticut Supreme Court in a different case (albeit not the scope of "sudden" collapse forms), the Second Circuit refused the plaintiff’s request for certification in this case, declaring that it did not present any special issues requiring guidance from the state Supreme Court. 

ILLINOIS    Construction Defect/"Occurrence"/Equitable Contribution

The Appellate Court has ruled in Acuity Ins. Co. v. 950 West Huron Condominium Association, 2019 IL App. (1st) 180743 (Ill. App. Ct. Mar 29, 2019) that a trial court erred in ruling that an earlier liability insurer of a building subcontractor was not entitled to equitable contribution from a later insurer for claims arising out of water intrusion at a condominium complex. The First District ruled that the Acuity had wrongfully refused to defend because the damage claimed by the condominium association was not limited to the insured subcontractor’s own faulty workmanship. Despite Acuity's argument that it was completely foreseeable that a construction defect would cause damage to other portions of a construction project and should therefore not be treated as an "occurrence" the Appellate Court ruled that "[w]hile there is no occurrence when the subcontractor's defective workmanship necessitates removing and repairing work … this Court has repeatedly stated that damage to something other than the project itself does constitute an occurrence under a CGL policy." In cases involving subcontractors, the court ruled that the term "project" should be construed as being limited to the scope of the insured's own work and the precise nature of any damage that might occur to something outside of that scope is an unforeseeable event for which coverage should be provided. Having found that Acuity should have participated in the subcontractor’s defense, the court ruled that Cincinnati Insurance was entitled to equitable contribution for a portion of its incurred defense costs but remanded the case back to the trial court for a determination of how much Acuity owed.

ILLINOIS    Umbrella Coverage/Additional Insureds/Permissive Drivers 

The Illinois Appellate Court has ruled that a permissive user was not entitled to claim coverage under a vehicle owner's umbrella policy. In State Farm Mutual Automobile Ins. Co. v. Murphy, 2019 IL App (2nd) 180154 (Ill.. App. Ct. Mar. 29, 2019), the Second District declared that the permissive user was not some other "person or organization to the extent they are liable for the use of an automobile, recreational motor vehicle or watercraft by a person included" in the other insured provisions of the umbrella policy. The court rejected the claimant's argument that this language was ambiguous or that the "last antecedent rule" limited the application of the "person included" language to watercraft and not also to automobiles. Because the named insured in this case was not liable for the permissive user's operation of this vehicle, the court declined to find that the permissive user was entitled to coverage as an insured.

PENNSYLVANIA    Bad Faith

The Pennsylvania Supreme Court announced last week that it would agree to hear an insured’s appeal of Berg v. Nationwide Mut. Ins. Co., in which the Superior Court set aside a $21 million bad faith verdict against an auto insurer.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

Lloyd’s reported last week that it suffered a billion dollar loss in 2018 as the result of several major natural catastrophes around the globe. 

Willis Re declared last week that claims arising out of last month’s Ethiopian air crash and the subsequent grounding of Boeing 737 MAX 8 planes around the world may add up to the largest non-war reinsurance claim ever.

QBE has announced that it will cease writing coverage for coal-fired power plants as part of a larger effort to encourage industries to shift away from energy generation that may be contributing to climate change. 

The House Financial Services Committee voted 40-15 last week to approve the SAFE Banking Act, which would lend protection to banks and insurers doing business with cannabis producers. 

The chair of the North Carolina Republican Party has been indicted for attempting to bribe state insurance regulators to end an investigation of his insurance company (Global Bankers Insurance Group). Representative Mark Walker was already under investigation for regulatory irregularities in Florida.

* * * Social Media Dept. * * *

The Second Circuit has issued a summary order in Herrick v. Grindr LLC, No. 18-396 (2d Cir. Mar. 25, 2019) declaring that a social media company could not be liable for a man’s use of its "hook up" app to harass his former girlfriend. The court ruled that Grndr was protected from liability for such claims by Section 230 of the Communications Decency Act of 1996. 

* * * Mark Your Calendars * * *

Emerging and Environmental Claims Managers Association Annual Claims Conference
Portofino Hotel-Orland
May 1-3, 2019

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

 

 

Back to Newsletters