Apr 17 2019

MM Insurance Law Update – 4/12/2019

CASES OF CONSEQUENCE

ELEVENTH CIRCUIT    TCPA/Occurrence (GA)

The Eleventh Circuit has sustained a Georgia District Court's declaration that an insured's unauthorized transmission of junk faxes to prospective customers was not an "accident" under Georgia law.  In G. M. Sign, Inc. v. St. Paul Fire and Marine Ins. Co., No. 17-14247 (11th Cir. April 12, 2019) the Court declared in an unpublished disposition that this issue was controlled by its 2000 opinion in Mindis Metals in which it concluded that intentional conduct is not accidental even if it is premised on erroneous information.  Even though the insured had argued in this case that it was only negligent in sending the faxes because it never intended to send any faxes without the recipient's consent, the Court ruled that the conduct in question was not an "occurrence" because the insured had sent the faxes and thus intended to cause the resulting property damage (the use of the fax machines and depletion of ink and paper).  The court concluded that "the fact that MFG mistakenly thought the recipients had consented to receive the faxes is insufficient under Mindis Metals to render the property damage an accident under Georgia law."  Further, the Court refused to find that St. Paul was estopped to dispute coverage under Illinois law.

ALABAMA    Discovery/Attorney Client Privilege

 The Alabama Supreme Court has ruled in Ex Parte Alfa Insurance Corp., 1170804 (Ala. April 5, 2019) that a trial court erred in requiring a liability insurer to disclose legal opinion letters from its outside coverage counsel.  The court ruled that Alfa had not asserted an advice of counsel defense or otherwise waived the privilege.  Further, the court declined to expand the ‘crime fraud" exception or to otherwise establish a new exception to for cases involving insurance coverage disputes.  Further, the court ruled that even if it was inclined to adopt section exception, it should be done by the legislature and not by judicial fiat. 

CALIFORNIA    Additional Insureds/”Required by Written Contract”

On remand from the California Supreme Court’s 2018 ruling that a contractor’s negligent supervision of an employee who intentionally assaulted a 13 year old student was an “occurrence,” a federal district court has ruled in Liberty Surplus Lines Ins. Co. v. Ledesma & Meyer Construction Corp., No. 12-900 (C.D. Cal. April 11, 2019) that the San  Bernardino County Unified School District, which had sought coverage from the contractor’s liability insurer, was not entitled to claim coverage as an “additional insured” because the contract between Ledesma & Myer and the School District did not require the contractor to name the School District as an additional insured.  The court rejected the School District’s argument that “required by written contract” was ambiguous or that this requirement was satisfied by the indemnity and insurance provisions in the parties’ agreement.

MASSACHUSETTS    Bad Faith

Despite having previously ruled that that a liability insurer did not owe CGL coverage beyond the $300,000 liquor liability sublimit that it had already paid, a federal district court has ruled that a liability insurer is subject to treble damages under the Massachusetts Consumer Protection Act for its claimed willful failure to conduct a full pre-suit investigation of an accident in which an inebriated stripper fatally collided with a car being driven by an off-duty police officer.  In Capitol Specialty Ins. Co. v. Higgins, No. 14-40086 (D. Mass. Mar. 25, 2019), Judge Hillman ruled that the liability insurer had willfully failed to interview key witnesses and had not followed up leads that would have contradicted its insured manager’s self-serving claim that the bar had not served any drinks to its employee.   He observed that ”had Capitol used minimal effort and expense and allowed Norfield & Associates to track down and interview witnesses, and collect the relevant facts immediately following the accident this case would have followed a far different path.” Having found that the insured’s liability for serving alcohol to the 20 year old dancer that contributed to her car crash was reasonably clear, the District Court ruled that Capitol Specialty’s delay in settling had diminished the available limits because of defense costs in the interim and had obliged the claimant to incur legal expense to obtain a settlement.   The court therefore concluded that Higgins had suffered $1.8 million in damages, which he trebled based upon a finding of willful misconduct.  Judge Hillman did not explain how he concluded that $1.8 million was the amount of damages, although he did ruled that he was not bound by a $7.5 million consent judgment that the insured had previously entered into with the bar.

WASHINGTON    Equitable Subrogation/Additional Insureds

In a dispute between the liability insurers of a general contractor and a subcontractor, the Washington Court of Appeals has sustained a trial court’s ruling that Zurich breached its duty to defend a personal injury suit, despite its contention that the injuries could not have arisen out of its insured’s operations since its insured had not begun work yet, but that Zurich was not obliged to reimburse \Mt. Hawley for indemnity payments made to settle the case.  In an unpublished disposition, Division I ruled in Mt. Hawley Ins. Co. v. Zurich American Ins. Co., No. 77379-8-I (Wash. App. April 1, 2019)  that Mt. Hawley was equitably subrogated to the rights of the general contractor to pursue a claim against Zurich for failing to defend it as an additional insured under its policy.   However, the Appeals Court ruled that Zurich was not obliged to reimburse Mt. Hawley for any share of settlement as the actual facts showed that its insured was not to blame for the underlying accident.

OTHER DEVELOPMENTS OF NOTE

** * Inside the Insurance Industry * * *

An investigation undertaken by outside counsel hired by Markel Corp.to look into alleged mismanagement at Markel has failed to disclose any evidence of misconduct or bad faith in setting loss reserves in 2017 and 2018.

Aon's latest Global Catastrophe Recap estimates that global flooding last month resulted in $8 billion in loss.

* * * Across the Bar * * *

 In the race to fill former Chief Judge Shirley Abrahamson’s seat on the Wisconsin Supreme Court, liberal jurist Lisa Neubauer has conceded to conservative Brian Hagedorn, giving the conservative wing of the court a 5-2 advantage through at least 2023.

 Steptoe & Johnson has closed its Phoenix office after several of its Arizona lawyers left to join Dentons LLP.

* * * Data Breach Update * * *

 Yahoo has agreed to increase the amount of its proposed settlement of a data breach class action suit to $117.5 million dollars after criticism from the Federal District Court Judge in California to whom it was submitted for approval.

* * * IBNR Dept. * * *

The Naismith Memorial Basketball Hall of Fame has filed a trademark infringement in the U.S. District Court in Boston, seeking damages from Naismith’s Pub and Pretzel in Springfield, Massachusetts.

* * * Watch This Space * * *

The Supreme Judicial Court of Massachusetts has requested amicus filings in the matter of Rawam v. Lala, SJC 12691 on the issue of  "whether a liability insurer violated its duty, under G. L. c. 176D, § 3 (9) (f), to effectuate a prompt, fair, and equitable settlement of a claim in which liability had become reasonably clear, where the insured refused to consent to a settlement and the insurance policy provided that the insurer would not settle any claim without the informed consent of the insured; whether such a provision is unenforceable as against public policy."

 

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