Apr 23 2019

MM Insurance Law Update – 4/19/2019

CASES OF CONSEQUENCE

ELEVENTH CIRCUIT    Construction/"Your Work" Exclusion (FL)

The Eleventh Circuit has ruled in Southern-Owners Ins. Co. v. Mack Contractors of Florida, LLC, No. 18-13040 (11th Cir. April 11, 2019) that a Florida District Court erred in granting summary judgment to the liability insurer of a subcontractor. Although the District Court had declared that these claims were subject to the "your work" exclusion as involving property damage that occurred after the insured’s work was completed, the Eleventh Circuit ruled that a duty to defend nonetheless existed owing to the fact that the complaint was silent with respect to when property damage occurred and the allegations could reasonably be interpreted as alleging, at least in part, that property damage had occurred while the insured's operations were ongoing such that they were not subject to the "completed operations" hazard as required by Exclusion L.

CONNECTICUT   Agents and Brokers/Tolling

On a certified question from the Second Circuit, the Connecticut Supreme Court has ruled in Essex Insurance Company v. William Kramer & Associates, LLC, SC 20130 (Conn. April 23, 2019) that there was insufficient evidence of a "continuing course of conduct" to toll the 3 year statute of limitations for an insurer's lawsuit against an independent adjuster that failed to discover that there was a mortgage on the damaged property that affected how payments should be directed. Notwithstanding the insurer's argument that there was a special relationship between the parties that required ongoing vigilance with respect to such problems, the court declared that the adjuster's involvement with respect to this matter ended in 2007 when final payment was made and it's adjustment services terminated.

GEORGIA   Absolute Pollution Exclusion

A federal district court has ruled that a liability insurer must defend a case involving personal injuries suffered by a warehouse worker who was exposed to nitrogen fumes as the result of accidental emissions from cryogenic storage freezers inside the insured’s facility notwithstanding an absolute pollution exclusion in the policy. In Evanston Ins. Co. v. Xytex Tissue Services, Inc., No. 17-140 (S.D. Ga. Mar. 27, 2019), Judge Wall ruled that nitrogen is not always harmful (e.g. air). Further, in light of cases such as Barrett and conflicting APE rulings in Georgia, the District Court declared that it could not find that nitrogen case is an "irritant" for purposes of summary judgment. The court also declined to bar the testimony of a chemist who offered an expert opinion that nitrogen gas is not considered to be an "irritant," finding that while such testimony is improper with respect to an issue of law, it might be permitted to resolve factual issues concerning the characterization or properties of nitrogen gas.

TENNESSEE   First Party/Depreciation

On a certified question from the U.S. District Court for the Middle District of Tennessee, the Tennessee Supreme Court has ruled in Lammert v. Auto-Owners Mut. Ins. Co., No. 17-2546 (Tenn. April 15, 2019) that an insurer in making an actual cash value payment may not withhold a portion of repair labor as depreciation when the policy (1) defines actual cash value as the cost to replace damaged property with new property of similar quality and features reduced by the amount of depreciation applicable to the damaged property immediately prior to the loss, or (2) states that actual cash value includes a deduction for depreciation. In light of Tennessee law regarding the interpretation of insurance contracts, the Supreme Court concluded that the language in the policies is ambiguous and must be construed in favor of the insured parties.

WASHINGTON   Standing/Bad Faith

The state Court of Appeals has ruled has that a condominium unit owner lacked standing to see coverage from the condominium association’s property policy for damage to the contents of her unit. In Michels v. Farmers Insurance Exchange, No. 77919-2-I (Wash. App. April 8, 2019), the court ruled that Michels had no right of recovery since she was not an insured under the policy nor was she intended to be a third party beneficiary of this coverage. Under the circumstances, the court further found that she had no right to pursue a claim against Farners under the state Consumer Protection Act. While agreeing that one did not have to be an insured in order to pursue a CPA claim against an insurer, Division One declared that only an insured may bring a CPA claim based upon an insurer’s claimed failure to comply with statutory duties to its policyholders.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

Improved underwriting results and reduced catastrophic losses generated $796 million in net income for Travelers in the first quarter of 2019, substantially better than industry analysists had predicted. 

A new report by Marsh reveals that demand for cyber insurance has trebled in the last few years, even as its cost has fallen slightly. "As risk awareness has grown, more organizations, particularly those focused on their business interruption risk, are turning to the cyber insurance market for protection," according to Tom Reagan, Marsh U.S. Cyber Practice leader. 

* * * Pelvic Mesh Update * * *

The FDA plans to impose an ban on the production and sale of surgical mesh in the U.S. in light of the claimed failure of mesh manufacturers Boston Scientific and Coloplast to demonstrate that there is "a reasonable assurance of safety and effectiveness for these devices." 

* * * Asbestos News * * *

The U.S. EPA announced last week that it intends to promulgate a new regulation that will require companies to obtain federal approval in order to domestically manufacture or import specific types of products using asbestos.

* * * Mark Your Calendars * * *

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

American College of Coverage Counsels Annual Meeting
Chicago Athletic Club
May 7-9, 2019

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

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