Apr 29 2019

MM Insurance Law Update – 4/26/2019

CASES OF CONSEQUENCE

NINTH CIRCUIT    First Party/Late Notice/"External" Causes (WA) 

The U.S. Court of Appeals from the Ninth Circuit has ruled that a federal district court in Seattle erred in granting summary judgment to a property insurer with respect to the availability of coverage for an incident in which a plant that converted raw landfill gas into natural gas had to be shut down after a gas diffuser basket broke and the bottom plate fell away leaving important portions of the apparatus unprotected. The Ninth Circuit agreed with the District Court that Washington law should apply since the plant was located in Washington even though the insured was headquartered in Virginia. However, the court went on to rule in Ingenco Holdings, LLC v. ACE American Ins. Co., No. 16-35792 (9th Cir. April 15, 2019) that issues of fact precluded entry of summary judgment for ACE on the issues of fortuity and whether the loss was due to an "external cause." While agreeing that fortuity should be applied to "all risks" policies under Washington law, the Ninth Circuit concluded that the issue in this case was not whether the processed gas was fortuitous but whether the insurance loss was fortuitous. In this case, the court ruled that the failure of the diffuser basket and related equipment was not inevitable and that there was no evidence that the materials would fail under normal gas pressures. Further, the court ruled that the district court's conclusion that an inherent defect was responsible for this shutdown failed to account for material evidence with respect to the circumstances of the loss. Having concluded that there were at least disputed issues of fact as to whether the loss was fortuitous the case was remanded for further findings as to whether it resulted from an "external cause." 

TENTH CIRCUIT   Household "Resident"/"Any Insured" Exclusions (WY) 

The Tenth Circuit has ruled that a teenage boy who only lived part time with his mother was not a "resident" of her household and therefore could not be treated as an "insured" for the purposes applying an exclusion for the intentional or criminal acts of "any insured." In reversing a lower court's declaration that a homeowner's insurer was not liable to provide coverage for allegations that the mother had been negligent in storing a handgun that her son used to kill a friend, the Court of Appeals ruled in American National Property and Casualty Company v. Burns, No. 18-8006 (10th Cir. April 23, 2019) that the "resident" language in the policy was ambiguous under Wyoming law in cases where a child has multiple residences. 

MISSISSIPPI   Property Insurance/Loss Payees/Notice of Cancellation 

The Mississippi Supreme Court has ruled in James Allen Insurance Brokers and Certain Underwriters at Lloyd's, London v. First Financial Bank, 2018–307 (Miss. April 18, 2019) that a bank was entitled to claim the insurance proceeds from a fire that occurred at the insured poultry farm because Lloyd's had failed to comply with Mississippi law requiring that notice of an insurer's cancellation of a property policy be given to a loss payee. The court rejected Lloyd’s argument that the notice requirements set forth in Mississippi Code §§ 83-13-9 and 83-5-28(1) did not apply because the policy had been cancelled for non-payment of premium. In this case, the court ruled that a valid binder had been issued and that the insured’s alleged delay in issuing the premium owed did not invalidate the operative statutory requirements for notice. The court ruled that whether this coverage was cancelled or lapsed for failure to pay the premium was an issue to be resolved between the policyholder and its insurer but did not affect the rights of the mortgagee/loss payee. 

NEW YORK   Asbestos/Allocation

The First Department has issued a brief affirmance in In Re Matter of Liquidation of Midland Insurance Company, 2019 NY Slip Op 02961 (App. Div. April 18, 2019), declaring that a trial judge was correct in concluding that asbestos liabilities occurring over the course of successive policies should be allocated on an "all sums" basis consistent with the New York Court of Appeals 2016 ruling in Viking Pump. The court ruled that in this case the excess policies issued by Midland followed form to primary policies issued by American Home that contained non-accumulation clauses. Further, the court ruled that vertical exhaustion should be applied as being consistent with the theory of "all sums" allocation. 

OTHER DEVELOPMENTS OF NOTE 

* * * Inside the Insurance Industry * * * 

Fitch reports in its new "U.S. Property/Casualty Industry Statutory Results and Forecast Performance Improves on 2018 Underwriting Profit" analysis that an increase in premium and lower cat losses have allowed domestic insurers to reduce their combined ratios below 100 for the first time in years. 

A group of Hawaiian homeowners have sued Lloyd’s and numerous insurance brokers in the Island State claiming that they were "steered" towards property insurance policies that lacked coverage for damage from recent volcanic eruptions. 

* * * Scout’s Honor * * * 

Counsel representing dozens of Boy Scouts who have allegedly been abused over the years released documents last week from the BSA’s so-called confidential "perversion files" that evidence over 12,000 incidents in which young men were molested or sexually accosted by nearly 8000 Scout leaders back to 1944. 

* * * Restating the Law * * *

North Dakota has become the latest state to enact legislation declaring that the American Law Institute’s recently enacted Restatement of Law, Liability Insurance is not good legal authority to be cited in the courts of North Dakota. House Bill No. 1142 declares that "A person may not apply, give weight to, or afford recognition to, the American Law Institute's "Restatement of the Law, Liability Insurance" as an authoritative reference regarding interpretation of North Dakota laws, rules, and principles of insurance law." Similar legislation is awaiting final approval in Arkansas and is under active consideration in Indiana and Texas. 

* * * Mark Your Calendars * * * 

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

American College of Coverage Counsel Meetings
Chicago Athletic Club
May 7-9, 2019 

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

 

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