May 9 2019

MM Insurance Law Update – 5/10/2019

NOTEWORTHY NEW RULINGS

SEVENTH CIRCUIT    Intentional Acts Exclusion (IL)

The Seventh Circuit has ruled in LeTran Tran v. Minnesota Life Ins. Co., No. 18-1723 (8th Cir. April 29, 2019) that an insured’s suicide that arose of a botched "auto-erotic asphyxiation" was excluded from coverage under a life insurance policy in light of an "intentionally self-inflicted injury" exclusion.

EIGHTH CIRCUIT   Total Pollution Exclusion/"Dispersal" (MN)

Claims against a restauranteur for selling contaminated recycled fat that a pork producer used to manufacture animal feed have been declared to arise out of the "dispersal" of a pollutant. In Restaurant Recycling LLC v. Employers Mut. Cas. Co., No. 17-2792 (8th Cir. April 29, 2019), the Eight Circuit declared that Minnesota law does not require that the dispersal be intentional and that it was sufficient in this case that at least one of the impurities have caused property damage.

ILLINOIS   Independent Counsel/Punitive Damages

The Appellate Court has ruled that an insured was entitled to independent counsel where its insurer was reserving rights based on a punitive damages exclusion and the claim for punitive damages was the greatest part of the insured’s exposure. In Xtreme Protection Services LLC v. Steadfast Ins. Co., 2019 IL App (1st) 181501 (Ill. App. Ct. May 3, 2019), the First District concluded that "where punitive damages form a substantial portion of the potential liability in the underlying action and Steadfast disclaims liability for punitive damages, Xtreme is left with the greater interest and risk in the litigation. Therefore, a conflict of interest exists, entitling Xtreme to obtain independent counsel paid for by Steadfast." The Appellate Court also rejected Steadfast’s claim that Xtreme had breached the duty to cooperate, declaring that telling defense counsel not to take any actions that impeded its defense had not caused prejudice to Steadfast and therefore did not bar coverage based upon a breach of a condition to coverage.

NEW JERSEY   Auto/PIP Coverage

A narrowly divided Supreme Court has ruled that there is no evidence that the Legislature meant to deviate from the rule that plaintiffs cannot introduce evidence of medical expenses in excess of a driver’s PIP limits when it amended New Jersey’s no fault insurance regime to permit motorists to purchase PIP limits that were far lower than the original $250,000 default amount. In the absence of such evidence, the majority declared in Haines v. Taft, A-13 (N.J. May 1, 2019) that it could not conclude that the legislature had meant "to deviate from the carefully constructed no-fault first-party PIP system of regulated coverage of contained medical expenses and return to fault-based suits consisting solely of economic damages claims for medical expenses in excess of an elected lesser amount of available PIP coverage. Unless the Legislature makes such an intent clearly known, the Court will not assume that such a change was intended by the Legislature through its amendments to the no-fault system in the Automobile Insurance Cost Reduction Act. Justice Allen filed a dissenting opinion, arguing that N.J.S.A. 39:6A-12 is intended to prevent a double recovery of damages, not to deny an automobile accident victim a just recovery of damages and that the majority’s interpretation of the statute will have a catastrophic impact on the right of low-income automobile accident victims to recover their medical costs from the wrongdoers who cause their injuries.

PENNSYLVANIA   Coverage B/"Advertising"

A federal district court has ruled that allegations that an ice cream manufacturer sold its products through kiosks and containers that copied those of a competitor triggered a duty to defend under a CGL policy. Despite Liberty Mutual’s contention that none oft these claims arose out of the insured’s advertising and were therefore subject to an intellectual property exclusion in its policy, Judge Conner declared in Hershey Creamery Co. v. Liberty Mutual Fire Ins. Co., No. 18-694 (M.D. Pa. May 6, 2019) that he was not required to decide whether signage inside the insured’s stores constituted "advertising" because the underlying allegations did not preclude any possibility of coverage and therefore must be defended. The court observed that "broad claims for trademark infringement..., which generally allege improper use by Hershey of f’real’s trademarks in Hershey’s competing slogans—quite naturally could include infringement in advertising as well as in packaging and displays."

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

A new Fitch report finds that reduced cat losses for P/C insurers and improved underwriting results have combined to reduce insurers’ combined ratios to 99.3

A new report from CipherTrace concludes that there were $1.2 billion in losses from the theft of cryptocurrencies from exchanges and fraud-related activities during the first three months of 2019, far beyond claims filed in 2018.

Guenter Kryszon, who presently serves as the head of AIG’s retail property division, is moving to Markel, where he will assumed the role of executive underwriting officer for global property effective May 13, 2019.

* * * Must See CLE * * *

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

Massachusetts Insurance and Reinsurance Bar Association Conference
Back Bay Harvard Club
June 13, 2018

 

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