May 16 2019

Insurance Law – 5/17/2019

CASES OF CONSEQUENCE

FOURTH CIRCUIT    Duty to Cooperate (MD)

The Fourth Circuit has ruled that a professional liability insurer is bound by a default judgment that entered against the insured physician after he fled the United States. Although defense counsel had withdrawn from the case because he concluded that Maryland’s rules of professional responsibility barred him from defending a case without a consenting client, the Fourth Circuit agreed with the U.S. District Court that neither ethical rules, nor Maryland law or the terms of this terms of the Lancet policy prevented Lancet from defending the malpractice action. In Mora v. Lancet Indemnnity Risk Retentiion Group, No. 18-1566 (4th Cir. May 7, 2019)(unpublished), the court interpreted the "right and duty" language in this policy as giving "advanced consent" by the insured to its insurer’s right to defend. The court also faulted Lancet for not consulting with other lawyers before accepting the conclusion of appointed defense counsel and withdrawing from any further effort to defend its absentee insured. Finally, the court declared that Lancet had failed to show that it was prejudiced by any failure to cooperate on the part of its insured.

EIGHT CIRCUIT   Auto/UIM (MO)

The Eighth Circuit has affirmed a Missouri District Court’s declaration that an incident in which the insured was shot by a drive-by vehicle did not arise out of the use or operation of an uninsured vehicle. In Patel v. LM General Ins. Co., No. 18-2035 (8th Cir. May 3, 2019), the court adopted numerous decisions of the Missouri Court of Appeals that had declared that uninsured vehicles are not in "use" merely because they are the situs of tortious conduct and rejected the insured’s argument that these rulings are not in conflict with Schmidt v. Utilities Ind. Co., 182 S.W.2d 181 (Mo. 1944).

IOWA   Bad Faith/TPAs

The Iowa Supreme Court has ruled that because a third-party administrator does not possess these attributes that have led to the imposition of bad-faith liability, an injured employee may not sue a TPA for its claimed bad faith in adjusting his worker’s compensation claim. On a certified question from a U.S. District Court, the Supreme Court ruled in De Rios v. Indemnity Ins. Co. of North America, No. 18-1227 (Iowa May 10, 2019) that the rationale underlying the evolution of bad faith law in Iowa simply did not apply to TPAs. While acknowledging that it had allowed employees to sue self- insured employers for bad faith, the court emphasized that in all of these cases the focus of its analysis was on the relationship between the insurer (or its functional equivalent in the case of self-insurance), whereas TPAs have no relationship to employees and are not subject to the statutory and regulatory requirements that are imposed upon insurers. Two dissenting justices criticized the majority’s view of the law as "anachronistic" and argued that the increase trend of insurers "outsourcing" claims functions to third parties required that those parties be subject to sanction in cases of misconduct.

MONTANA   Consent Judgments

The Montana Supreme Court has ruled that a trial court erred in sustaining a $10 million consent judgment in a case that a professional liability insurer had been defending under a reservation of rights. Whereas the trial court had ruled that the insurer’s failure to settle was equivalent to a breach of the duty to defend and that, having been "abandoned" by its insurer, the insured was to settle over the insurer’s objections, the Supreme Court ruled in Draggin’ Y Cattle Co. v. Junkermeier, Clark, Campanella, Stevens, PC, 2019 MT 97 (Mont. April 24, 2019) that the claimants’ remedy against an insurer for failure to settle was a statutory claim for bad faith under the Montana UTPA but that it was improper for the court below to make a finding that the underlying $10 million consent judgment was both reasonable and enforceable in this case, where the insurer was defending. Rather, in such cases there is no presumption of reasonableness and the claimant must itself establish that the settlement was fair and reasonable. Three justices joined in a concurring opinion in which they argued that New York Marine had a full and fair opportunity to challenge the reasonableness of the settlement amount and should not be permitted to relitigate that issue on remand.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

Julie McPeak is stepping down after eight years at Tennessee’s insurance commissioner. Deputy Commissioner Carter Lawrence will head the agency until a permanent successor is selected.

Allianz reported this week that it earned a profit of $2.2 billion in the first quarter of 2019, up slightly from the same period in 2018.

The Florida legislature has approved HB 301, an omnibus insurance bill that provides, among other things, a new rule that a civil remedy notice may not be filed within 60 days after appraisal is invoked by any party in a residential property insurance claim.

* * * Cyber News * * *

Here is the latest newsletter from MM’s cyber practice group.

* * * Pharma Update * * *

The attorneys general of 44 states filed a law suit in the U.S. District Court in Connecticut last week, accusing the nation's largest manufacturers of generic drugs of conspiring to keep drug prices high and monopolize markets.

* * * Roundup News * * *

In the largest Roundup verdict to date, a California jury has awarded $2 billion against Monsanto for claims of cancer allegedly arising out of the plaintiffs' exposure to the weed killer. Last month, the U.S. EPA released a study concluding that the active ingredient in Roundup (glyphosate) is not a carcinogen.

* * * IBNR Update * * *

The Guns ‘n Roses rock band has sued a Colorado brewery, alleging that the Oskar Blues Brewery is violating its trademark by selling "Guns ‘n Rose" beer.

* * * Sexual Abuse Update * * *

New Jersey has enacted legislation liberalizing the period of time for sexual abuse victims to bring suits. The bill signed into law by Governor Murphy this week allows victims to sue until they turn 55 or within 7 years of first realizing that they had suffered abuse. (Current New Jersey law requires suits to be brought before a victim turns 20 years old or within 2 years after first realization). The legislation also creates a 2-year window for victims whose claims were previously time-barred.

* * * MM In the News * * * 

Boston partner Michael Aylward was elected as the President of the American College of Coverage Counsel at the ACCC’s annual meeting in Chicago last week. The ACCC is an invitation only conclave of 300 of leading insurance coverage and bad faith lawyers from the United States and Canada.

* * * The Restatement in the Dock * * *

Arkansas has become the fifth state to enact legislation warning courts not to follow the Restatement of Law, Liability Insurance if it is inconsistent with state law. Act 742, which was enacted on April 8,, declares that the Restatement "does not constitute the public policy of Arkansas "if the statement of the law is inconsistent or in conflict with, or otherwise not addressed by (1) a statute of the State of Arkansas; (2) the common law and statute law of England as adopted in Arkansas under Section 1-2-119 or Arkansas case law precedent." 

* * * In Memoriam * * * 

It may have been McHale’s boat but Tim Conway ran the show. 

* * * 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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