May 23 2019

MM Insurance Law Update – 5/24/2019

CASES OF CONSEQUENCE

FIFTH    CIRCUIT NFIP/Statute of Limitations (TX)

The U.S. Court of Appeals for the Fifth Circuit has ruled a Texas District Court did not err in granting summary judgment to a property insurer in light of the homeowner's failure to bring suit within the 1-year statute of limitations. In Cohen v. Allstate Ins. Co., No. 18-20330 (5th Cir. May 17, 2019) ,the court emphasized that any party seeking recovery pursuant to the National Flood Insurance Program "must comply strictly with the terms and conditions that Congress has established for payment" including the relevant limitations period for asserting a claim.

SEVENTH CIRCUIT  Environmental/Expert Testimony (IL)

The Seventh Circuit has ruled that an Illinois District Court did not err in striking the testimony of a geologist who gave unfounded "expert" testimony denying that releases of pollutants from the diesel refueling area of the insured's facility had been "sudden" or "accidental." In Varlen Corp. v. Liberty Mutual Ins. Co., No. 17-3212 (7th Cir. May 16, 2019), the Seventh Circuit agreed with the District Court that Roger's testimony was "nothing more than guesses" and had been properly stricken as being unreliable and speculative in violation of FRE 702.

CALIFORNIA    Bad Faith/Punitive Damages

The California Court of Appeal has ruled in Mazik v. GEICO Ins. Co., B281372 (Cal. App. May 17, 2019) that there was sufficient evidence to sustain a million dollar award of punitive damages in a bad faith case. Notwithstanding GEICO's argument that the evidence at trial was insufficient to show that any "officer, director or managing agent" had engaged in acts that were oppressive, fraudulent or malicious, the Second District declared that the involvement of supervisory employees at GEICO satisfied the requirements of Section 3294 and that the amount of punitive damages (three times the insured's actual loss) was constitutionally appropriate.

VIRGINIA    Absolute Auto Exclusions

The Virginia Supreme Court has ruled in James River Insurance Company v. Doswell Truck Stop LLC, No. 180624 (Va. May 16, 2019) that a trial court erred in failing to rule that an incident in which a truck stop customer was fatally injured when a tire that was being installed on his tractor trailer exploded was excluded from coverage as arising out of the "maintenance" of "any" auto. Whereas the trial court had ruled that "maintenance" was ambiguous because it could either "regular repair operations" or a "possessory interest other than ownership or use of an auto," the Supreme Court found that "regular repair operations" was the only reasonable interpretation of "maintenance." that could reasonably be applied to every instance of the term in the James River policy Having found the exclusion was not ambiguous, the Supreme Court went on to declare that the exclusion applied since the underlying injuries clearly "arose out of maintenance of the vehicle." The Supreme Court rejected the insured's argument that the exclusion should not apply to alternative theories of liability such as the insured's negligence in allowing a customer into an area where he was exposed to a dangerous condition.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

Swiss Re's latest SONAR report declares that the top five emerging risks for the insurance industry are (1) clashes between older technologies and new digital platforms; (2) threats from 5G mobile networks (3) the inflexibility o central banks; (4) genetic testing (for life insurers) and (5) climate change.

The California Court of Appeals has reinstated a $27.5 million fine that was levied by the state Insurance Commissioner on Mercury Insurance in 2015 for illegally charging broker fees in nearly 200,000 auto insurance transactions between 1999 and 2004.

* * * Cyber News * * *

Municipal computer systems in Baltimore remain frozen as the result of a Ransomware attack earlier this month.

Speaking at a cyber-security conference in Paris this month, Scor CEO Denis Kessler predicted that losses from cyber-claims will soon eclipse risks than natural catastrophes for the insurance sector.

* * * Across the Bar * * *

DRI announced this month that it has begun a national search to replace its long-time Executive Director, John Kouris, who is retiring after several decades of exemplary service to the defense bar.

* * *Restating the Law * * *

On the heels of its controversial May 22, 2018 approval of a liabilty insurance Restatement, the American Law Institute voted at its annual meeting in Washington, D.C. this week to defer consideration of a Tentative Draft of the proposed "Restatement of Law, Consumer Contracts" that many business interests had criticized for reasons similar to those raised in opposition to the insurance Restatement.

Meanwhile, as more states enact legislation rejecting the ALI Insurance Restatement as an appropriate source of law in these states, the American Law Institute has reportedly hired two Austin lobbyists to persuade legislators in Texas not to move forward with House Concurrent Resolution 58 and related bills that would prohibit courts from citing this Restatement in their opinions.

* * * California Burning * * *

New estimates from California’s Insurance Commissioner predict that insurance claims from last year’s destructive wildfires will exceed $12 billion, making them the most expensive in state history.

* * * Settlement Strategies * * *

Coverage maven turned mediator Andrew Nadolna has published a useful article on considerations that parties should ponder before hiring a mediator.

* * * New Coverage Litigation of Note * * *

A South Carolina utility has sued a pipeline contractor’s property insurers, alleging in Kiawah Island Utility, Inc. v. Westport Ins. Corp., No. 19-1359 (D.S.C.) that it is an additional insured under "all risks" policies underwritten by Swiss Re and Lloyd’s and is entitled to coverage for damage that a pipeline suffered while being constructed under the Kiawah River.

* * * On the Road Again * * *

Boston partner Michael Aylward and AIG’s Tom Chaseman will be presenting a paper on May 7 at DRI’s bad faith conference in Washington, D.C. discussing the implications of the ALI’s Restatement of Law, Liability Insurance for the future of bad faith litigation.

* * * 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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