Jun 14 2019

MM Insurance Law Update – 6/14/2019


CALIFORNIA    Construction Defect/Additional Insureds

The California Court of Appeal has ruled that a trial court erred in refusing to grant additional insured coverage to a general contractor on the basis that the claims in question fell within the scope of a policy exclusion for damage to "property in the care, custody or control of the additional insured." In McMillin Homes Construction Inc. v. National Fire and Marine Ins. Co., DO74219 (Cal. App. June 5, 2019) Dash, the Fourth District agreed with the general contractor that this exclusionary language only applied where the insured had exclusive or complete control – and not shared control – over the property that was damaged. In this case, the Court of Appeal found that the general contractor and the subcontractor shared control over this work. In any event, the court ruled that a contrary interpretation of this language would nullify the broad coverage provided for general contractors under the policy in a manner that was inconsistent with an insured's objectively reasonable expectations of coverage.

FLORIDA    Tripartite/Malpractice Claims

The Florida Supreme Court announced this week that it would accept the Fourth District Court of Appeals’ invitation in Arch Ins. Co. v. Kubicki Draper LLP, No. 4D17-2889 (Fla. App. Mar. 20, 2019) to answer whether "an insurer has standing to maintain a malpractice against counsel hired to represent the insured where the insurer has a duty to defend."

FLORIDA    TCPA Privacy Claims/Exclus 

A federal district court has reportedly ruled in iCan Benefit Group v. Liberty International Underwriters (S.D. Fla. June 3, 2019) that Liberty did not owe coverage for a $60 million settlement of TCPA claims that a health insurance broker entered into light of an exclusion its policy for claims "based upon, arising out of, or attributable to any actual or alleged defamation, invasion of privacy, wrongful entry and eviction, false arrest or imprisonment, malicious prosecution, abuse of process, assault, battery or loss of consortium."

ILLINOIS    "Occurrence"/Pornography/"Penal Laws" Exclusion

A federal district court has ruled in Doe v. Citizens Insurance Company of Illinois, 2019 WL 2346980 (N.D. Ill. June 4, 2019) that an Illinois legislator who was convicted in 2014 for violating federal criminal child pornography statutes could not obtain coverage from his homeowner’s insurer a settlement that he entered into for a civil lawsuit brought by victims depicted in the child pornography. Judge Kocoras ruled that the sexual mistreatment of a minor is not an "occurrence" under a liability insurance policy and noted the insured's admission in the criminal case and in the civil judgment that he entered into with these claimants stating that he had "intentionally intruded upon the solitude and seclusion of the plaintiffs in their most devastating private affairs and concerns." In any event, the District Court declared that any coverage that might apply was defeated by operation of the "penal law" exclusion in the policy as the child pornography statutes in question are clearly penal laws.

RHODE ISLAND     Construction Defect/Additional Insureds

The Rhode Island Supreme Court has ruled in Bacon Construction Co., Inc. v. Arbella Protection Ins. Co., 2017-350 (R.I. June 4, 2019) that a trial court did not error in ruling that a subcontractor’s liability insurer was not obliged to provide coverage to the general contractor for personal injuries suffered by a worker at a construction project at the University of Rhode Island. The Supreme Court declared that the additional insured endorsement to the policy limited coverage to those situations where liability was attributable, at least in part, to the negligence of the named insured, whereas the allegations in the underlying complaint in no ways suggested that these injuries were due to any negligence on the part of the named insured. The Supreme Court rejected Bacon's argument that the phrase "caused in whole or in part" did not specifically require or imply proof of negligence. The Supreme Court ruled that the endorsements referenced to the terms "liability" and "bodily injury caused by one's acts or omissions" implicitly required proof of negligence on the part of the named. insured. Despite the evidence of any negligent acts on the part of the named insured, the insured had argued the coverage should arise because these injuries would not have occurred but for the named insured's work on behalf of the general contractor at the construction site. The Supreme Court refused to find that the mere fact that the employee was injured while working for the named insured met the causation requirement of the additional insured endorsement.

WISCONSIN     Auto/UIM/Claim Preclusion

The Wisconsin Supreme Court has ruled that the doctrine of claim preclusion precluded a direct action claim against an automobile liability insurer by the victims of an auto accident involving Wilson Mutual’s insured. As these claimants had already unsuccessfully pursued a claim against Wilson Mutual’s insured, the court ruled in Teske v. Wilson Mut. Ins. Co., 2019 WI 62 (Wis. June 4, 2019) that the disposition of the earlier claims against the policyholder precluded a new suit against the insurer for the same injuries. The State Supreme court ruled that the doctrine of claim preclusion precluded the re-litigation of these claims as there was an identity between the parties, the causes of action and dispute and that there had been a final judgment on the merits in a court of competent jurisdiction.


* * * Inside the Insurance Industry * * *

Progressive Insurance has reportedly agreed to pay $2 million to settle claims by Pennsylvania policyholders who claim that the auto insurer cheated them out of a promised premium discount for installing car theft security devices.

A new market survey by Willis Towers Watson finds that commercial insurance prices among domestic carriers rose 2 percent in the first quarter of 2019, led by commercial auto, commercial property, excess and umbrella insurance and D&O lines.

QBE North America has appointed Kris Hill as its new president for Alternative Markets. Hill joined QBE in January 2017 as its chief financial officer.

A new Aon study finds that even though the number of insurers offering cybercoverage and the number of policies issued continues to growth, the rate of growth has slowed recently in comparison with past years.

* * * Cyber Claims * * *

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

* * * Restating the Law * * *

The Federalist Society convened an interesting luncheon discussion at the National Press Club that I attended last week where a panel of senior ALI members and conservative pundits to consider the question "ALI: Unbiased Analyzer or Agenda Driver?"

While in Washington, I spoke at a DRI conference concerning the implications of the ALI’s new insurance Restatement for the future of bad faith litigation. Here’s a copy of my paper.

The Restatement of Law, Liability Insurance will also be the keynote topic of this year’s conference of the Massachusetts Insurance and Reinsurance Bar Association, which will be held at the Harvard Club in Boston’s Back Bay on June 13.


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