Aug 2 2019

MM Insurance Law Update – 8/2/19

CASES OF CONSEQUENCE

THIRD CIRCUIT    Environmental/”Occurrences”/Excess (NJ)

The Third Circuit has revived part of a primary insurer’s effort to obtain contribution from an excess insurer for sums that it paid to settle three New Jersey environmental liability claims against a waste hauler. In Penn National Ins. Co. v. North River Ins. Co., No. 18-2687 (3d Cir. July 30, 2019) (unpublished), the court affirmed the lower court's declaration that any claims with respect to the Helen Kramer Landfill were barred by the statute of limitations. The court rejected Penn National's argument that the three landfills should be treated as a single "occurrence" because they all arose out of the insured's hazardous waste hauling activities. To the contrary, the Third Circuit agreed with the District Court that these losses involved separate landfills in different areas occurring at different times resulting in separate types of environmental damage in distinct and discreet locations, and were therefore each a separate "occurrence." While therefore affirming the entry of judgment with respect to the Helen Kramer Landfill as being time-barred, the Third Circuit ruled that Penn National might still be entitled to contribution under the excess coverage provided by North River on the grounds that the pro-rated portion of the Helen Kramer Landfill settlement allocable to its 1982-1983 policy exceeded a claimed $500,000.00 aggregate limit in that policy. As the District Court had not considered whether the sums paid to settle the Helen Kramer Landfill claim should have been subjected to Carter-Wallace allocation and would have therefore exhausted the aggregate policy limit, the case was remanded to the District Court for further findings with respect to whether such an aggregate actually existed and what effect it would have.

FLORIDA    Tripartite

Arch Insurance filed its brief this week in the Florida Supreme Court in support of its contention that the Fourth District of the state Court of Appeal erred in ruling on March 20, 2019 that it lacked standing to sue appointed defense counsel for malpractice.

SOUTH CAROLINA    Late Notice/Auto

In a complex opinion that traces the evolution of late notice law in South Carolina, the state Supreme Court has ruled that recent legislative enactments mandating basic levels of auto insurance did not entirely negate the effect of untimely notice. In Neumayer v. Philadelphia Ind. Co., No. 27902 (S.C. July 24, 2019), the court ruled that although Section 38-77-142 (C) voids any language that would defeat coverage for the mandated $25,000 limits for auto insurance, it did not eviscerate the consequences of an insured’s untimely notice. As a result, the court ruled that Philadelphia Indemnity was only obliged to pay $25,000 on behalf of its insured and not the full amount of a $622,500 default judgment against the insured.

VERMONT    Auto Insurance/Damage/”Short Pay” Claims

The Vermont Supreme Court has ruled in Parker's Classic Auto Works, LTD. v. Nationwide Mut. Ins. Co., 2019 VT 46 (Vt. July 12, 2019) that an auto insurer cannot “short pay” claims by an auto repair company to recover the full amounts that it paid to repair insured vehicles. As the term "damage" was not defined in the policy, the court construed it as meaning "the amount of money needed to repair an insured vehicle to pre-accident condition not to exceed the value of the vehicle before the accident". The court was not persuaded by Nationwide's argument that the insureds themselves had not suffered any loss since it was only the repair shop that had not been fully reimbursed for its costs and observed that an assignee such as the repair shop may seek to collect an unpaid debt on behalf of its assignor. Finally, the court rejected Nationwide's argument that it was not obliged to pay "repair and labor costs" because labor costs are only covered under the towing clause of the policy and not the collision-coverage insuring clause.

WASHINGTON    Auto/Subrogation/”Made Whole” Doctrine

The Supreme Court of Washington has ruled in Daniels v. State Farm Mutual Automobile Ins. Co., No. 9618-9 (Wash. July 3, 2019) that lower courts erred in holding that an auto insurer that was only able to recover 70% in a subrogation act was not required to reimburse its insured for 100% of the policy deductible. The court ruled that the "made whole" doctrine required a first party insurer to reimburse the full amount of the insured's deductible before it could retain any portion of the subrogation proceeds for itself. The court declared that "whether in the context of a reimbursement request, off set or direct subrogation action, a false-free insured must be made whole for their entire loss before an insurer may offset or recovery its own payments." Furthermore, the Supreme Court found that State Farm's policy violated WAC 284-30-393, a regulation promulgated by the Washington Insurance Department that require insurer's to include deductible in its subrogation demands. The court appears to have been persuaded by an amicus brief that the Insurance Department filed asserting that State Farm's policy was inconsistent with the purpose underlying this regulation.

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

Markel has reportedly settled lawsuits brought against it by two former senior executives who alleged that it improperly accessed their phone records and fired them for having a private relationship, as a ruse to avoid paying them $77 million in bonuses.

B3i Services AG is promoting a distributed ledger process that applies block chain technology to allow insurers, brokers and reinsurers to place a catastrophe excess-of-loss treaty by with full confidence with respect to the agreed times and without the need to replicate communication of the submission package to each participant in the treaty.

* * * Cyber Update * * *

A new report from FM Global concludes that while most corporate risk managers believe that they are covered by cyber losses, their expectations may be unrealistic. Of the more than 100 chief financial officers (CFOs) and other senior financial executives, commissioned by FM Global, one of the world’s largest commercial property insurers, 45 percent said they expected their insurer will cover “most” related losses from a cyber security event, and 26 percent said they expected their carrier will cover “all” related losses.

Here’s the latest newsletter from Morrison Mahoney’s cyber-security claims group.

* * * California Burning * * *

Various insurers who have subrogation claims against Pacific Gas & Electric for insured losses arising out of recent wildfires in California have asked the federal bankruptcy judge overseeing PG&E Chapter 11 case to give them broader latitude with respect to the utility’s plan of reorganization.

* * * Merrimack Valley Claims Update * * *

Columbia Gas announced this week that it will pay $143 million to fund a settlement of class action claims arising out of natural gas explosions that rocked the Merrimack Valley towns north of Boston last October.

Back to Newsletters