Aug 7 2019

MM Insurance Law Update – 8/9/2019

CASES OF CONSEQUENCE

FOURTH CIRCUIT    Coverage B/Prior Publication Exclusion (NC)

The U.S. Court of Appeals for the Fourth Circuit has ruled in Pennsylvania National Mutual Cas. Ins. Co. v. Beach Mart, Inc., No. 18-1285 (4th Cir. Aug. 1, 2019) § B) that a North Carolina District Court erred in declaring that a “prior publication” exclusion precluded Penn National's duty to defend trademark infringement claims arising out of conduct that had begun prior to the inception of the policies at issue. The Fourth Circuit opined that such exclusions only defeat coverage for "an insurer's continuous and repeated publication of substantially the same offending material…"  The Fourth Circuit declared that Penn National had not shown that the underlying allegations precluded the possibility that the post-coverage infringing conduct were not "different in substance" from the pre-coverage publications.  Furthermore, the court ruled that there was at least one clear distinction since the post-coverage publications had involved the use of the term “Wings” as a slogan, whereas the earlier claims all involved the “Wings” trademark.  The court ruled that there was a legal distinction between trademarks and slogan and that a slogan therefore, clearly differed in substance from any earlier trademark infringement.

FIFTH CIRCUIT    Property Insurance/Limitations Period (TX)

The Fifth Circuit has affirmed a Texas District Court’s ruling that a homeowner’s suit against her property insurer was time-barred where she waited more than two years after the claim was denied.  In Smith v. Travelers Cas. Ins. Co. of America, No. 18-20645 (5th Cir. July 26, 2019), the Court of Appeals ruled that the statute of limitations for first party claims runs from the date of the insurer’s denial and rejected the insured’s contention that the “discovery rule” should toll the insured’s claims until it obtained information establishing that the insurer had wrongly denied its claim.  Similarly, the court ruled that the two year limitations period for filing suit was not tolled by discussions between the parties after Travelers had denied the claim.

EIGHTH CIRCUIT    Property Insurance/Misrepresentations (MN)

The Eighth Circuit has ruled in Borchardt v. State Farm Fire & Cas. Co., No. 18-2610 (8th Cir. July 29, 2019 that a Minnesota District Court did not err in barring coverage for an insured's fire loss on the basis of material misrepresentations by the insured.  The court rejected the insured's argument that, "being inaccurate on their proof-of-loss statement does not necessarily equate to being untruthful with an intent to deceive or defraud their insurer."  The court found that there was ample evidence to support the jury's finding that the insured's misrepresentations in this case were material and "substantial enough to matter to a reasonable insurer."

MASSACHUSETTS    Bad Faith

A federal district court has refused to dismiss a liability insurer’s claim that Quincy Mutual acted in bad faith in directing its insured to file a frivolous and ultimately unsuccessful law suit against another insurer seeking coverage as an additional insured.  In Quincy Mut. Ins. Co. v. Atlantic Specialty Ins. Co., No. 18-11868 (D. Mass. July 29, 2019), Judge Burroughs ruled that summary judgment should not be granted as Quincy Mutual had not yet been able to obtain discovery from Atlantic Specialty with respect to whether and to what it extent it knew that these claims were baseless.  The court rejected Atlantic Specialty’s alternative arguments that litigation conduct cannot form the basis for a 93A claim.  Finally, Judge Burroughs granted Quincy Mutual’s motion to compel production of Atlantic Specialty’s claim file, including privileged communications and work product that would have been protected from discovery had Atlantic Specialty not pleaded “advice of counsel” as an affirmative defense to these 93A claims.  The court left the door open to limit production of certain privileged communications by submitting a privilege log explaining why this legal advice was unrelated to the 176D claims and had not been relied on it in the underlying matter.

SOUTH CAROLINA    Auto/UIM

On a certified question from a federal district court in South Carolina, the state Supreme Court has ruled in Progressive Direct Ins. Co. v. Reeves, No. 27909 (S.C. July 24, 2019) that the obligation of auto insurers to offer UIM coverage set forth in Section 38-77-350 (C) was satisfied at the time that the policy was originally issued and did not require the insurer to make new offers every time that the policy was amended to add insureds or change the scope of coverage.  As a result, the court ruled that Progressive was not required to provide UIM benefits to its insured’s son who was added to the policy after it was issued. 

OTHER DEVELOPMENTS OF NOTE

* * * Inside the Insurance Industry * * *

GEICO has become the latest auto insurer to jump on the telematics bandwagon.

Munich Re has reported a $1.1 billion profit in the second quarter of 2019, a 36% jump over poor 2018 results due to severe storm events and other losses.

Clyde & Co.’s latest Insurance Growth Report states that there were 222 mergers and acquisitions of insurers globally in the first half of 2019 compared with 196 the year before.

* * * New Coverage Litigation * * *

James River Insurance has sued Rawlings Corporation in federal court in California, seeking a declaration that its policy does not cover allegations that the sporting goods manufacturer falsely advertised its baseball bats as being heavier than they actually are.

 

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