Aug 16 2019

MM Insurance Law Update – 8/16/2019


FIFTH CIRCUIT    D&O/"Claims Made"/Related Claims (TX)

The U.S. Court of Appeals for the Fifth Circuit has ruled in ADI Worldlink v. RSUI Indemnity Co., No. 17-41050 (5th Cir. Aug. 2, 2019) that a D&O insurer was not obliged to provide coverage for various claims that were timely reported to RSUI during its policy term as they were related to claims in earlier years that were not timely reported.

FIFTH CIRCUIT    "Property Damage"/Economic Loss (AL)

In a case applying Alabama law, the Fifth Circuit has ruled that a contractor’s liability insurers did not owe coverage for a subcontractor’s quantum meruit claim to recover costs that it incurred to install water lines at a Margaritaville casino in Mississippi. In Greenwich Ins. Co. v. Capsco Industries, Inc., No. 18-60032 (5th Cir. Aug, 12, 2019), the court affirmed a Mississippi District Court’s finding that the underlying claim was solely for the cost of labor and supplies and was therefore a pure economic loss and not "property damage" within the scope of CGL coverage. The court declared that: "Capsco was obligated to pay the reasonable value of the services Ground Control provided. It was not paying for property damage or loss of its use; it was paying for labor and materials. Payment for work is a step removed from paying for property damage that necessitated the work."

SEVENTH CIRCUIT    Property Insurance/"Replacement Cost" (IL)

The Seventh Circuit has ruled in Windridge of Naperville Condominium Assoc. v. Philadelphia Ind. Ins. Co., No. 18-2103 (7th Cir. Aug. 7, 2019) that even though a hail storm only damaged the siding on two sides of the insured’s building, a property insurer must pay to replace all four sides since replacement siding is no longer available in the original color. The court found an ambiguity in the policy in light of the apparent conflict between the policy’s requirement of "direct physical loss" on the one hand and the insured’s agreement to pay "[t]he cost to replace the lost or dam‐ aged property with other property … [o]f comparable material and quality…" In any event, the court ruled that the better approach is to consider the building as a whole and not consider the individual facades separately.

EIGHTH CIRCUIT    Excess/Undifferentiated Verdicts (MN)

The Eighth Circuit has ruled that a Minnesota judge erred in ruling that an excess insurer had failed to show that a sexual molestation exclusion in an excess policy did not preclude coverage for a $7 million verdict against the insured day care center. Whereas the District Court has ruled that RSUI had failed to show what portion of the verdict was for injuries due to sexual assault (as opposed to claims of physical assault that would have been covered), the Eight Circuit ruled in RSUI Ind. Co. v. New Horizon Kids Quest, Inc., No. 17-3567(8th Cir. Aug. 12, 2019) that as RSUI had not been a party to the underlying trial and as the jury had not categorized the damages awarded, RSUI was entitled to litigate whether the damages for physical assault were $3 million or less and therefore fully within the limits of the underlying Travelers policy.

NINTH CIRCUIT    Auto/UM/"Permissive User" (HI)

The Ninth Circuit has certified a question to the Hawaii Supreme Court, asking in State Farm Mut. Auto Ins. Co. v. Mizzuno, No. 17-15497 (9th Cir. Aug. 5, 2019) "is a permissive user of an insured vehicle, whose connection to the insured vehicle is permission to use the vehicle to run errands and drive to work, entitled to uninsured motorist (UM) benefits under the chain-of-events test because he was injured by an uninsured motorist?"

ILLINOIS    Auto/Excess/Intoxication Exclusion

The Appellate Court has ruled that a trial judge erred in refusing to give effect to an "intoxication" exclusion in an excess auto policy issued to a rental car customer. In Crowley v. Empire Fire & Marine Ins. Co., 2019 IL App (2d) 180752 (Ill. App. Ct. Aug. 2, 2019), the Second District ruled that the supplementary insurance was not mandated by Illinois law and that any exclusions contained in it were therefore not void as being contrary to the public policy underlying the state’s minimum insurance regime for motorists.


* * * Inside the Insurance Industry * * *

HDI Global has hired Patricia Ryan as its new general counsel. Prior to joining HDI, Ryan served as executive vice president and general counsel of American Overseas Group in Bermuda.

Lloyd’s reports that its syndicates surpassed targets in the second quarter for placing more than half their risks electronically.

Lawyers representing U.S. Treasury Secretary Steve Mnuchin have asked a federal bankruptcy judge overseeing the Sears bankruptcy in Manhattan to lift a stay so that he can obtain coverage from Sears’ D&O insurer that he oversaw a wrongful transfer of assets while serving as the Chair of the Sears’ Board of Directors.

* * * IBNR Update * * *

A dozen cases of Legionnaires’ Disease have been linked to a Sheraton hotel in Atlanta and several dozen more claims have been deemed "probable" by state health authorities.

* * * New Coverage Litigation * * *

Rockefeller University has filed suit in New York state court, seeking a declaration that its liability insurers are obliged to accept coverage for sexual abuse claims arising out of assault committed by Doctor Reginald Archibald.

* * * Must See CLE * * *

FETTI Claims Conference
Chicago, IL
September 25-27, 2019

DRI Annual Meeting
New Orleans
October 16-19, 2019

DRI Insurance Coverage Forum
Hartford, CT
November 6, 2019

FDCC I-3 Symposium
November 6-8, 2019
New York City

DRI Insurance Coverage and Practice Symposium
New York City
December 5-7, 2019


Back to Newsletters