Aug 23 2019

MM Insurance Law Update – 8/23/2019


FIFTH CIRCUIT    Construction Litigation/Waiver of Subrogation (MS)

The Fifth Circuit has asked the Mississippi Supreme Court to clarify whether a contractor’s waiver of subrogation claims against subcontractors as set forth in Article 11.3.7 in the AIA standard form agreement applies to the full extent of property insurance that covered the loss or whether, as a Mississippi District Court ruled in this case, the waiver only extends to the insured’s own work. In Liberty Mut. Fire Ins. Co. v. Fowlkes Plumbing, LLC, No. 18-60608 (5th Cir. Aug. 12, 2019), the court therefore asked whether "the waiver of subrogation between the school district and Sullivan limited to damages to the Work or does it also apply to damages to non-Work property?"

SEVENTH CIRCUIT   Late Notice /Excess(IL)

The Seventh Circuit has ruled that an excess insurer was not obliged to provide coverage for a large verdict arising out of the trial of its automobile liability claims against insured in light of the fact that it was only notified of the loss on the eve of trial, seven years after the original accident had occurred. in Landmark American Ins. Co. v. Deerfield Construction, Inc., No. 18-2206 (7th Cir. Aug. 12, 2019), the Seventh Circuit declared that notice seven years late was neither "prompt" or "as soon as practicable." The court rejected the insured’s argument that its latest notice was excused because it had been advised that the underlying suit was "frivolous" and that it therefore had no reason to believe that Landmark’s excess coverage would be triggered. The court refused to find that Landmark was equitably estopped since it had not controlled the insured’s defense or made statements upon which the insured had relied to its detriment. The court also refused to impose liability on the broker, Arthur J. Gallagher.

EIGHTH CIRCUIT   D&O/Allocation (MN)

The Eighth Circuit has ruled in Brand v. National Union Fire Insurance Company of Pittsburgh, P.A. No. 18-1372 (8th Cir. Aug. 16, 2019) that a Minnesota District Court did not err in granting summary judgment to a directors and officers insurer on the issue of allocating defense costs between insured and uninsured parties. The Eighth Circuit emphasized that the directors have taken a "all or nothing" approach asserted that they were entitled to be reimbursed for 100 percent of the defense costs and could not now make an intermediate demand alleging that they should be reimbursed for 40 percent or 82 percent based upon alternative theories of allocation.

NINTH CIRCUIT   D&O/Consent to Settle (AZ)

In its latest request for help from a state court, the Ninth Circuit has certified a D&O insurance coverage question to the Arizona Supreme Court in Apollo Education Group v. National Union Fire Ins. Co. of Pittsburgh, PA, No. 17-17293 (9th Cir. Aug. 15, 2019) asking how it should determine "whether National Union unreasonably withheld consent to Apollo’s settlement with shareholders in breach of contract under a policy where the insurer has no duty to defend." At issue is a D&O policy which does not contain duty to defend language and requires the insurer’s consent to any settlement, said consent not to be "unreasonably withheld."


* * * Inside the Insurance Industry * * *

Swiss Re reports that cat losses in the first half of 2019 were only $44 billion, down significantly from recent years, and only $19 billion (42%) of that amount was covered by insurance.

* * * Cyber Update * * *

New Hampshire Governor Chris Sununu has signed Insurance Data Security Law (Senate Bill 194-FN). The new statute, wihich largely tracks the NAIC’s model data security act and takes effect in 2020, will require insurance companies doing business in New Hampshire to report cybersecurity events within 72 hours. Additionally insurers must require third party service providers to implement appropriate administrative, technical, and physical measures to secure Information Systems and Nonpublic Information.

Here’s the latest newsletter from MM’s cyber-practice group.

* * * IP Update * * *

Ohio State University filed an application last week with the U.S. Patent and Trademark Office to register "THE" as a protected trademark for sales of clothing and sporting apparel. Ohio State’s 2017 effort to trademark "OSU" ran afoul of objections by Oklahoma State and ultimately resulted in a settlement. Meanwhile, the University of Michigan ridiculed Ohio State’s proposal, warning that it might protect "OF" too.

* * * IBNR Dept. * * *

Over 400 law suits, including claims against the Boy Scouts of America, the Catholic Church and Jeffrey Epstein were filed in New York last week during the first week of the Empire State’s year long exemption from statutes of limitations periods for such claims.

* * * A New "High" * * *

BDS Analytics predicts that marijuana sales in California will top $3 billion this year.

* * * Restating the Law * * *

Seventeen months after the American Law Institute voted to approve the final version of the Restatement of Law, Liability Insurance, a hard copy of the RLLI is finally rolling off the presses. Copies may be purchased on the ALI website for $266.

Meanwhile, the latest ALI newsletter features a letter from ALI Director Richard Revesz defending the ALI’s process against charges that its new Restatements are failing to follow the common law. Revesz argues that the ALI has always used a certain amount of judgment in formulating Restatements and that case law authority, while important, is not conclusive. In any event, Revesz assures the public that ths process is meant to be transparent and that if Reporters choose to adopt minority rules for good and proper reasons, they shall so state and why. He concludes:
I end this letter with three thoughts. First, the debate over whether Restatements should reflect what the law "is" as opposed to what the law "ought to be" has been a core part of the ALI’s focus since its founding. And, for more than half a century, we have followed a fairly consistent approach of generally restating majority rules but not necessarily being wedded to them, especially when ignoring better rules or trends would cast ALI into the role of being a roadblock to change. Second, equating what the law "is" with majority approaches and what the law "ought to be" with minority approaches is a category mistake. It would certainly surprise a minority jurisdiction that its law is aspirational but not real. And, third, instances in which critics claim that a Restatement provision has no support are often examples of the ALI articulating a rule that explains a pattern developing in the case law.

* * * Kudos * * *

Fourteen Morrison Mahoney partners are featured in the 2020 edition of Best Lawyer’s in America© including listings for Michael Aylward, John Graceffa and Ed Landers for the practice of Insurance Law.

* * * New Coverage Litigation of Note * * *

Arch Insurance filed suit against the University of Southern California on August 9, seeking a declaration that it does not owe coverage for a $215 settlement of sexual abuse claims arising out the misconduct of a university gynecologist and alleging that USC improperly attempted to persuade Arch to delete a sexual misconduct exclusion in its professional liability nsurance policies without sharing its knowledge of impending suits against the university.

* * * 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


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