Nov 15 2019

Insurance Law – 11/15/2019


THIRD CIRCUIT    E&O/"Outside Business" Exclusion (PA)

The U.S. Court of Appeals has ruled in Westport Ins. Corp. v. Hippo Fleming & Pertile Law Offices, No. 18-3351 (3d Cir. Nov. 8, 2019)(unpublished) that a Pennsylvania District Court did not err in declaring that a malpractice suit alleging that an attorney diverted a client’s business to a company controlled by the lawyer was subject to a policy exclusion for "claim based upon, arising out of, attributable to or directly or indirectly resulting from any Insured’s activities" arising from involvement with a company "other than the Named Insured." The Third Circuit acknowledged that it was conceivable that facts could be alleged that would fall outside the scope of this exclusion but declined to impose a duty to defend based upon hypothetical claims that were not yet set forth in the underlying complaint.

SEVENTH CIRCUIT   First Party/Appraisal (IN)

The Seventh Circuit has rejected a condo association’s argument that the appraisal process in its property policy is ambiguous or contrary to Indiana law. The court also ruled in Villas at Winding Ridge v. State Farm Fire & Cas. Co., No. 19-1731 (7th Cir. Nov. 8, 2019) that an umpire’s award should not be set aside based on documents that the insured submitted after the award was rendered, claiming that it was necessary to replace 100% of the shingles on its property and not just the ones suffering hail damage because shingles of a matching color and design were no longer available. The court ruled that permitting "this kind of second guessing would only frustrate the purpose of a binding appraisal in the first place." In keeping with these conclusions, the court also rejected the condo association’s claim that State Farm had acted in bad faith, ruling that there was no evidence that State Farm delayed payment to Winding Ridge, deceived Winding Ridge, or exercised an unfair advantage to pressure Winding Ridge to settle the claim.

CALIFORNIA   Independent Counsel/SLAPP Claims

The California Court of Appeal has rejected an effort by a liability insurer to dismiss an insured’s coverage suit pursuant to Code of Civil Procedure Section 425.16 as a strategic lawsuit against public participation (anti-SLAPP). In Miller Marital Deduction, Inc. v. Zurich American Ins. Co., 2019 WL 5304862 (Cal. App. Oct. 21, 2019), the Second District ruled that Zurich’s claimed refusal to provide Cumis counsel in this case did not "arise from allegations about the conduct of attorneys representing Zurich’s insured in the course of the" federal action, and that such allegations of petitioning activity subjected the complaint to an anti-SLAPP motion." In refusing to find that these Zurich’s actions were protected by the litigation privilege, the Court of Appeal observed that "While a breach of the implied covenant of good faith and fair dealing may be carried out by means of communications between the parties’ respective counsel, the fact of counsels’ communications does not transform the claim to one arising from protected activity within the meaning of section 425.16."

ILLINOIS   E&O/Exclusion for Consumer Protection Violations

The Appellate Court has ruled that a class action by tenants alleging that an apartment building manager violated Chicago’s Landlord Tenant Rent Control Ordinance triggered coverage under Hanover’s professional liability insurance policy notwithstanding an exclusion for violation of state or local consumer protection laws. While agreeing that some aspects of the RLTO resembled a consumer protection ordinance, the First District concluded in Evergreen Real Estate Services, Inc. v. Hanover Ins. Co., 2019 IL App (1st) 1181867 (Ill. App. Nov. 4, 2019) that "landlords and tenants derive direct benefit from the RLTO, while only purchasers of goods and services derive direct benefit from consumer protection laws." While therefore finding coverage, the court refused to award bad faith damages under Section 155 as Hanover had at least a plausible basis for its legal position.

MARYLAND   Construction Claims/Tender/Pre-Judgment Interest

The Maryland Court of Special Appeals has affirmed a lower court’s declaration that the insurers of various building subcontractors wrongly refused to defend construction defect claims against the general contractor. In Selective Way Ins. Co. v Nationwide Ins. Co., 2019 WL 5588994 (Md. App. Oct. 30, 2019), the court found that a lack of specificity in the underlying complaint with respect to the acts or omissions of the subcontractors did not preclude a court from finding that the general contractor’s liability arose out of their work on the site. Further, the court ruled that the insurers must defend the entire suit and could not restrict their duties by only paying for the defense of covered claims. However, the Court of Special Appeals also ruled that the trial judge had erred in also awarding over $400,000 in pre-judgment interest, finding that attorney’s fees are not liquidated damages and that Nationwide had not included a claim to the jury for pre-judgment interest. The court also set aside the lower court’s award of DJ fees to Nationwide, ruling that a new trial was required on this issue at which Nationwide would be obliged to prove "the amount of reasonable and necessary fees and expenses that it incurred in the declaratory judgment action as a result of Selective Way's breach of contract."


Inside the Insurance Industry

Liberty Mutual Holding Co. Inc. and its subsidiaries on Thursday reported $274 million in third quarter profits in 2019, a 3.2% drop from this period last year with overall year-to-date profits standing at $1.4 billion.

A new article in Insurance Journal reports that James River Group stopped writing Uber this year due to problem with its estimation of its claims exposure. James River Group Holdings experienced a net loss of $25.2 million in the third quarter of 2019 after taking a $50 million charge for Uber losses.

New Coverage Litigation

Kinsale Insurance has sued Pulte Group in the U.S. District Court for the Northern District of Florida seeking a declaration of coverage that it does not owe coverage for various claims which homeowners have contended that Pulte Group constructed homes that were not compliant with local building codes.

Evanston Insurance has filed suit in the Southern District of Florida, seeking a ruling in Evanston Ins. Co. v. AntiageRX LLC that it does not owe coverage for a malpractice claim against the insured cryogenic clinic.

Up in Smoke

Epic Insurance Brokers has begun writing a Pollution Site Liability program for cannabis producers who may face pollution liability exposures due their use of fertilizers and chemicals such as ethanol in growing marijuana.

Legal Writing Competition

The American College of Coverage Counsel is again sponsoring a writing competition for third year law students with an interest in insurance law. The competition, now in its fourth year, asks law students to provide practical and legal advice to either the insurer or its policyholder with respect to a dispute resolution strategy for a complex coverage case. The three winners will receive a cash prize and an invitation to attend the ACCC’s annual conference in Chicago in May. This year’s problem focuses on a hypothetical set of malpractice and tort claims brought by the Capulets and the Montagues following the conclusion of Act V of Shakespeare’s Romeo and Juliet. If there is a law school in your area that teaches insurance law, please forward this link to the professor(s) in question.

Faster Than A Speeding Coverage Opinion

MM insurance coverage specialists Michael Aylward, John Graceffa and Bill Schneider were recognized in the latest list of New England "Super Lawyers."

Must See CLE

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


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