Dec 2 2019

Insurance Law – 11/29/2019

NEW CASES OF CONSEQUENCE

ILLINOIS    Discovery/"Common Interest"

Notwithstanding the sweeping "common interest" exception to the attorney-client privileged that it recognized three decades ago in Waste Management, the Illinois Supreme Court ruled last week that a broker that was being sued for failing to buy insurance with coverage for securities claims could not compel he policyholder plaintiff to provide it with reports from the defense counsel in those securities claims. In Robert R. McCormick Foundation, Inc. v. Arthur J. Gallagher Risk Management Services, 2019 IL 123936 (Ill. November 21, 2019), the court declared that its expansion of the "dual client" underpinnings of the "common interest" doctrine to include a case where an insured was in litigation with its liability insurers could not support a further expansion to a malpractice dispute between an insured and its broker. In refusing to extend Waste Management outside the insurer-insured context, the court observed that the broker did not have any claimed duty to defend or stand in the shoes of the insured such that a "common interest" might arguably apply. It concluded, therefore that "To apply the doctrine here would be at odds with the purpose of the attorney-client privilege to promote full and frank consultation between a client and legal advisor without fear of compelled disclosure. It seems to us that Gallagher’s and the Foundations’ interests were always adverse, and there was not a commonality of interest in the same way that is the case when an insurer has a duty to indemnify and defend from the beginning ."

MASSACHUSETTS   "Arising Out of"/Criminal Acts Exclusion

A federal district court has ruled in Ricchio v. Bigal, Inc., No. 15-13519 (D. Mass. Nov. 22, 2019) that the liability insurer of the Shangri-La Motel must defend sex trafficking claims brought under the Victims of Trafficking and Violence Act by a young woman who was imprisoned in the motel for several days. Although Judge Saylor agreed with Peerless that Coverage A did not apply, since the claims were excluded as arising out of a personal injury, he declared that a defense was required under Coverage B given the complaint’s allegations of wrongful imprisonment and detention. Although the insurer had argued that this coverage was subject to Exclusion D in the policies as involving criminal violations, the District Court found that it was possible in this case that the motel’s liability under this statute could be based on negligent conduct that would not trigger a finding of criminal liability.

NEW YORK   Bad Faith/Fraud Reporting Liability

On a certified question from the Second Circuit, the New York Court of Appeals has rejected a surgeon's effort to pursue bad faith claims against an automobile liability insurer for reporting his claimed insurance fraud to the Office of Professional Medical Conduct. In Haar v. Nationwide Mutual Fire Ins. Co., No. 81 (N.Y. Nov. 22, 2019) the Court of Appeals refused to find that §230 (11)(b) of the Public Health Law created a private right of action for alleged malicious reporting to the Office of Professional Medical Conduct. Consistent with prior cases in which it has been assessed whether a statute creates a private right of action, the Court of Appeals ruled found that there was no suggestion in the text or legislative history of this statute that such a private right of action had ever been contemplated or intended.

WASHINGTON   "Insured Premises"

A federal judge in Seattle has ruled that a liability policy issued in Montana that designed the insured’s business premises in Montana as the sold "Insured Location" did not provide coverage for liability claims arising out the explosion of a chlorine tank that was being recycled at a facility that was operated by the insured in Washington. In Mountain West Farm Bureau Ins. Co. v. Jackson, No. 18-396 (E.D. Wash. Nov. 21, 2019), Judge Bastian declared that coverage did not apply since this was not an "Insured Location" and was subject to the policy’s Location Not Insured exclusion.

OTHER DEVELOPMENTS OF NOTE

Inside the Insurance Industry

A.M. Best reports that domestic P/C insurers earned $4.5 billion in underwriting income during the first nine months of 2019, up 12.7% from the year before.

HDI Global has named Jim Clark as its new CEO. Clark will succeed HDI Global’s long-time CEO and president, Lothar Becker, who will remain with the Company as its deputy chairman chief executive officer.

Kevin H. Kelley is resigning as Liberty Mutual’s vice-chair of Global Business Operations. Kelley joined Liberty Mutual in 2017 coincident with its acquisition of Ironshore and had also served as the CEO of Lexington Insurance from 1997 to 2008.

New Coverage Litigation

Church Mutual has filed suit against a senior center in federal court in Chicago, seeking a declaration in Church Mutual Insurance Co. v. Triad Senior Living Inc., No. 19-7599 (N.D. Ill.) that its liability policy does not cover allegations that its insured violated by the Illinois Biometric Privacy Information Act by requiring a fingerprint scan for residents to enter its facility in Oklahoma that lacked the data retention and destruction procedures required by the Act.

Across the Bar

A former White & Williams subrogation lawyer has pleaded guilty to federal wire fraud charges that he submitted over $3 million in fraudulent subrogation claims. Craig Cohen allegedly told insurance clients that their claims were not worth pursuing when, in fact, he did pursue them and pocketed the proceeds.

Winter is Coming

Just in time for winter, the New Hampshire Supreme Court has expanded the scope of tort liability for snow removal companies. In Bloom v. Casella Construction, Inc., 2008-0425 (N.H. Oct 16, 2019), the court declared that a snow removal company might be liable for a slip and fall in a hospital parking lot, even though its contract with the hospital did not give it complete control over the premises. Prior to Bloom, it was believed that winter maintenance contractors only owed a duty to third parties if a contractor completely assumes a landowner's duty with respect to the premises.

Legal Writing Competition

The American College of Coverage 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.

Must See CLE

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

 

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