Dec 27 2019

Insurance Law – 12/27/2019

CASES OF CONSEQUENCE

SECOND CIRCUIT    Bad Faith/Medical Professionals (NY)

Having received an answer from the New York Court of Appeals last month with respect to a certified question, the Second Circuit has entered an order in Haar v. Nationwide Mutual Fire Ins. Co., No. 18-128 (2nd Cir. Dec. 17, 2019) declaring that a New York District Court did not err in refusing to find that Public Health Law Section 230(11)(b) creates any private right of action for bad faith complaints by medical professionals to New York's Department of Health's Office of Professional Misconduct.

ELEVENTH CIRCUIT   First Party/"Collapse"/Abrupt (FL)

The Eleventh Circuit has ruled that a commercial property insurer was not obliged to provide "collapse" coverage to the owner of a building on Miami Beach that partially caved in due to a rotting wooden support beam. In an unpublished opinion, the court ruled in S. O. Beach Corp. v. Great American Ins. Co. of NY, No. 18-11967 (11th Cir. Oct. 31, 2019) that a Florida District Court had not erred in rejecting the insured's argument that the policy's requirement that a collapse be abrupt was ambiguous and should not defeat coverage for a process of gradual decay. The court ruled that "regardless of whether the cause of a collapse was gradual or abrupt, the collapse itself is covered only if it was abrupt."

ELEVENTH CIRCUIT   Bad Faith/Failure to Settle (FL)

The Eleventh Circuit has affirmed a Florida District Court’s declaration that Allstate did not act in bad faith and was not obliged to fund a $1.5 million consent judgment due to its claimed failure to effectuate a settlement of an auto accident claim where it quickly issued a check for its $50,000 policy limit but was thwarted in finalizing the settlement due to completing claims of the victim’s employer and WC insurer. In Martin v. Allstate Property & Cas. Ins. Co., No. 19-11164 (11th Cir. Dec. 10, 2019)(unpublished), the court ruled that the release presented by Allstate in response to the plaintiff’s policy limit demand did not materially deviate from the requested terms and that even if it did, Allstate could not be deemed to have acted unreasonably or in bad faith under Florida’s "totality of the circumstances" standard.

ILLINOIS   Construction Defect/"Occurrence"/"Property Damage"

The Appellate Court has ruled in Certain Underwriters at Lloyd’s, London v. Metropolitan Builders, Inc., 2019 IL App (1st) 190517 (Ill. App. Ct. Dec. 18, 2019) that a trial court erred in refusing to find a duty to defend for a subrogation claim arising out of a building collapse. While agreeing with the trial court that "the collapse of the structures was not an ‘accident" or ‘occurrence’ but was, instead, the natural and ordinary result of faulty workmanship on the contractor’s work product", coverage was nonetheless triggered by the suit’s stray reference to damage to "personal property." Notwithstanding Lloyd’s protests that there was no factual support for the reference to "personal property," nor was there any evidence that the subrogating insurer (AIG) had compensated the insured for any loss of personal property, the Appellate Court ruled that there was enough claimed to trigger a duty to defend. The court expressed no opinion with respect to whether Lloyd’s might owe indemnity, however.

NEW YORK   Publishing/Plagiarism

A federal district court has ruled that rap artist Fat Joe Cartagena’s alleged theft of another artist's song triggered coverage under a policy issued to his publishing company for various liability claims arising out of the music business including "infringement of copyright, plagiarism, Piracy and misappropriation of ideas under implied contract or other misappropriation of ideas or information." While agreeing with Homeland that the availability of coverage was subject to the law of Florida (where the policy was issued and where the insureds were domiciled) rather than New York (where Homeland is located), Chief Judge McMahon ruled in Cartagena v. Homeland Ins. Co. of New York, No. 19-6287 (S.D.N.Y. Dec. 16, 2019) that the underlying action set forth covered claims for piracy and plagiarism. Further, the court rejected Homeland's contention that the underlying claimant was an independent contractor or joint venturer with the insured so as to be subject to an exclusion in the policy.

OTHER DEVELOPMENTS OF NOTE

Inside the Insurance Industry

Allstate announced last week that it is closing down its Esurance and Encompass brands and will consolidate its sales operations to allow consumers to buy car and home insurance through the Allstate web site.

William Roberts will step down next year as GEICO’s President and CEO after 35 years with the Company. He will be replaced by Todd Combs.

The Sweet Smell of Success

Two years after being sued by consumer who complained that mildew from defective air conditioning units in their cars induced the sensuous smell of moldy sweat socks, Mercedes Benz has agreed to a class action settlement to pay for repairs and establish a ten year warranty program for affected vehicles.

Across the Bar

A woman who sued Blistex, claiming that its lip balm product isn’t actually .15 ounces because it’s hard to get the balm at the bottom of the stick tops the U.S. Chamber of Commerce’s list of the most ridiculous law suits of 2019. Other finalists were the action brought by a Tennessee man who sued Popeye’s after repeated unsuccessful efforts to score on of their popular fried chicken sandwiches and a woman who fell down the steps in a New York subway station after being scared by a poster for the "Dexter" TV show.

In Memoriam

Alan G. Miller, a leading member of this law firm that once bore his name, passed away in Arizona earlier this month at the age of 88. Alan was difficult, mercurial and one of the most brilliant lawyers that I ever worked with.

 

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