Jun 19 2020

Insurance Law – 6/19/2020

CASES OF CONSEQUENCE

CALIFORNIA     Construction Defect/Equitable Subrogation

The California Court of Appeal has ruled in Pulte Home Corp. v. CBR Electric, Inc., E06853 (Cal. App. June 10, 2020) that a trial court erred in refusing to permit a general contractor's liability insurer to pursue equitable subrogation claims against various subcontractors that were contractually obligated to indemnify the general contractor. Whereas the trial court had ruled that it was not fair to permit St. Paul Mercury to recover all of the defense costs that it had paid on behalf of its insured, the Fourth District concluded that the trial court had misapplied the "balancing of the equities" element of a claim for equitable subrogation and that nothing in the law of equitable subrogation necessarily limited its application to situations in which a loss was entirely shifted from an insurer to the defendant. While the court observed that it is sometimes the case that a party seeking equitable subrogation seeks to shift the entire loss, as in the case of excess versus primary disputes, the claimed loss for which the insurer seeks to be equitably subrogated does not have to be the entire loss that the subrogee suffered. Having found that the trial court misapplied this element of the doctrine of inequitable subrogation, the Court of Appeal proceeded to consider the other seven elements and concluded that St. Paul Mercury had, in fact, pleaded a viable claim for equitable subrogation. Nevertheless, it declined St. Paul Mercury's invitation to enter an award and instead remanded the case back to the trial court for an allocation of $102,291.00 that was not specifically allocable to claims arising out of individual subcontractors.

MAINE     Auto/”Use”/Reach and Apply

The Supreme Judicial Court of Maine has affirmed a lower court's declaration that victims of a home intrusion could not recover against the insurer of the operator of the truck that transported the assailants. In Haskell v. State Farm Fire & Cas. Co., 2020 ME 88 (Me. June 11, 2020), the court ruled that an assault that occurred after a delusional individual exited the insured vehicle, ran into the plaintiff's home and attack them did not arise out of any covered “use” of the insured vehicle. In a ruling that featured a lengthy recitation of Maine law with respect to cases construing both auto policies and "auto" exclusions in liability policies, the court declared that there was no causal connection between the use of the vehicle and the conduct giving rise to the plaintiff's injuries in this case.

MARYLAND     Auto/UIM/Statute of Limitations

The Maryland Court of Appeals has ruled that the statute of limitations for bringing an underinsured motorist claim begins to run when the insurer denies the insured's demand for benefits. In Nationwide Mutual Ins. Co. v. Shilling, No. 38 (MD April 20, 2020), the court declared that the 3-year limitations period for civil actions brought pursuant to Maryland Code § 5‑101 did not run until there is a breach of contract, Notwithstanding Nationwide's argument that the statute of limitations should begin to run when the insurance policy issued to the car that caused the accident is exhausted (i.e., the point in time when the insured is able to bring a UIM claim), the Court of Appeals held that there is no breach of contract until the insurer actually denies the claim.

RHODE ISLAND     First Party/Water Loss

The Rhode Island Supreme Court has affirmed a trial court’s finding that a homeowner’s policy did not cover water damage to the insured’s basement after a hot water heater burst. In Nelson v. Allstate Ins. Co., No. 2019-166 (R.I. June 11, 2020), the Supreme Court declared that the “literal language in the policy indicates that the policy does not include water damage caused by a malfunctioning appliance in the dwelling as part of the “sudden and accidental direct physical loss[es]” explicitly listed as covered losses by the policy…Even without a specific exclusion, the damage caused by the plaintiff’s malfunctioning water heater is clearly not one of the hazards articulated in the policy.”

OTHER DEVELOPMENTS OF NOTE

Inside the Insurance Industry

Vermont Governor Scott has signed a bill strengthening the state’s protections for captive insurers and risk retention groups.

Pandemic Update

Sixty more law suits were filed last week, bringing the total number of pandemic insurance cases to more than 500.

Although relatively few of these suits involve policies with virus exclusions, a Pittsburgh law firm filed suit in federal court in Pennsylvania last week, arguing that insurers should be estopped from relying on virus exclusions given statements that ISO made at the time that this exclusion was adopted in 2006. Here’s an article that I wrote earlier this week discussing the inapplicability of “regulatory estoppel” doctrine to these claims.

Attorney John Houghtaling, who filed the first COVID-19 BI suit in New Orleans on March 14 and has since championed the rights of restauranteurs to obtain insurance coverage, is urging Congress to create a program that would allow insurers whose policies arguably but do not clearly cover virus claims to pay such losses and be reimbursed by the government. In an interview with Insurance Journal, Houghtaling stated that “[m]y proposal is that if an insurance company has put the word virus somewhere into the policy, and is arguing that that’s excluding everything for a pandemic, then that carrier is not compelled to but can voluntarily pay it now and receive reimbursement for the claim amount and the claim expenses…Part of the responsibility for the shutdown is the government. Part of the [problem] may be from the insurance companies not being clear on their contracts and not using the word pandemic when they should have. Let’s come with an equitable solution that will be cheaper.”

Cyber Dept.

Here is the latest newsletter from MM’s Cyber-Security claims group.

Sexual Assault Claims

Three new suits have been filed in California, accusing USA Swimming of failing to prevent athletes from the predation of team coach Andy King in the 1980s and 1990s.

Tort Reform

Louisiana Governor John Bel Edwards has vetoed the Omnibus Premium Reduction Act of 2020 (SB 418), which would have comprehensively amended the way that auto accident claims are adjudicated in Louisiana. The Governor complained that, the title of the legislation notwithstanding, there was no evidence at all that these proposals would reduce the cost of auto insurance.

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