Jun 26 2020

Insurance Law – 6/26/2020


SECOND CIRCUIT     Coverage B/IP Exclusion/Ambiguity (NY)

The Second Circuit has ruled that the placement of commas around the phrase “in your advertisement or on your web site” did not make this a “non-restrictive clause” subject to different meanings and thereby compelling coverage for copyright infringement claims against the insured fabric manufacturer. In Spandex House v. Hartford Fire Ins. Co., 2020 WL 3263340 (2d Cir. June 17, 2020), the court ruled that the advertising exception to the policy’s intellectual property exclusion unambiguously applied where the sole allegation pertaining to the infringement of intellectual property rights was causally linked to the insured’s advertising or web site. In rejecting the insured’s fussy argument that the language was ambiguous because it was denoted by commas, the Second Circuit observed that under New York law “[p]unctuation in a contract may serve as a guide to resolve an ambiguity that has not been created by punctuation or the absence therein, but it cannot, by itself, create ambiguity.”


The Seventh Circuit has ruled in Market Street Bancshares Inc. v. Federal Ins. Co., No. 18-3395 (7th Cir., June 19, 2020) that a new theory of damages that a customer asserted against the insured bank nearly 13 years into the course of tortured litigation involving the bank's alleged mishandling of a letter of credit was not a "claim" asserted during the E&O's policy. The court ruled that the term "claim" referred to the entire civil action and not just the legal theories and factual allegations in the complaint that commenced the action. The court ruled in this case the "claim" against the insured arose when the original lawsuit was filed in 2003, and therefore fell outside the scope of Federal's 2016 policy.

NINTH CIRCUIT     “Personal Injury”/Defamation/Duty to Defend (CA)

The Ninth Circuit has ruled in Kaufman v. Federal Ins Co., No. 19‑55603 (9th Cir., June 19, 2020) (unpublished) that a former employee of Blue Shield of California was not entitled to a defense by his homeowner's insurer for a cross-complaint that Blue Shield had brought against him for fraud, breach of fiduciary duty, breach of the duty of loyalty, conversion and negligent misrepresentation for claims arising out of the employee's alleged misuse of his company credit card. In affirming the California District Court's entry of summary judgment for Federal, the Court of Appeals agreed that none of these claims set forth an action for defamation, libel or slander within the scope of the policy's "personal injury" coverage. The court observed that "where the facts known to the insurer, whether alleged or extrinsic, omit an essential element of the cause of action, there is no potential for liability, and thus no duty to defend."

CALIFORNIA     Auto/Excluded Drivers

The California Court of Appeal has ruled in Century-National Ins. Co. v. Olivo, E071183 (Cal. App. June 17, 2020) (unpublished) that a trial court did not err in requiring an auto insurer to provide coverage to an individual who was not listed as an insured or permissive user under its policy. Notwithstanding the insurer's argument that the driver was subject to an "exclusion of driver endorsement", the Fourth District ruled against it in light of the fact that the endorsement in question was not signed by the named insured.

FLORIDA     Auto/Permitted Users/Relative

In Owners Ins. Co. v. Allstate Fire and Casualty Ins. Co., No. 2D18-2309 (Fla. DCA 2, June 19, 2020), the Second District of the Florida Court of Appeals has reversed itself on rehearing and now finds that an automobile accident involving Allstate's insured triggered coverage under the policy that Owners had issued to the operator's mother and stepfather as he was living in their household and was a relative. Owners had argued (and initially persuaded the Court of Appeals) that this coverage only extended to relatives who did not own their own car, the Second District found that the liability insurance provisions of the Owners' policy (Section II) do provide basic liability coverage for relatives whether they own cars or not. The court observed that "where an insured is injured while occupying an owned vehicle that is not listed on the policy, the insured is entitled to uninsured motorist coverage even if he would not have been entitled to liability coverage had the accident in question been his fault. The court observed that Florida permits auto insurers to enter into agreements with policyholders to exclude certain insureds from UM coverage if the named insured knowingly accepts such a limitation and the insurer reduces its premium accordingly but that in this case Owners did neither.

ILLINOIS     Auto/UIM/”Temporary Substitute” Vehicle

The Appellate Court has ruled that an Illinois trial court erred in finding that a rented automobile triggered the operator's coverage for medical payments and UIM coverage because the Hertz car was a "temporary substitute car." In State Farm Mutual Automobile Ins. Co. v. Osborne, 2020 IL App. 5th) 190060 (Ill. App. Ct. June 19, 2020), the Appellate Court declared that the temporary substitute coverage only applied where the insured's own vehicle was either out of use or had broken down or was being repaired or serviced. The court declined to find that the insured's concern that their regular vehicle might not be up to long travel constituted an "out of use" status.

TEXAS     Bad Faith/Timely Claims Payment

The Texas Supreme Court ruled last Friday in Perry v. USAA, No. 19‑0210 (Tex., June 19, 2020) that the intermediate appellate xourt had erred in finding that an insurer's payment of an appraisal award precluded a policyholder's claim under the Texas Prompt Payment of Claims Act. In a per curiam, the court declared that its recent opinions in Menchaca and Ortiz made clear that a timely payment of an appraisal award does not necessarily extinguish claims under the Texas Insurance Code or the TPPA.


Inside the Insurance Industry

Thierry Léger will succeed Edi Schmid as group chief underwriting officer Swiss Re Ltd. as of September 1, 2020.

Beazley has entered into arrangement with Vizient Insurance Services to provide “active shooter” coverage for Vizient members. In a press release, Beazley described the new program as including “prevention and crisis management services as well as insurance coverage to indemnify covered losses. The coverage is designed to help reduce the likelihood of an incident by providing risk assessments and educational tools to help clients improve security and resilience to an incident. In such event, Beazley’s crisis response services include security, investigation into the cause of the incident and assistance with managing crisis communications.”

William H. Steinberg has been named as the new head of wholesale property for the Navigators division of The Hartford.

Swiss Re’s latest Sonar Report lists the emerging risks of 2020.

Pandemic Update

Environmental consultants are warning of a risk of Legionnaire’s Disease outbreaks as commercial office buildings are re-opened. Legionella bacteria can grow in stagnant water, including water pipes that have not been used for months.

The Illinois legislature has approved an amendment to Senate Bill 2135 that directs the state’s Insurance Department to appoint a 10 person commission to study possible changes to business interruption insurance to better address future pandemic-like losses.

Cozen O’Connor filed a motion to dismiss last Friday on behalf of Penn National, asserting in Richard Kahn v. Pennsylvania National Mut. Ins. Co., No. 20-781 (E.D. Pa.) that a South Carolina restaurant had not suffered any “direct physical loss” as the result of this pandemic and that coverage was, in any event, negated by the policy’s virus exclusion.

The Potts Law Firm has filed a petition with the United States Judicial Panel on Multidistrict Litigation in In Re: National Ski Pass Insurance Litigation, MDL No. 1:20‑P‑113 seeking consolidation in Arkansas of seven pending "related actions" involving the failure of Vail Resorts' event cancellation insurer to pay losses suffered by disappointed season tickets holders.

The JPMDL entered an order last week closing briefing on the consolidation applications filed in In RE: COVID 19 Business Interruption which is due to be decided at the panel’s July 30 meeting in Boston. The docket for these MDL applications now lists 554 entries, including briefs filed by dozens of insurers that have appeared as “interested parties,” including AIG, Certain Underwriters at Lloyd’s, Chubb, Continental Casualty, Hartford, Liberty Mutual, Starr Surplus and State Farm.

Society Insurance filed a motion to dismiss last week in a Wisconsin dispute with local bakeries, arguing in Rising Dough v. Society Ins. Co., No. 20-0623 (E.D. Wis.) that the insured premises have not suffered “direct physical loss,” nor is the loss of use of the premises a basis for finding coverage, particularly as the insured was able to provide take out service during the pandemic.

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