Jul 17 2020

Insurance Law – 7/17/2020

CASES OF CONSEQUENCE

EIGHTH CIRCUIT     Auto/UIM/Reformation (MN/WI)

The Eighth Circuit has ruled that a Minnesota District Court did not err in refusing to reform a Wisconsin auto policy to apply Minnesota’s approach to calculating UIM awards in a case where the estranged husband of the insured had moved to Minnesota and was struck while riding his bicycle there. Despite the fact that Minnesota follows an "add-on" approach to UIM benefits pursuant to Minn. Stat. § 65B.49(4a), the Eighth Circuit ruled in Brill v. Mid-Century Ins. Co., No. 19‑1416 (8th Cir. July 15, 2020) that Section 65B.49 did not apply, since the policy at issue had not been "renewed, delivered, or issued for delivery, or executed" in Minnesota. According, the court agreed with Mid-Century that Wisconsin's "limits-less-paid" approach applied.

ELEVENTH CIRCUIT     Property Insurance/Wind v. Water/Proof (GA)

The U.S. Court of Appeals for the Eleventh Circuit has ruled in Greater Hall Temple Church of God v. Southern Mutual Church Ins. Co., No. 20-1054 (11th Cir. July 15, 2020) that a Georgia District Court did not abuse his discretion in excluding the testimony of the insured's three expert witnesses on the issue of whether damage resulting from Hurricane Matthew in 2016 was due to a covered peril or not. Noting the general lack of experience and expertise of the proposed witnesses, the Eleventh Circuit declared in this unpublished opinion that the trial judge's decision to exclude their testimony was not "manifestly erroneous." Nevertheless, the Eleventh Circuit reversed the lower court's entry of summary judgment for Southern Mutual, holding that the Georgia District Court's conclusion that a "surface water" exclusion applied to precluded coverage for damage to the interior of the church caused by water that had puddled on the church roof ignored the fact that part of the insurance claim was for damage to the roof itself. Further, the court found that there was sufficient evidence to support the insured's claim that a covered peril (wind) had precipitate this damage by opening holes in the church structure through which rainwater had penetrated. Whereas, the District Court had concluded that proof of causation required expert testimony (all of which had by then been excluded), the Eleventh Circuit declared that whether expert testimony is required to prove that a certain force produced the damage that the Eleventh Circuit ruled that under Georgia law expert testimony is not necessarily required to prove causation and that, as here, an insured may satisfy its burden of proof through circumstantial lay testimony. The Court of Appeals concluded that even though the insured had no expert evidence and none of its lay witnesses had actually seen Hurricane Matthew cause the roof damage, there was at least circumstantial evidence from which a jury could conclude that the hurricane did, in fact, cause the roof damage.

CALIFORNIA     Asbestos/Excess/”Horizontal Exhaustion”/Proof

In light of the California Supreme Court's recent rejection of "horizontal exhaustion" in Montrose Chemical Corp. v. Superior Court, 9 Cal. 5th 215 (2020), the California Court of Appeal has ruled in SantaFe Braun, Inc. v. Insurance Company of North America, A151428 (Cal. App. July 13, 2020), that a trial court erred in granting summary judgment to numerous excess insurers in this asbestos coverage dispute. In keeping with Montrose III, the First District declared that the insured was not required to horizontally exhaust all underlying layers of coverage before it could obtain coverage under these excess policies, and, furthermore, that the trial court had abused its discretion in refusing to consider additional evidence of exhaustion that the plaintiff had presented years after the evidentiary phase of the trial was completed. Finally, the Court of Appeal declared that the insured was entitled to rely on the primary insurer's allocation of losses between products and non-product claims, although the excess insurers retained the right to challenge such determinations as to any given claim.

ILLINOIS     Bad Faith/Genuine Dispute Doctrine

In Nine Group II, LLC v. Liberty International Underwriters Inc., 2020 IL App. (1st) 190320 (Ill. App. Ct. June 18, 2020), the First District has affirmed a trial court's ruling on partial summary judgment that a D&O insurer did not violate Section 155 by disputing coverage as there was a bona fide basis for this coverage dispute. It's a preliminary matter, the court declared that it would use a de novo standard for review even though Illinois courts have often applied an "abuse of discretion" standard with respect to disputes involving attorney's fees and costs under Section 155. The Appellate Court also rejected the insured's argument that LIU had acted in bad faith by failing to adequately investigate the claim or communicate with it throughout the investigative process.

MASSACHUSETTS     Jurisdiction/Abstention/Pollution

Judge Burroughs has ruled in Scottsdale Ins. Co. v MRH Enterprises, Inc., No. 19‑11878 (D. Mass. June 30, 2020) that she will not retain jurisdiction over a dispute involving the applicability of an absolute pollution exclusion to claims against a composting company. The court concluded that it would be better to have this case resolved in the Superior Court “because the facts at issue in this case is so intertwined with the facts before the state court, allowing both cases to proceed separately would risk inconsistent rulings and be an inefficient use of the parties' and courts' resources."

OTHER DEVELOPMENTS OF NOTE

Inside the Insurance Industry

A provocative new Reuters article ponders what the world of insurance will look like post-pandemic.

Pandemic Update

Whereas the first four months of the pandemic litigation has been dominated by small business and local law firms, that now be changing. earlier this week, the parent company of the Houston Rockets sued a subsidiary of F.M. Global in state court in Rhode Island.

Even as all interested parties await the July 30 meeting of the JPMDL on pending consolidation proposals, insurers continue to seek dismissal of pending cases in federal court.

In Atma Beauty, Inc. v. HDI Global Specialty, No. 20-21745 (S.D. Fla.), Lloyd’s filed a motion to dismiss on Tuesday of this week, arguing that the insured beauty parlor had not suffered physical loss and that its claims for business interruption were subject to exclusions for loss due to microorganisms or pollution.

Meanwhile, Judge Gibson in Pittsburgh declined to rule on a hospital’s motion for summary judgment, declaring in Winber Hospital v. Travelers Property Cas. Co., No. 20-80 (W.D. Pa. July 14, 2020) that she must first resolve the issue of class certification before turning to the merits of the insured’s business income claim.

Earlier in the week, National Fire and Marine filed a motion to dismiss a novel “regulatory estoppel” challenge to virus exclusions, arguing in I S.A.N.T., Inc. v. Berkshire Hathaway, Inc., No. 20-862 (W.D. Pa. July 13, 2020) . Co-defendant Berkshire Hathaway separately argued for dismissal on the grounds that it was just a holding company over which the court lacked personal jurisdiction.

A federal judge in Los Angeles has agreed to dismiss claims against passengers who alleged that they suffered emotional distress due to fear of contracting the virus while traveling on the Grand Princess cruise ship in March. Judge Gary Klausner ruled on Tuesday that allowing these cases to proceed would “lead to a flood of trivial suits.”

Cyber Update

Here is a link to MM’s latest cyber-claims report.

Across the Bar

Jane Byrne, the long-time chair of Quinn Emanuel’s insurance group, has been hired away by McDermott Will & Emery.

Hot Off the Presses

The latest issue of The Brief, the ABA TIPS section magazine, features an article by Boston partner Michael Aylward discussing recent case law involving allocation between insured and uninsured losses.

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