Jul 24 2020

Insurance Law – 7/24/2020


CASES OF CONSEQUENCE

EIGHTH CIRCUIT     Class Actions/Life Insurance (MO)

The U.S. Court of Appeals for the Eighth Circuit has sustained a Missouri district court's $34 million verdict in favor of a class action brought by 25,000 life insurance policy holders who alleged that State Farm had impermissibly included non‑listed factors in calculating Cost of Insurance fees. In Vogt v. State Farm Life Ins. Co., No. 18-30419 (8th Cir. June 26, 2020), the court rejected State Farm’s argument that there were impermissible conflicts within the certified class, given the different periods of insurance at issue, or that the court had created a “fail safe” class. The court also ruled that the Missouri District Court had not erred in allowing the plaintiffs to present evidence in the form of data summaries, declaring that these damages models did not violate FRCP 26 and “are best characterized as summaries that Vogt introduced to better aid the jury in understanding the evidence at trial.” The case was remanded back to the District Court, however, as the Court of Appeals ruled that pre-judgment interest should have been award through the date of judgment and did not end as the date of policy termination or surrender.

NINTH CIRCUIT     Coverage B (CA)

The Ninth Circuit has sustained a California District Court's declaration that a liability insurer had no obligation to defend trademark infringement claims against the swimming pool manufacturer. In an unpublished opinion, the court ruled in Premier Pools Management Corp. v. Colony Ins. Co., No. 18-16551 (9th Cir. July 20, 2020) that its PPMC had standing to see coverage as an insured party did not address the broader issue of the duty to defend not could it therefore be the "law of the case." Further, the Ninth Circuit held that these trademark infringement claims failed to trigger Coverage B since they did not involve the use of a third party's "advertising idea" or “slogan." As the insured had failed to tender the underlying complaint to Colony, the court also ruled that Colony had no duty to investigate those allegations or to defend against them as a matter of law.

CALIFORNIA     Jurisdiction/Pandemic Claims

A federal district court in Sacramento has dismissed one of the few COVID-19 declaratory judgment actions brought to date by an insurer. In Travelers Property and Casualty Co. v. Geragos & Geragos, No. 20-2619 (C.D. Cal. July 20, 2020), Judge Gutierrez granted the insured law firm's motion to dismiss for lack of jurisdiction, declaring that Travelers had failed to show that more than $75,000 was at issue. Geragos had argued in its motion that Travelers was engaged in “forum shopping” and that the federal court should abstain from acting pending the disposition of the insured’s own suit in state court.

INDIANA     "Claims Made”/Related Wrongful Acts Exclusion

In a rare setback for the Plews Shadley firm, the Indiana Court of Appeals has sustained a trial court's determination that various excess insurers are not obliged to cover the NCAA for the latest round of lawsuits brought against it by student athletes complaining of restrictions on their financial aid. In NCAA v. Ace American Ins. Co., 19 A-Pl-1313 (Id. App. July 15, 2020), the court held that the current class action litigation was subject to a "related wrongful acts" exclusion that precludes coverage for acts prior to the issuance of the policies that share a "common nucleus of facts" with the current allegations of liability. In this case, the Court of Appeals found that the current litigation arose out of and was sufficiently similar to the 2006 White litigation as to be subject to the exclusion. It rejected the NCAA's argument that the "related wrongful acts" exclusion was ambiguous or that the current conduct of which it was accused was sufficiently different from the earlier assertions of liability as to be outside the scope of the exclusion.

MASSACHUSETTS     Employee Exclusion/Any Insured/Separation of Insureds

A federal judge in Boston has ruled that general contractor’s liability insurer was not required to cover claims by a subcontractor’s injured employee in light of an endorsement excluding coverage for claims by the employees of a subcontractor of “any insured.” While declaring that pleadings and discovery in the underlying case pointing to the fact that Nagog Real Estate had, in fact, hired this subcontractor was extrinsic evidence that she could not consider in assessing an insurer’s claimed duty to defend, Judge Casper ruled in Nagog Real Estate Consulting Corp. v. Nautilus Ins. Co., No. 19-11714 (D. Mass. July 20, 2020) that coverage was nevertheless excluded since the allegation was that an affiliated company that was also an insured under the policy had hired the subcontractor. The court emphasized that this “any insured” exclusion was broadly drafted and was not in conflict with the Massachusetts Supreme Judicial Court’s Marnell interpretation of “separation of insureds” clauses. MM's Michael Aylward represents Nautilus.

NEW YORK     Reinsurance/”Back to Back”

Ten years after the infamous decision of Wasa International v. Lexington, AIG has finally obtained some measure of redemption from a federal district court judge in Manhattan. In Insurance Company of the State of Pennsylvania v. Equitas Insurance, Ltd., No. 17-6850 (S..N.Y. July 16, 2020), Judge Swain ruled that a facultative reinsurer was obliged to reimburse ICSOP for the full amount of its $7.2 million limit of these agreements pursuant to $20 million that AIG had paid to resolve California groundwater contamination claims against the Dole Food Company even though the pollution had gone on for more than 40 years. Applying English law to the Equitas agreements, the District Court declared that AIG was entitled to compel payment on a "back to back" ("all sums") basis. Further, the court rejected the reinsurer's late notice argument finding that it had failed to show that ICSOP acted with "extreme dishonesty" such that Equitas had been "seriously prejudiced" under English law or had acted in "bad faith" under New York law.

OTHER DEVELOPMENTS OF NOTE

Inside the Insurance Industry

Fitch Ratings reports that US auto insurers are likely to earn improved underwriting profits in 2020 owing to reduced auto usage during the pandemic.

Pandemic Update

Trial has begun in London in a case where the Financial Conduct Authority presses its claim that Hiscox, RSA , Zurich and several other major European property insurers ow coverage for business interruption losses arising out of the COVID-19 virus pandemic.

Attorney John Hougtaling, who filed the first BI suit on behalf of the Ocean Grill in New Orleans on March 16 and has since lobbied President Trump on behalf of the restaurant industry, has reportedly persuaded Congressman Michael Thompson (D. Cal.) to file legislation that would create a federal fund to reimburse property insurers that voluntary pay pandemic claims notwithstanding virus exclusions.

Chez Panisse is the latest high-end Bay Area eatery to sue its property insurer for pandemic related business interruption losses.

The first filed Massachusetts case presenting a motion to dismiss on the issue of direct physical loss is now teed up for a decision by Judge Nathaniel Gorton in the U.S. District Court in Boston now that Strathmore Insurance has filed a Reply Brief in Legal Sea Foods LLC v. Strathmore Ins. Co., No. 20-10850 (D. Mass.)

Lloyd’s has filed a motion to dismiss in Independent Restaurant Group v. Certain Underwriters at Lloyd’s, London, No. 20-2365 (E.D. Pa.), arguing that a Philadelphia beer garden’s claim for pandemic-related business interruption losses not only do not involve “direct physical loss” to the insured premises but are separately subject to a “micro-organisms” exclusion and various pollution exclusions that preclude coverage for any claim related to substances that pose a threat to human health.

Here is a video link to the 90 minute pandemic insurance webinar that the American College of Coverage Counsel presented last week with the Boston College Law School.

New Coverage Litigation

Certain Underwriters at Lloyds, London have filed suit against the Archdiocese of Indiana alleging that the Archdiocese failed to disclose allegations of sexual abuse by Reverend David Marcotte when it applied for sexual misconduct insurance last year.

Emerging Claims

Two class actions were filed last week in Philadelphia, accusing the police department and numerous unnamed policemen of using excessive force and brutalizing Black Lives Matter protesters in the course of breaking up a demonstration in West Philadelphia on May 31.

Roundup Roundup

The California Court of Appeal has sustained a San Francisco jury's finding that Monsanto Roundup weed killer caused Hodgkin's Lymphoma. While sustaining the finding of liability, the Court of Appeal reduced the lower court’s award from $78.5 million to $20.5 million (a substantial reduction from the jury's original award of $289.2 million dollars. In a 86 page decision, the First District declared in Johnson v. Monsanto Co., A155940 (Cal. App. July 20, 2020) that substantial evidence had been presented at trial that glyphosate and other Roundup ingredients cause cancer.

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