Jun 11 2021

Insurance Law – 6/11/2021


Despite a few recent setbacks in state courts, insurers continue to win an overwhelming number of cases in federal court.    Recent insurer victories include:
Brown Jug, Inc. v. The Cincinnati Ins. Co., No. 20-13003 (E.D. Mich. May 27, 2021)(no “direct physical loss”).

Deer Mountain Inn v. Union Ins. Group, No. 20-984 (N.D.N.Y. May 24, 2021)(insured has failed to allege “direct physical loss” to its property or that a nearby property has suffered damage due to a covered cause of loss).

Estes v. Cincinnati Ins. Co., No. 20-138 (E.D. Ky. June 4, 2021) (dictionary definitions support insurer’s contention that “direct physical loss” requires physical damage to the premises).

Glacial Cryotherapy v. Evanston Ins. Co., No. 21-0266 (W.D. Wash. June 2, 2021)(no “direct physical loss”; virus exclusion).

Lexfit LLC v. West Bend Mut. Ins. Co., No. 20-413 (E.D. Ky. June 10, 2021)(fitness center did not suffer direct physical loss).

Manhattan Partners LLC v. American Guarantee Liability Ins. Co., No. 20-1342 (D.N.J. May 24, 2021)(general allegations that virus particles were on the surface of insured’s property insufficient to plead “direct physical loss”).

MMMM DP, Inc. v. The Cincinnati Ins. Co., No. 20-867 (E.D. Mo. May 24,2021)(no “direct physical loss’).

SA Hospitality Group LLC v. Hartford Fire Ins. Co.. No. 20-1033 (D. Conn. June 3, 2021)(applying New York law, where insured’s restaurants were located, court ruled that the insured had failed to plead a plausible claim for “direct physical loss” in light of the Appellate Division's ruling in Roundabout Theater and the unanimous view of federal court rulings in New York on these claims) 

Star Buick-GMC v. Sentry Ins. Group,
 No-3023 (E.D. Pa. May 26, 2021)(Judge Leeson rules that insured’s property did not suffer “direct physical loss” and rejects “reasonable expectations” as a basis for avoiding virus exclusion).
New appellate filings:
Goodwill Industries of Oklahoma v. Philadelphia Insurance Ind. Co. No. 21-6045 (10th Cir.)(insured's Opening Brief)
Mashallah, INc. bv. West Bend Mut. Ins. Co., No. 21-1507 (7th Cir.)(insurer's brief)

Strathmore Insurance filed its principal brief in the First Circuit on June 2, arguing in Legal Sea Foods v. Strathmore Ins. Co., No. 20-10850 that the court should sustain the lower court’s finding of no “direct physical loss” and that the issue need not be certified to the Supreme Judicial Court of Massachusetts.

Heavy metal bank Metallic sued Certain Underwriters at Lloyd’s in the Los Angeles Superior Court earlier this week, seeking event cancellation coverage for a tour that was cancelled during the pandemic.


EIGHTH CIRCUIT             Mass Torts/Success Liability/Standard of Review (MN)

The Eighth Circuit has ruled in Continental Ins. Co. v. Daikin Applied Americas Inc.
, No. 20‑1689 (8th Cir. May 21, 2021) but a Minnesota District Court erred in granting summary judgment to Continental on the basis that over 100 underlying asbestos suits did not expressly seek to impose liability on the current entity as the successor to its named insured.  The Court of Appeals declared that Minnesota law only requires that a claim "arguably" implicate a policy’s coverage in order to trigger the insurer's duty to defend and that this duty could be based both upon express allegations in the underlying complaint and extrinsic facts.  The case was therefore remanded to the Minnesota District Court for a case by case analysis of this court "arguably" standard.

ELEVENTH CIRCUIT        TCPA/Privacy Exclusion (FL)

The U.S. Court of Appeals for the Eleventh Circuit has ruled that a policy exclusion for "claims…arising out of…an invasion of policy" precluded any obligation to provide coverage for a lawsuit alleging the transmission of junk faxes in violation of the Telephone Consumer Protection Act of 1991.  In upholding a Florida District Court's declaration that the exclusion precluded coverage for class action claims involving the insured's robo-dialing operations, the Court of Appeals ruled in in Horn v. Liberty Insurance Underwriters, Inc,, No. 19-12525 (11th Cir. June 1, 2021) that the class action specifically alleged that insured had intentionally invaded the class members' privacy and sought recovery for those invasions.  Writing in dissent, Judge Newsom ruled that "invasion of privacy" connotes only the common law tort and does not extend to violations of statutes such as the TCPA and is, at a minimum, ambiguous.

FLORIDA                             Tripartite/Standing to Sue/Subrogation

In a tripartite case that had been pending before it for nearly two years, the Florida Supreme Court has ruled in Arch Ins. Co. v. Kubicki Draper, LLC, No. SC-673 (Fla. June 3, 2021) that a professional liability insurer could bring a malpractice claim against appointed defense counsel based on the subrogation clause in its policy.     As had the courts below, the Supreme Court ruled that the insurer was not in privity with the law firm, nor was it an intended third-party beneficiary of the relationship between the law firm and the insured.  However, whereas the lower courts had therefore ruled that the insurer lacked standing to pursue a malpractice claim against the firm, the Supreme Court declared that Arch could bring an action based upon the subrogation clause in its professional liability insurance policy.  Inasmuch as Arch was contractually subrogated to the rights of its insured law firm, which included claims for legal malpractice against counsel retained by defendant, the Supreme Court held that the insurer was likewise entitled to bring such an action.  Whereas the law firm had argued that the supreme court had generally prohibited assignment of legal malpractices claims on the grounds of public policy, the Supreme Court declared that there are exceptions when public policy is inapplicable including this one and that Florida public policy does not support shielding a law firm from accountability for its professional malpractice.  The court observed that subrogation exists to hold the premium rates down by allowing insurers to recover indemnification payments from the tortfeasor who caused the injury and that allowing an insurer to recoup payments from a law firm who created a liability by missing a statute of limitations defense to the detriment of the insured was actually consistent with Florida public policy.

SOUTH DAKOTA                    “Damages”/Injuctive Remedies

On a certified question from a local U.S. District Court, the South Dakota Supreme Court has ruled in Sapienza v. Liberty Mutual Fire Ins. Co., 2021 S.D. 35 (S.D. June 2, 2021) that a liability insurer's coverage for damages extends to all payments to satisfy the insured's liability and are not limited to sums paid in compensation to third parties.  As a result, the court ruled that Liberty Mutual was obliged to pay for the cost of complying with an injunctive remedy in rebuilding the insured's home.  The court ruled that this broader conception of damages was consistent with the common and ordinary meaning of that term, as confirmed by numerous dictionary definitions.  The court ruled that is interpretation also reflected the fact that these costs were predicated on the insured’s legal liability for what would otherwise had to be assessed as money damages had the court determined that a monetary payment to the neighbors would have been adequate to remedy the harm suffered by the insured's conduct.  The court also distinguished between the injunctive remedies that restrict action and those that compel it, as in this case.  Two dissenting justices argued that the majority’s reliance on environmental cases interpreting whether clean up costs are "damages" was misplaced and that there should not have been coverage in this case.


Inside the Insurance Industry

Business Insurance reports that Aon PLC plans to close its $30 billion proposed purchase of rival Willis Towers Watson PLC as early as possible in the third quarter.

Governor DeSantis announced this week that he will sign Senate Bill 76, which was pass on the closing day of this year’ legislative session, although that the legislation does not do more to curb excess litigation and improve the insurance market in Florida.

John Berrigan, the head of financial services for the European Union’s executive body has urged a conservative approach to recent proposals for a public-private scheme for insuring companies against economic lockdowns in future pandemics declaring that [t]his is a very complex debate and needs time to mature”

The Sins of the Fathers 

An Illinois attorney who has already disclosed the identity of 175 priests who are accused of sexually molesting minors has called upon the Archdiocese of Chicago to disclose the identify of other abusive priests.

Cyber Update 
Even with this week’s welcome news that the FBI was able to steal back nearly half of the millions that Colonial Pipeline paid last month, it was reported this week the giant meat producer JBS paid $11 million to shut down a ransomware attack.  Meanwhile, it was reported this week that Colonial Pipeline has filed a claim with its own insurance company seeking coverage for losses due to the attack.  

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