Apr 8 2022

Insurance Law 4/8/2022


The Eighth Circuit issued a summary opinion this week in United Hebrew Congregation of St. Louis v. Selective Insurance Company of America, No. 21-2752 (8th Cir. April 5, 2022) declaring that the insured’s claim for coverage was foreclosed by the court’s 2021 opinion in Oral Surgeons.

The First District of the Illinois Appellate Court has joined the Second District in rejecting an insurer’s effort to obtain business interruption coverage for COVID 19 losses. In ABW Development, LLC v. Continental Cas. Co., 2022 IL App (1st) 210930 (Ill. App. Ct. Mar. 30, 2022), the intermediate appellate court held that the operator of medical imaging facilities in Illinois and Indiana had not pleaded a viable claim for “direct physical loss of or damage” based on the interpretation of “physical injury” adopted by the Illinois Supreme Court in Eljer as involving “an alteration in appearance, shape, color or in other material dimension.” The court observed that this holding was consistent with analysis of numerous federal appellate courts as well as the Appellate Court’s own recent rulings in Sweet Berry Café and Lee v. State Farm.

On the same day, the Second District set aside a trial court’s certification of a class of businesses seeking “contamination” coverage from Society Insurance. In Alley 64, Inc. v. Society Ins. Co., 2021 IL App (2d) 210401 (Ill App. Ct. Mar. 30, 2021), the Appellate Court ruled that class certification was inappropriate based upon its conclusion that the insured had not pleaded facts to show that the suspension of its business operations was due to contamination on its property. Despite the insured’s contention that it was “virtually certain” that virus particles were on the premises or that it was “highly probable” that infected persons had visited the insured’s bar, the court held there was no claim that contamination had actually occurred.

The uncertainty of federal courts in Nevada appears to be ebbing. On March 31, Judge Dawson refused to permit the Wolfgang Puck restaurants to pursue their COVID 19 BI claims, ruling in WP 6 Restaurant Management Group v. Zurich American Ins. Co., No. 20-1506 (D. Nev. Mar. 31, 2022) that “[t]he overwhelming weight of authority holds that “direct physical loss of or damage” requires a “distinct, demonstrable, physical alteration of the property….Pure economic losses caused by COVID-19 closures do not trigger policy coverage predicated on ‘direct physical loss or damage.’”


SIXTH CIRCUIT           Jurisdiction/Opioid Litigation (OH)

The Sixth Circuit has sustained an Ohio District Court’s determination that the availability of coverage for opioid claims is better handled in state court. In holding that the Ohio District Court did not abuse its discretion in remanding the case to state court, the Sixth Circuit declared in Cardinal Health, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, No. 22-057 (6th Cir. Mar. 30, 2022) that five factors that it had set forth for such questions in its 1984 opinion in Grand Trunk weighed in favor of the insured here, particularly on the grounds that retaining jurisdiction would increase friction between state and federal courts in Ohio.

ELEVENTH CIRCUIT           Bad Faith/Excess Judgments (FL)

Notwithstanding its earlier unpublished opinion in Cawthorn v. Auto-Owners that only a judgment following a trial that results in a judgment exceeding the availability insurance can satisfy the causation requirement for a negligent failure to settle under Florida law, the Eleventh Circuit now rules that this causation requirement is satisfied by a consent judgment in an amount exceeding the policy limits. In McNamara v. GEICO, No. 20-13251 (11th Cir. April 5, 2022), the court cited Perrera and other Florida Supreme Court rulings to the effect that “an insured is not obligated to obtain the determination of liability and the full extent of his or her damages through a trial and may utilize other means of doing so, such as an agreed settlement, arbitration or stipulation before initiating a bad faith cause of action.” The court emphasized that was is crucial is a binding judgment and not a “verdict.”

MASSACHUSETTS           “Damages”

The Supreme Judicial Court heard oral argument this week in Vermont Mut. Ins. Co. v. Poirier, SJC-13209. At issue is whether attorney’s fees that were awarded against the insured for violations of the Massachusetts Consumer Protection Act (G.L. c.93A) are sums that the insured is legally obligated to pay as “damages” under a CGL policy.

MASSACHUSETTS           Assault/"Expected or Intended”

The Appeals Court has ruled that a homeowner’s insurer had no duty to defend claims arising out of an incident in which the insured’s teenage son assaulted a team mate during a flag football game. In Citation Ins. Co. v. Chin, 20-P-312 (Mass. App. Ct. April 4, 2022)(unpublished), the court took note of statements that the boy made before the assault stating his intention to harm the other boy and the fact that he struck him in the throat and continued to beat him on the ground as conclusive evidence that the resulting injuries were intended. The court rejected Chin’s argument that he had not expected the boy to suffer such severe injuries (brain trauma) as it was sufficient that he intend some injury and that, in this case, “Chin intended to, and did, punch Williams in the throat and jaw.” MM’s Bill Schneider represented Citation Insurance.

PENNSYLVANIA           Recoupment/Defense Costs

A federal judge in Philadelphia has ruled in Chemical Equipment Labs, Inc. v. Travelers Property Casualty Company of America, 2022 U.S. Dist. LEXIS 61298 (E.D. Pa. Mar. 31, 2022) that it was not entitled to obtain reimbursement sums that it had paid to defend arbitration for breach of a charter agreement. The court ruled that there is no implied right to recoupment for defense costs in the absence of an express clause in the policy allowing recoupment.

NEW YORK           Estoppel

The First Department has ruled that insurers were not estopped to dispute claims by condominium unit owners for damage due to water intrusion. In First Mercury Ins. Co. v Nova Restoration of NY, Inc. 2022 NY Slip Op 02059 (App. Div. Mar. 24, 2022), Appellate Division found that Section 3420(d)(2) is limited to accidents occurring in New York and that the unit owner’s claim, which asserts shoddy construction resulting in water damage and growth of mold does not arise out of an "accident."


Must See CLE

The Massachusetts Insurance Reinsurance Bar Association is presenting its annual symposium at the Harvard Club in Boston’s Back Bay from 12-5:30 p.m. on April 27, 2022. This year’s symposium is entitled “Going Nuclear! New Issues in the Insurance and Reinsurance World” and will feature two panels of industry experts discussing into ground-breaking developments in the social inflation and nuclear verdict realm and hot topics in the reinsurance industry. We will also be hosting a COVID-19 discussion forum, to include analysis of the amicus brief filed by MIReBA in the Massachusetts Supreme Judicial Court in Verveine Corp. v. Strathmore Ins. Co. The event is live this year and will include a box lunch as well as a reception following the presentations. To register, please e-mail please email Alicia Salemi at asalemi@robinskaplan.com

Across the Bar

Priscilla O’Briant has moved her Las Vegas bad faith practice from Lewis Brisbois to Tyson Mendes.

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