May 26 2022

Insurance Law - Week of May 27, 2022


The Illinois Appellate Court handed two more COVID wins to Zurich last week. In Firebirds International v. Zurich American Ins. Co., 2022 IL App (1st) 210558 (Ill. App. Ct. May 20, 2022), the First District affirmed a lower court’s declaration that the insured’s COVID claims were excluded as being subject to a Louisiana endorsement that did not include any reference to viruses and excluded coverage for “Contamination, and any cost due to Contamination including the inability to use or occupy property or any cost of making property safe or suitable for use or occupancy, except as provided by the Radioactive Contamination Coverage of this Policy.” The Appellate Court declined to rule that this exclusion was ambiguous or should be construed as affecting the applicability of the policy’s Contamination Exclusion to properties outside of Louisiana. The Appellate Court also rejected the insured’s argument that the Contamination Exclusion only applied to costs resulting from actual damages to the insured’s premises, such as loss rents. To the contrary, the First District pointed out that the exclusion applies to “contamination, and any cost due to contamination” and therefore applied to business income losses due to the claimed presence of virus particles in and around the insured’s businesses premises.

The First District also ruled in GPIF Crescent Court Hotel LLC v. Zurich American Ins. Co.. 2022 IL App (1st) 211335 (Ill. App. Ct. May 20, 2022) that the policies at issue unambiguously required “a physical alteration or substantial dispossession, not merely loss of use.” In keeping with its rulings in Sweet Berry and Lee, the Appellate Court declared that the policy required proof of “an alteration in appearance, shape, color or in other material dimension” which was not alleged here.

The Sixth Circuit has ruled in Renaissance/The Park LLC v. Cincinnati Ins. Co., 22-205 (6th Cir. May 20, 2022)(unpublished) that it will not reconsider its recent Estes ruling finding that COVID 19 virus particles did not cause “direct physical loss” under Kentucky law. The court held that a three judge panel is bound to follow the ruling of an earlier panel unless or until there was an en banc opinion from the court reversing or the Kentucky Supreme Court issues a contrary ruling. Further, the court was unpersuaded by the insured’s argument that it was “likely” that there were virus particles in its building, declaring that mere supposition did not meet the plausibility standard necessary to defeat a Rule 12(b)(6) motion.

The Eighth Circuit has added to its policyholder toll in COVID case, rejecting a Missouri dentist’s clam for coverage in Edwards v. Travelers Cas. Ins. Co.,No. 21—3035 (8th Cir. May 13, 2022)(unpublished).

Finally, the Eleventh Circuit has ruled in Gio Pizzeria Bar & Hospitality v. Certain Underwriters at Lloyd’s, London, No. 21-12229 (11th Cir. May 17, 2022)(unpublished) that the insured’s property had not suffered “direct physical loss of or damage” to property under Florida law.


FIFTH CIRCUIT           Property Insurance/Concurrent Causes (TX)

The Fifth Circuit has again asked the Texas Supreme Court to give it guidance with respect to the role of the concurrent causation dispute in property insurance cases. Having previously certified this issue to the court last year in Frymire v. Home Services only to see the case settle before oral argument, the court issued a new opinion in Overstreet v. Allstate Ins. Co., No. 21-0462 (5th Cir. May 20, 2022), asking the court to clarify:

  1. Whether the concurrent cause doctrine applies where there is any non-covered damage, including “wear and tear” to an insured property, but such damage does not directly cause the particular loss eventually experienced by plaintiffs;
  2. If so, whether plaintiffs alleging that their loss was entirely caused by a single, covered peril bear the burden of attributing losses between that peril and other, non-covered or excluded perils that plaintiffs contend did not cause the particular loss; and
  3. If so, whether plaintiffs can meet that burden with evidence indicating that the covered peril caused the entirety of the loss (that is, by implicitly attributing one hundred percent of the loss to that peril.

EIGHTH CIRCUIT           Silica Dust Exclusions (MN)

The Eighth Circuit has ruled that a Minnesota District Court did not err in ruling that two silica dust exclusions in a liability policy issued by Grinnell Mutual relieved it of any obligation to cover liability claims arising out of its insured’s demolition of dry wall that spread dust throughout a home insured by Great Lakes. In Grinnell Mut. Re v. Great Lakes Insurance SE, No. 21-2712 (8th Cir. May 18, 2022), the court found that even though the dust had not been tested before it was cleaned up, Grinnell Mutual had presented sufficient evidence that it contained silica. Further, the court rejected Great Lakes’ contention that there was a misplaced comma in these exclusions that required that the exclusions be limited to curing the “effects” of silica as distinguished from cleaning up the silica dust itself. The court observed that this interpretation did not make sense and that it was unlikely that the same scrivener’s error had occurred in the same place in two exclusions that were drafted by different trade organizations.

CALIFORNIA           Cumis Counsel

The Court of Appeal has voted to publish its April opinion in Simonyan v. Nationwide Ins. Co. of America that a disagreement between a motorist and his insurer as to who was at fault for an accident and whether the insured could pursue a claim against the other driver created a right to independent counsel under Section 2860.

FLORIDA           Fee Awards/Lodestar Multiplier

The Florida District Court of Appeals has set aside as excessive a trial court’s award of $372,975 to a homeowner who recovered $52,000 in a dispute with Lloyd’s concerning Hurricane Irma damage to his home. In Certain Underwriters of Lloyd’s, London v, Candelaria, No. 3D20-2871 (Fla. App. Ct. May 18, 2022), the court credited the testimony of Lloyd’s expert that reasonable fees would have been $169,797.50 and that the trial court had erred in applying 1.8 multiplier. The court declared that the insured’s fee claim was not supported by competent evidence as the insured’s expert did not conduct a line by line analysis of counsel’s time records and that the trial judge erred in simply applying a 15% across the board reduction to redress excessive charges. Under the circumstances, the Court of Appeals declared that the trial judge’s use of “an arbitrary, “across-the-board” reduction of fifteen percent resulted in an improper lodestar amount that is unsupported by the competent substantial evidence and fails to meet the requirement of making “particularized reductions” and/or “specific findings as to disputed time entries.” The court therefore reduced the fee award and eliminated any multiplier.

ILLINOIS           Property Insurance/Appraisal/Pre-Judgment Interest

The Illinois Appellate Court has ruled in Greater New York Mut. Ins. Co. v. Galena at Wild Spring Condominium Association, 2021 IL App (2d) 210394 (Ill App. May 23, 2022) that a condo association was not entitled to 5% statutory pre-judgment interest for storm damage to its property because the value of the damage was not readily ascertainable before an appraisal that resulted in GNY paying the full amount of the appraised award. The court rejected the insured’s claim that interest should run from the date that it submitted a proof of loss or that GNY had unnecessarily delayed the resolution of these claims.


Industry News

The Eighth Circuit has revived a Missouri insurance agents’ suit against AIG, declaring in A.I.G. Agency, Inc. v. American International Group, No. 21-1498 (8th Cir. May 13, 2022) that there were disputed issues of fact that should have precluded entry of summary judgment against the agency for AIG’s claims of trademark infringement and dilution under the Lanham Act.

A federal grand jury has indicted former Georgia Insurance Commissioner on charges of conspiracy to commit health care fraud and conspiracy to commit money laundering based on allegations that he used his private insurance agency to “obtain kickbacks for unnecessary genetic and toxicology lab tests, and used his insurance business to hide those kickbacks.”

Climate Change Litigation

The Supreme Judicial Court of Massachusetts has affirmed a trial court’s ruling denying an energy company's motion to dismiss the Massachusetts Attorney-General’s suit alleging that Exxon Mobil misled investors concerning the impact of climate change. In Commonwealth v. Exxon Mobil Corp., SJC-13211 (Mass. May 24, 2022), the SJC concluded that the history and text of the Massachusetts anti-SLAPP statute made clear that the legislature had never intended to apply it to law suits brought by the Attorney-General.

The Sins of the Fathers

New York Governor Kathy Hochul has signed the Adult Survivors Act (S.66A/A.648A) which creates a one year window for victims of sexual abuse who were 18 years or older at the time of their assault to file suit for claims that would otherwise fall afoul of the statutes of limitations for such claims.

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