National Insurance Law Forum : Insurance Litigation Lawyer & Attorney : National Insurance Law Forum : Insurance Coverage, Bad Faith Litigation

In Kassis v. The Ohio Casualty Company, 2009 NY Slip Op 05207 (June 25, 2009), the New York Court of Appeals considered whether a provision in a lease agreement requiring insurance for the “mutual benefit” of landlord and tenant was sufficient to trigger coverage under the terms of a blanket additional insured endorsement extending coverage to “any person or organization whom [the named insured is] required to name as an additional insured on this policy under a written contract or agreement.” The Court answered in the affirmative.

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In P.J.P. Mechanical Corporation v. Commerce and Industry Insurance Company, 2009 N.Y. Slip Op. 04984 (June 18, 2009), New York’s Appellate Division, First Department, held that an insurer has no duty to defend its insured against an affirmative defense based on a claim of offset raised in the responsive pleadings. Imposing such a duty, held the court, was counter to long-established business practices and would lead to uncertainty.

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In Evanston Insurance Company v. OEA, Inc., 2009 U.S. App. LEXIS 10921 (May 21, 2009), the Court of Appeals for the Ninth Circuit addressed the issue of “notice” under a claims-made policy. The Ninth Circuit upheld the decision of the U.S. District Court for the District of California, holding that, under a claims-made policy, the insured’s unreasonable subjective belief that a complaint does not evidence an intent to hold the insured liable for injuries will not create a genuine factual dispute as to when the insured’ received “notice” of the claim where the complaint clearly names the insured and specifically alleges that the insured is liable for injuries.

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In a 5-2 decision, the New York Court of Appeals held in Matter of Allstate Insurance Company, 2009 N.Y. Slip Op. 04300 (June 4, 2009) that Supplemental Uninsured/Underinsured Motorists (“SUM”) coverage is not triggered where payments to multiple insureds reduces the liability limits of the tortfeasor’s policy. Thus, SUM benefits were unavailable to co-occupants of a covered vehicle.

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In Rhiner v. Red Shield Insurance Co., issued May 27, 2009, the Oregon Court of Appeals addressed the issue of whether an individual whom an insured hired directly, and who filed a workers’ compensation claim against the insured for on-the-job injuries is an “employee” or a “temporary worker” within the meaning of the policy. The appeals court reversed the trial court’s grant of summary judgment in favor of the insured, and remanded for entry of judgment for insurer holding that because the insured hired the individual directly, and not with the aid of a third party, the individual was not a “temporary worker” within the meaning of the policy, and the policy did not provide coverage of his claims against the insured.

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In an action to rescind life insurance policies for fraud and misrepresentation, a New York appellate court recently held that although the action was timely filed within the statutory two-year incontestability period, the insurer was estopped from seeking rescission for having collected and retained nine premium payments after commencing suit.

In Security Mutual Life Insurance Company of New York v. Rodriguez, defendants purportedly purchased three life insurance policies worth $20 million from Security Mutual agents who, prior to the commencement of the action, had pled guilty to insurance law crimes in connection with the issuance of life insurance policies. 2009 WL 1444524 (1st Dep’t May 26, 2009). The action for rescission and fraud alleged that defendants, in conjunction with the agents, procured the policies by providing false and misleading financial and medical information. On a motion to dismiss the complaint, defendants argued the action was untimely and that the insurer had waived its right to rescind the policy and had failed to plead fraud with sufficient particularity.
 

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A California federal trial court decision adds to the growing body of law of how much the facts (and how those facts are presented) determine the number of occurrences question. Evanston Ins. Co. v. Ghillie Suits.Com, Inc., 2009 U.S. Lexis 22256 (N.D.Cal. 2009).

Cases examining number of occurrences (for purposes of determining the number of limits available on (often) non-aggregated claims or how many deductibles an insured may have to pay) are decidedly fact-driven. See, for instance, recent case examples where the courts have concluded there is more than one occurrence: London Market Insurers v. Truck Ins. Exchange, 146 Cal.App.4th 648 (Ct. App. 2007) (“Kaiser Cement”) (in inter-insurer dispute, asbestos liabilities that arose out at many different locations from different products and situations creating exposure, were not all a single occurrence); Lennar Corp. v. Great American Ins. Co., 200 S.W.3d 651 (Tex. App. 2006) (in examining claims based on defective stucco, the court noted that “under the ‘cause’ analysis, the proper focus . . . is on the number of events that cause the injuries and give rise to the insured's liability, rather than the number of injurious effects”); Nicor, Inc. v. Associated Electric and Gas Ins. Services Ltd, 223 Ill. 2d 407, 413 (Ill. 2006) (mercury spills in 195 homes were separate occurrences because different acts of negligence and not common methodology, thus requiring insured to pay multiple self insured retentions).

In the Evanston case, during a U.S. Marine training session, two marines were badly burned after their “fireproof” clothing caught fire. The parties, in presenting the issue to the court, stipulated that when the first marine’s suit caught fire from a flash from a gun - that was a single occurrence. The question was whether the ignition of the second marine’s clothing was part of that same occurrence or a separate occurrence. The court painstakingly went through the details of the event (all of which happened in a matter of minutes) and the various theories as to whether there were different causes for the two fires even though close in time and space. In the end, what the court appeared to find most compelling was that the second marine was safe, and it is only that he decided to assist the first marine that caused the second marine’s clothing to ignite. Thus, the court found there were two occurrences (and two occurrence limits applied).

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In Fairbanks v. Superior Court of Los Angeles County (Farmers New World Life Insurance Co.) 46 Cal.4th 56 [2009 WL 1035264] (2009), the California Supreme Court held life insurance is not a service subject to the protections of California’s Consumer Legal Remedies Act (“CLRA”). The decision provides life insurance companies with a solid defense against CLRA lawsuits alleging unfair or deceptive acts and practices in the marketing or sale of life insurance policies.

The CLRA (Calif. Civ. Code § 1750 et seq.) provides a nonexclusive statutory remedy for unfair methods of competition and unfair or deceptive acts undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.  The Act provided a means to recover damages, punitive damages, and attorneys fees.

Absence of this remedy does not preclude other causes of action, namely under California’s Business & Professions Code Section 17200 for unfair competition (limited to injunctive relief and restitution), or a “bad faith” claim (if there has been a breach of contract).

In reaching its decision in Fairbanks, the California Court rejected decisions from other jurisdictions (namely Texas and Colorado), which held life insurance does come within the meaning of services under similar consumer protection statutes. The California Court determined that, unlike the broadly worded statutes in other states, the CLRA “contains a restrictive definition of ‘services’ that excludes life insurance.”

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The Fourth Circuit  ruled yesterday  that allegations that employees of an American security firm that abetted the torture of detainees at the Abu Ghraib prison in Iraq are outside the Coverage Territory of a CGL policy issued by St. Paul. In CACI, International, Inc. v. St. Paul Fire & Marine Ins. Co., No. 08-1885 (4th Cir. May 14, 2009), the court voted 2-1 to affirm the findings of a West Virginia District Court that the alleged abuses did not occur within the territory of the United States and its possessions. The court declined to find that allegations that conduct that did occur in the United States wherein the insured was allegedly negligent in hiring these employees triggered coverage. Apart from the fact that the Complaint did not expressly allege where these acts occurred, the court ruled that it is the place of injury, not of the insured’s negligent acts, that governs the application of the Coverage Territory clause.  Justice Shedd authored a brief dissent, arguing that the claims fell within the exception for insureds working outside the territory for a “short period.”

Kudos to Walter Andrews of Hunton & Williams!

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