International Couriers Corp. v North River Ins. Co. (NY App., 1st Dept., Oct. 30, 2007)
Court held that certificate of insurance naming plaintiff as additional insured was not sufficient to confer coverage in light of clear policy language; damages for insured’s breach of obligation to procure insurance limited to out-of pocket expenses where plaintiff obtained its own policy.
The U.S. Supreme Court announced earlier today that it has agreed to accept Exxon’s petition for certiorari from a ruling of the Ninth Circuit holding it liable for $2.5 billion in punitive damages for its claimed misconduct in connection with the Exxon Valdez oil spill.
It appears from the court’s October 29 cert order, which accepted briefing on issues raised by Exxon's petition concerning the propriety of such an award under federal maritime law but not on grounds of constitutional due process, that any resulting ruling will have narrower application to bad faith claims and other punitive damage suits than the Court’s recent rulings in State Farm v. Campbell and Williams v. Philip Morris.
On October 26, 2007, the Utah Supreme Court reversed a trial court’s determination that injuries to a seven-year old boy that suffered brain injuries when the eight-year old insured swung a hockey stick at his head was an “accident” under the subject Safeco policy of insurance finding that “accident” must be viewed from the standpoint of a reasonable eight-year old insured.
Continue Reading...Oregon Attorney General Hardy Myers filed a stipulated general judgment in Marion County Circuit Court on October 25, 2007 with ACE Group Holdings, Inc. and its subsidiaries in which ACE agreed to pay $4.5 million to a group of eight state AGs in settlement of antitrust claims. The case alleged improper, fictitious quoting and steering of insurance businesses in the commercial insurance market, orchestrated by Marsh & McLennan of New York. According to the press release issued by the Oregon AG, the scheme devised by broker Marsh & McLennan gave commercial policyholders the illusion of a legitimate competitive bidding process on policies while Marsh had secretly pre-designated certain insurers to win bids, but the results for the policyholders were actually inflated rates, not competitive bids. Prior to the settlement, ACE paid out compensation for overcharges to a nationwide group of policyholders and adopted significant business reforms that govern its bidding and underwriting practices.
After much "gnashing of teeth," a panel of the Ohio Court of Appeals has affirmed a lower court's ruling that the aggregate limits contained in various missing three year policies issued back in the 1960s and 1970 by Aetna Property & Casualty (now ACE) are ambiguous and therefore apply on a "per year" basis. The court also rejected ACE's argument that these claims were subject to the "deemer" clause in its policies so as to arose out of a single "occurrence."
Cincinnati Ins. Co. v. ACE INA Holdings involved a dispute between an excess insurer (Cincinatti) and the primary insurer (ACE) of Flexo Manufacturing, which faces silicosis liabilities around the country due to its manufacture of masks used in sand blasting operations. Each of the ACE policies, insofar as could be determined given their incomplete nature, contained a $300,000 aggregate for bodily injury claims. However, the policies (or whatever was left of them) did not contain an "annualization" clause or any other language declaring whether the aggregate applied on a "per policy" or "per year" basis.
Continue Reading...On certified questions from the Eleventh Circuit, the Florida Supreme Court holds in Garcia v. Federal Ins. Co. (Oct. 25, 2007), that additional insured provisions in a homeowner’s policy extending coverage to “any other person or organization with respect to liability because of acts or omissions” of the named insured limits coverage to instances of vicarious liability, and does not extend to the additional insured’s own active negligence.
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Hochhauser v. Electric Ins. Co. (NY App. Oct. 23, 2007)
Court holds that neither insured's statement in insurance investigation report, nor testimony regarding statement, are admissible at a hearing under the business records exception to the hearsay rule, since insured lacks a business duty, as opposed to a contractual duty, to report to insurer in the course of its investigation regarding insurance coverage.
As one grows older and sometimes wiser, it becomes apparent that the most important legal subjects are the ones that we largely ignored during law school. Such is clearly the case with Conflicts of Law. Apart from allocation, few fields of insurance law have generated so many different analyses: lex loci contractus, “LeFlar factors,” “most significant contacts,” “governmental interest,” “grouping of contacts” and (the author’s personal favorite): renvoi (what can you say about a state like Maryland whose university mascot is a turtle?).
Now comes California to further muddy the waters. Until recently, it had seemed relatively settled that California followed a “governmental interest” approach wherein the law of conflicting jurisdictions would be evaluated in accordance with which state had the more substantive interest in the outcome of the dispute. However, a recent opinion of the California Court of Appeal has suggested an entirely different approach.
In Frontier Oil Corp. v. RLI Ins. Co., B189158, 2007 Cal. App. LEXIS 1298 (2d Dist. August 6, 2007) an oil company and its subsidiary were sued by students and residents near the Beverly Hills High School (an area whose riches apparently include not only Tori Spelling but also significant oil and gas deposits) for respiratory problems and other injuries from exposure to airborne contaminants discharged in the course of the defendants’ oil and gas production operations in the area.. The Superior Court granted summary judgment to RLI holding that, under Texas law, the claims were subject to an absolute pollution exclusion in its policies.
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The US Supreme Court recently set forth a heightened standard to apply to Fed. R. Civ. P. 12 motions to dismiss in its decision in Bell Atlantic Corp. v. Twombly in which a class action was dismissed for failure of the class to demonstrate that it could “plausibly” win at trial. In Twombly, the Court stated that to survive such a motion, the claim must include "enough facts to state a claim to relief that is plausible on its face." The Court explained that the factual "allegations must be enough to raise a right to relief above the speculative level." The Court noted that it was not imposing a "probability requirement at the pleading stage," and a well-pleaded complaint could proceed even if it was apparent that actual proof of the facts alleged was improbable and recovery was unlikely. The Court further explained that the complaint merely needed to contain enough factual matter to "raise a reasonable expectation that discovery will reveal evidence of" the claim or element. This ruling essentially departed from the established standard set forth in Conley v. Gibson, 355 U.S. 41 (1957) where the Court stated that lawsuits should not be dismissed at such an early stage unless it appeared that the party could prove “no set of facts” at trial that could support its claim. Court watchers have indicated that this ruling will substantially impact the ability of plaintiffs to withstand attacks on complaints where the intent of a defendant is a necessary predicate to obtaining relief. It is unknown how the 26 states that have patterned their dismissal standards on the Conley “no set of facts” language will apply the ruling in cases involving only the interpretation of state law.
Continue Reading...Only two months after Governor Spitzer vetoed efforts to permit "direct actions" in New York and impose a requirement of prejudice in late notice cases, a new bill has been introduced in the State Senate and Assembly that would change New York law in much the same way that SB 06306 proposed to. The new proposal, which is co-sponsored by 38 senators and 120 Assemblymen, would:
Webster v. Acadia Ins. Co. (NH Oct. 17, 2007)
Court holds insurer obligated to defend insured against claim for damages resulting from roof repairs. Court found complaint alleged claims beyond insured’s defective roof replacement, to include buckling, bowing, lateral movement, and separation of ceiling beams from building frame, that were direct result of insured’s work. The damages represented actual damage to property separate and distinct from insured’s own work product.
Any insurer who complacently assumes that New York courts will follow a "time on the risk" approach in the wake of the Court of Appeals ruling a few years ago in Consolidated Edison would do well to consider the October 16 ruling of the First Department in State of New York Ins. Dept. v. Generali Ins. Co. 2007 NY Slip Op. 07767.
Continue Reading...A surprising new opinion from the Tenth Circuit suggests that umbrella carriers may be liable for those sums that an insured pays to satisfy its deductible or self-insured retention for a large loss even if, as a result, the primary insurer never exhausts its limits.
Continue Reading...Score it Insurers 8-Policyholders 6 as casualty insurers won a round today in the on-going battle over whether insureds must allocate long-tail losses in accordance with the duration of the loss or can "spike" their claims to a single year of coverage to trigger higher layer policies and avoid those nasty orphan shares and gaps in coverage.
Continue Reading...On August 31, 2007, the Texas Supreme Court issued its long awaited decision in Lamar Homes v. Mid-Continent Casualty Company, 2007 WL 2459193. Although the bulk of the decision dealt with coverage under a liability policy for construction defect claims against an insured, another part of the decision has created significant alarm among some American insurers concerning the Court’s willingness to allow the Texas Prompt Payment of Claims statute to apply to defense and indemnity claims under a liability policy. The statute – previously found in Article 21.55 and now found in Article 542.051 of the Texas Insurance Code -- only applies to “first party claims” that “must be paid by the insurer directly to the insured or beneficiary.” Historically, Texas insurers have interpreted the penalty statute to only apply to claims under property, life, health, and other traditional “first party” coverages. In Lamar Homes, the Texas Supreme Court said that the Texas penalty statute also applied to defenses and indemnity claims under liability policies.
Continue Reading...The Fifth Circuit Court of Appeals recently recognized that an insurer's reliance on the reports of objective experts is a defense to bad faith allegations when it affirmed a district court’s summary judgment in favor of a health insurer regarding an insured’s extra-contractual claims. In Henry v. Mutual of Omaha Insurance Company, 2007 WL 2897966 (5th Cir. October 05, 2007), the plaintiffs, on behalf of their deceased son, filed suit against Mutual of Omaha Insurance Company (“MOIC”), the issuer of their son’s health insurance coverage, alleging that MOIC’s denial of coverage for intravenous immunoglobulin (“IVIG”) replacement therapy caused their son to commit suicide. The federal district court granted MOIC’s motion for summary judgment and the Fifth Circuit affirmed.
The plaintiffs’ extra contractual claims were the sole subject of the appeal. The Fifth Circuit explained the plaintiffs’ claims under the DTPA, Insurance Code, and for common law bad faith all failed because MOIC had a reasonable basis for its decision to deny coverage. The court explained: “[p]lainly put, an insurer will not be faced with a tort suit for challenging a claim of coverage if there was any reasonable basis for denial of that coverage.” The Fifth Circuit found MOIC’s reliance upon the proffered opinions of several board-certified doctors who reviewed the insured’s claim demonstrated good faith. The court rejected the insured’s argument that the reports prepared by MOIC’s in-house and independent physicians were not objective, because these physicians were paid by MOIC. The court noted that the doctors were not “patently off-base in their analysis and conclusions” and their professional justifications were not “illegitimate or specious.” The court concluded by explaining: “[t]he question is not whether in the end MOIC’s doctors were right or wrong in their diagnosis of [the insured’s] condition and medical needs; the question is whether their methods and conclusions were reasonable, and whether MOIC was reasonable in relying on these conclusions.” The Fifth Circuit affirmed because it was satisfied that MOIC did not breach its duty of good faith and fair dealing, stating that MOIC clearly had a reasonable basis on which to deny coverage of its insured’s IVIG treatment for lack of medical necessity.
Editor’s Note: Although this case arises out of a health insurance context, the Fifth Circuit’s broad pronouncements about the standards applicable to determine whether an insurer’s reliance on experts in evaluating claims is proper will have applicability to any first party insurance claim where the insurer retains one or more expert consultants to evaluate some aspect of the submitted claim.
On October 12th, the Supreme Court of Texas issued a surprising decision of importance to liability carriers doing business in Texas regarding the reimbursement claims available to liability insurers against other insurers in Texas.
Continue Reading...Ash v Continental Ins. Co. (Pa. Oct. 11, 2007)
In an action for bad faith following denial of a first-party property claim for damages caused by fire, Pennsylvania Supreme Court held that claim was barred by two-year statute of limitations applied to tort actions. Court rejected argument that six-year limitations period applicable to breach of contract and other claims should apply, concluding that the duty imposed under Pennsylvania’s bad faith insurance statute (42 Pa.C.S. § 8371) derives primarily from the law of torts.
Certain Underwriters at Lloyd's, London v Foster Wheeler Corp. (NY Oct. 11, 2007)
For reasons stated in the intermediate appellate court’s decision below (Certain Underwriters at Lloyd's, London v Foster Wheeler Corp., 36 AD3d 17 (1st Dept. 2006)), New York’s high court affirms that, in determining the law governing liability policies covering multistate risks, the state of the insured's principal place of business is the primary factor and should be regarded as a proxy for the principal location of the insured risk, which is a controlling factor in determining the law applicable to a liability policy. Court reasoned that state of the insured's principal place of business has a greater concern with issues of policy construction and application bearing on the amount of coverage than do states where contracting, negotiation, or payment of the premium happened to occur.
The Washington Supreme Court released its opinion this week in Mutual of Enumclaw Ins. Co. v. Dan Paulson Const. Inc., No. 79027-2, 2007 Wash. LEXIS 788 (Wa. Oct. 11, 2007), finding that an insurer acted in bad faith by subpoenaing an arbitrator in an underlying case involving its insured for his mental impressions of the underlying arbitration and sending two letters to the arbitrator setting forth its coverage position with regard to the underlying case. The court further found that the insurer, Mutual of Enumclaw (“MOE”) failed to rebut the resulting presumption of harm to its insured.
Continue Reading...There is an interesting article from the front page section of the Wall Street Journal today concerning the Stoneridge Investment Partners LLP v. Scientific-Atlanta, et al, case that was heard by the US Supreme Court today. The Stoneridge case concerns whether private investors may sue third-parties such as accountants or lawyers that allegedly participate in a scheme to defraud shareholders and thus violate Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. A summary and analysis of the oral argument has been posted here by the Akin Gump SCOTUS blog.
Continue Reading...City of Renton v. Lexington Ins. Co. (USA), 2007 U.S. Dist. LEXIS 69959 (W.D. Wash. September 9, 2007)
In an unpublished decision, the U.S. District Court for the Western District of Washington recently held that even a strictly construed "inherent vice" clause encompassed the error in design of the "Monster Road Bridge" in Renton, Washington where the design error (and not any other event) led to cracks in the girders of the bridge and caused the City's loss for costs of repair. Because the defendant insurers were entitled to summary judgment, the re-insurer defendants were also entitled to judgment as as a matter of law as there was no obligation to “follow the settlement” and reimburse the underlying insurers for payment to the insured.
Zeldin v. Interboro Mut. Indemnity Ins. Co. (NY App., 2nd Dept., Oct. 2, 2007)
Plaintiff, who obtained judgment against insured for injuries sustained in motor vehicle accident, obtained an assignment of insured’s rights under policy and commenced bad faith action against carrier. Court held that dismissal of suit was proper. While plaintiff provided written notice to insurer, the insured did not. Plaintiff, who stands in the insured’s shoes for purposes of this action, was therefore estopped from contending that insurer improperly disclaimed coverage. Significantly, plaintiff did not commence declaratory judgment action in her capacity as injured party. As a result, any defenses that insurer might have had against insured were good as against plaintiff.
AIU Ins. Co. v. Nationwide Mut. Ins. Co. (Sup. Ct., NY Cty., Oct. 2, 2007)
Court holds that insurer providing workers’ compensation coverage under wrap-up plan with specific location endorsement entitled to contribution from carrier affording concurrent coverage for employer’s locations generally; evidence of parties’ contrary intent not admissible where policy terms unambiguous. Carrier seeking contribution not entitled to pre-judgment interest.
Bovis Lend Lease LMB, Inc. v. Royal Surplus Lines Ins. Co. (NY App., 1st Dept., Oct. 2, 2007)
Court holds that 37-day delay between insurer’s receipt of report from investigator detailing accident and its letter disclaiming coverage was unreasonable as a matter of law under NY Insurance Law § 3420(d), since the reasons for disclaimer were readily apparent from documents, including notice of claim and investigation report.Enter keywords:
