Coming Soon To An Appeals Court Near You...
So you haven't finished your holiday shopping yet? No worries--here are three new matters that are due to be decided shortly in Massachusets, Pennsylvania and Texas that every insurance maven will want on their year end wish list!
1. Boston Gas v. Century Indemnity, SJC 10246 (Mass.)
The Supreme Judicial Court will hear oral argument on January 8, 2009 on allocation issues certified to it from the First Circuit in Century Indemnity's appeal from this pollution clean up case, Boston Gas v. Century Indemnity Co., 529 F.3d 8 (1st Cir. 2008) At issue is whether a federal district court erred in allowing a gas utility to allocate the entire cost of cleaning up a former MGP site to excess coverage issued in the 1960s. Unlike several neighboring states (CT, NH, NY, VT), whose Supreme Courts have adopted pro rata approaches to long tail cases, Massachusetts has, to date, appeared to go its own way as lower courts have permitted "spking" whether on an "all sums" or joint and several theory.
The Boston Gas appeal has drawn significant attention from amici despite the fact that tjhe SJC, contrary to its recent practice, made no formal request for amicus briefing.
It will be interesting to see if the attitude of the court is affected by the fact that Judge Botsford, who authored the trial court in Rubenstein v. Royal Ind. adopting joint and several liability, is now sitting on the SJC. Another interesting sidebar will be whether Ralph Gants plays a role. Gants, who was nominated this week by Governor Patrick to take the seat of retiring Justice Greaney, must still be approved by the Governor's Council, which may or may not take place in the next 30 days. Gants currrently sits in the state's business court where he has devoted significant time and attention to insurance issues, albeit with mixed results for carriers.
2. American & Foreigh Ins. Co. v. Jerry's Sports Center (PA).
On November 19, 2008, the Pennsylvania Supreme Court announced that it would accept review of American & Foreign Ins. Co. v. Jerry’s Sport Center, Inc., 948 A.2d 834 (Pa. Super. 2008) in which the Superior Court ruled that where an insurer had a contractual duty to defend, it may not recoup its defense costs later on, even if found not to owe coverage, under a theory of unjust enrichment or quantum meruit.
Jerry's Sport Center was a defendant in one of the nuisance suits that the NAACP and numerious municipalities brought against gun manufacturers, distributors and vendors a few years ago. Royal defended under a reservation of rights but later obtained a ruling that it had no duty to defend because the NAACP case did not allege or involve “bodily injury.” Consistent with its reservation of rights, Royal then sought to recoup the sums that it had paid in the interim to defend.
Royal's claim was accepted by the Court of Common Pleas, which found that an implied contract existed between the parties in light of the fact that the insured had accepted Royal’s defense pursuant to a reservation of rights letter that included an asserted right to recoupment of fees. On appeal, however, the Superior Court held that such an analysis undercut the focus of the duty to defend on the possibility of coverage as distinguished from such facts as might ultimately be adjudicated. The court also took note of the fact that it was Royal’s suggestion that the insured retain independent counsel as opposed to participating in a joint defense involving multiple defendants that would have resulted in substantially lower legal costs to the policyholder. Where the insurer had a contractual duty to defend and had obtained various benefits by exercising that right to defend, the Superior Court refused to find that an implied contractual right to reimbursement existed or that the insured was unjustly enriched by the defense that Royal had provided so as to entitle Royal to reimbursement of attorney’s fees under a theory of quantum meruit.
It is heartening that the Supreme Court has accepted Royal's appeal, although it faces an uncertain fate given the fractious composition of the court and closely divided way that high profile cases such as Baumhammer's and Madison Construction have been resolved in recent years.
3. Tanner v. Nationwide Indemnity, No. 07-0760 (TX)
And you thought that the Texas Supreme Court had emptied its insurance docket!
In this case, the court is being asked to decide whether accident victims can compel coverage for the insurer of a motorist who collided with them after driving over 100 mph in an effort to elude police. The insured (Gibbons) was charged with using his car as a deadly weapon but later jumped bail. His insurer (Nationwide) disclaimed coverage on the basis of an intentional acts exclusion which provides, in pertinent part, that the policy did not cover “willful acts the result of which the insured knows or ought to know will follow from his conduct.”
A decade ago, the Texas Supreme Court ruled in Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819 (Tex. 1997) that a liability insurers had no duty to provide coverage for emotional distress claims brought by a customer against a camera store that surreptitiously copied and circulated of “candid” photos. In Cowan, the court held that the insured's intentional acts were no “accident” as the resulting emotonal distress was the reasonable foreseeable result of these acts. The question in Tanner will be whether the same sort of analysis should apply to conduct that, while highly reckless, was not intended to cause injury and might not necessarily have resulted in injury.
The Supreme Court heard oral argument on October 19, 2008 (the briefs and and a video and audio transcript are on the court's web site). Press reports concerning the justices' questions have since prompted some newspapers to editorialize that the the court has gotten to friendly to the insurance industry (Lamar Homes, Frank's Casing???).
