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Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

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INSURANCE SUBBROKER HELD TO NOT OWE DUTY TO WARN OF AN INSURANCE COMPANY FRAUD DURING THE PLACEMENT OF INSURANCE

Under Illinois statutory and common law an insurance broker owes a duty only to the named insured who has purchased insurance from the broker. Recently, the question arose under Illinois law regarding whether a sub broker, who played an administrative role in the placement of a large and complex risk involving a chain of brokers and subcontractors, but did not place any insurance on the behalf of the named insured or received commissions from the placement owed any type of duty to warn the named insured of potential "red flags" suggesting that the insurance company under which the program was placed was untrustworthy and that its polices issued might be worthless.

INDIANA COURT OF APPEALS HOLDS THAT POLICY SIR EXHAUSTION REQUIREMENT APPLIES TO ADDITIONAL INSURED AND NOT JUST THE NAMED INSURED

The Indiana Court of Appeals in Walsh Construction Co. v. Zurich American Insurance Co. 2017 WL 1151033 (IN Ct App March 28th 2017) acknowledged that under Indiana law in situations that arise between the insurer and the named insured, the insurer's responsibility is to defend and indemnify the named insured only after the SIR has been satisfied and exhausted. However, the question of whether a SIR endorsement applied only to the insurers relationship to the named insured or whether it also applied to an additional insured was resolved in the Walsh case as a question of first impression.

KENTUCKY COURT FINDS THAT OWNED-BUT-NOT-SCHEDULED POLICY EXCLUSION FROM UIM COVERAGE WAS ENFORCEABLE

Kentucky Supreme Court held in Philadelphia Indem. Ins. Co., Inc. v. Tryon, 502 S.W.3d 585 (Ky. 2016) that UIM exclusion pertaining to owned-but-not-scheduled automobiles were enforceable under Kentucky law provided that the policy expressly and plainly apprised the insured of the exclusion. According to the Supreme Court, Kentucky's public policy did not bar reasonable UIM exclusion provisions. Under Kentucky law, UM coverage was required by statute but UIM coverage was not. The Kentucky Supreme Court had previously ruled that a policy exclusion from the UIM definition of a vehicle available for the insured's regular use was enforceable and the fact that UIM benefits were non-mandatory by nature under Kentucky law, the Kentucky Supreme Court found that Philadelphia Indemnity's policy encompasses UIM exclusion provisions like the owned-but-not-scheduled exclusion.

THE CALIFORNIA COURT OF APPEALS FINDS THAT A 10:1 RATIO OF COMPENSATORY DAMAGES TO PUNITIVE DAMAGES IS APPROPRIATE IN AN INSURANCE BAD FAITH CASE AND THAT THE RATIO SHOULD BE NO HIGHER

In Nickerson v. Stonebridge Life Ins. Co., 5 Cal.App.5th 1, 209 Cal.Rptr.3d 690 (2nd Dist. 2016), the California Court of Appeals recently reduced a $19M punitive damages award in an insurance bad faith case to $475,000 applying a 10:1 ratio of compensatory damages to punitive damages.

CALIFORNIA COURT OF APPEALS HOLDS THAT AUTOMOBILE POLICY'S COLLISION COVERAGE DID NOT REQUIRE THE INSURANCE COMPANY TO PAY FOR THE CAR'S LOST MARKET VALUE

In Baldwin v. AAA Northern California, Nevada & Utah, 204 Cal.Rptr 3d 433 (1st Dist. 2016), the Court held that an automobile insurer had no obligation to pay the "pre-accident value" of the insured vehicle under the policy's collision coverage provision which gave the insurer the option to repair the vehicle and which expressly excluded diminution in value damages. The Court held that the insurer did not breach the policy's implied covenant of good faith and fair dealing by not compensating its insured for the diminished value of the vehicle.

THE IDAHO SUPREME COURT REFUSES TO ENFORCE UIM POLICY ANTI-STACKING PROVISIONS

The Idaho Supreme Court in Gearhart v. Mutual of Enumclaw Ins. Co., 160 Idaho 666, 378 P.3d 454 (Idaho 2016), found that a UIM anti-stacking provision was ambiguous and, therefore, unenforceable. In Gearhart, the Court considered a UIM policy's anti-stacking clause which stated that the maximum limit of liability under all of the policies that were issued was the highest applicable limit under any one policy. However, the Court found this clause to be ambiguous and, therefore, did not preclude a passenger from recovering the total cumulative UIM benefits under each policy issued to the insured's parents. The majority opinion concluded that the anti-stacking clause in question was ambiguous because it could be construed to "mean that one aggregates all of the applicable policy limits and then the total of the limits constitutes the highest limit of any one policy." The dissent characterized the majority's conclusion as "nonsensical." The dissent would have found the anti-stacking clause to be neither ambiguous nor complex.

THE ELEVENTH CIRCUIT COURT OF APPEALS CONSIDERS EXHAUSTION REQUIREMENT IN EXCESS UM LIABILITY POLICIES UNDER GEORGIA LAW. THE ELEVENTH CIRCUIT UPHELD THE POLICY EXHAUSTION REQUIREMENTS

Recently, the Eleventh Circuit Court of Appeals in Coker v. American Guar. & Liab. Ins. Co., 825 F.3d 1287 (11th Cir. 2016) (applying Georgia law) held that UM policy exhaustion requirements were enforceable under Georgia law. The Court found that Georgia's UM statute did not transform excess policies into primary policies.

IN THE STATE OF WASHINGTON INSUREDS DO NOT WAIVE ATTORNEY-CLIENT AND WORK-PRODUCT PRIVILEGES WHEN THEY SEEK THE COURT'S APPROVAL OF A COVENANT JUDGMENT SETTLEMENT WHICH ASSIGNS TO THE ADVERSE PARTY THE INSURED'S BAD FAITH CLAIM AGAINST THE INSURER

In Steel v. Philadelphia Indemnity Ins. Co., 195 Wash.App. 811, 381 P.3d 111 (Wash. App. 2016), the Washington Court of Appeals held that insurance companies do not waive attorney-client privilege or work product protection when their insured enters into a covenant judgment settlement that is subject to judicial determination as to reasonableness. In Steel, a day care center's employee was convicted of child rape and child molestation of two children at the day care center. At the time, the defendants were insured under a Philadelphia Indemnity policy providing $1M in coverage. Plaintiffs offered to settle their claims for $4M which was rejected by Philadelphia. Shortly before trial was scheduled to begin, the insureds entered into a $25M covenant judgment settlement with the plaintiffs, receiving a covenant not to execute in return, for an assignment of the insureds' bad faith claims against Philadelphia.

INSURANCE COMPANIES HAGGLING OVER RELEASE LANGUAGE CAN RESULT IN BAD FAITH LIABILITY

In Barickman v. Mercury Cas. Co., 2 Cal.App.5th 508, 206 Cal.Rptr.3d 699 (2d Dist. 2016), an insurance company's refusal to consent to additional release language which was designed to preserve the claimant's rights to receive criminal restitution from the insured tortfeasor caused the case not to settle and, as a result, it was found that the insurance company breached the implied covenant of good faith and fair dealing by not doing all that it could do within its power to effectuate the settlement.

THE WISCONSIN SUPREME COURT, IN A SPLIT DECISION, REAFFIRMED THE "FOUR-CORNERS" RULE GOVERNING A LIABILITY INSURANCE COMPANY'S DUTY TO DEFEND

The High Court confirmed that under Wisconsin Law there were no exceptions to the rule that extrinsic evidence cannot create a duty to defend.

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