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Phoenix Insurance Law Blog

Court Finds that an Earth Movement Exclusion Included Landslides

In Parker v. Safeco Insurance Co. of America, 2016 WL 3911544 (Mont. July 19, 2016) the issue was whether damage to a vacation cabin from a large bounder that fell down a hillside and into the cabin structure was covered under the Safeco policy. Safeco's policy contained an earth movement exclusion in which "earth movement" was defined as the "shrinking, rising, shifting, expanding, or contracting of earth." Examples given in the policy included earthquake, landslide, mudflow, mudslide, sinkhole, subsidence and erosion. The Montana Supreme Court held that the earth movement exclusion was not limited to damages caused by soil movement and it was broad enough to include damage from a falling boulder. There was no basis to separate rocks from soil for purposes of application of the exclusion. The policy included landslides as an example of earth movement without mentioning soil. The court found that a common understanding of the term "landslide" included a large boulder that came down the hill and onto plaintiff's cabin.

What's in a Label? Coverage for advertising injury?

The 2nd Circuit recently found that the sale of counterfeit branded goods was not covered as advertising injury under a commercial general liability policy. In USF&G v. Fendi Adele S.R.L., 823 F.3d 146 (2nd Cir. 2016), applying New York law, upheld the district court's ruling that the commercial general liability policy issued by USF&G did not cover sales of counterfeit goods because the sale of counterfeit goods did not qualify as an advertising injury. The court found that the sale and resulting injury of counterfeit goods was not, itself, an advertisement of the counterfeit goods. The court drew a distinction between the act of placing a counterfeit branded label on a handbag and the act of actually soliciting customers through advertisements.

Indiana Supreme Court Finds That UIM Suit Limitation Clause Was Ambiguous

In State Farm Mutual Auto. Ins. Co. v. Jakubowicz, 56 N.E.3d 617 (Ind. 2016) the Supreme Court of Indiana struck down State Farm's suit limitation clause in its UIM policy which imposed a three-year deadline for pursuing UIM benefits because it conflicted with the policy's requirement to exhaust the tortfeasor's liability coverage which created an ambiguity.

The 11th Circuit Court Of Appeals, Interpreting Georgia Law, Recently Enforced A UIM Excess Policy Exhaustion Requirement In Disallowing A UIM Claim

The 11th Circuit held in Coker v. American Guarantee and Liability Insurance Co., 825 F.3d 1287 (11th Cir. 2016), interpreting Georgia law, that Georgia's UIM statute did not transform excess UIM policies into primary UIM policies.

The court found that Georgia's insurance laws required every auto policy to provide UM limits equal to the liability limits of the policy unless the insured expressly rejected such coverage in writing. In this case, the insurers failed to obtain waivers of UM coverage and therefore were required to afford excess UM (including UIM) coverage up to their respective limits.

Wisconsin Supreme Court Weighs In On The "Made Whole" Doctrine In Subrogation Cases

The Wisconsin Supreme Court in Dufour v. Progressive Classic Insurance Co., 881 N.W.2d 678 (Wis. 2016) held that insurance companies may retain funds obtained as subrogation for payments that the insurer had previously made, even though the insured may not have been fully compensated for the loss. The court found that it would look to the specific facts and equities in dictating whether the "made whole" doctrine would apply. Under the "made whole" doctrine, insurers are typically prevented from retaining funds received for its subrogation claims in cases where the insured has not been made whole. The court found that the "made whole" doctrine is an equitable doctrine and only applied when the equities favor the policyholder. In cases where there were reasonable reasons why the equities favored the insurance company, the doctrine would not be applied.

Excess Other Insurance Clause Struck Down By 5th Circuit Court Of Appeals

The U.S. Court of Appeals for the 5th Circuit recently held, interpreting Mississippi law, that a policy's excess other insurance clause in a policy issued to an alumni association was mutually repugnant with the other insurance clause in the University's policy.

In Southern Insurance Co. v. Affiliated Insurance Co., 2016 WL 3947761 (5th Cir. July 21, 2016) interpreting Mississippi law, Southern Insurance Company insured the University of Southern Mississippi alumni association with commercial property coverage. A house that the association leased from the University was covered by the policy. Under the lease with the University, the University was obligated to maintain and repair the house while the association was obligated to pay for repairs exceeding the normal scope of repairs that took place to other buildings. The University was included as an additional insured under the policy. At the same time the University had a policy with Affiliated Insurance Company that covered multiple university buildings, including the house.

Utah Court Of Appeals Rules That Homeowner Policy Did Not Cover Water Infiltration Caused By Storm When The Water Entered Into The Property Through A Partially Completed Roof

In Poulsen v. Farmers Insurance Exchange, 26 UT App. 170 (2016) the court found that Farmers' homeowners policy did not provide coverage for water intrusion from a wind storm when the water entered into the house through a partially completed roof. The roof contained only roofing components that were in place at the time of the storm and was not a roof.

In this case the homeowners were in the process of replacing the roof shingles on their house. They had removed the shingles and the black felt tar that lay underneath the shingles, revealing the plywood deck. A new ice and water shield (IWS) was placed over the plywood. However, before the job was completed, i.e., there were no new shingles, there was a sudden storm bringing torrential rains. The storm winds ripped the IWS and plywood, allowing water to enter and damage the house.

Covenant Judgment Settlements In Washington Do Not Automatically Constitute A Waiver Of Attorney-Client Privilege And Work Product Protection When The Insured's Claims For Bad Faith Against The Insurer Are Assigned To The Adverse Party

In Steel v. Philadelphia Indemnity Co., 381 P.3d 111 (2016), a daycare center employee was convicted of child rape and child molestation while working at a daycare center. The parents brought a negligence action against the center. The daycare center had $1 million in coverage. Plaintiffs offered to settle for $4 million, which was rejected by Philadelphia. As trial approached, the insureds entered into a $25 million covenant judgment settlement with the plaintiffs. As part of the settlement the insureds received a covenant not to execute and the plaintiffs received an assignment of the insured's bad faith claims.

Timely Offering Policy Limits Does Not Immunize Insurer From Bad Faith Exposure

The California Supreme Court in Barickman v. Mercury Casualty Co., 2 Cal. App. 5th 508 (2nd Dist. 2016) held that the insurance carrier was liable for bad faith failure to settle, notwithstanding the fact that the carrier offered its policy limits to the claimants in a timely manner in exchange for a full release of civil liability. The court found that the insurer's failure to do "all within its power to effect a settlement" could constitute bad faith, notwithstanding the fact that the insurance company offered its policy limits to the injured claimants in exchange for a full release of liability. The insurance company had refused to consent to additional language in the release designed to preserve the claimant's rights to receive criminal restitution from the insured tortfeasor.

7th Circuit Finds that Extrinsic Evidence is Admissible in a Declaratory Judgment Action to Determine the Carrier's Duty to Defend

In Landmark American Insurance Co. v. Hilger, 838 F.3d 821 (7th Cir. 2016) the U.S. Circuit Court of Appeals for the 7th Circuit found that the insurance company was allowed to offer evidence outside the underlying court complaints and that the defendant did not render the professional services in question as an independent contractor. In this case the insured was sued by two credit unions in two different states (Michigan and Tennessee) for allegedly joining with a life insurance agent and a life insurance broker to persuade the credit unions to fund loans based upon life insurance policies with an overstated value that was used as collateral. When the insured and the insurance agent were sued, they tendered their defense to Landmark American under the agent's and the broker's liability policy. The policy provided coverage for claims arising out of any negligent act, error, or omission committed in the agent's rendering of professional services as an agent or broker. However, the tenders were denied.

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