Recently the Supreme Court of Virginia in Corriveau v. State Farm Mutual Auto Insurance Co., 836 S.E.2d 694 (Va. 2019) ruled that child abuse inflicted by a bus driver and a bus driver's aide were not covered by the victim's uninsured motorist coverage. The Court found that the tortious misconduct could have occurred anywhere and therefore it did not result specifically from the use of the bus for transportation purposes. The case involved the abuse of an autistic child whereby a school bus driver and the driver's aide inflicted physical injury on the autistic child. The child's mother reported the claim to her uninsured motorist insurer, State Farm. State Farm denied coverage on the ground that the injuries did not arise from the use of the bus itself. Ultimately, the Virginia Supreme Court found that the abused child was not injured by the use of the bus as a bus, but rather upon experiencing physical abuse by adults upon special needs children. That type of conduct was not intrinsically associated with the use of a motor vehicle and could have occurred anywhere. The court reached this result notwithstanding the fact that the bus was equipped with special harnesses to keep the children restrained. The Court noted that the harness could restrain a person anywhere, not just on a bus.
CHILD ABUSE IN SCHOOL BUS DOES NOT GIVE RISE TO UM CLAIM
PROPERTY INSURERS ARE NOT ALLOWED TO DEPRECIATE LABOR COSTS WHEN CALCULATING ACTUAL CASH VALUE IN MISSISSIPPI
The U.S. Court of Appeals for the 5th Circuit in Mitchell v. State Farm Fire and Cas. Co., 954 F.3d 700 (5th Cir. 2020), applying Mississippi law, held that State Farm's definition of actual cash value was ambiguous and therefore had to be interpreted in the homeowners' favor. The State Farm policy did not define actual cash value and the Court found that the term "actual cash value" by itself was ambiguous as a matter of law. Thus, labor costs were part of ACV.
MARYLAND ADOPTS PRO-RATA ALLOCATION ON A TIME ON RISK BASIS
In Rossello v. Zurich Am. Ins. Co., 468 Md. 92, 226 A.3d 444 (2020), the Maryland Supreme Court held that Maryland law did not permit "all sums" allocation of liability policies in continuous and progressive injury cases. The Court held that for continuous and progressive injury cases, allocation would be made on a pro-rata basis, by time on the risk, among all insureds and insured periods that were triggered by the injury. Moreover, the insured was responsible for liability allocated to periods during which the insured was uninsured or had insurance that excluded coverage, provided that the liability coverage was available in the marketplace.
CLAIM HANDLERS OWE DIRECT DUTY UNDER TEXAS LAW TO THE INSURER
In an extensive ruling, a Texas Court of Appeals in Kenyon v. Elephant Ins. Co., LLC, No. 04-18-00131-CV, 2020 WL 1540392 (Tex. App. Apr. 1, 2020), held, on first impression, that an insurer's claim handlers owed the insured a direct duty to prevent physical harm to a spouse at the scene of an accident. Under the facts of the case, the insured, Lorraine Kenyon, was involved in an automobile accident in Texas. She called her insurance company, Elephant, to report the collision. She also called her husband to come to the scene of the accident. When the husband arrived at the scene, his wife was speaking with the Elephant adjuster. The adjuster advised the wife to take some photos of the damaged vehicle in order to assist in adjusting the claim. The wife, in turn, told her husband to take the photographs. While taking the photographs, the husband was struck by another vehicle and was killed. Thereafter, the wife sued Elephant for numerous causes of action in tort, including negligence gross negligence, negligent undertaking, and negligent training. These claims were dismissed by the trial court, finding that the insurance company owed the Kenyons no obligation to protect them from bad drivers at an accident scene. The Court of Appeals reversed.
DEPRECIATING LABOR COSTS IN DETERMINING ACV IN NORTH CAROLINA
The North Carolina Supreme Court in Accardi v. Hartford Underwriters Ins. Co., 373 N.C. 292, 838 S.E.2d 454 (2020), held that a property insurer was allowed to depreciate the cost of labor in calculating ACV under a policy. In this case, a storm caused damage to the roof of the insured's home, siding, and garage. Under the homeowner's policy, the insurer was obligated to initially pay ACV for the loss, and then once the property was repaired or replaced, the policy obligated the insurer to pay the RCV. The policy contained a separate endorsement limited to roof damage, which was silent on the issue of labor costs. The insurance company argued that its policy language nevertheless unambiguously allowed it to depreciate both the cost of materials and the cost of labor. The insured argued that the insurer was required to separately calculate the materials and labor costs of repairing or replacing the damaged property and depreciate only the material costs and not the labor costs.
TEXAS SUPREME COURT REJECTS THE USE OF EXTRINSIC EVIDENCE IN DECIDING THE DUTY TO DEFEND BY UPHOLDING A STRICT EIGHT-CORNERS RULE
Recently, the U.S. 5th Circuit Court of Appeals certified the following question to the Texas Supreme Court: "Is the policy-language exception to the eight-corners rule articulated in B. Hall Contracting, Inc. v. Evanston Ins. Co., 447 F.Supp.2d 634 (N.D. Tex. 2006), a permissible exception under Texas law?" In the B. Hall case, the eight-corners rule did not prohibit consideration of extrinsic evidence under the eight-corners rule unless the insurance policies in question explicitly required the insurer to defend "all actions against its insured no matter if the allegations of the suit are groundless, false, or fraudulent." See, B. Hall Contracting, Inc. v. Evanston Ins. Co., 447 F.Supp.2d 634, 645 (N.D. Tex. 2006).
RETROACTIVE PAYMENT CURES FAILURE TO DEFEND
The Wisconsin Supreme Court in Choinsky v. Employers Insurance Co. of Wausau, 390 Wis. 2d 209, 938 N.W.2d 548 (2020), held that an insurance company's retroactive payment of its insured's defense costs satisfied the insurer's duty to defend, thereby insulating the insurer from liability.
DETERMINING AUTOMOBILE ACV
Recently the 5th Circuit Court of Appeals in Singleton v. Elephant Insurance Co., 953 F.3d 334 (5th Cir. 2020), held that an insurance policy provision which limited the insurer's liability for a totaled car to "actual cash value" of the car at the time of the accident did not include a requirement to pay taxes and fees. According to the Court, ACV was the equivalent to fair market value which, under Texas law, was the price a willing buyer would pay and a willing seller would accept for the vehicle. While the taxes might be considered by negotiating parties when agreeing to a price, that practice did not require that taxes be added to the price when calculating fair market value.
UNDER MINNESOTA LAW, THE 8TH CIRCUIT FINDS THAT EXCESS INSURERS THAT DID NOT PARTICIPATE IN THE INSURED'S DEFENSE WERE ALLOWED TO SEEK ALLOCATION OF THE JURY' VERDICT BETWEEN COVERED AND NON-COVERED CLAIMS
In RSUI Indemnity Co. v. New Horizon Kids Quest, Inc., 933 F.3d 960 (8th Cir. 2019), applying Minnesota law, the 8th Circuit held that when an excess insurer had not participated in the insured's defense, that insurer was allowed the opportunity to allocate the jury's verdict between covered and noncovered claims in a subsequent coverage action.
MEDICAL NECESSITY IS CONSIDERED BY WASHINGTON SUPREME COURT
In Strauss v. Premera Blue Cross, 449 P.3d 640 (Wash. 2019), the Washington Supreme Court considered the concept of medical necessity.
In Strauss, the insured plaintiff was diagnosed with prostate cancer. The insured's doctor recommended proton beam therapy rather than traditional radiation therapy. The insured's doctor believed that proton beam therapy had fewer side effects than the alternative accepted treatment. Premera Blue Cross denied the request for medical authorization for the PBT on the ground that PBT was not "medically necessary." The policy defined "medically necessary" as being "[i]n accordance with generally accepted standards of medical practice . . . and not more costly than the alternative [treatment] . . . at least as likely to produce equivalent therapeutic or diagnostic results."
