Steven Plitt, Expert Witness Steven Plitt, Expert Witness
Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

Phoenix Insurance Law Blog

A Pedestrian's Being Struck By A Motor Vehicle Did Not Give Rise To "Occupancy" During The Sequence In Which The Pedestrian Was In Physical Contact With The Vehicle

In Hahn v. GEICO Choice Insurance Co., 420 P.3d 1160 (Alaska 2018), the Alaska Supreme Court held that UIM benefits did not extend to a person falling on an insured vehicle after it struck him. In this case, the insured was sitting on his motorcycle while stopped at a traffic signal. The tortfeasor's vehicle struck the insured's motorcycle, throwing the insured backward onto the tortfeasor's vehicle's hood, windshield, and roof. The motorcyclist then landed on the pavement. Focusing on the "upon" language in the GEICO UIM coverage, the motorcyclist attempted to argue that he was an occupant of the tortfeasor's vehicle which was insured by GEICO. The Alaska Supreme Court found this argument to be unreasonable. The Court found that the policy insured covered persons who were actually occupying the vehicle, and not persons who happened to be "upon" the insured vehicle. According to the Court, the concept of "occupying" meant "in, upon, getting into, or getting out of" in accordance with the policy's language. When the phrase was read in context rather than in isolation, the term "upon" was a subset of "occupying." The Court found that no reasonable person would come to the conclusion that the fortuity of where a person's body bounced enroute to being thrown to the pavement allowed for UIM coverage attachment.

Supreme Court Finds That a Policyholder's Arbitration Agreement With tts Insurer Does Not Apply to Disputes Between the Policyholder and the Insurance Agent

In Jody James Farms, J.V. v. Altman Group, Inc., 547 S.W.3d 624 (Tex. 2018), the insurance agent failed to timely submit a hail and rain claim on behalf of the insured to the insurance company. The agent was then sued by the policyholder, alleging breach of fiduciary duty and deceptive trade practices. The insurance agency moved to compel arbitration, which was granted by the Texas District Court. The case then proceeded through arbitration and resulted in a panel finding in favor of the agency. The trial court then affirmed the arbitration award. However, the Texas Supreme Court reversed the trial court's ruling.

Binding the Insurer to Relevant Facts Through a Consent Settlement

Recently the Missouri Supreme Court in Allen v. Bryers, 512 S.W.3d 17 (Mo. 2016), as modified (Apr. 4, 2017), reh'g denied (Apr. 4, 2017), cert. denied sub nom. Atain Specialty Ins. Co. v. Allen, 138 S. Ct. 212, 199 L. Ed. 2d 118 (2017) held that an insurance company's wrongful refusal to defend its insured bound the insurer to the findings made in the underlying tort action. The court found that when the insurer improperly refused a defense to its insured, the insured was entitled to enter into a consent judgment which bound the insurer to findings of fact that were made in the underlying tort action. In this case, the insured failed to pursue a declaratory judgment action, failed to appeal the denial of a motion to intervene in the tort action, and subsequently made an untimely motion to intervene. However, the court did find that the insurance company was not liable for damages in excess of the policy limits where there had been no finding that the insurer engaged in bad faith when it denied coverage.

Settling into Bad Faith

Under Florida Insurance Code §624.155, in order to bring a bad faith action there must be a favorable determination of liability against the insurer as a prerequisite to maintaining a bad faith action. In Barton v. Capitol Preferred Ins. Co., Inc., 208 So. 3d 239 (Fla. Dist. Ct. App. 2016), a property insurer settled the insured's breach of contract claim relating to sinkhole damages for an amount less than the available policy limits. The insured alleged that the insurance company had failed to perform a complete, statutorily-compliant sinkhole/subsidence investigation prior to it summarily denying the claim for coverage. After the lawsuit was filed, the insurer proposed settling the claim for $65,000 in order to dismiss the breach of contract action. After the dismissal of the breach of contract action, the insureds brought a bad faith lawsuit. The insurance company moved for summary judgment on the bad faith claim, arguing that under the statute, the insured had failed to prove that the underlying breach of contract claim had been resolved in favor of the insured and that there had been a determination of the actual extent of the loss. Summary judgment was granted in favor of the insured. On appeal, however, the summary judgment grant was reversed. The Florida Court of Appeals found that while the insured may obtain a determination of liability and a determination of the full extent of damages through trial, there were other acceptable means for establishing the predicate for a bad faith lawsuit, including settlement, arbitration results, and stipulation. The court then found that the insurer's payment of $65,000 was a favorable resolution of the claim and the fact that the claim was settled for less than the policy limits or the amount initially demanded by the insured, was irrelevant. The court found that §624.155 did not condition the right to bring a bad faith lawsuit on the insured's recovery of the claimed policy limits or an amount that was greater than the insureds had demanded for the resolution of the claim.

Failure to Read Insurance Policy Not Required in Deceptive Business Practice Action Against Agent

Generally, insureds are required to read their insurance policies in Texas. However, where the nature of the lawsuit brought against the agent or broker involves affirmative misrepresentations under Texas' Deceptive Business Practices statute, the insured's failure to read the insurance policy is not fatal to proceeding with that type of claim under Texas law.

Can Issuing a Supplemental ROR Letter Cure the Insurer's Failure to Seek Reimbursement in the Original ROR Letter?

In James River Insurance Co. v. Medolac Laboratories, 290 F.Supp.3d 956 (C.D. Cal. 2018) the court held that a liability insurance company's failure to seek reimbursement of defense costs in an initial reservation of rights letter did not preclude the insurance company from later reserving the right to do so from the date of a supplemental reservation of rights letter. In so holding, the court rejected the insured's contention that the insurance company had waived its right to reimbursement or was estopped from asserting the right to reimbursement of attorney's fees which were incurred after the date of the supplemental reservation of rights letter (where the insurer first reserved its right to seek reimbursement). Regarding waiver, the court held there was no evidence that the insurer's failure to assert the right in its first ROR was a voluntary relinquishment of a known right. Regarding the estoppel claim, the court found that the insured's admission that she had acted more proactively in monitoring her insurer-appointed attorney after receiving the supplemental ROR precluded a finding of detrimental reliance and therefore the necessary element of the estoppel claim was missing. 

Actual Cash Value Does Not Permit Depreciation of Labor Costs in Mississippi

The Federal District Court in Mississippi held in Titan Exterior, Inc. v. Certain Underwriters at Lloyd, London, 2018 WL 1057139, _____ F.Supp.3d _____ (No. Dist. Miss. February 26, 2018) that the concept of ACV did not allow for depreciation of labor costs. In this case, the insurer calculated an ACV payment by utilizing the replacement cost value less depreciation methodology. The insurer first determined the cost to replace the damaged property and then subtracted depreciation to determine its actual cash value. The policy did not define "actual cash value" or "depreciation." The insurer argued that the plain meaning of the term "value" included labor depreciation in as much as the concept of value meant the value of the entire property, including both materials and labor when calculating depreciation. The court rejected this argument, finding that the policy was ambiguous because some states had approved labor depreciation while other states rejected labor depreciation. Finding both positions reasonable, the court held that ACV, when defined as "replacement cost value less depreciation," and when "depreciation" was not further defined in the policy, an ambiguity existed which had to be construed in favor of the insured. 

Florida Requires UIM Coverage Limits to Mirror the Policy's Liability Coverage

In Amica Mutual Insurance Co. v. Willis, 235 So.3d 1041 (Fl. App. 2d Dist. 2018) the Florida Court of Appeals held that the scope of UIM coverage must mirror the policy's liability coverage. In so finding, the Court of Appeals struck down a golf cart exclusion in the automobile policy's UIM section because there was no reciprocal exclusion in the policy's liability coverage.

Oregon Court Finds That Insurer Bad Faith Is Not Elder Abuse

The Oregon Supreme Court, answering a certified question by the 9th Circuit Court of Appeals, held that bad faith delay or denial of payment of an insurance claim did not state a claim under Oregon's Financial Elder Abuse Statute. In Bates v. Bankers Life and Casualty Co., 362 Or. 337, 408 P.3d 1081 (Or. 2018), the Oregon Supreme Court held that an insurance company's alleged bad faith did not simultaneously constitute a violation of Oregon's elder abuse statute. In this case, the plaintiffs were senior citizens who had purchased long-term healthcare insurance policies issued by Bankers Life. The seniors sued Bankers, alleging that Bankers had developed onerous procedures to delay and deny insurance claims that were submitted by seniors. The seniors brought an elder abuse claim against Bankers under ORS §124.110. However, the Federal District Court dismissed the claim, finding that the Elder Abuse Statute only applied in "bailment or trust scenarios expressly referenced in the statutory language." The dismissal was appealed to the 9th Circuit Court of Appeals. In turn, the 9th Circuit certified a question to the Oregon Supreme Court on the issue.

Breach of Contract Exclusion Trumps Advertising and Personal Injury Coverage According to a California Court

In James River Insurance Co. v. Medolac Laboratories, 290 F.Supp.3d 956 (C.D. Cal. 2018) the court held that a CGL policy's breach of contract exclusion precluded personal and advertising injury coverage in a situation where the insured promised not to commit any personal and advertising injury offenses after being terminated from her prior relationship with the claimant.

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