Recently, in a fire loss case, the Wisconsin Supreme Court revisited the question of the number of occurrences. In Secura Insurance v. Lyme St. Croix Forest Company, LLC, 918 N.W.2d 885 (Wis. 2018), the issue of multiple occurrences arose. Under the facts of the case, a fire started in a piece of logging equipment owned by the insured. The flames from the fire spread from dry grass to a pile of recently felled jack pine and then into the surrounding forest. Eventually, the fire had burned thousands of acres over the course of three days. There was both real and personal property loss to many individuals and businesses. Secura Insurance, the insured's liability insurance company, brought a declaratory judgment action to establish that the fire involved a single occurrence subject to the policy's $500,000 per occurrence limit, as opposed to the policy's $2 million aggregate limit. The trial court found against Secura. The trial court found that each property owner's claim qualified as a separate occurrence and, therefore, Secura's total liability under the policy was the aggregate limit. The intermediate appellate court agreed with the trial court. However, the Wisconsin Supreme Court reversed.
WISCONSIN SUPREME COURT WEIGHS IN ON QUESTION OF NUMBER OF OCCURRENCES
ADDITIONAL INSURED STATUS IS LIMITED BY RHODE ISLAND SUPREME COURT
In Bacon Construction Co., Inc. v. Arbella Protection Insurance Company, Inc., 208 A.3d 595 (R.I. 2019), the Rhode Island Supreme Court enforced the terms of an endorsement which limited additional insured status to liability events that were caused partially by the acts or omissions of the named insured or those acting on behalf of the named insured. In this case, a subcontractor's liability policy contained an endorsement which listed the construction project's general contractor as an additional insured, but only with respect to liability for injury or damage caused partially by the acts or omissions of the named insured. The underlying case involved an employee's lawsuit against the general contractor only for negligence. Because the underlying complaint only alleged the general contractor's negligence, the Court enforced the limiting language of the additional insured endorsement when finding that the general contractor was not an additional insured because the named insured's liability was not involved at least partially in the underlying tort case.
INDIANA COURT FINDS ONE OCCURRENCE
In a recent case, the Indiana Court of Appeals held that while a spill of hazardous materials resulted from two distinct regulatory violations, the event was a single occurrence for purposes of insurance. In Auto-Owners Ins. Co. v. Long, 112 N.E.3d 1165 (Ind. Ct. App. 2018), transfer denied, 124 N.E.3d 61 (Ind. 2019., a shipping company which was shipping a hazardous substance failed to properly label and package a hazardous substance that was being shipped. The hazardous substance spilled and injured a postal worker. The Court found only one occurrence, notwithstanding the two regulatory violations (labeling and packaging). Using a cause analysis for determining the number of occurrences, the Court found that while the insured failed both to properly label and package the hazardous substance did not multiply the number of occurrences. Both regulatory violations resulted in only one accident that resulted from the regulatory violations. Although the insured did two things wrong, both in shipping and packaging the hazardous material, the wrongdoing resulted in only one spill, which was the single proximate, uninterrupted, and continuing cause that resulted in the injury to the postal worker.
ADDITIONAL INSURED STATUS IS LIMITED BY RHODE ISLAND SUPREME COURT
In Bacon Construction Co., Inc. v. Arbella Protection Insurance Company, Inc., 208 A.3d 595 (R.I. 2019), the Rhode Island Supreme Court enforced the terms of an endorsement which limited additional insured status to liability events that were caused partially by the acts or omissions of the named insured or those acting on behalf of the named insured. In this case, a subcontractor's liability policy contained an endorsement which listed the construction project's general contractor as an additional insured, but only with respect to liability for injury or damage caused partially by the acts or omissions of the named insured. The underlying case involved an employee's lawsuit against the general contractor only for negligence. Because the underlying complaint only alleged the general contractor's negligence, the Court enforced the limiting language of the additional insured endorsement when finding that the general contractor was not an additional insured because the named insured's liability was not involved at least partially in the underlying tort case.
UNDER ALABAMA LAW, INSURANCE AGENTS AND BROKERS DO NOT OWE A DUTY TO THEIR CUSTOMER TO ADVISE REGARDING THE ADEQUACY OF THE CUSTOMER'S INSURANCE COVERAGE
In Somnus Mattress Corp. v. Hilson, No. 1170250, 2018 WL 6715777 (Ala. Dec. 21, 2018) the Court found that the insurance agent and broker in that case had no duty to advise the insured of the adequacy of its insurance coverage. The allegation that the agent made statements to the insured that the insured did not need business income coverage was nothing more than an opinion that could be accepted or rejected by the insured. Of significance to the Court was the fact that the insured had had a prior loss which involved a loss of business income and the fact that the insured knew its own finances and needs. Under the totality of the circumstances, the Court found that the insured did not justifiably rely upon the agent's opinion regarding the need for business income coverage, even if the Court were to have interpreted Missouri law as imposing a duty on the agent to advise the insured about the adequacy of coverage that it was purchasing.
UNDER ILLINOIS LAW, SUIT AGAINST AGENT FOR NEGLIGENT FAILURE TO PROCURE COVERAGE BEGAN TO RUN WHEN THE INSURED RECEIVED THE INSURANCE POLICY
In a split decision, the Illinois Supreme Court in Am. Family Mut. Ins. Co. v. Krop, 2018 IL 122556, 120 N.E.3d 982, reh'g denied (Nov. 26, 2018) held that in a negligent failure to procure lawsuit against an insurance agent, the applicable statute of limitations began to run under Illinois law when the insureds received the policy rather than when the insurance company denied coverage. In so holding, the Supreme Court held that the suit against the agent sounded in negligence, which was a tort claim arising out of a contractual relationship. The contract was breached when the agent procured a policy that did not provide the requested coverage. The Court found that the discovery rule was inapplicable because the insureds had an obligation to read and understand their own policies. In the decision, the Court emphasized that requiring customers to read their insurance policies was reasonable because customers know the coverage that they want. Such a rule also incentivized customers to act in good faith. On the other hand, the Court noted that a contrary rule would allow customers to maintain defective policies for many years and assert the defect after potential evidence supporting the insurer may have been lost.
SOUTH CAROLINA SUPREME COURT INVALIDATES PIP SETOFFS
In Cothran v. State Farm Mutual Auto Insurance Co., 2019 WL 3683591 (S.C. 8/2/19) the Colorado Supreme Court invalidated a PIP provision in State Farm's policy which attempted to coordinate its benefit with workers compensation benefits. The Court held that South Carolina's PIP statute prohibited set-offs, and therefore the clause was void. The Court found that the language of South Carolina's Section 38-77-144 was intended to prevent insurance companies from avoiding payment of PIP benefits by directing their insureds to other sources of recovery, such as workers compensation insurance.
ILLINOIS COURT WEIGHS IN ON MATCHING ISSUE FOR PURPOSES OF APPLYING PROPERTY DAMAGE COVERAGE
In Windridge of Naperville Condo Ass'n v. Philadelphia Indemnity Ins. Co., __ F.3d __,2019 WL 3720876 (7th Cir. 8/7/19), a condominium association sought replacement cost property coverage for a direct physical loss to its "buildings or structures" which included complete replacement of all building siding even though only one side of the building was damaged. In this case a storm had physically damaged the siding on the south and west sides of the condominium buildings. Although the insurer paid for that physical damage, the insurer refused to pay for additional costs to replace the siding on the building's north and east sides. Matching siding was no longer available and, in order to return the buildings to their pre-damage condition, it was necessary to replace both the damaged and undamaged siding. In reaching its decision, the Court noted that the policy provided coverage for direct physical loss to covered property which was defined as buildings or structures. The Court found that the language was unclear because the unit of covered property to consider under the policy (each panel of siding vs. each side vs. the buildings as a whole) was ambiguous as applied to the facts. Therefore, applying Illinois law, the7th Circuit applied the interpretation that led to coverage. Favoring coverage, the Court determined that "covered property" in the policy referred to the buildings as a whole as opposed to a section of the buildings. In doing so, the Court rejected the insurance company's argument that "the direct physical loss" provisions of the policy required only the damaged siding to be replaced. While the insurer's position had some supporting case law, the Court determined that the insurer's coverage position was less reasonable because the association would not be made whole, nor return to its pre-storm status, if the insurer replaced only some portions of the siding. The Court noted that if a minor section, i.e., a shingle of the building, were damaged, the insurer could pay the insured for the building's minor decrease in value to make the insured whole again. However, by contrast, the decrease in value would be significant if a building were left with a zebra-striped siding situation. In the latter situation, the insured's company would likely choose to pay to replace the siding rather than compensate the building owner for the reduction in value of the building.
ATTORNEYS FEES AWARDED TO A PREVAILING PARTY WERE DETERMINED TO NOT BE SUPPLEMENTAL PAYMENTS UNDER A LIABILITY POLICY ACCORDING TO A MASSACHUSETTS APPELLATE COURT
In Styller v. National Fire & Marine Ins. Co., 95 Mass. App. Ct. 538, 128 N.E.3d 612 (2019) the Massachusetts Courts of Appeals held that a prevailing party's attorneys' fees did not constitute "costs taxed" against the insured within the meaning of the liability policy's supplemental payment provision. The Court held that attorneys fees were a separate category of expense from costs when used in a technical sense.
THE COLORADO SUPREME COURT HOLDS THAT INSURANCE COMPANY SUBROGATION ACTIONS ARE NOT SUBJECT TO COLORADO'S FAIR DEBT COLLECTION PRACTICES ACT
In Ybarra v. Greenberg & Sada, P.C., 2018 CO 81, 429 P.3d 839, reh'g denied (Nov. 19, 2018), the high court rejected a claim that the lawyers hired by the insurance company to pursue a subrogation action violated Colorado's Fair Debt Collection Practices Act. The claimant alleged that the law firm had violated the Act by using a deceptive means in attempting to collect a debt by filing for damages in tort. It was also alleged that the subrogation law firm filed the insurer's negligence action in the wrong location, as well as having made false representations regarding the character, amount, or legal status of the debt.
