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

Phoenix Insurance Law Blog

Montana Supreme Court Determines What Standard to Utilize in Approving Consent Settlement Agreements

Recently, the Montana Supreme Court, in a split decision, found that the trial court must utilize an objective standard in considering the value of the claim and the insured's loss of coverage when it determines the reasonableness of a stipulated settlement entered into by the insured after the insurance company wrongfully denied coverage.

New York Appellate Court Determines Who Bears Responsibility for Orphan Share in Long Latency Continuous Trigger Cases

New York has adopted a pro-rata allocation methodology for continuous and progressive losses where coverage for all triggered policies is determined on a time-on-the-risk basis. Recently, the New York Court of Appeals in Keyspan Gas East Corp. v. Munich Reinsurance America, Inc., 143 A.D.3d 86 (Appellate Division, September 1, 2016), found that insurance companies were not required to indemnify the insured for those periods in the allocative schedule where liability insurance was unavailable in the marketplace. The question before the court was the following: When the reason for the period of no insurance is that the insured could not have obtained insurance even if it had wanted to, is the risk attendant to the unavailability of insurance in the marketplace allocable to the existing, triggered insurance policies or to the insured?" The court found that because the insurance policies did not provide coverage for injury or damage during periods of no insurance, the court would have to rewrite the insurance policies to require insurers to assume the risk for uninsured periods simply because the insured was not to blame for the lack of insurance. The court chose not to rewrite the terms of the policy for equitable reasons. Therefore, allocation of uninsured periods was assessed to the insured in continuous and progressive loss cases.

Allocating Defense Costs in Long Latency Cases in Louisiana

Louisiana has recognized a pro rata allocation method for determining indemnification in long latency exposures. However, the Louisiana courts have not resolved the issue of whether defense costs should also be allocated in those type of cases. The Louisiana Supreme Court recently resolved that issue in Arceneaux, et al. v. Amstar Corp., et al., 2016 WL 4699163 (La. September 7, 2016). In Arceneaux the court applied a pro rata method of allocation of defense costs. In doing so, the court found that a pro rata allocative method did not violate the reasonable expectations of the insurers or the insured because neither party could reasonably expect the insurer was liable for losses that occurred outside the policy coverage periods. The court noted that a pro rata allocation scheme was an equitable system for resolving long latency disease cases. Under the court's ruling, insureds are required to pay for its defense costs during years in which it did not acquire any insurance coverage, i.e., the orphan period.

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.

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