In Travelers Property Casualty Co. of America v. Klick, 867 F.3d 989 (8th Cir. 2017) the 8th Circuit held, under Minnesota law, that carbon monoxide was a pollutant for purposes of a policy's pollution exclusion. The pollution exclusion in question required the pollutant to be released into the atmosphere. Under the case facts there was a carbon monoxide build-up in the engine compartment of a boat. When the boat owner went to check on the engine, the boat owner opened the engine compartment hatch, which allowed carbon monoxide to be released into the wheelhouse of the boat. The boat owner was injured when he lost consciousness and fell into the engine compartment and was severely burned while lying on the engine. The boat owner argued that his injuries did not arise out of the release of carbon monoxide into the atmosphere because the engine compartment did not contain "atmosphere." However, the 8th Circuit rejected this argument. The court found that the boat owner was exposed to a pollutant that was not in a controlled environment. The court also found that a reasonable person in the position of the insured would have understood that a person in the wheelhouse of the boat was in "atmosphere."
8TH CIRCUIT COURT OF APPEALS, INTERPRETING MINNESOTA LAW, FINDS THAT CARBON MONOXIDE IS A POLLUTANT FOR PURPOSES OF THE APPLICATION OF A POLLUTION EXCLUSION
ALLOCATING BETWEEN COVERED AND UNCOVERED CLAIMS IN MINNESOTA
The U.S. 8th Circuit Court of Appeals, interpreting Minnesota law, recently determined that the insured had the burden of allocating a settlement between covered and uncovered claims.
NEVADA SUPREME COURT WEIGHS IN ON CANCELLATION
Recently, the Nevada Supreme Court in O.P.H. of Law Vegas, Inc. v. Oregon Mut. Ins. Co.,401 P.3d 218 (Nev. 2017) found that a cancellation notice needed to comply with the statutory requirement of giving the policyholder information about its rights to request information regarding the factual basis for the cancellation and not just providing the specific facts on which the insurer based its cancellation decision.
CONNECTICUT COURT FINDS THAT LOSS OF CONSORTIUM CLAIMS FALL WITHIN THE "PER PERSON" LIMIT OF THE AUTO POLICY
In Amica Mut. Ins. Co. v. Piquette, 176 Conn.App. 559, 168 A.3d 623 (2017) the Connecticut Appellate Court reaffirmed Connecticut law, finding that loss of consortium claims are subject to the automobile policy's same "per person" limit that was available to the principal injury claimant's claim for bodily injury. Previously, the Connecticut Supreme Court in Izzo v. Colonial Penn Ins. Co., 203 Conn. 305, 524 A.2d 641 (1987) found that a loss of consortium claim was not a different injury from the claim brought by the person principally injured. The Supreme Court held that the "per person" limit applied to all damages "because of bodily injury" sustained in the accident and therefore a husband's loss of consortium claim for injuries to his wife were "because of" the physical injuries to the wife. The Connecticut Court of Appeals followed this precedent in Piquette.
BARKING UP THE WRONG TREE FOR AUTO COVERAGE
The Maine Supreme Judicial Court in Kelley v. North East Insurance Co., 2017 ME. 166, ____ A.3d _____2017, 2017 WL 3138209 (Me. July 25, 2017) considered whether a dog bite incident involving the insured's dog was covered under the insured's automobile liability policy. Under the facts of the case, the insured, Theresa Snyder, had an automobile liability policy on her Ford Mustang. Snyder owned the dog with another individual, Tim McCann. Snyder and McCann were not married. At the time of the incident, McCann was driving his employer's vehicle to meet the seller of another vehicle. During the trip, McCann brought their dog with him. While the dog was in the McCann vehicle, it bit a third party. At the time, Snyder was not present, was not the driver of the vehicle (Tim McCann was), was not a passenger or the owner of the vehicle (the employer was) that the dog was in when it bit the third party.
Termite Damage Is Not The Functional Equivalent Of Building Collapse For Purposes Of First-Party Property Coverage
The Kentucky Supreme Court recently found that the insurance company's homeowners policy did not cover termite damage that did not result in the home's collapse. In Thiel v. Kentucky Growers Insurance Co., 522 S.W.3d 198 (2017) the court concluded that the insured house has not collapsed under the policy definition. Under the homeowners policy, the policy covered direct physical loss "involving the collapse of a building or part of a building caused by only the following: ". . . hidden insect or vermin decay." The policy indicated that collapse did not mean settling, cracking, bulging, or expanding. The court applied a standard dictionary definition of "collapse" to mean "to break down or go to pieces suddenly, especially by falling in of sides; to cave in." See, Niagara Fire Insurance Co. v. Curtsinger, 361 S.W.3d 762, 763 (Ky. 1962). The insured presented a claim for termite infestation that was discovered throughout the insured home which had damaged both wall paneling and flooring. Nevertheless, the Kentucky Supreme Court found that the home had not collapsed within the meaning of the insurance policy. The court adhered to the clear and ambiguous wording of the policy and gave a plain and ordinary meaning to the term "collapse" in finding no coverage. In doing so, the court refused to adopt the more lenient majority rule in the country under which the structure may not be in imminent danger of collapse, provided that the damage would substantially impair the structural integrity of the building.
Insured Must Obtain Settlement Consent Where Policies Require it
Where insurance policies require written consent from the insurer to enter into any settlement agreement, it is important to remember to ask, "May I?" Failure to do so may void coverage. That is what occurred recently in One West Bank, FSB v. Houston Casualty Co., 676 Fed.Appx. 664, 2017 WL 218900 (9th Cir., filed January 19, 2017). In this case, Houston Casualty issued a professional liability policy which had a restrictive condition requiring the insured to seek prior written consent prior to entering into any type of settlement agreement regarding a covered claim. The insured, One West, was sued for its alleged failure as a loan servicer, to mitigate or avoid losses on mortgage loans for which the plaintiff had guaranteed the principle and interest payments. The plaintiff in One West agreed to a settlement that was memorialized in a settlement term sheet without One West seeking Houston Casualty's written consent prior to executing the term sheet. The 9th Circuit Court held, applying California law, that One West breached the prior written consent provision of the policy and therefore Houston Casualty was relieved of its coverage obligation for the settlement. Under California law, an insured can be excused from a written consent provision based upon economic necessity, insurer breach, or other extraordinary circumstances. In this case the settlement term sheet provided all of the relevant terms of a settlement agreement and therefore it was determined that One West and the plaintiff intended to enter into a final and binding settlement agreement when they executed the term sheet. The district court could find no exception to the prior written consent provision and therefore found it to be enforceable. With respect to One West's claim for a breach of the covenant of good faith and fair dealing, the court found that a necessary predicate to such a breach required a demonstration that the insurance company withheld benefits that were due under the policy. Absent the prior consent of the insurer for the settlement term sheet, there was no evidence that Houston Casualty withheld benefits that were due under the policy. Therefore, the insured's claim for breach of the implied covenant of good faith and fair dealing failed as a matter of law.
Disparagement is not "Patent Pending"
Some insurance policies do not specifically define the term "disparagement" in the policy. When the term "disparagement" is not defined, the courts will come up with a workable definition. As an example, in Lexmark International, Inc. v. Transportation Insurance Co., 327 Ill.App.3d 128, 140, 160 Ill.Dec. 658, 761 N.E.2d 1214 (2001), the court defined "disparagement" as constituting "words which criticize the equality of one's goods or services." The court in Lexmark further explained this concept:
Washington Court Rules On Discoverability Of Insurer's Claim File By Third Parties
In 2013 the Washington Supreme Court found that an insurance company's claim file was presumptively not privileged in disputes between insurance companies and their insureds unless the insurance company could demonstrate that the attorney-client aspects of the file involved the attorney providing counsel as to the insurance company's potential liability. See, Cedell v. Farmers Insurance Co. of Washington, 295 P.3d 239 (2013). More recently, the Washington Court of Appeals extended the Washington Supreme Court's ruling in Cedell by finding that third parties suing insurance companies as assignees of the insureds were entitled to discovery the insurer's claim file unless the insurance company could demonstrate that any attorney-client privileged materials involved the attorney providing counsel to the insurer regarding potential liability.
TERMITE DAMAGE IS NOT THE FUNCTIONAL EQUIVALENT OF BUILDING COLLAPSE FOR PURPOSES OF FIRST-PARTY PROPERTY COVERAGE
The Kentucky Supreme Court recently found that the insurance company's homeowners policy did not cover termite damage that did not result in the home's collapse. In Thiel v. Kentucky Growers Insurance Co., 522 S.W.3d 198 (2017) the court concluded that the insured house has not collapsed under the policy definition. Under the homeowners policy, the policy covered direct physical loss "involving the collapse of a building or part of a building caused by only the following: ". . . hidden insect or vermin decay." The policy indicated that collapse did not mean settling, cracking, bulging, or expanding. The court applied a standard dictionary definition of "collapse" to mean "to break down or go to pieces suddenly, especially by falling in of sides; to cave in." See, Niagara Fire Insurance Co. v. Curtsinger, 361 S.W.3d 762, 763 (Ky. 1962). The insured presented a claim for termite infestation that was discovered throughout the insured home which had damaged both wall paneling and flooring. Nevertheless, the Kentucky Supreme Court found that the home had not collapsed within the meaning of the insurance policy. The court adhered to the clear and ambiguous wording of the policy and gave a plain and ordinary meaning to the term "collapse" in finding no coverage. In doing so, the court refused to adopt the more lenient majority rule in the country under which the structure may not be in imminent danger of collapse, provided that the damage would substantially impair the structural integrity of the building.
