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

Phoenix Insurance Law Blog

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.

INSUREDS ARE REQUIRED TO READ THE INSURANCE POLICY UNDER ARKANSAS LAW

The 8th Circuit Court of Appeals in Hatcher v. MDOW Insurance Co., 903 F.3d 724 (8th Cir. 2018) interpreting Arkansas law held the insurance company which had provided its homeowner insured with multiple policy renewal letters advising the insured to review the policy, satisfied its notice obligations regarding the contents of the policy, including all endorsements to the policy even though they were not directly referenced in the renewal letter. Under Arkansas law, written notices of renewal satisfy an insurer's notice obligations. See Arkansas Code Ann. §23-88-105.

UNINSURED MOTORIST SETTLEMENT DOES NOT REQUIRE PAYMENT OF INTEREST UNDER COLORADO LAW

The Colorado Supreme Court in Munoz v. American Family Mutual Insurance Co., 425 P.3d 1128 (Colo. 2018) rejected an insured's claim for prejudgment interest on an uninsured motorist settlement. In rejecting the prejudgment interest the Colorado Court looked at Colorado Revised Statute §13-21-101 which provides that a party is entitled to prejudgment interest where (1) a lawsuit is brought, (2) damages are claimed, (3) a damages award is received, and (4) judgment is entered. In the context of this case, the insured never filed an action against the uninsured motorist, never sought or received damages, and did not recover a judgment. Because of this, the Court found that the statute was inapplicable. The Court noted that the outcome was consistent with the nature of UM coverage, which was to put the insured in the same position as if the tortfeasor had been insured. If the insured had received a settlement from the third-party carrier, the insured would not have been entitled to prejudgment interest on the settlement amount. For the same reason, the Court found that American Family agreed to pay a settlement based on the tortfeasor's wrongdoing and that the insured was not entitled to prejudgment interest simply because the payor was his own insurance company.

TEXAS COURT OF APPEALS FINDS THAT INSURANCE COMPANY'S PAYING TIMELY TENDER OF FULL AMOUNT OF APPRAISAL AWARD PREVENTED INSURED'S RECOVERY UNDER TEXAS' PROMPT PAYMENT OF CLAIMS STATUTE

In Marchbanks v. Liberty Ins. Corp., 558 S.W.3d 308 (Tex. App. 2018), the Texas Court of Appeals held that insureds could not recover for violations of Texas' Prompt Payment of Claims Act (Tex. Ins. Co. Ann. §542.051 et seq. (West 2013) for any type of underpayment of a claim in cases where the appraisal process was invoked at any time, even after a lawsuit had been filed, and the insurer made timely payment in accordance with the appraisal award.

OHIO COURT FINDS THAT PHYSICIAN'S SEXUAL RELATIONSHIP WITH A PATIENT DID NOT CONSTITUTE MEDICAL MALPRACTICE

In Beattie v. McCoy, 2018-Ohio-2535, 115 N.E.3d 867, the Court held that professional liability policies did not cover medical malpractice actions arising from a physician's sexual relationship with a patient. The policy in question provided coverage for defined "professional services." The policy defined "professional services" as "medical, surgical, dental, imaging, mental or other healthcare professional service or treatments . . . [and the] provision of drugs, healthcare supplies or appliances." Under the facts presented there was no obligation to provide coverage.

MISSOURI COURT UPHOLDS ATTORNEY-CLIENT PRIVILEGE

In State ex rel. Shelter Mut. Ins. Co. v. Wagner, 575 S.W.3d 476 (Mo. Ct. App. 2018), transfer denied (July 31, 2018), reh'g denied (July 31, 2018), the Missouri court held that in a bad faith lawsuit arising from the failure to settle, the insured was not entitled to discovery communications between the insurance company and its attorney who was retained to advise the insurer in the underlying case.

Nevada Adopts Minority View That An Insurer's Failure To Deend Can Render The Insurer Liable For An Excess Judgment Without A Finding Of Bad Faith Misconduct

In Century Surety Co. v. Andrew, 432 P.3d 180 (Nev. 2018) the Nevada Supreme Court adopted the minority view holding that the insurer's failure to defend its insured made the insurer liable for the excess judgment that was entered, even though there was no finding of bad faith misconduct. According to the court, the excess judgment was foreseeable, and therefore the insurer's liability was not limited to defense costs and indemnity within limits.

Safeco Waives Anti-assignment Clause

Clear Vision was an automobile windshield repair company which operated inside individual auto dealership repair shops. Clear Vision's business practice was to repair a customer's windshield once the customer had signed an assignment of the right to payment to Clear Vision under the customer's insurance policy. After the windshield was repaired, Clear Vision would then submit the invoice directly to the customer's insurance company. With respect to Safeco, Clear Vision had submitted thousands of glass repair claims, even though there was no contractual relationship between Clear Vision and Safeco. Eighty-five percent of the direct invoices were paid in the full amount of the invoice while 15% of the invoices were not paid. Throughout this process, Safeco never raised the anti-assignment clause as the reason why it was not paying the Clear Vision invoice. Recently the Texas Appeals Court found that the relationship between Clear Vision and Safeco resulted in a waiver of Safeco's policy right to assert the anti-assignment clause in its policy.

Mississippi Rejects Blue Ridge Doctrine

In Colony Ins. Co. v. First Specialty Ins. Corp., 262 So. 3d 1128 (Miss. 2019) , the Mississippi Supreme Court, as a matter of first impression, found that a liability insurance company could not fund a settlement under a reservation of rights and then seek reimbursement of its payment from the insured. According to the Court, the insurance company must make a selection of either absorbing the settlement or rejecting the demand with the hopes that it would prevail on its declaratory judgment action. In so finding, the Court held that while a payment which is made under compulsion is not a voluntary payment, the mere threat of a lawsuit was not the type of compulsion that would render an insurance payment non-voluntary. Insurers should pursue a declaratory judgment action as a legal avenue for determining coverage obligations. Settling the case before receiving a ruling on the coverage obligations resulted in the insurer having no right to seek reimbursement of the settlement payment that it might not otherwise have been obligated to make.

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