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

Phoenix Insurance Law Blog

DETERMINING AUTOMOBILE ACV

Recently the 5th Circuit Court of Appeals in Singleton v. Elephant Insurance Co., 953 F.3d 334 (5th Cir. 2020), held that an insurance policy provision which limited the insurer's liability for a totaled car to "actual cash value" of the car at the time of the accident did not include a requirement to pay taxes and fees. According to the Court, ACV was the equivalent to fair market value which, under Texas law, was the price a willing buyer would pay and a willing seller would accept for the vehicle. While the taxes might be considered by negotiating parties when agreeing to a price, that practice did not require that taxes be added to the price when calculating fair market value.

UNDER MINNESOTA LAW, THE 8TH CIRCUIT FINDS THAT EXCESS INSURERS THAT DID NOT PARTICIPATE IN THE INSURED'S DEFENSE WERE ALLOWED TO SEEK ALLOCATION OF THE JURY' VERDICT BETWEEN COVERED AND NON-COVERED CLAIMS

In RSUI Indemnity Co. v. New Horizon Kids Quest, Inc., 933 F.3d 960 (8th Cir. 2019), applying Minnesota law, the 8th Circuit held that when an excess insurer had not participated in the insured's defense, that insurer was allowed the opportunity to allocate the jury's verdict between covered and noncovered claims in a subsequent coverage action.

MEDICAL NECESSITY IS CONSIDERED BY WASHINGTON SUPREME COURT

In Strauss v. Premera Blue Cross, 449 P.3d 640 (Wash. 2019), the Washington Supreme Court considered the concept of medical necessity.

In Strauss, the insured plaintiff was diagnosed with prostate cancer. The insured's doctor recommended proton beam therapy rather than traditional radiation therapy. The insured's doctor believed that proton beam therapy had fewer side effects than the alternative accepted treatment. Premera Blue Cross denied the request for medical authorization for the PBT on the ground that PBT was not "medically necessary." The policy defined "medically necessary" as being "[i]n accordance with generally accepted standards of medical practice . . . and not more costly than the alternative [treatment] . . . at least as likely to produce equivalent therapeutic or diagnostic results."

PENNSYLVANIA SUPREME COURT WEIGHS IN ON AUTOMOBILE STACKING

Under Pennsylvania law, MVFRL §1739(c), insurance companies are required to offer insureds the option to waive stacked UIM coverage at the time of purchase. The Pennsylvania Supreme Court held recently that under Pennsylvania's Motor Vehicle Financial Responsibility Law, when the insured increases UIM coverage, that constitutes a statutory "purchase" which thereby voids any prior stacking waivers. Because of this, the purchase of increased UIM coverage then requires insurance companies to offer their insureds a renewed opportunity to waive the stacking. Failure to provide that renewed option of waiver entitled the insured to stack the UIM benefits.

BEYOND A REASONABLE DOUBT IS KEY FOR APPLICATION TO CRIMINAL-ACTS EXCLUSION

A typical criminal act exclusion states that there is no coverage for bodily injury or property damage arising out of any criminal act. Typically the exclusion applies regardless of whether the insured is actually charged with or convicted of a crime. In Country Mutual Ins. Co. v. Dahms, 2016 IL App. (1st) 141392, 405 Ill.Dec. 311, 58 N.E.3d 118 (2016), the Illinois Court of Appeals held that the insurance company was required to defend its insured during the pendency of both a criminal proceeding and a tort action for bodily injury where the complaint in the tort action contained allegations of negligence as well as criminal activity. The Court found that the insurer was required to defend the insured because there was a potential for a non-criminal finding in the tort action.

INSURERS CANNOT SEEK REIMBURSEMENT OF FEES IN ROR SITUATIONS IN ALASKA

In a strained decision, the Alaska Supreme Court in Attorneys Liability Protection Society, Inc. v. Ingaldson Fitzgerald, P.C., 370 P.3d 1101 (2016), answered certified questions from the Ninth Circuit Court of Appeals finding that Alaska's statute regarding independent counsel in insurance situations prohibited insurers from seeking reimbursement of fees and costs incurred during an ROR defense even if it was later determined that there was no obligation to provide a defense because there was no coverage. Instead of critically analyzing the Alaska Supreme Court's judicial legislating and strained analysis in rejecting the insurance company's right to reimbursement, I would encourage the reader to analyze the case in order to come up with the reader's own viewpoint on whether the Alaska Supreme Court stayed within its constitutional role of interpreting the statute as opposed to striking the statute down in the guise of legislative intent. 

WASHINGTON COURT FURTHER CLARIFIES DEFENSE COUNSEL'S ROLE IN ROR DEFENSE

The Washington Court of Appeals recently found (Arden v. Forsberg & Umlauf, P.S., 193 Wash.App. 731, 373 P.3d 320 (2016)), on first impression, that insurer retained attorneys (defense attorneys) were not automatically prohibited from representing insureds merely because the defense attorneys had an ongoing relationship with the insurance company where they were receiving defense case assignments as well as coverage assignments. Moreover, the Court found that defense counsel were not required by the duty of loyalty imposed on counsel under Washington law to disclose to the insured the defense attorney's business relationship with the insurer. However, the Court did note that it was "better practice for attorneys handling the reservation of rights (ROR) defense. to inform their clients if they have a long-standing relationship with the insurer and represent the insurer in other cases."

NEBRASKA INVALIDATES HOUSEHOLD EXCLUSION

In Shelter Mutual Insurance Co. v. Freudenburg 304 Nebraska 1015, 938 N.W.2d 92 (2020) the insurance company paid insurance policy in question had a sublimit of coverage in cases involving injuries to named insureds or their resident relatives. The sublimit was equal to the Nebraska's minimum financial responsibility limits. In question was Nebraska revised statute 60-310 which stated that no policy of automobile liability insurance was permitted to exclude, limit, reduce, or other otherwise alter policy coverage solely because the injured person was the named insured or a resident of the same household. In this case, the insurance company argued that its household exclusion sublimit should permitted because it did not violate Nebraska statute. The insurance company argued that the statute applied to "automobile liability insurance" which referred to the coverage mandated by the statute and not for amounts of coverage above the minimum statutory limits. The Nebraska Supreme Court invalidated the insurer's "partial" household exclusion after reviewing the legislative history of the statute.

CRACKING THE CONCEPT OF COLLAPSE IN A PROPERTY POLICY

In Valls v. Allstate Ins. Co., 919 F.3d 739 (2nd Cir. 2019) the 2nd Circuit construed the concept of collapse narrowly. The homeowner's insurance policy provided coverage for "the entire collapse" of a building structure, that "must be sudden and accidental" but the policy also excluded "cracking" from the definition of "collapse." Under that policy language the court found that building cracks in a basement's walls of the insured property, which was still standing, would not constitute collapse under the policy.

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