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

Phoenix Insurance Law Blog

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.

WASHINGTON COURT BRINGS NEW MEANING TO "DECAY"

In a case involving collapse under a property insurance policy, the Washington Court of Appeals in Feenix Parkside, LLC v. Berkley North Pacific, 438 P.3d 597 (Wash. App. 4/8/19) broadly defined the concept of "decay" in an insurance policy's coverage for collapse due to "decay." The court in Feenix held that where the term "decay" was not defined in the insurance policy, that the term needed to be interpreted in a manner consistent with the way the average purchaser of insurance would understand the term. Making this determination, the appellate court found that the trial court's ruling that "decay" meant some kind of decomposition of material was too narrow. The Court of Appeals adopted a broader definition of "decay" that included "a gradual decline in strength or soundness." Thus, in the state of Washington, where a property insurance policy covering collapse due to "decay" does not define the meaning of the term "decay" then the coverage is not limited to organic rot for purposes of determining collapse, but included in a broad sense the concept of "decay," meaning a gradual decline in strength or soundness.

YOU SHOULD HAVE KNOWN . . .

In Zavodnick, Zavodnick & Lasky, LLC v. National Liability and Fire Ins. Co., 2019 WL 1003157 (E.D. Pa. 3/1/19) the Pennsylvania court held that when a workers compensation board criticized the attorney's handling of the case, that a reasonable attorney would have known that a malpractice claim might be filed and therefore the professional liability policy's prior knowledge provision precluded coverage of a malpractice claim. 

COURT FINDS THAT A GOVERNMENT SUBPOENA SEEKING DOCUMENTS CONSTITUTED A CLAIM FOR NON-MONETARY RELIEF UNDER A D&O POLICY

The Texas court in Oceans Healthcare, LLC v. Illinois Union Ins. Co., 2019 WL 1437955 (E.D. Tx. 3/30/19) (appealed file), held that the subpoena alleged a wrongful act under the policy because the subpoena sufficiently alleged violations of the false claims act. The subpoena had sought documents "in connection with an investigation into . . . possible false claims act violations . . ." On other grounds the court held that the policy did not provide coverage. In this D&O case, the federal government issued a subpoena to the insured corporation seeking documents in a qui tam action, alleging that the corporation had submitted false and fraudulent payment claims to Medicare/Medicaid. The insured submitted a claim to its D&O insurer, seeking coverage for the expenses that the corporation incurred in responding to the government subpoena. The insurer denied the request for reimbursement, arguing that the government subpoena was not a "claim" inasmuch as the subpoena did not seek relief, but rather, sought information. The court rejected the insurer's argument, finding that the subpoena sought non-monetary relief under the policy. Under the D&O policy, a claim was "a written demand against any insured for monetary damages or non-monetary or injunctive relief." The policy did not define the term "relief."

IN DETERMINING INSURANCE AGENT LIABILITY FOR FAILURE TO PROCURE, A FUNDAMENTAL QUESTION IS WHETHER THE COVERAGE SOUGHT WAS EVEN AVAILABLE

According to the Wisconsin Court of Appeals, to assert an insurance agent's liability for negligent failure to procure requested coverage, the customer must establish that the coverage requested was actually available.

WASHINGTON COURT PREVENTS DUPLICATION OF LIABILITY AND UIM COVERAGES UNDER SINGLE AUTO POLICY

In Thompson v. Progressive Direct Insurance Co., 438 P.3d 53 (Wash. App. 2019) the court held that UIM coverage did not extend to a third party guest passenger in a covered auto under Progressive's policy. The Progressive policy contained an exclusion of the named insured's own covered vehicle from the policy's UIM coverage provision in situations where a guest passenger was seeking benefits for both liability and UIM coverage. Under the Progressive UIM portion of the policy, the policy defined an insured person as including any person occupying, but not operating, a covered auto. The policy also stated that a UIM vehicle did not include a covered auto under the policy unless the person insured was a named insured or relative of a named insured. In effect, the exclusion precluded guest passengers in a covered vehicle from recovering under both the liability and UIM provisions of the policy. The Washington Court of Appeals held that the non-duplication policy definition did not violate Washington law or public policy. The Court upheld the Washington Supreme Court's decision that had themselves upheld the validity of UIM exclusions of third party guest passengers.

DRIVE-BY SHOOTING IN MISSOURI NOT COVERED THROUGH UNINSURED MOTORIST COVERAGE

In Patel v. LM General Insurance Co., 922 F.3d 875 (8th Cir. 2019) (interpreting Missouri law) the 8th Circuit Court of Appeals found that there was no UM coverage for a fatal drive-by shooting because the violent act of the shooting arose from the conduct of the assailant and not from the operation of the vehicle.

LABOR COSTS NOT PART OF ACTUAL CASH VALUE

Recently the Tennessee Supreme Court held that in calculating actual cash value, depreciation was part of the calculation. Where the policy does not define what depreciation means, the insurance company may depreciate the cost of the materials used in a repair reconstruction, but not the cost of labor. See, Lammert v. Auto-Owners (Mutual) Insurance Co., 2019 WL 1592687 (Tenn. April 15, 2019). In the Lammert case, the Tennessee Supreme Court was asked by the Federal District Court to certify the following question:

PUTTING THE BRAKES ON SINGLE OCCURRENCE OUTCOMES IN ASBESTOS CASES

The Illinois Court of Appeals in Continental Casualty Co. v. Hennessy Industries, 2019 Ill. App. (1st) 180183 (April 23, 2019) reversed a trial court's ruling finding that there was only one occurrence arising from the insured's brake equipment asbestos exposure. The insured manufactured automobile brake equipment for 30 years. The insured was sued in thousands of lawsuits alleging asbestos exposure from the insured's brake equipment. The exposures were alleged to have occurred at numerous locations throughout the United States. The trial court held that notwithstanding the numerous locations where the exposures occurred there was a single occurrence for all lawsuits. In reversing the trial court, the court of appeals found that the insurance policies in question had a provision requiring exposures to substantially the same general conditions "existing at or emanating from each premises location shall be deemed one occurrence" applied to require all claims to be bundled into a single occurrence at each location.

THIRD PARTY WORKERS COMPENSATION CLAIM ADMINISTRATORS ARE NOT SUBJECT TO BAD FAITH LIABILITY UNDER IOWA LAW ACCORDING TO THE IOWA SUPREME COURT

The issue of whether Iowa's common law cause of action for bad faith failure to pay workers compensation claims applied to third party claim administrators (TPAs) in the workers comp context was recently addressed by the Iowa Supreme Court by way of certified question in DeDios v. Indemnity Ins. Co. of North America, 927 N.W.2d 611, 2019 WL 2063289 (IA 5/10/19), as amended 5/14/19.

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