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Insurance Law Archives


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.


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.


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.


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.


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.

Insurance Agents Not Held Accountable For Excess Judgments Under Utah Law

The Utah Supreme Court in Espenschied Transp. Corp. v. Fleetwood Servs., Inc., 2018 UT 32, 422 P.3d 829 (Utah 2018) held that the law allowing insureds to sue their insurance companies for bad faith conduct resulting in unpaid excess judgments did not apply to lawsuits brought against insurance agents who failed to procure requested coverage which, in turn, resulted in uncollectable judgment. In this case, the insured hired Fleetwood Services, an insurance agency, to procure a commercial lines insurance policy for their trucking company. As part of the procurement process, the insured provided Fleetwood with a list of vehicles to be insured. The policy was issued covering the vehicles that were on the list. Thereafter, one of the insured's vehicles was involved in an accident which resulted in a death. The survivors of the decedent sued the trucking company and its successor. The insurance company denied coverage because the vehicle involved in the accident was not on the list Fleetwood had provided to the insurer. A settlement was then reached between the decedent's family and the insured trucking company. At the time of the settlement the insured trucking company had formally dissolved its business and had no assets other than potential claims against third parties. As part of that settlement, the insured assigned to the decedent's family any claim it had against Fleetwood and the insurance company. As part of the settlement, the insured trucking company agreed to pursue claims against Fleetwood and the insurance company. Because the trucking company was a defunct corporation with no assets, the only way the family could recover from the trucking company was if the trucking company recovered from Fleetwood or the insurer.

Make Sure You Allege Mental Incomptency When Seeking a Defense in an Assault Case for There to Be a Defense Obligation

Recently, the Superior Court of Pennsylvania found that an insurer had properly denied a defense to its insured who had been sued for assault. See Kiely on Behalf of Feinstein v. Philadelphia Contributionship Ins. Co., 2019 PA Super 90 (Mar. 26, 2019). The facts before the court indicated that Christine Feinstein had hired Nydia Parkin as a domestic employee in her residence. Inexplicably, Feinstein physically attacked Parkin during her employment. Parkin sued for assault. Feinstein tendered the claim for a defense to her homeowner insurance company. The claim was denied on the ground that the assault was not an occurrence. In the ensuing coverage trial, Feinstein's attorney argued that Feinstein had suffered from a stroke and bipolar disorder and may even have had dementia at the time of the assault. The court nonsuited the case, finding that the attorney's testimony did not prove Feinstein's mental capacity was diminished to a point where she could not appreciate the nature of her conduct. The case was affirmed on appeal. The Superior Court held that Feinstein's reported mental incapacity, irrespective of whether it was real or imagined, was irrelevant because the underlying complaint did not mention mental incapacity. Instead, the complaint alleged that Feinstein had attacked Parkin, including choking and punching her, while uttering racial epithets, and that Parkin did not provoke the attack or fight back. Under those circumstances, the Superior Court found that Feinstein's mental health was not in question and that it was error for the trial court to even consider Feinstein's health in assessing the insurer's duty to defend.

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