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ADDITIONAL INSURED STATUS IS LIMITED BY RHODE ISLAND SUPREME COURT

In Bacon Construction Co., Inc. v. Arbella Protection Insurance Company, Inc., 208 A.3d 595 (R.I. 2019), the Rhode Island Supreme Court enforced the terms of an endorsement which limited additional insured status to liability events that were caused partially by the acts or omissions of the named insured or those acting on behalf of the named insured. In this case, a subcontractor's liability policy contained an endorsement which listed the construction project's general contractor as an additional insured, but only with respect to liability for injury or damage caused partially by the acts or omissions of the named insured. The underlying case involved an employee's lawsuit against the general contractor only for negligence. Because the underlying complaint only alleged the general contractor's negligence, the Court enforced the limiting language of the additional insured endorsement when finding that the general contractor was not an additional insured because the named insured's liability was not involved at least partially in the underlying tort case.

ADDITIONAL INSURED STATUS IS LIMITED BY RHODE ISLAND SUPREME COURT

In Bacon Construction Co., Inc. v. Arbella Protection Insurance Company, Inc., 208 A.3d 595 (R.I. 2019), the Rhode Island Supreme Court enforced the terms of an endorsement which limited additional insured status to liability events that were caused partially by the acts or omissions of the named insured or those acting on behalf of the named insured. In this case, a subcontractor's liability policy contained an endorsement which listed the construction project's general contractor as an additional insured, but only with respect to liability for injury or damage caused partially by the acts or omissions of the named insured. The underlying case involved an employee's lawsuit against the general contractor only for negligence. Because the underlying complaint only alleged the general contractor's negligence, the Court enforced the limiting language of the additional insured endorsement when finding that the general contractor was not an additional insured because the named insured's liability was not involved at least partially in the underlying tort case.

UNDER ALABAMA LAW, INSURANCE AGENTS AND BROKERS DO NOT OWE A DUTY TO THEIR CUSTOMER TO ADVISE REGARDING THE ADEQUACY OF THE CUSTOMER'S INSURANCE COVERAGE

In Somnus Mattress Corp. v. Hilson, No. 1170250, 2018 WL 6715777 (Ala. Dec. 21, 2018) the Court found that the insurance agent and broker in that case had no duty to advise the insured of the adequacy of its insurance coverage. The allegation that the agent made statements to the insured that the insured did not need business income coverage was nothing more than an opinion that could be accepted or rejected by the insured. Of significance to the Court was the fact that the insured had had a prior loss which involved a loss of business income and the fact that the insured knew its own finances and needs. Under the totality of the circumstances, the Court found that the insured did not justifiably rely upon the agent's opinion regarding the need for business income coverage, even if the Court were to have interpreted Missouri law as imposing a duty on the agent to advise the insured about the adequacy of coverage that it was purchasing.

UNDER ILLINOIS LAW, SUIT AGAINST AGENT FOR NEGLIGENT FAILURE TO PROCURE COVERAGE BEGAN TO RUN WHEN THE INSURED RECEIVED THE INSURANCE POLICY

In a split decision, the Illinois Supreme Court in Am. Family Mut. Ins. Co. v. Krop, 2018 IL 122556, 120 N.E.3d 982, reh'g denied (Nov. 26, 2018) held that in a negligent failure to procure lawsuit against an insurance agent, the applicable statute of limitations began to run under Illinois law when the insureds received the policy rather than when the insurance company denied coverage. In so holding, the Supreme Court held that the suit against the agent sounded in negligence, which was a tort claim arising out of a contractual relationship. The contract was breached when the agent procured a policy that did not provide the requested coverage. The Court found that the discovery rule was inapplicable because the insureds had an obligation to read and understand their own policies. In the decision, the Court emphasized that requiring customers to read their insurance policies was reasonable because customers know the coverage that they want. Such a rule also incentivized customers to act in good faith. On the other hand, the Court noted that a contrary rule would allow customers to maintain defective policies for many years and assert the defect after potential evidence supporting the insurer may have been lost.

SOUTH CAROLINA SUPREME COURT INVALIDATES PIP SETOFFS

In Cothran v. State Farm Mutual Auto Insurance Co., 2019 WL 3683591 (S.C. 8/2/19) the Colorado Supreme Court invalidated a PIP provision in State Farm's policy which attempted to coordinate its benefit with workers compensation benefits. The Court held that South Carolina's PIP statute prohibited set-offs, and therefore the clause was void. The Court found that the language of South Carolina's Section 38-77-144 was intended to prevent insurance companies from avoiding payment of PIP benefits by directing their insureds to other sources of recovery, such as workers compensation insurance.

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.

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.

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