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Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

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7th Circuit Finds that Extrinsic Evidence is Admissible in a Declaratory Judgment Action to Determine the Carrier's Duty to Defend

In Landmark American Insurance Co. v. Hilger, 838 F.3d 821 (7th Cir. 2016) the U.S. Circuit Court of Appeals for the 7th Circuit found that the insurance company was allowed to offer evidence outside the underlying court complaints and that the defendant did not render the professional services in question as an independent contractor. In this case the insured was sued by two credit unions in two different states (Michigan and Tennessee) for allegedly joining with a life insurance agent and a life insurance broker to persuade the credit unions to fund loans based upon life insurance policies with an overstated value that was used as collateral. When the insured and the insurance agent were sued, they tendered their defense to Landmark American under the agent's and the broker's liability policy. The policy provided coverage for claims arising out of any negligent act, error, or omission committed in the agent's rendering of professional services as an agent or broker. However, the tenders were denied.

CALIFORNIA COURT OF APPEALS HOLDS THAT AUTOMOBILE POLICY'S COLLISION COVERAGE DID NOT REQUIRE THE INSURANCE COMPANY TO PAY FOR THE CAR'S LOST MARKET VALUE

In Baldwin v. AAA Northern California, Nevada & Utah, 204 Cal.Rptr 3d 433 (1st Dist. 2016), the Court held that an automobile insurer had no obligation to pay the "pre-accident value" of the insured vehicle under the policy's collision coverage provision which gave the insurer the option to repair the vehicle and which expressly excluded diminution in value damages. The Court held that the insurer did not breach the policy's implied covenant of good faith and fair dealing by not compensating its insured for the diminished value of the vehicle.

NEW YORK APPELLATE COURT REJECTS THE CREATION OF AN UNAVAILABILITY EXCEPTION TO NEW YORK'S RULE REQUIRING UNINSURED PERIODS TO BE ALLOCATED TO THE INSURED IN CONTINUOUS AND PROGRESSIVE LOSS CASES

New York Law requires insurance companies to allocate continuous, progressive losses on a pro rata basis among all triggered policies based upon a time-on-the-risk allocation model. The New York Appellate Court recently rejected an invitation to create an unavailability exception to the allocation rule so that insurers were not required to indemnify the insured for periods when liability insurance was unavailable in the marketplace.

Duty to Defend Decision in the LA Supreme Court

THE LOUISIANA SUPREME COURT RECENTLY HELD THAT THE DUTY TO DEFEND IN LONG LEGACY DISEASE CASES SHOULD BE PRORATED BETWEEN THE INSURANCE COMPANY AND THE INSURED IN SITUATIONS WHERE AN OCCURRENCE-BASED POLICY PROVIDED COVERAGE FOR ONLY A PORTION OF THE TIME FOR WHICH THE EXPOSURE OCCURRED.

THE LOUISIANA SUPREME COURT RECENTLY HELD THAT THE DUTY TO DEFEND IN LONG LEGACY DISEASE CASES SHOULD BE PRO RATED BETWEEN THE INSURANCE COMPANY AND THE INSURED IN SITUATIONS WHERE AN OCCURRENCE-BASED POLICIES PROVIDED COVERAGE FOR ONLY A PORTION

In Arceneaux, et al. v. Amstar Corp., et al., 299 So.3d 277, 2015-0588(La., 9/7/16), the Louisiana Supreme Court allocated the costs of defending long legacy disease claims between the insurer and insured based on a time-on-the-risk allocation model. Under existing Louisiana law, an insurer's duty to indemnify was to be prorated among insurance carriers based on a time-on-the-risk approach the insurance carriers that were on the risk during the period of exposure to the injurious conditions. While the law in Louisiana was settled regarding time-on-the-risk pro rata allocation applying to indemnification, there was no Louisiana precedent on whether the insurer's duty to defend could also be pro rated among the insurers and the insured during periods of self-insurance in long latency disease cases. The Court then adopted the time-on-risk method of allocation for defense costs, adopting the reasoning of the Sixth Circuit United States Court of Appeals in Ins. Co. of North America v. Forty-Eight Insulations, Inc., 633 F.2d 1212 (6th Cir. 1980), clarified on re'hrg 657 F.2nd 814 (6th Cir. 1981), cert denied, 454 U.S. 1109 (1981). The Louisiana Court found that the pro rata allocated scheme was an equitable system.

The Ninth Circuit Court Of Appeals Finds That The Absence Of A Litigated Judgment Did Not Preclude An Equitable Subrogation Claim From Being Brought By An Excess Insurer For Bad Faith Failure To Settle

In RSUI Indemnity Co. v. Discovery P&C Ins. Co., 649 Fed.Appx. 534 (9th Cir. 2016), the primary insurer unreasonably had refused to pay a settlement demand within policy limits. In order to achieve a settlement, the excess insurer paid a portion of the settlement within its policy limits. The question before the Court was whether an excess insurance company could contribute to the settlement on behalf of the insured, and then sue the primary insurer to recover the amount of the settlement under the theory of equitable subrogation. The Ninth Circuit answered that question in the affirmative.

In A Surprising Decision, A Federal District Court, Applying Florida Law, Granted Summary Judgment To An Insurance Company On A "Failure To Settle" Claim Because The Insured's Liability Was Not Clear

Florida is a testing ground for creative lawyering designed to set up insurance companies on failure to settle claims. However, in Welford v. Liberty Ins. Corp., 2016 WL 3360431 (N.D. Fla., 6/2/16), at least one Federal District Court refused to countenance yet another attorney's attempt to create a failure to settle claim against an insurance company under Florida law. In this case, the insurance company tendered its limits within two days after receiving the lawsuit. Nevertheless, the claimant argued that the insurance company had failed to promptly tender the limits earlier in the matter when it was first notified of the accident. The District Court found that no reasonable trier of fact could have determined that the insured's liability was "clear" when the claim was first reported. The facts before the Court were complicated and disputed.

In A Self-Evident Decision, The Eighth Circuit Court of Appeals Recently Held That An Insurance Company's Failure To Re-Evaluate A Case Value After The Trial Court Eliminated A Key Affirmative Defense Justified A Bad Faith Failure To Settle Verdict

The Eighth Circuit Court of Appeals in Bamford, Inc. v. Regent Ins. Co., 822 F.3d 403 (8th Cir. 2016), held that the District Court had properly denied an insurance company's post-verdict motions challenging the jury's verdict in a bad faith failure to settle case and the evidence demonstrated that the insurer had failed to re-evaluate its settlement position after a trial court ruling in the underlying case eliminated a key affirmative defense. The Eighth Circuit Court noted that the insurance company's evidence that it had made multiple efforts to settle the case based on its evaluation of the case, continuously increased its reserves and offers in the settlement process, had followed the advice and valuations of the case of outside counsel as well as two mediators, and had discussed the claim value in multiple roundtable meetings with senior management was nevertheless insufficient to establish that the insurance company acted in good faith as a matter of law because the insurance company did not factor into its evaluation the trial court's elimination of a key affirmative defense.

The Montana Supreme Court Brings Clarity to the Meaning of "Accident" in a CGL Policy's Occurrence Definition

In Employers Mutual Cas. Co. v. Fisher Builders, Inc., 383 Mont. 187, 371 P.3d 375 (2016), the Montana Supreme Court was called upon to interpret the term "accident" in a CGL policy's "occurrence" definition. The Court found that the term "accident" could include intentional acts if the damages "were not objectively intended or expected by the insured." Therefore, triable issues of fact existed regarding whether the insured, a construction contractor, had objectively intended or expected to violate a construction permit during a remodeling project.

Two Wrongs Don't Make It Right

In an interesting case, the New York Appellate Court found that an insured could not sue the insurance broker for delaying in presenting a claim to the insurance company when the insured also delayed submission of the claim to the agent. In Rockland Exposition, Inc. v. Marshall & Sterling Enterprises, Inc., 138 A.D.3d 1085, 31 N.Y.S.3d 139 (N.Y.A.D. 2016), the New York Appellate Court held that the insured's delay of 52 days in notifying the insurance broker of the lawsuit that needed to be submitted to the insurance company precluded the insured from bringing a suit against the broker for liability for the broker's delay in providing notice to the insurer. The Court found that the insured's delay in providing notice to the broker was the precipitating breach of the insurance policy's requirement that the insured provide notice "as soon as practicable" and was the proximate cause of the insured's loss of coverage. In this case, the Court, in essence, held that two wrongs did not make it right.

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