Steven Plitt, Expert Witness Steven Plitt, Expert Witness
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Insurance Law Archives

Timing Is Everything When It Comes To Malicious Prosecution Coverage

The Illinois Supreme Court in First Mercury Ins. Co. v. Ciolino, 107 N.E.3d 240, appeal denied, 108 N.E.3d 840 (Ill. 2018), considered when a malicious prosecution claim became an "offense" for purposes of insurance coverage and whether the claim fell within the subject policy. The Court found that when dealing with malicious prosecution claims, the date of occurrence for triggering coverage was the date that the prosecution commenced and not the date on which plaintiff was exonerated. The Court noted that the use of the term "offense" in the policy did not demonstrate the intent of the parties that coverage would only be triggered upon the fulfillment of all elements of the tort of malicious prosecution under Illinois law. The Court found that coverage was dependent upon whether the insured's offensive conduct was committed during the policy period, irrespective of whether there had been an accrual of the malicious prosecution tort.

Choose Your Own Poison

The Washington Court of Appeals recently adopted a choose your own poison approach to cases where an insurer exhausts its policy limits in settlement of one claim while other related claims remain unresolved. In Singh v. Zurich American Ins. Co., 428 P.3d 1237 (Wash. App. Div. I, 2018) the court found that an insurance company's fiduciary duty may preclude the insurer from exercising policy rights.

Illinois Court Treats SIR As A Primary Policy Requiring Exhaustion

In Lamorak Ins. Co. v. Kone, Inc., 2000 Ill. App. (1st) 163398 (Ill. App. May 15, 2018), the Illinois Appellate Court found that in policies containing self-insured retentions, that the SIR was to be treated as a primary policy that had to be exhausted before the insured could tap into the excess layer of coverage.

In For One, In For All Rule Does Not Apply To Title Insurers In Pennsylvania

Under the so-called "in for one, in for all" rule, if there is one covered claim on a multi-count complaint while other claims are not covered, the insurer is required to defend the entire action. Recently, the US Court of Appeals for the Third Circuit in Lupu v. Lone City, LLC, 903 F.3d 382 (3rd Cir. 2018) (interpreting Pennsylvania law) held that a title insurer was entitled to limit its duty to defend only to covered claims. The court found that title insurance policies differed from general liability policies because title insurance policies are limited to loss from defects that cloud or invalidate a title. Because title insurers cover past defects in title, title insurers were entitled to limit their risk by searching the public records before issuing a policy. This was different than general liability insurance which typically provided insurance against future events. Additionally, general liability insurance companies typically promise to defend "a suit" or "any suit" seeking damages for covered acts or omissions. In contrast, title insurers promise to defend only claims arising from defects in title.

Once is Enough!

The Kentucky Supreme Court in Allstate Insurance Co. v. Smith, 487 S.W.3d 857 (Ky. 2016) held that the insurer had a duty to advise its insured of the availability of underinsured motorist coverage when the policy was initially purchased. However, the insurer had no duty to advise the insured of the availability of UIM coverage after the insured renewed the policy for the first time. Although it was undisputed that the designation of UIM coverage was not listed on the declarations page of the insured's policy, the evidence also showed that Allstate sent a form to the insured with each renewal, notifying the insured about the ability to purchase higher limits for UM and UIM coverage.

In Louisiana, Insurers Are Not Vicariously Liable For The Negligence Of A Roofer Who Was Provided To The Insured Under The Insurance Company's "Direct Repair Contractor Program"

In Rubin v. American Insurance Co., 193 So. 3d 408 (La. App. 2016), American Insurance Company had a direct repair contractor program which was a list of approved contractors. If the insured used one of the approved contractors, the program provided that AIC would "be responsible" for the roof it provided. In this case, the insureds agreed to use the approved contractor provided by AIC to repair a roof damaged by a hail storm. The insureds alleged that the roofer was negligent when it removed the roof, but did not adequately protect the roof thereafter, nor did the approved contractor return to the job for several days while it was raining. It was alleged that mold grew in the house because of this negligence. The insureds sued AIC, alleging that AIC was responsible for the contractor's negligence under theories of vicarious liability or joint venture. The case was tried to a jury, which rendered a verdict in favor of the insureds, although the jury found that the insurance company was not, itself, negligent. The trial court then granted AIC's motion for a directed verdict as to the complaint.

Criminal Acts Exclusion Conclusively Applies In Cases Where The Insured Is Convicted Of A Crime

In Country Mutual Insurance Co. v. Dahms, 116 Ill. App. (1st) 141392, 2016 WL 2941713 (Ill. App., May 19, 2016) the Court found that a criminal conviction extinguished the insurance company's obligation to defend the insured. The Court held that prior to a criminal conviction the insurance company was required to defend its insured in a mixed complaint, alleging both negligence and criminal activity, because there was the potential for coverage based upon the non-criminal allegations. However, when the insured was convicted by a jury of aggravated battery, the criminal acts exclusion became applicable and the duty to defend ceased. Following the conviction, the insurance company could rely upon the jury verdict, which was based on the highest burden of proof known to the American legal system.

Insured's Duty To Defend Could Not Be Based On Speculation Over Whether Unpled Claims Existed Or Not

While it is an obvious conclusion, the Montana Supreme Court recently held in Fire Insurance Exchange v. Weitzel, 371 P.3d 457 (Mont. 2016) that the insured's duty to defend could not be based on speculation over whether unpled claims existed or not. The Court found that the complaint in question did not potentially seek damages for false imprisonment or bodily injury where the sole allegation was that the insured defrauded an elderly person. The Montana Supreme Court noted that a complaint did not need to expressly allege a covered cause of action to trigger the insurer's defense obligation, the complaint did need to contain facts that would support a covered claim.

Supreme Court Finds That a Policyholder's Arbitration Agreement With tts Insurer Does Not Apply to Disputes Between the Policyholder and the Insurance Agent

In Jody James Farms, J.V. v. Altman Group, Inc., 547 S.W.3d 624 (Tex. 2018), the insurance agent failed to timely submit a hail and rain claim on behalf of the insured to the insurance company. The agent was then sued by the policyholder, alleging breach of fiduciary duty and deceptive trade practices. The insurance agency moved to compel arbitration, which was granted by the Texas District Court. The case then proceeded through arbitration and resulted in a panel finding in favor of the agency. The trial court then affirmed the arbitration award. However, the Texas Supreme Court reversed the trial court's ruling.

Binding the Insurer to Relevant Facts Through a Consent Settlement

Recently the Missouri Supreme Court in Allen v. Bryers, 512 S.W.3d 17 (Mo. 2016), as modified (Apr. 4, 2017), reh'g denied (Apr. 4, 2017), cert. denied sub nom. Atain Specialty Ins. Co. v. Allen, 138 S. Ct. 212, 199 L. Ed. 2d 118 (2017) held that an insurance company's wrongful refusal to defend its insured bound the insurer to the findings made in the underlying tort action. The court found that when the insurer improperly refused a defense to its insured, the insured was entitled to enter into a consent judgment which bound the insurer to findings of fact that were made in the underlying tort action. In this case, the insured failed to pursue a declaratory judgment action, failed to appeal the denial of a motion to intervene in the tort action, and subsequently made an untimely motion to intervene. However, the court did find that the insurance company was not liable for damages in excess of the policy limits where there had been no finding that the insurer engaged in bad faith when it denied coverage.

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