Reinsurance Law Blog

Reinsurance Law Blog

Lost income — which insurer is primary? 8th Circuit, Minnesota

Posted in New Case

In Zup’s of Babbitt-Aurora, Inc. v. West Bend Mutual Insurance Co., the issue was which insurer was responsible for the insured’s lost income following a fire which destroyed its store and adjacent shopping mall.  Zup’s had a supermarket in a strip mall; and also owned and leased other space in the mall. Zup’s lost income from its supermarket as well as rent from its tenants. Zups made claims for lost income to Security and West Bend. The parties agree that Security National’s policy covered Zup’s lost supermarket income and West Bend’s policy covered Zup’s lost rent. The question was whether West Bend is also responsible for Zup’s lost supermarket income.

After the insurers filed cross-motions for summary judgment, the district court first concluded that West Bend’s policy covered the lost supermarket income. It next held that reformation was unwarranted. Finally, the court held that even though both policies covered the lost supermarket income, Minnesota law made only Security National responsible for it.  The Eighth Circuit affirmed.

Applying either the “closeness to the risk” test or the “total policy insuring intent” test, Security National’s coverage of lost income from the supermarket was the primary coverage and West Bend only had liability if Security National’s coverage was exhausted; since it is undisputed that Security’s coverage was not exhausted, Security was responsible for the insured’s lost supermarket income.

No subrogation by contractor for faulty workmanship claims 8th Cir. (Iowa)

Posted in Contractual Liability, New Case

In The Weitz Company v. Lexington Insurance Company, Weitz was a party to a construction contract with Hyatt. Hyatt claimed that faulty workmanship caused damage to the completed buildings. Hyatt made a claim on its insurers, but they paid only a portion of the damages because of various exclusions. Hyatt then sued Weitz directly. After that suit settled, Weitz was reimbursed for its payments – in fact, Weitz got more in reimbursements than it paid in settling the claims. Then Weitz sued Hyatt’s insurers claiming Hyatt’s insurers should have paid the claims. Summary judgment to the insurers was affirmed. Weitz had no claim for subrogation, because the settlement was on its own behalf, not on behalf of others. One cannot get subrogation for one’s own fault. Even if you could, Hyatt had released the insurers from liability, and that would bind any other party seeking subrogation. The claim for unjust enrichment failed as a matter of law.

Discretionary Function under the Federal Tort Claims Act – Parking lot guardrails. 8th Circuit

Posted in immunity, New Case

In Metter v. U.S., Metter’s spouse was killed while fishing when a parked truck slipped out of gear and struck him. The guardrails had been removed so equipment could get into the area for flood repairs and the contractor had agreed to have the guardrails replaced before the accident occurred. The Army Corps of Engineers’ decision to remove guardrails and not post signs during these renovations and repairs fell within the discretionary function exception to the Federal Tort Claims Act as the action was discretionary and susceptible to policy analysis. The order granting the motion to dismiss was affirmed.

Note: many states have modeled their tort claims acts after the federal act.

$20M bad faith verdict overturned because of bad jury instructions -Oklahoma

Posted in Contractual Liability, Insurance Bad Faith, New Case
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In Aduddell Lincoln Plaza Hotel v. Certain Underwriters at Lloyd’s, 2015 OK CIV APP 34; a judgment of nearly $20 million (for actual damages, bad faith damages, punitive damages, and interest) was reversed because of bad jury instructions. Lloyds offered to pay $50,000 on a $600,000 claim, after deducting for old damage and depreciation. Jury instruction 12 said  Lloyd’s issued the policy without reservation and had the opportunity to know of the condition of the complex including the roofs. You are instructed that Lloyd’s cannot avoid or limit payment by suggesting the roof was in poor condition. The jury rejected Lloyds’ argument that it was not obligated to pay for the condition of the roofs which pre-existed the storm.  Lloyds’ defense, that it paid what it owed under the policy, was so undermined by the “waiver of condition” instruction that it probably caused a miscarriage of justice.

Instruction No. 8 was argumentative and should have been limited to the pattern jury instruction. The Unfair Claims Settlement Practices Act is not an appropriate guide for a jury to determine bad faith. Lost profits were properly considered.

The case was reversed and remanded for a new trial.

 

No bad faith where there was evidence the insured caused the fire and lied to the insurance company, 8th Circuit, Arkansas law

Posted in Contractual Liability, Insurance Bad Faith, Mortgage, New Case

In Jackson v. Allstate, the Eighth Circuit affirmed a trial court judgment in favor of Allstate on a breach of contract / bad faith claim.  Jackson’s house was damaged in an arson fire.  Allstate denied the claim based on the intentional acts exclusion and the material misrepresentation exclusion. Allstate’s motion for partial summary judgment was granted on the grounds that Jackson’s unjust enrichment and estoppel claims were precluded under Arkansas law and that Jackson had failed to produce sufficient evidence that Allstate denied her claim in bad faith. The case went to trial on a breach of contract claim.

The night before trial, the district court informed the parties that, because the case had been reduced to a simple contract dispute, the court would permit the parties one day each to present their case.

Jackson’s claims for unjust enrichment and estoppel were properly dismissed.  That Jackson had to make mortgage payments after the fire was part of her breach of contract damages.  The bad faith claim was properly dismissed since Allstate had substantial evidence that Jackson intentionally caused her house to be burned and materially misrepresented her role in causing the fire.

In addition, Jackson’s expert, could not say whether Allstate denied Jackson’s claim in bad faith. Under Arkansas law, “a claim based on the tort of bad faith must include affirmative misconduct by the insurance company, without a good faith defense, and . . . the misconduct must be dishonest, malicious, or oppressive in an attempt to avoid its liability under [the] insurance policy.”

The appellate court upheld the trial court’s pretrial rulings and rulings on the evidence.  As to the mortgage payment, the Bank failed to provide a proof of loss for 2 years. When a proof of loss was provided, Allstate issued a check to the Bank, but Jackson would not agree to the funds being used to pay her mortgage.  Presumably, Jackson wanted to get back some of her payments made after the fire. Allstate did not have to pay more than the Bank’s proof of loss.

Duty to defend copyright, slogan, advertising claims Eighth Circuit, applying Minnesota law

Posted in Contractual Liability, Duty to Defend, New Case

Selective Insurance Company v. Smart Candle, LLC

The insured, Smart Candle, sells light-emitting diode (LED) flameless candles and commercial lighting systems internationally. Excell sued Smart Candle under the Lanham Act alleging that, among other things, Smart Candle’s use of the trade name and trademark “Smart Candle” infringed rights that Excell had over use of that name and trademark. Excell sought a permanent injunction against Smart Candle’s use of the name, trademark, and domain name “smartcandle.com.”

Selective Insurance Company insured Smart Candle. Smart Candle requested a defense from Selective Insurance but Selective said the claim wasn’t covered and there was no duty to defend. While the policy had “personal and advertising injury” coverage, which covered infringement “upon another’s copyright, trade dress or slogan in your ‘advertisement,’” the policy excluded coverage for any injury “arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.”

Because the policy required Selective to defend only suits claiming infringement of “copyright, trade dress[,] or slogan,” Selective insisted, Selective had no duty to defend Smart Candle against Excell’s suit for infringement of the “Smart Candle” trademark. Because Excell did not claim infringement of a “slogan” or “copyright,” Selective explained, it had no duty to defend or indemnify Smart Candle. Selective brought a declaratory judgment action on the coverage issues. Selective won on cross motions for summary judgment and the 8th Circuit affirmed, finding the claim was for the use of the name “Smart Candle” and that the name “Smart Candle” was not a slogan. Since there was no claim of slogan infringement, there was no duty to defend.

 

Governmental Tort Claims Act, Uninsured Motorist Coverage and Set Off — Okla law

Posted in Contractual Liability, immunity, New Case, Vehicle

In Mariani v. State ex rel. Oklahoma State University, 2015 OK 1, the issue was whether the governmental tortfeasor was entitled to a set off for the uninsured motorist coverage paid by the injured party’s insurer. Under the Governmental Tort Claims Act (GTCA), the state’s liability is limited to a certain dollar amount– in this case, $175,000.  The trial court refused to reduce the amount owed by the State by the amount paid by the victim’s insurance, and the Oklahoma Supreme Court affirmed.  The Court noted the collateral source rule is still the law in Oklahoma and the statutory language relied upon did not abrogate the collateral source rule.

General attorneys fees statute does not apply to action on insurance policy — Arkansas law

Posted in Contractual Liability, New Case

In Gafford v. Allstate Insurance Company, 2015 Ark. 110, the insureds were the prevailing party in a lawsuit filed after their rental house was damaged by fire.  But the insureds recovered less than 80% of what they claimed was owed.  So they sought attorneys fees under Arkansas’ general attorneys fee statute, 16-22-308 rather than the attorney fee statute which deals specifically with insurance claims, 23-79-208. From a certified question from the Eastern District of Arkansas, the Arkansas Supreme Court held that the specific statute controlled, and the only way to get attorneys fees was under 23-79-208:

Section 23-79-208 applies in actions against an insurance company when a party seeks attorneys’ fees on a policyholder’s claim for loss. Based on the plain language of section 23-79-208, the statutory remedy of attorneys’ fees is available to insureds “in all cases in which loss occurs,” id., conditioned on prevailing and on receiving an award within twenty percent of the amount demanded. Thus, because section 16-22-308 does not contain any such condition on a fee award, section 23-79-208 falls squarely within section 16-22-308’s exception that it does not apply when attorneys’ fees are “otherwise provided by law.” Id.
* * * *
In reading these two statutes together, we conclude that section 23-79-208 provides for an insured’s exclusive means of recovering attorneys’ fees in an action to recover for a loss under an insurance policy.

The concurring opinion relied upon legislative history, rather than the plain language of the statutes to reach the same conclusion.

 

Duty to defend — intent to injure — defamation — 8th Circuit — Minnesota law

Posted in Contractual Liability, Duty to Defend, New Case

In Sletten & Brettin Orthodontics v. Continental Casualty Company, the insured, (Sletten & Brettin) were sued for intentional defamation regarding an on line review of a competitor. There were several counts, but each count claimed that the insured intended to injure the competitor’s reputation.  The insurance policy excluded coverage for acts done with the intent to injure.  Because every claim in the competitor’s complaint pleaded that the insured acted with the intent to injure the competitor, the insurers had no duty to defend. The court found the policy provided coverage for intentional acts but excluded coverage for acts committed with the intent to injure. “Accordingly, the insurance policy here provides coverage for defamation in general, an intentional act, but excludes coverage for defamation committed with the intent to injure.”

The dismissal was affirmed, and the opinion is marked for publication.

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