Brecek & Young Advisors, Inc. v. Lloyds of London Syndicate involved a claims made professional liability policy. The policy excluded coverage for interrelated wrongful acts paid under a previous policy. The insureds (Plaintiffs) were accused of churning accounts. The 10th Circuit reversed and remanded a summary judgment for Plaintiff. The trial court erred by finding that three arbitration claims were separate (and thus subject to separate retentions or deductibles) and not interrelated wrongful acts (subject to one deductible). The 10th Circuit found that there was a substantial factual nexus between the previous claims and the claims at issue. The insurer was estopped from denying coverage because it had full knowledge of the previous claims and waited three years to raise the issue. Because estoppel requires detrimental reliance, the matter was remanded to determine if there was any detrimental reliance.
In Berendes v. Geico Casualty Co., the 10th Circuit (Utah) (unpublished) affirmed summary judgment in favor of the defendant insurance company on a bad faith claim. Plaintiff said the insurance company was in bad faith because there was no offer of policy limits within 30 days. Plaintiff sued the tortfeasor, got an excess judgment, and went after the insurance company. But the insurer HAD offered policy limits, which were rejected by plaintiff’s counsel as conditional, since the insurer asked for a waiver of subrogation from Plaintiffs insurer and requested information on the hospital lien. Rather, it was the plaintiff’s rejection of the settlement checks which caused undue delay; and those actions did not amount to bad faith by the insurer.
The assignability of tort claims was raised; and the court also found there was no duty of good faith to a third party claimant.
Appellant and respondent, both insurers, agreed to a joint defense but respondent refused to participate. Equitable contribution is due when one insurer pays part of another insurer's share on the same loss. It may be due between primary and excess coverage insurers. Remedy for unjust enrichment is subrogation. On appellant's equitable subrogation claim, respondent prevailed by summary judgment. But appellant's evidence of respondent's bad faith, and settlement on terms favorable to both appellant and respondent, raised genuine issues as to material facts. Amount of damages and percentage of fault are issues of fact. Genuine issues also remained as to respondent's duty to defend. Missouri Court of Appeals.
Missouri Public Entity Risk Management Fund vs. American Casualty Company of Reading, Pennsylvania ;
In Allen v. Continental Western, the issue was whether the insurance company had a duty to defend a claim alleging a wrongful repossession by the insured. The insured had repossessed Whipple's van twice, apparently to get her to pay back a loan. In Missouri, an insurer's duty to defend is broader than that of the duty to indemnify."The duty to defend arises whenever there is a potential or possible liability to pay based on the facts at the outset of the case and is not dependent on the probable liability to pay based on the facts ascertained through trial." In determining an insurer's duty to defend a suit against its insured, the court compares the language of the insurance policy with the allegations asserted in the plaintiff's petition. But those facts which are known or ascertainable also control an insurer's duty to defend.
First, the court found the tort of conversion was not an “occurrence” (or accident) as required by the policy, because it was an intentional rather than an accidental act. Next, the court dismissed the idea that one could plead within coverage by claiming an intentional act was also negligent. The pleading reveals not a hint of negligent conduct.
Finally, the policy did not apply to "'[b]odily injury' or 'property damage' expected or intended from the standpoint of the insured." Since the insureds consciously acted to repossess Whipple’s van with both the intention, and expectation that Whipple would not be able to use it, there could be no coverage.
In Smith Flooring v. Pennsylvania Lumbermens, the insured had a policy with Pennsylvania Lumbermens (PennL) for 5 years. An endorsement excluding coverage for a building was omitted from the policies issued for the last two years. Of course, in the last year, the building collapsed; Smith Flooring made a claim and the insurer denied it. When Smith Flooring sued, PennL asked that the policy be reformed to exclude the collapsed building, that the insurance policy did not accurately set forth the agreement of the parties. When the jury found for Smith Flooring on all claims, the court decided that the reformation claim finding was advisory only. The trial court then substituted its judgment for the jury's and found for PennL. The Eighth Circuit affirmed.
While the trial court erred in finding that there were no issues common to the parties' legal and equitable claims, there was no need to reverse or retry the case. Smith Flooring had a Seventh Amendment right to a trial by jury on the common issue of what the terms of the intended contract were. The district court also erred in treating the jury's verdict as merely advisory under Federal Rule of Civil Procedure 39 insofar as this issue is concerned. But there was insufficient evidence to find in Smith Flooring's favor as all the evidence showed the "clear intent of the parties originally was to exclude the Pine Warehouse from coverage. The inadvertent omission of an exclusion endorsement created only the appearance of coverage; it did not provide proof of a request for coverage or of payment therefor. The provisions of the written policy sans endorsement did not reflect the agreement of the parties that there was no coverage for the Pine Warehouse in January 2009."Continue Reading...
As reported by the Washington Insurance Law Letter, the Supreme Court of Washington refused to permit an insurer to recoup defense costs where the insurer had defended its insured under a Allowing reimbursement is not consistent with Washington cases regarding the duty to defend, which have squarely placed the risk of the defense decision on the insurer’s shoulders. In other words, since insurers have the right to control the defense, the risk of choosing badly is put on the insurance company. . . i.e., with great power comes great responsibility.
In Merseal v. Farm Bureau, the Merseals filed for bankruptcy and valued the property in their home at $600. Six months later, the house was destroyed in a fire, and the Merseals made a personal property claim for $150,000 dollars.
Farm Bureau denied the claim because the Merseals intentionally misrepresented the extent and amount of their personal property. Farm Bureau based its belief on the discrepancy between the value of the personal property stated in the Merseals’ bankruptcy filing and the insurance claim. The Merseals sued alleging breach of contract and vexatious refusal to pay. A jury found in favor of the Merseals, and the trial court entered judgment according to the jury's verdict. The Merseals were awarded $134,362 on the policy, $13,586 for vexatious refusal to pay, and $67,000 in attorney's fees. The appellate court affirmed.
Misrepresentations must be intentional to avoid the policy. The method of valuation for bankruptcy is different from the method for valuation for insurance claims. Further, it was claimed the mistakes were made in the bankruptcy filing, and not in the insurance claim. The vexatious refusal claim was also upheld. Farm Bureau placed the limits on the personal property after the bankruptcy claim without input from the Merseals; had the property valued after the fire by an independent company which valued the property at $131,929 actual cash value and $146,135 replacement cost; and failed to further investigate after getting a letter from the Merseals acknowledging errors on their bankruptcy statement, and explaining those errors.
In Kersten v. State Farm, 2013 Ark. 124, Kersten was sued by State Farm for negligence as a result of a car accident involving a State Farm insured. Kersten filed a counterclaim against State Farm alleging that State Farm was unjustly enrich ed as a result of having engaged in the deceptive and unlawful business practice of causing collection-style letters to be mailed in an attempt to collect unadjudicated, potential subrogation claims as debts. The counterclaim was filed on her own behalf and on behalf of others similarly situated. The class certification was dismissed, but the Arkansas Supreme Court reversed.
“We conclude that these allegations, at this early stage of the pleading phase, sufficiently plead a course of State Farm’s conduct that is typical of both Kersten and the class. And we conclude that the circuit court therefore abused its discretion in adopting the flawed reasoning State Farm asserted in its motion as to the typicality requirement being subject to determination according to the injuries sustained by the alleged wrongful conduct.”
The Arkansas Supreme court reversed the trial court and remanded the matter; but did not grant class certification as requested by Kersten.
When Joyce Bentley brought her granddaughter and friend to her house for the night, she forgot to turn her car off in the garage. All got sick from the fumes, and Bentley and the granddaughter died. The estate and her insurer, American National Property & Casualty, (ANPAC) were sued. The trial court granted summary judgment to ANPAC on its claim that the pollution exclusion applied to preclude coverage. The appellate court reversed, finding that the pollution exclusion was ambiguous, and that the reasonable expectations of an insured would be that such claims would be covered.
The exclusionary language relied upon by ANPAC in denying coverage states: Coverage E – Personal Liability and Coverage F – Medical Payments to Others do not apply to bodily injury or property damage: * * * n. arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants . . . Elsewhere, the policy defines "pollutants" as "any solid, liquid, gaseous, or thermal irritant or contaminant, including but not limited to smoke, vapors, soot, fumes, acids, alkalis, toxic chemical, and waste. Waste includes materials to be recycled, reconditioned, or reclaimed." "Combining these various provisions, the Policy excludes coverage for any bodily injury resulting from the 'discharge, dispersal, seepage, migration, release or escape' of 'any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, [toxic] chemicals and waste." Apana v. TIG Ins. Co., 574 F.3d 679, 681 (9th Cir. 2009).
This is standard language used by the insurance industry and is frequently referred to as the "total pollution exclusion." Id. at 680.
The court discusses the history of the pollution exclusion clause: "Since the adoption of the absolute pollution exclusion, however, insurers have repeatedly sought to exclude coverage under this exclusion for injuries that have occurred outside the realm of what would be considered traditional environmental pollution." The court rejected the claim that the dictionary definition should apply: "Rather, a court properly refusing to make 'a fortress out of the dictionary' must attempt to put itself in the position of a layperson and understand how he or she might reasonably interpret the exclusionary language." "Without some limiting principle, the pollution exclusion clause would extend far beyond its intended scope, and lead to some absurd results."
In short, an interpretation that ignores the familiar connotations of the word "pollutant" and that would lead to absurd results is not the interpretation that an ordinary person of average understanding would adopt.
The court cited cases holding that carbon monoxide would not be excluded under a pollution exclusion clause and reasoned that carbon dioxide should be similarly treated. The exclusion was ambiguous and the reasonable expectations of the policy holders required that the claim be covered. Summary judgment to the insurance company was reversed, and summary judgment for the policy holder was entered.
A household exclusion was not ambiguous despite placement, indemnification provision, incorporation of statute by reference, lack of dollar amount in reference to statute's minimum requirements, or effect on family members. Statute requires insurance policy to provide minimum protections and household exclusion is void only as to that requirement; above that amount exclusion is effective. Exclusion is void only to the extent of the minimum.Continue Reading...