There is a new edition of the on line newsletter, Coverage Opinions. There is a case on the “Designated Premises Endorsement” a case claiming bad faith as a result of withdrawing the defense on the eve of trial; the duty to defend an additional insured that doesn’t ask for a defense among others.
In National Surety Corporation v. Dustex Corporation, the issue was whether the insurance company properly reserved its rights to deny coverage to its policyholder / insured, Dustex. The insurance company had reserved its rights as to the declaratory judgment action, but had not specifically reserved its rights as to the arbitration proceeding. The trial court ruled there was no coverage under the policy, but that there was a fact question as to whether the insurance company was estopped from denying coverage for the arbitration. Since estoppel is an equitable concept, and since the policyholder had acknowledged that the insurance company was defending under a reservation of rights, the trial court found the insurance company was not estopped to deny coverage.
There were various acknowledgements that Dustex knew the case was being defended under a reservation of rights. Dustex claimed this applied to the declaratory judgment action, and not to the arbitration. A specific reservation of rights as to the arbitration action was not sent for 3 1/2 years. There was an email from Dustex thanking the insurance company for defending “this claim” under a reservation of rights. Dustex’s argument that it thought “this claim” only referred to the declaratory judgment action, and not the arbitration, did not (and was not) accepted by the trial court. Errors in another reservation of rights letter did not make the reservation of rights ineffective. Judgment for the insurance company was affirmed.
In American Family Mutual Ins. v. Donaldson, American Family insured Todd Patton with an auto policy and an umbrella policy. Todd’s son Jacob was driving the family car when he was in an accident which hurt his passenger, Donaldson. Jacob was apparently inebriated at the time. American Family agreed to pay the policy limits of the auto policy to Donaldson, while allowing Donaldson to litigate whether there were other policies out there to cover the claim. Donaldson agreed to limit his recovery to insurance proceeds. Then, when American Family filed a declaratory judgment action against its insureds and the Donaldsons, seeking a declaration the umbrella policy did not apply, the insureds and the Donaldsons entered into an agreement where the insureds admitted liability (amount to be determined by arbitration) and the Donaldsons agreed to seek recovery only against insurance, not against the insureds personal assets. Summary judgment to American Family was affirmed on the grounds of the breach of the cooperation clause.
Rather than discuss the exclusions the parties argued, the 8th Circuit ruled that the admission of liability by the insureds was a violation of the cooperation clause which precluded coverage. The insureds were already protected from personal liability by the agreement between American Family and the Donaldsons. American Family admitted the existence of coverage as the primary carrier on the automobile policy, but denied coverage as the excess carrier under the umbrella policy. It didn’t matter, though, because the insureds had no personal liability because of the settlement between American Family and Donaldson. The breach of the cooperation clause was material and prejudicial, allowing American Family to avoid coverage, and allowing the 8th Circuit to avoid analyzing the intentional acts and the violation of law exclusions.
The elements of a claim for transactional malpractice against a lawyer include proximate cause, meaning that the lawyer’s negligence made plaintiff miss out on an agreement more favorable to plaintiff, which includes proof that any other party to the agreement would have agreed to the more favorable agreement. Plaintiff carried its burden by showing that the initial agreement included a payment that defendant’s amendment negligently omitted. Such causation is “clear and palpable” and therefore requires no expert evidence in support. Plaintiff need not litigate over reformation of the agreement, nor show that such litigation was doomed to fail, because mitigation of damages is not an element of a claim for transactional malpractice. Settlement of the disputed payment, with the other party to the agreement, does not negate damages because not all damages are recoverable by litigation with the other party. Therefore, the circuit court did not err in refusing instructions on whether plaintiff showed that the settlement was necessary. Testimony that defendant was negligent, from defendant’s expert witness, negates prejudice from instruction describing a method of negligence. No intervening cause occurred when the client signed the negligently drafted amended agreement because following defendant lawyer’s advice was foreseeable and an intervening cause is unforeseeable. Rule provides that an authorized after-trial motion extends the circuit court’s jurisdiction beyond the usual 30 days after judgment, but only as to relief sought in such motion, so post-judgment interest not requested but awarded more than 30 days after judgment was unauthorized.
SKMDV Holdings, Inc., v. Green Jacobson, P.C.
Missouri Court of Appeals, Eastern District – ED102493
In Bolinger vs. Clarks Fork Mutual Insurance Company, Clarks Fork Insurance did not pay for the collapse of the Bolingers’ turkey barns after a winter storm. The insurer said the policy didn’t cover the claim. Summary judgment to the insureds was reversed.
The Bolingers claimed that since the policy did not exclude collapse, it must be covered. But the policy was not an “all risk” policy — it was a named perils policy.
“Under an all-risk insurance policy, recovery will be allowed for all fortuitous loss, unless the policy contains a specific provision expressly excluding the loss from coverage.” Pakmark Corp. v. Liberty Mut. Ins. Co., 943 S.W.2d 256, 259 (Mo. App. E.D. 1997). The Policy purchased by the Bolingers was a “named peril” policy. To recover on a named peril policy, the insured must prove the loss for which the insured seeks damages was caused by a peril insured against by the policy. Franklin v. Farmers Mut. Ins. Co., 627 S.W.2d 110, 113-14 (Mo. App. W.D. 1982).
Normally, in a “named peril” policy, a non-covered peril does not need to be specifically listed as an exclusion because there is nothing that brings the peril under the terms of coverage of the Policy to begin with. “Ensuing loss clauses” . . . “permit coverage for certain losses that flow from an excluded peril.”
A broad ensuing loss clause “covers any loss occurring subsequent to an excluded loss as long as the subsequent loss is not excluded by the policy.” Id. In this case, the phrase “‘We’ do pay for an ensuing loss unless the ensuing loss itself is excluded” may reasonably be read as a broad ensuing loss clause. If a weather condition causes a loss that, in turn, causes an additional, subsequent loss that would otherwise be covered under the Policy, the secondary loss remains covered.
Fact questions precluded summary judgment. Further, the Bolingers failed to address and negate Clark Fork’s affirmative defenses. Summary judgment was reversed and the case remanded.
In Maxwell v. Sprint, 2016 OK 41, (not yet released for publication, thus, subject to change) the Oklahoma Supreme Court found parts of Oklahoma’s new workers compensation laws unconstitutional. First, the court ruled that scheduled members (such as limbs, toes, eyes) do not have to be evaluated per the latest AMA Guides. Furthermore, loss to scheduled members are determined per the scheduled member, not per the body as a whole. Second, the Act “deferred” payment of permanent partial disability damages to workers if they went back to work. This meant that workers had to choose between getting paid for their permanent injury or working. This part of the law was unconstitutional as a “special law” since it applied only to permanent disability to the body as a whole and not to scheduled members:
Under the AWCA, the Legislature has arbitrarily determined that employees who suffer injuries to scheduled members and who receive permanent partial disability awards under § 46(A) are unable to return to work, and thus, entitled to receive the permanent partial disability award. But even an employee who suffers the total loss of use of a hand, for example, may in some circumstances be able to return to his or her pre-injury job. We find no valid reason for the differential treatment of injured employees under § 46(A) and § 46(C). Although the Legislature has the power to exclude classes of employees from coverage under the workers’ compensation system generally, the Legislature is without power to vary the effect of a permanent partial disability award by excluding one group of claimants from benefits accorded other permanent partial disability recipients. The deferral of permanent partial disability benefits to a subclass of injured workers is an unconstitutional special law under Art. 5, § 59 of the Oklahoma Constitution.
The Court concluded:
that scheduled members are exempt from the AMA Guides under the AWCA. We also hold that the permanent partial disability deferral provision of 85A O.S. Supp. 2013 § 45(C)(5) is an unconstitutional violation of due process under Art. 2, § 7. Sections 45(C)(5)(a-e) are invalid and stricken. The deferral of permanent partial disability benefits to a subclass of injured workers under 85A O.S. Supp. 2013 § 46(C) is an unconstitutional special law under Art. 5, § 59. Only that portion of § 46(C) that makes the deferral provision applicable to injuries to the body as a whole or “other cases” is invalid. Any definitional provisions found in 85A O.S. Supp. 2013 § 2, as discussed herein, are invalid to the extent they are inconsistent with the views expressed today. On remand, the Commission, through its ALJs, shall take all action necessary to implement today’s pronouncement.
Previously, an opt out provision that let employers opt out of state-regulated workers’ compensation was rejected and declared unconstitutional by state regulators. And the Supreme Court found the legislature’s attempt to prohibit cumulative trauma claims within the first 180 days of employment was unconstitutional. One member of the Oklahoma Supreme Court noted that under the new workers compensation act, a worker may suffer an “impairment” or permanent physical disability because of a work related accident, yet still be denied and compensation for that impairment because it may not affect the worker’s earning capacity.
Oklahoma adopted an administrative workers compensation act effective February, 2014.
In Country Mutual Insurance Co. v. Orloske, Eric Orloske shot his brother, Brian, to death after Eric tripped and fell down the stairs in his home while holding a loaded shotgun. A wrongful death action was filed, and the insurer filed a declaratory judgment action claiming no duty to defend or indemnify. The insurer, Country Mutual, got summary judgment because Eric had pleaded guilty to manslaughter for Brian’s death and the insurance policy excluded coverage for criminal acts. On appeal, it was claimed that Minnesota’s reasonable expectations doctrine should invalidate the criminal-acts provision in the policy. The Eighth Circuit affirmed the finding of no coverage.
The policy provision:
9. Criminal Acts
“Bodily injury” or “property damage” arising from any criminal act. Criminal act means any act or omission which is criminal in nature or for which a penal statute or ordinance permits or requires any term of imprisonment or sentence of public service duties. This exclusion applies regardless of whether any “insured” is actually charged with or convicted of a crime and regardless of whether any “insured” subjectively intended the “bodily injury” or “property damage” for which a claim is made[.]
It was argued that Minnesota’s reasonable-expectations doctrine should apply and render the criminal-acts exclusion unenforceable on the instant facts. The district court concluded that the reasonable-expectations doctrine did not apply in this case “because the criminal-acts exclusion is neither ambiguous nor obscure.” The court states:
The . . . arguments misapprehend the narrow focus of Minnesota’s reasonable-expectations doctrine. The doctrine forces insurers to communicate the coverage and exclusions of their policies clearly; it is not a means of avoiding unambiguous policy language.
In Universal Underwriters Ins Co. v. Winton, Roberts caused a motor vehicle accident which killed 5 people, including herself. Robinson was driving a car she got from Heitz 2 days before. Heitz got the car from Moore, another car dealer. A big judgment was rendered against Robinson. After Robinson’s insurer paid its limits (the minimum required limits of $50,000) the injured people went after Heitz and Moore. Summary judgment to these dealers were affirmed. Heitz’s insurer, Universal, is not liable under its garage coverage because it indemnifies a Heitz customer only to the extent that the customer’s personal liability policy does not provide the statutory mandatory coverage of $50,000 — and Robinson had such minimum coverage. The Heitz/ Universal umbrella policy does not cover customer liability, and Moore’s insurers are not liable because Moore did not own the Chrysler at the time of the accident.
The Victims nevertheless argue that Heitz was covered (which is undisputed) and that Ms. Roberts was covered because “WHO IS AN INSURED” includes “YOU . . . with respect to (1) any AUTO . . . used in YOUR business or (2) personal use of any AUTO owned or hired by YOU,” id. at 251. They point out that the Chrysler was used in Heitz’s business and was a car owned by Heitz that was being personally used. But they are confusing what is covered with who is covered. They may have an argument that there is coverage with respect to Ms. Roberts’s accident, but that would mean only that Heitz itself would be covered if it were found liable with respect to the accident (for negligent entrustment or the like).
Moore did not own the vehicle even though it had not transferred the title certificate at the time of the accident. Despite failure to convey a certificate of title, “[t]he sale of [an] automobile [is] complete upon delivery of the car with the intent to sell.”
In re: Robinson Helicopter Co., involved a writ against a trial court which ordered Robinson Helicopters to file exhibits in a case closed 4 years before. The exhibits (depositions, apparently) were never filed in the case while it was open. The exhibits were supposed to be file to make them available to the plaintiffs in an unrelated case filed in California. The Eighth Circuit stated:
The district court lacks authority at this juncture to require production of these documents for use by third parties.
In U.S. Metals v. Liberty Mutual, the insured provided flanges to a refinery. These flanges were welded onto pipes. When tested by the refinery, they were found to leak, so the refinery replaced them all and sought damages from the insured. The insured settled with the refinery and sought coverage from its insurer, Liberty Mutual. At issue were the exclusions from coverage to “your product” and “impaired property.” The court stated:
The convoluted provisions of the standard-form CGL policy:
• obligate Liberty Mutual to “pay those sums that [U.S. Metals] becomes legally obligated to pay as damages because of . . . ‘property damage’ to which this insurance applies”;
• define “property damage” to mean “[p]hysical injury to tangible property, including all resulting loss of use of that property”, and “[l]oss of use of tangible property that is not physically injured”;
• exclude, in subparagraph K, “‘property damage’ to ‘your product’ arising out of it or any part of it”;
• exclude, in subparagraph M, “‘[p]roperty damage’ to ‘impaired property’ or property that has not been physically injured, arising out of . . . [a] defect, deficiency, inadequacy or dangerous condition in ‘your product’”;
• define “your product” to mean “[a]ny goods or products . . . sold . . . by [U.S. Metals]”; and
• define “impaired property” to mean:
tangible property, other than “your product” . . . , that cannot be used or is less useful because:
a. It incorporates “your product” . . . that is known or thought to be defective, deficient, inadequate or dangerous; or
b. You have failed to fulfill the terms of a contract or agreement;
if such property can be restored to use by the repair, replacement, adjustment or removal of “your product” . . . or your fulfilling the terms of the contract or agreement.
All damages for which U.S. Metals claims coverage arose out of its defective flanges, and thus Exclusions K and M apply. Under Exclusion K, damages to the flanges themselves are not covered, and U.S. Metals does not claim them. Under Exclusion M, the policy does not cover damages to property, or for the loss of its use, if the property was not physically injured or if it was restored to use by replacement of the flanges. The existence and extent of coverage thus depends on whether the refinery’s property was (1) physically injured or (2) restored to use by replacing the flanges. U.S. Metals contends that the refinery’s property was physically injured both by the mere installation of the faulty flanges and also later, during the replacement process. U.S. Metals further contends that the diesel units could not be restored to use simply by replacing the flanges because welds, gaskets, insulation, and coating were destroyed in the process and had to be replaced as well.
The Court found the policy only covered physical injury, and the installation of the faulty flanges did not physically injure the refinery. The refinery had physical injury from replacing the flanges because the flanges had to be cut off the pipes. But Exclusion M applied to preclude coverage for “impaired property” which is property that could be restored to use by replacement of the faulty flanges. (Insulation and gaskets which were replaced were not impaired property, and thus was not excluded from coverage.)
The case still pends before the Texas Supreme Court on rehearing.