In Decker Plastics, Inc. v. W. Bend Mut. Ins. Co., the insurer denied coverage after its insured, Decker, was sued for damages caused by Decker’s defective plastic bags. West Bend argued the defective plastic bags did not constitute an “occurrence” under the policy. Judgment for the insured was proper because “occurrence” includes damages to property other than the insured’s work product. Thus, the policy covered all damages except to the plastic bags themselves.
In Fidelity Nat. Title Ins. Co. v. Woody Creek Ventures, L.L.C., an insured sued its title insurance company claiming the title was unmarketable because the insured lacked a permanent right of access between parcels. The insured claimed the thirty-year revocable right of way provided by the insurer to access the second parcel was insufficient. Judgment for the insurer was proper because there is no requirement to provide permanent or unrestricted access. Further, the insured’s inability to sell the second parcel was inconsequential because economic unmarketability does not render a title unmarketable where no legal ownership defect is present.
In Lexington Ins. Co. v. Precision Drilling Co., L.L.P., the insurer sued the insured after an accident on the insured’s oil rig. The insurance policy was purchased by the oil rig management company. The insurer claimed the policy violated the Wyoming Anti-Indemnity Statute because the policy was purchased by a third party and the statute voids any agreement indemnifying an oil and gas company’s negligence. Judgment for the insured was proper because the statute did not apply to “any insurance contract[s].” The legislature’s use of “any” evidenced clear intent to exempt all insurance contracts from the statute regardless of purchaser.
In National Fire Insurance Company v. E. Mishan & Sons, Inc., Emson was sued in two class action lawsuits that claimed Emson worked with two other companies to to deceptively trap customers into recurring credit card charges. The underlying lawsuits asserted that Emson acted as a purveyor of data, facilitating “data passes” and transferring private customer information for profit. Emson was insured by National Fire and others under several commercial general liability policies. The Policies provided coverage for “those sums that the insured becomes legally obligated to pay as damages because of ‘personal and advertising injury’ to which this insurance applies.” The Policies defined “personal and advertising injury” to include the “[o]ral or written publication, in any manner, of material that violates a person’s right of privacy.” In addition, the Policies included an exclusion to coverage for personal and advertising injuries for knowing violations of another’s rights, defined as “ ‘[p]ersonal and advertising injury’ caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury.’
The district court found the insurers had no duty to defend the lawsuits because “all of the allegations” against Emson in the underlying lawsuits fall into the coverage exclusion for “personal and advertising injury” caused by knowing violations of another’s rights. The Second Circuit reversed. The Court considered both the causes of action and the accompanying factual allegations against Emson and concluded that the knowing violation exclusion alone did not absolve the Insurers of their duty to defend. The Court could not conclude with certainty that the policy does not provide coverage, because the conduct triggering the knowing violation policy exclusion is not an element of each cause of action. Therefore, Emson could be liable to plaintiffs even absent evidence that it knowingly violated its customers’ right to privacy. Furthermore, while the underlying plaintiffs allege generally that Emson acted knowingly and intentionally, the actual conduct described does not rule out the possibility that Emson acted without intent to harm.
The underlying lawsuits both assert claims against Emson for breach of contract and unjust enrichment, neither of which require a showing of knowledge or intent.
The summary judgment was reversed.
In Capson Physicians Insurance Co v. MMIC Insurance Inc., Dr. Hasik changed his private medical practice from Arkansas to work in a hospital in Iowa. He got new professional liability insurance from Capson. In addition, the hospital sought coverage for Dr. Hasik through its insurer, MMIC. Most professional liability insurance is written on a claims made (rather than an occurrence) policy. Between the time Dr. Hasik applied for the MMIC insurance, and the time it was issued, Dr. Hasik was sued for professional negligence. Capson said MMIC was on the hook for the claim, and that Capson’s liability on the claim was secondary to MMIC. The court disagreed, and the 8th Circuit affirmed. MMIC was entitled to rescission under Iowa law.
Dr. Hasik’s and the hospital’s nondisclosure of the Wilson lawsuit was the equivalent of a false assertion. The claim made against Dr. Hasik constituted a significant change that affected the risk that MMIC was offering to underwrite. It also rendered part of Dr. Hasik’s application untrue. The hospital and the doctor had a duty to report the lawsuit to MMIC. Stipcich v. Metro. Life Ins. Co., 277 U.S. 311 (1928) (“Insurance policies
are traditionally contracts uberrimae fidei and a failure by the insured to disclose conditions affecting the risk, of which he is aware, makes the contract voidable at the insurer’s option.” The Eighth Circuit quoted from Stipchich:
But the reason for the rule still obtains, and with added force, as to changes materially affecting the risk which come to the knowledge of the insured after the application and before delivery of the policy. For even the most unsophisticated person must know that, in answering the questionnaire and submitting it to the insurer, he is furnishing the data on the basis of which the company will decide whether, by issuing a policy, it wishes to insure him. If, while the company deliberates, he discovers facts which make portions of his application no longer true, the most elementary spirit of fair dealing would seem to require him to make a full disclosure. If he fails to do so the company may, despite its acceptance of the application, decline to issue a policy, or, if a policy has been issued, it has a valid defense to a suit upon it.
Capson argued the doctrine of uberrimae fidei conflicted with Iowa law, which places the burden on the insurer to seek information, construes doubts in favor of the insured, precludes rescission when the insurer’s questions have been answered truthfully, and does not permit courts “to rewrite insurance contracts based upon amorphous policy considerations.” But Iowa permits equitable rescission where one party has superior information on a material issue, as here. And it didn’t matter if the duty to provide this information was found in the policy. See Stipcich, 277 U.S. at 318 (“The obligation was not one stipulated for by the parties, but is one imposed by law as a result of the relationship assumed by them and because of the peculiar character of the insurance contract.”).
A claims-made policy provides coverage for claims that are first made and reported to the insurer during the term of the policy, regardless of when the insured’s alleged negligent act was committed. Insurers limit their exposure “by inserting a ‘retroactive date’ into the policy, prior to which the insured’s acts are not covered.” Occurrence policies provide coverage for occurrences within a specific policy period. It does not matter when the claim is made or reported.
In Cooper v. General American Life Ins. Co., Cooper got an annuity from General American. But the money funding the annuity didn’t clear, so General American reversed the transaction. General American would reinstate the annuity and pay Cooper interest if and when the payment cleared. Before the matter was resolved (payment was made and finally cleared) Cooper sued General American seeking penalties, interest and attorneys fees. Summary judgment to General American was affirmed. There was no payment due under the policy so the attorneys fees statutes (which must be strictly construed) did not apply. A general attorneys fee statute for breach of contract claims did not apply because there was no claim for breach of contract.
In Etherton v. Owners Insurance Company, Etherton was hurt in a car wreck and had 3 back surgeries. He settled with the other driver for $250,000 and wanted $750,000 from his uninsured / underinsured motorist carrier — the remainder of his $1M policy limit. The UM carrier (Owners) offered $150,000, because it did not believe the injuries claimed arose from the accident. Etherton sued for breach of contract and delay in payment and got $2,250,000 in damages. (This amount was determined as the amount owed under the contract — 750,000, and twice that amount for delay damages.) The Tenth Circuit affirmed.
First, Etherton’s causation expert was properly allowed to testify under Daubert. But the expert’s methodology was well accepted in the medical community for medical treatment purposes, and the methodology was reliably applied in this case, so the evidence ruling was affirmed. Second, the jury properly decided that the insurance company was liable under Colorado’s unreasonable delay/denial statute.
Owners claimed it could not be liable for delay or denial of the claim because under the policy, Owners and Etherton had to agree to the damages before Owners was liable. The Tenth Circuit soundly rejected this claim. Not only would such a reading of the policy unreasonably insulate insurers from claims, it would also conflict with Colorado statutes.
In sum, Owners’ interpretation of the contract provision is unreasonable and would be void as against public policy as stated in Colo. Rev. Stat. § 10-3-1115.
Whether Owners acted reasonably was a jury question, decided against it. And, under Colorado law, Etherton was entitled to his contract damages and twice his contract damages for bad faith. The judgment was affirmed.
The Washington Insurance Law letter for Spring, 2016, is now available. The newsletter contains several dog cases, a discussion of how many accidents resulted from a drunk driver’s various collisions; a discussion of Cumis counsel cases and reimbursement clauses in policies, and recreational land use immunity.
In Burger v. Allied Property and Cas. Ins. Co., Burger was injured in a car accident. The other driver paid Burger the policy limits of $100,000 for damages, but Burger had additional damages so she made a claim against Allied for underinsured motorist coverage. Summary judgment to Allied was affirmed. The policy defines an “underinsured motor vehicle” as one that was subject to a policy with a limit of liability that was less than the limit of liability for UIM coverage under insured’s policy. Here the tortfeasor’s liability limits of $100,000 exceeded the UIM (underinsured motorist) limits of $50,000. Thus, the policyholder was not injured by an “underinsured motor vehicle” and summary judgment was proper.
Recent severe weather means property damage. If you have property damage, read this important information before making a claim.