Reinsurance Law Blog

Reinsurance Law Blog

Paid vs incurred means $1 verdict ok, Missouri

Posted in New Case

In Walker vs. Kelley, Walker was rear-ended by Kelly and got some treatment.  Before and after the accident, Walker had jobs which required strenuous physical labor.  There was evidence that Walker was billed $25,000 for medical treatment after the accident, and that these bills were satisfied by payment of about $11,000.  The jury found for Walker and initially awarded him $0 damages.  The judge told them they could not find for Walker and award zero damages, so the jury came back with an award of $1 to Walker.  Walker appealed, claiming the award was insufficient.  But since there was evidence to support the finding, e.g., that Walker was not liable for his medical bills because they had been paid, the verdict was upheld.

The statute presumes that medical damages consist of the amount needed to satisfy providers, not the amount billed. Both amounts appeared in an exhibit, and parties stipulated to the admissibility of the exhibit into the record, but did not stipulate as to the truth of its contents. On appeal challenging the adequacy of jury award, the weight of the evidence is not at issue. When a motion for new trial is based on an inadequate verdict, review is for abuse of discretion, which a jury commits “only when the jury verdict is so shockingly inadequate as to indicate that it is a result of passion and prejudice or a gross abuse of its discretion.” With plaintiff’s verdict, an award of $0 is inconsistent but not an award of $1. A $1 does not per se prove circuit court error or jury bias or passion.

TCPA exclusion applies to non-TCPA claims, such as conversion — ED Missouri, applying Illinois law

Posted in Duty to Defend

In Regent Insurance Co. v. Integrated Pain Management, 4:14-CV-1759 RLW, 2016 WL 5357408 (E.D. Mo. Sept. 23, 2016) the policyholder was sued for sending unsolicited faxes in violation of the TCPA — Telephone Consumer Protection Act. In addition to the statutory damages, the complaint said that by sending the faxes, the policyholder converted the plaintiffs’ toner and paper.  The federal district court determined that under Illinois case law,  the claims are subject to the TCPA exclusions in the policies.

G.M. Sign, Inc. v. State Farm Fire & Cas. Co., 2014 IL App (2d) 130593,  18 N.E.3d 70 (Ill. App. Ct. 2014) held that a conversion claim arose out of the same conduct which constituted a violation of the TCPA and thus was not covered because of a TCPA exclusion. That some of the faxes sent may not have been “advertisements” did not matter. It did not matter if additional theories of recovery were alleged, as the conduct was the same. The conduct was excluded under the policies. There was no duty to defend, and summary judgment was granted to the insurance companies.


Arkansas nixes proposed constitutional amendment limiting contingency fees and non economic damages based on bad title

Posted in New Case, Proposed Legislation

In Wilson v. Martin, 2016 Ark. 334, the Arkansas Supreme Court found that a proposed ballot title was insufficient, and thus, the proposed constitutional amendment which would limit non economic damages and attorneys fees in medical negligence actions would not be properly before the voters.  The proposed constitutional amendment would have limited attorneys fees in medical negligence cases to one third (33 1/3%); and would have limited non economic damages to no less than $250,000 per health care provider.  But non economic damages was not defined:

The term “non-economic damages” is a “technical term” that is not readily understood by voters. Without a definition of this term, the voter would be in the position of guessing as to the effect his or her vote would have unless he or she is an expert in the legal field. In other words, the voter would be unable to reach an intelligent and informed decision for or against the proposal without an understanding of the terms and the consequences of his or her vote. See Cox , 374 Ark. 437, 288 S.W.3d 591. Accordingly, we conclude that the ballot title of the proposed amendment is insufficient because it fails to define the term “non-economic damages.” Therefore, we grant the petition to enjoin Respondent Secretary of State Mark Martin from counting or certifying any ballots cast for the proposed amendment at the general election on November 8, 2016.

Title insurance not liable for loss of building by fire Okla

Posted in Contractual Liability, New Case

In Choate v. Lawyers Title Insurance Corp., 2016 OK CIV APP 60, the policy holder purchased title insurance when he bought an old church property in Seminole.  Several years later, the building on the property burned down (the fire was arson) and the City had the property razed based on safety concerns.  Choate sued the title company claiming that the City had a policy to raze several blocks of property, including his, (which included slow fire department response) and that the title attorney who was a city attorney at the time and was also on the board of the church knew it.  This policy was claimed to be an encumbrance on the property, such that the title policy should pay.

A previous dismissal of the claim with prejudice was reversed because there were no reasons for the dismissal given. The trial court again dismissed the action with prejudice finding no liability under the title policy.  This time, the dismissal was affirmed.

“Title insurance,” is “insurance of owners of property or others having an interest therein, or liens or encumbrances thereon, against loss by encumbrance, or defective titles, or invalidity, or adverse claim to title.” 36 O.S.2011 § 709.  Title insurance is “of a state of ownership at a specific point in time. . . ” The policy in this case “insures, as of the Date of the Policy … against any loss or damage … sustained or incurred by the insured by reason of … 2. Any defect in or lien or encumbrance on the title; 3. Unmarketability of the title.” In the breach of contract section of Insured’s petition, he alleges City’s so-called “policy decision” to demolish and/or condemn the Building created the “defect in or lien or encumbrance on the title” and “unmarketability of the title,” respectively section (2) and section (3). But the Title Insurer contended the policyholder / Insured has not and cannot allege any facts that would indicate he does not have clear and marketable title to the property.

¶36 Insured has not alleged the title or ownership to his real property or land has been affected by the loss of the Building, the cause of which he admits in the petition was determined to be arson. He also has not alleged any person or entity has made either a claim of ownership or to an interest to his land. Instead, the loss Insured alleges he sustained is to the Building affixed to his land.

¶37 A title insurance policy insures against defects or clouds in title to land, not land itself. 11 Couch on Ins. 3d, § 159:5. Many courts distinguish between matters that affect the title to land and matters that affect only the physical condition of the land. 1 Title Ins. Law § 5:5 (2015 ed.), “Defects, liens or encumbrances.”

¶38 Similarly, several courts distinguish between loss caused by unmarketability of the title and by physical conditions or other matters affecting the market value of the property. 1 Title Ins. Law § 5:7 (2015 ed.), “Unmarketable title.” “Defects which merely diminish the value of the property, as opposed to defects which adversely affect a clear title to the property, will not render title unmarketable within the meaning and coverage of a policy insuring against unmarketable title.” 11 Couch on Insurance 3d § 159:7.

The loss of the building was not covered under the policy, and there was no evidence that the policyholder’s title was impaired.  Thus, the dismissal was affirmed.

Owned vehicle exclusion upheld, UIM not mandatory — Missouri law

Posted in Contractual Liability, New Case

In Maxam vs. American Family Mutual Insurance Company, Maxam had uninsured motorist coverage on one car, but was hurt in a different car he owned.  When he wanted his uninsured motorist coverage for the accident, American Family denied his claim, because he was in a car he owned, but which did not have UM coverage when he was hurt.  This is the “owned vehicle” or “owned car” exclusion.  Summary judgment to the insurance company was affirmed.

Maxam claimed that the policy is ambiguous because it grants UIM (Underinsured Motorist Coverage) coverage to the person but then excludes certain vehicles from coverage.  But the Court disagreed, finding the “owned vehicle” exclusion is clear and unambiguous by its own terms as well as within the context of the policy as a whole, it will be enforced. The Exclusion states:

1. We do not provide coverage for bodily injury sustained by an insured person:

a. while occupying , or when struck by, a motor vehicle that is not insured for this coverage under this policy if it is owned by you or a resident of your household.

The exclusion was unambiguous.  Further, no specific limits are required of UIM, unlike liability coverage.  And UM is not mandated.  Thus, the contract controls and summary judgment was proper.


7th Circuit affirms order requiring payment of life insurance benefits to a stranger with no insurable interest — Wisconsin law

Posted in Contractual Liability, Insurance Bad Faith

In U.S. Bank National Association v. Sun Life Assurance Company, (opinion by Judge Posner)Sun Life issued a $6M life policy on Margolin in 2007.  In 2011, US Bank bought the policy and kept up the premiums.  In 2014, Margolin died.  Sun said it was looking into whether it had to pay the policy and US Bank sued.  Most states prohibit taking out life insurance on a “stranger”, as there is no insurable interest in the life of a stranger.  But Wisconsin changed its law such that insurance companies would be liable on such policies, but may or may not have to pay the proceeds to one with an equitable interest.  Wisconsin reasoned that this would give insurance companies more incentive to make sure that those buying policies would have an insurable interest in them.

Sun Life declared that it would refuse to pay U.S. Bank the policy proceeds until it investigated the policy’s validity. That refusal, should it ripen from tentative to definitive up – on completion of the investigation, would be profitable because during the seven years that the policy was in force Sun Life had collected and retained almost $2.5 million in premiums paid by the successive owners of the policy. And even if Sun Life was ordered to return the premiums, see Venisek v. Draski , 150 N.W.2d 347, 353–54 (Wis. 1967), it would save $6 million if it didn’t have to pay U.S. Bank the policy proceeds. Reacting to Sun Life’s declaration and armed by Wisconsin’s requirement that insurers in Wisconsin pay claims within 30 days, Wis. Stat. § 628.46, U.S. Bank brought this diversity suit against Sun Life, and prevailed in the district court; the district judge ruled that the bank was entitled to the policy proceeds—the $6 million—plus statutory interest and “bad faith” damages for Sun Life’s foot dragging.

The court rejected the claim that no payment was due because the policy was a gambling contract, citing Grigsby v. Russell , 222 U.S. 149. The court rejected a claim that the Wisconsin Constitution forbid gambling, and thus no payment was due.

Gambling contracts, including life insurance policies that lack an insurable interest, are still forbidden. The statute changed only the remedy for violation, from invalidation of the policy to requiring the insurer to cough up the proceeds rather than—as Sun Life claims entitlement to—being allowed to keep all the premiums and pay nothing to the policy holder because the latter had no insurable interest in the policy.

Finally, the trial court properly granted statutory interest and bad faith damages, as there was no reasonable proof that the insurer did not have to pay the claim; and there was evidence that the insurer lacked a reasonable basis for the delay.

Note that apparently, the life policy was a security, because it was bundled and sold with other insurance policies.

Fact questions preclude summary judgment on breach of contract and bad faith claims — WD Oklahoma

Posted in Contractual Liability, Insurance Bad Faith

In Neill v. State Farm Fire & Cas. Co., CIV-13-627-D, 2016 WL 4384793, (W.D. Okla. Aug. 16, 2016), Neill sued State Farm for breach of contract and bad faith for failure to pay enough on a tornado claim.  There were factual issues which precluded summary judgment on the contract claim — specifically, whether the repair estimates by State Farm were appropriate.  Thus, summary judgment on this issue is denied.

State Farm contends Plaintiffs cannot establish bad faith because it paid their claim in a timely manner and they filed suit without any evidence that the scope or cost of repairs exceeded State Farm’s estimate. State Farm argues that Plaintiffs’ theory of inadequate investigation fails because they lack evidence State Farm overlooked important facts and that a more thorough investigation would have produced relevant information. State Farms’ final argument, articulated in its reply brief, is that any disagreement between the parties regarding the extent of Plaintiffs’ loss or their entitlement to ALE coverage is a legitimate dispute and will not support tort liability.

  • * * * *

Regardless whether the Court would reach the same conclusions, Plaintiffs have presented minimally sufficient facts from which reasonable jurors could find that State Farm did not conduct an investigation and assessment of the damage to Plaintiffs’ home that was appropriate under the circumstances.

No coverage for accident where policy lapsed before accident and a new policy was issued after the accident — ED Ark

Posted in Contractual Liability

In United Fin. Cas. Co. v. Pearson, 4:15-CV-00192-KGB, 2016 WL 5079249 (E.D. Ark. Sept. 16, 2016), the insured, Pearson, failed to pay his premiums, and the insurance was cancelled effective March 25.  The insured sought to reinstate the policy on June 2, after an accident.  But the insurance company would not reinstate the policy, and would only issue a new policy if the insured paid the amounts owed under the old policy.  The new policy was issued a few hours after the accident.  On default summary judgment, the court found there was no coverage under either the first policy which was properly cancelled or the second policy, issued after the accident.

Claim file discoverable on issue of duty to defend — WD Okla applying Illinois law

Posted in Contractual Liability, Duty to Defend, Insurance Bad Faith

In Federal Insurance Company v. Indeck Power Equipment Company, CIV-15-491-D, 2016 WL 5173402 (W.D. Okla. Sept. 21, 2016) the trial court granted a motion to compel discovery of a claim file.  The case had been bifurcated for discovery between duty to defend and bad faith.

According to Federal, information regarding the claim file relates to the issue of whether Federal committed bad faith, an issue that has been reserved for the second phase of the bifurcated process. Indeck responds that the claim file’s contents are, at minimum, potentially relevant to the duty of defend, especially in light of the fact Federal initially determined that there was a possibility of coverage and subsequently reversed course. Both parties agree that Illinois law governs the present dispute.

The Court found that

[C]onsideration of relevant portions of a claim file in determining a duty to defend is in line with Illinois law that states a trial court may consider extrinsic evidence beyond the underlying complaint and policy, if doing so does not determine an issue critical to the underlying action. The Court agrees that Federal’s reasons for initially deciding to defend the Altus lawsuit, then subsequently changing its position, are relevant to the present issue, and such information is subject to production. Again, relevance at this stage is broadly construed, and “[i]nformation within this scope of discovery need not be admissible in evidence to be discoverable.” Fed. R. Civ. P. 26(b)(1). Federal has not shown to the Court’s satisfaction that such evidence is of such marginal relevance that the potential harm occasioned by discovery would outweigh the ordinary presumption in favor of broad disclosure. The Court reiterates that it is not ordering Federal to produce the entire claim file, but only those portions that may relate to Federal’s duty to defend.


Employee dishonesty, non-cumulation provision, policy holder gets multiple years of coverage Oklahoma

Posted in Contractual Liability, New Case

In First United Methodist Church of Stillwater, Inc. v. Philadelphia Indemnity Insur. Co., 2016 OK CIV APP 59, First United’s finance manager embezzled nearly $200,000 between 2009 and 2012. First United gave notice to Philadelphia of the thefts in January 2013 that it discovered in December 2012. Philadelphia conducted an investigation and ultimately paid First United the limit of liability under the 2013 Policy in the amount of $50,000. First United brought this action for breach of contract because it claims it has coverage under the separate insurance policies in 2011 and 2012, each with a limit of liability of $50,000 for the thefts that occurred during those policy years and discovered within the timeframe specified in the 2011 Policy and 2012 Policy. Philadelphia denies it is in breach and contends it has fulfilled its contractual obligation under the policy presently in effect, the 2013 Policy.

On cross motions for summary judgment the trial court found for the insured policy holder, and the appellate court affirmed. In affirming, the Oklahoma Court of Civil Appeals relied upon E.J. Zeller, Inc. v. Auto Owners Insurance Company, No. 4-14-04, 2014 WL 5803028 (Ohio Ct. App. Nov. 10, 2014) (unpublished), wherein the Ohio appellate court examined multiple provisions of similar insurance policies , determined the policy provisions were unambiguous, and determined the insured had coverage under each of two separate policies. The limits of insurance did not exclude coverage under other policies, so long as the loss was discovered within a year of the policy period, there could be coverage; and the non cumulation provision did not limit coverage under prior policies.

The policy provisions and discussion of them are below.

The policies defined Occurrence as “Act or series of related acts involving one or more persons. . .” The policies’ “Limits of Insurance,” provides:

The most we will pay for loss in any one “occurrence” is the applicable Limit of Insurance shown in the Coverage Summary. . .

In addition, the policy said “Discovery Period for Loss  We will pay only for covered loss discovered no later than one year from the end of the policy period.” The policies also contained a “Non-Cumulation of Limit of Insurance” (non-cumulation provision) which states “Regardless of the number of years this insurance remains in force or the number of premiums paid, no Limit of Insurance accumulates from year to year or period to period.”

The policy period provision excludes any loss caused by acts of employee dishonesty outside the policy period from coverage. Thus, losses attributable to acts that occurred during prior policy periods would not be covered under the current policy. However, this provision does not clearly state that coverage under prior policies for those losses is excluded by the current policy. It is merely a limit of coverage under the current policy.

As to discovery of loss, the court stated the provision creates a “temporal limit as to when a limit must be discovered”; the provision, however, “does not cause the current policy to exclude coverage under prior policies.” Once a year has passed, however, “the policy coverage expires and can no longer provide any coverage for any losses. Thus, while this provision in the current policy does nothing to limit recovery under prior policies, coverage can be defeated under a prior policy, so long as it contains this provision and losses were not discovered within one year after the end of the respective policy periods.”

The “prior loss” provision specifically limits coverage for an individual loss that is covered under two policy periods. However, as discussed, each policy only covers losses caused by acts that occur inside of the policy period. Any loss attributable to acts that occur solely outside the policy period are automatically excluded under each policy. Thus, this provision cannot apply to an individual loss attributable only to acts inside the policy period of a single policy, as that loss will only be covered by one policy. Instead, this provision applies when acts occurring in two separate policy periods contribute to an individual loss. Under those circumstances, this exclusion would allow the insured to have the benefit of whichever policy provided greater coverage for that individual loss, but not be allowed to claim that loss under two different policies periods.

The Zeller Court, unlike the courts who considered the meaning of comparable prior loss provisions in Reliance, Wausau and Madison, specifically emphasized the “any loss” language of the provision as applying to an individual loss instead of the “all loss” language defining occurrence. The court further stated:

Notably, this provision does not utilize the term “occurrence.” It applies to individual losses, not to an aggregation of losses. Indeed, were this provision to apply when an “occurrence” was partly covered by two policies, then an occurrence would necessarily include losses covered under prior policies. However, as this provision is written, it only applies when a loss spans multiple policy periods. Thus, while this provision limits recovery for an individual loss that spans multiple policy periods, it does not otherwise exclude coverage under prior policies that are attributable to acts that occurred solely during that policy period.

The non-cumulation provision specifically applies to multiple policies. However, it does not operate to exclude coverage under prior policies.

This provision is specifically limited to “this insurance.” While “this insurance” is not defined in the policy, when it is used elsewhere it is only in reference to the current policy, not to all policies issued by the insurers. Indeed, the Prior Loss exclusion operates when a loss was covered under “this insurance” and any prior insurance issued by the insurers. Thus, the definition of the term “this insurance” cannot include any prior insurance. As a result, the NonCumulation provision only operates in the event that “this insurance,” i.e. the current policy, is extended or otherwise covers multiple years. When each policy period is covered by a different contract for insurance, this exclusion does nothing to limit recovery to a single policy.

The Court concluded:

While we do not agree with the conclusion reached by those courts who have found no ambiguity in similar contract provisions, we do not find Philadelphia’s arguments concerning the non-cumulation provision unreasonable. Philadelphia argues the non-cumulation provision23 restricts coverage for employee dishonesty to the definition of “occurrence” (“all loss caused by, or involving” an employee “whether the result of a single act or series of acts”); that is, to one occurrence (though the acts occurred over many years) regardless of the number of successive, separate policies the insured has purchased. According to Philadelphia’s reasoning, the non-cumulation provision acts to restrict coverage to only the current year’s policy and Limits of Liability (e.g., $50,000) and to exclude coverage under prior policies for an occurrence that took place within a prior year’s policy period.

The Zeller Court’s comprehensive analysis of multiple provisions of insurance contracts similar to those present here, however, is instructive and persuasive that another interpretation of the policy language – one that does not restrict recovery for an occurrence that occurs in separate policy periods to only one policy period – is also reasonable. Even if Philadelphia meant to limit recovery for occurrence spanning many years and multiple policies, as written the policy language can be reasonably interpreted to limit recovery to the aggregate of losses incurred within one policy period regardless of the number of thefts or dishonest acts by an employee, but does not preclude recovery for an occurrence within a particular policy period, and, thus, does not preclude recovery for an occurrence that also occurs in another policy period, even if the theft or dishonest acts are committed by the same employee. Consequently, because the provisions herein discussed are susceptible to more than one reasonable interpretation, the terms are ambiguous, and are to be construed against Philadelphia, who crafted the contract language, and in favor of First United as a matter of law.