Reinsurance Law Blog : Oklahoma Insurance Lawyer & Attorney : Stauffer & Nathan Law Firm

In Clark v. State Farm, the issue was whether the court should have certified a class action against State Farm after Clark’s claims against it had been determined and a judgment issued.  The case involved a PIP claim under Colorado law.  There was a determination that the State Farm policy at issue had to be retroactively reformed to comply with Colorado law; it was, and a judgment was entered against State Farm for the policy limits, which was paid.  The court then refused to certify a class of others for whom such retroactive reformation could apply, finding the controversy moot, as judgment had been entered for Clark.  Other people were not allowed to intervene as plaintiffs because they sought intervention too late.  The court said there was no case or controversy, and class action was properly denied.
 

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In Mansur v. PFL Life Insurance Co., the issue was whether PFL was properly granted summary judgment on Mansur’s claims of breach of contract and bad faith.  PFL issued Mansur a long term care policy which was to pay $80 a day while Mansur was in a nursing home.  If the parties agreed on an Alternate Plan of Care (APC) then it could provide benefits while the insured was at home.  This appeal concerns the meaning of the Policy’s APC provision. Mansur claims that because PFL agreed that the home care provided was appropriate, the requirements for APC coverage were satisfied and PFL should have paid $80 per day for Mansur’s home care after she left the nursing home. Mansur also claims that PFL acted in bad faith (1) by offering to pay under that provision only $32 per day for one period and $48 per day for a later period, (2) by refusing to pay even those amounts when Mansur demanded the full $80, and (3) by refusing to waive payment of Policy premiums while Mansur was receiving home care. The trial court’s grant of summary judgment to PFL was affirmed. 

 

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In Graham v. Hartford Life & Accident, the Tenth Circuit held that a health and disability plan provided to US postal employees was not a governmental plan – therefore it was subject to ERISA.  The plan was apparently offered through the National Rural Letter Carriers Association, the exclusive bargaining agent for rural letter carriers.  Since the plan was governed by ERISA, there was no right to a jury trial.  The court affirmed the ruling of the trial court that the denial of benefits was not arbitrary and capricious
 

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In reviewing the year end blogs and blawgs, I came across this list of the top 10 coverage cases in 2009.  Page 3 starts the list of dumb insurance cases of the year; the top 10 significant cases are listed at p. 4; and then discussed beginning on p. 5; the cases include a discussion of whether single or multiple occurrences resulted when two boys fell into a pit on the insured's property (court found there were two occurrences); whether insurers are entitled to get attorneys fees from each other in coverage disputes between them (no; there is no exception to the American rule for insurance companies); and whether a contractor's endorsement which effectively reduced coverage to an insured was enforceable (it was). 

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While the insurer had waived certain privileges relating to the settlement of the underlying claim, based on the insurer’s concession that it would not advance an advice of counsel defense, the waiver would not be expanded to include all privileged communications and work product of the insurer’s attorneys.  The decision clarifies a prior decision which found a waiver of attorney client privileges related to the settlement of underlying asbestos claims. 

Previously, the court found that USF&G waived the attorney-client privilege as to communications between its officer, James Kleinberg, and Robert Omrod, the in-house lawyer whose advice Kleinberg disclosed at his examination before trial regarding preparation of the reinsurance billing.

“During the testimony of Kleinberg, many questions were asked regarding USF&G's decision to allocate all claims to a single treaty year as opposed to spreading them over the several coverage years. This witness repeatedly revealed the advice he received regarding preparation of the bill. Consequently, he placed this matter at issue,” the panel concluded. “Therefore, the Reinsurers may seek testimony and production of documents regarding presentation of the reinsurance claim . . .  only to the extent that the discovery relates to disclosures made during James Kleinberg's examination before trial testimony.”

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(reported by harrismartin.com reinsurance news)

A federal judge has denied Swiss Reinsurance Corp.’s motion to dismiss bad faith claims brought by an insured seeking coverage for a furnace malfunction, ruling that the policy at issue is unclear as to whether Swiss Re acted as insurer or reinsurer. Felman Production Inc. v. Industrial Risk Insurers, et al., No. 3:09-0481 (S.D. W. Va.). 

After examining the policy language, Judge Robert C. Chambers of the U.S. District Court for the Southern District of Virginia ruled that it was reasonable for the policyholder to expect Swiss Re to act as a direct insurer.

In its motion to dismiss, Swiss Re asserted that it is the reinsurer of IRI’s insurance contract with Felman, not the original insurer, therefore there is no privity of contract between Swiss Re and Felman and Felman fails to state a claim upon which relief can be granted.

Judge Chambers noted that, generally, an insured party cannot maintain a direct action against a reinsurer because the insured is neither a party to the reinsurance policy nor in privity therewith. However, a reinsurer may become directly liable to the insured if the reinsurance contract is drafted to provide for direct liability on the part of the reinsurer where the original insured is a third-party beneficiary to the contract and/or the reinsurer expressly assumes liability, the judge noted. A reinsurer may also become directly liable to the insured by directly handling an insured’s claim, the judge added.

Judge Chambers concluded that the terms of the original insurance contract are unclear as to Swiss Re’s role under the policy, therefore it was reasonable for Felman to expect Swiss Re to act as a direct insurer and to join it as a defendant in the instant suit.

“In West Virginia, an insurance policy should be interpreted according to the plain, ordinary meaning of the language used,” the judge explained. “Further, ‘whenever the language of an insurance policy provision is reasonably susceptible of two different meanings or is of such doubtful meaning that reasonable minds might be uncertain
or disagree as to its meaning, it is ambiguous.’ An ambiguous provision in an insurance policy is then ‘construed strictly against the insurer and liberally in favor of the insured.’”

As evidence of its role as a reinsurer, Swiss Reinsurance pointed to the “Syndicate Policy” pages in the policy, which identified Swiss Re as the reinsurer. Felman countered that the insurer is referred to as “the companies” throughout the policies and “the companies” is defined as “the members of Industrial Risk Insurers as hereby applicable to this policy.” Felman further argued that the “insurer” is identified as “Industrial Risk Insurers” in the body of the policy.


 

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