Giant African snails are invading Miami. The snails can grow up to 8 inches in length; and eat not only vegetation, but stucco and concrete; which could damage homes. But these types of damages are usually not covered under homeowners policies which view pest problems as maintenance issues.
MSNBC has the article and a video.
In Lombardi v. American Guarantee, the plaintiff lawyers fell for an email scam where it was contacted to deposit a check and then remit it to other parties less their fees. After the check cleared, it was determined to be a counterfeit and the plaintiff lawyers were required to make it good to the bank. The lawyer's insurer did not participate in the settlement of the claims between the insureds lawyers and the bank, claiming there was no coverage.
The insurance policy issued by defendant provided coverage for any claim "based on an act or omission in [plaintiff's] rendering or failing to render Legal Services for others." "Legal Services" is defined by the policy as "those services performed by an Insured as a licensed lawyer in good standing . . . or in any other fiduciary capacity but only where the act or omission was in the rendition of services ordinarily performed as a lawyer." The terms of this policy encompass more than what would traditionally be considered "legal malpractice" (see United States Fid. & Guar. Co. v U.S. Underwriters Ins. Co., 194 AD2d at 1029).
The court found that when dealing with the Bank, the lawyers were performing legal services as defined by the policy. The policy did not require that the lawyers perform services for a client (who in this case was an impostor); only that the lawyer perform legal services for others. Holding money for others and paying it on demand is part of legal services that attorneys provide routinely.
The only remaining element under the policy's coverage definition is whether the claim was "based on" plaintiff's actions in rendering legal services to others. The phrases "based on" and "arising out of" are practically synonymous in the insurance coverage context (see Mount Vernon Fire Ins. Co. v Creative Hous., 88 NY2d 347, 352 [1996]). The latter phrase "requires only that there be some causal relationship between the injury and the risk for which coverage is provided" (Maroney v New York Cent. Mut. Fire Ins. Co., 5 NY3d 467, 472 [2005]). Of course, since the court used such a broad definition, this element was found to be met.
The contractual liability exclusion did not apply, and the insurer had a duty to defend. The case was remanded to determine if there was also a duty to indemnify.
In Valley Forge v. Health Care Management, the insureds were sued for medicare fraud and asked their insurers for a defense. The insurers agreed, but told the insureds that it was under a reservation of rights and that if there was no duty to defend, the insurers would ask the court to make the insureds pay the insurers for the defense costs. The court previously held there was no duty to defend (see Zurich Am. Ins. Co. v. O’Hara Reg’l Ctr. for Rehab., 529 F.3d 916 (10th Cir. 2008)) and sent it down to determine the amount of fees owed. The trial court gave the insurers all their fees but no interest and both parties appealed. The Tenth Circuit affirmed in a wonderfully written opinion by Judge Gorsuch.
The insureds claimed that the insurers cannot recover the defense costs they expended for the simple reason that no provision in the parties’ insurance contracts contemplates that possibility. The insurers argued, however, that Colorado law requires an insurer to pay defense costs, but at the same time provides the insurer with this assurance: if it pays defense costs pursuant to a reservation of rights letter, the insurer may later seek and obtain recoupment of its defense costs if the facts at trial prove the claim against the insured wasn’t covered by the policy. The court notes it must follow Colorado law on the issue and sides with the insurers – and cites Sherlock Holmes! (See below) The court also finds that the insurers need not wait until the underlying action is completed before seeking a declaration of no coverage.
Having decided that the insurers were entitled to recover the defense costs, the next question is are they entitled to all of their defense costs or might the amount be limited in some way? The court says it does not matter since the case was decided on summary judgment and no factual issues are presented. The insured’s expert affidavit was not quite sufficient under Rule 56(f) to get them more discovery. As to prejudgment interest, the statute talks about money wrongfully withheld, not wrongfully paid, and there are no cases awarding insurers interest on recoupment.
Here is the part that cites to Sherlock Holmes:
The fact that the [Hecla decision] did not mention any other comparable condition — such as specific contractual language — cannot be so easily ignored. It’s the dog that didn’t bark. Cf. Chisom v. Roemer, 501 U.S. 380, 396 n.23 (1991) (noting that silence on the issue can be probative evidence of legislative intent); United States v. Lopez, 518 F.3d 790, 798 n.2 (10th Cir. 2008); Sir Arthur Conan Doyle, Silver Blaze, in The Memoirs of Sherlock Holmes (1894).
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).
On a more humurous note, here is a posting of the top 10 insurance claim photos; we hope that none of your claims are pictured.
In Berry & Murphy v. Carolina Cas. Co., the issue was whether notice to a former law partner of a claim was notice to the other law partner. The court held it was. Thus, because the former partner had notice of the claim before the policy was issued, the claim was not covered as to the other law partner.
Facts
The Burkhardts hired Murphy to handle a lawsuit. Murphy was a partner at Berry & Murphy. A year after he filed suit for the Burkhardts, he left the firm taking the case with him. The case was dismissed for failure to prosecute and was later reinstated with new counsel. A year after the partner left with the case, Burkhardts new counsel put Murphy on notice of a potential malpractice claim for the way he handled the lawsuit. Murphy put his carrier on notice of the potential claim – which happened to also be Carolina Casualty. No notice was given to Berry. When Berry was sued along with Murphy, he tendered the claim to Carolina Casualty, which denied coverage, claiming that the alleged malpractice claim was first made against an insured (i.e., Murphy) prior to the inception of the insurance policy, thereby falling outside the claims-made coverage of the policy.
Discussion
The policy was a claims made policy, rather than an occurrence policy. This means it covered claims only if first made during the policy period. “A Claim shall be deemed to have been first made at the time notice of the Claim is first received by any Insured.” The court found that Insured was defined to include an individual after he left the law firm if the claim involved that individual’s acts or omissions that occurred while at the law firm. Thus, Murphy was an insured, and notice to him of the claim before the policy period meant that Berry was not covered under the policy.
There is a spirited dissent, which states that since Murphy was not Berry’s agent when he had notice of the claim, notice to Murphy was NOT notice to Berry.
The odd thing about this case is that Carolina Casualty did have notice of the claim, and had it before Berry did; and issued the policy anyway. But, the policy as a claims made policy, was not in effect when Murphy gave Carolina Casualty notice. Therefore, it was not a claim made within the policy period and was not covered. An occurrence policy also requires that the event happen during the policy period. If Carolina Casualty had insured Berry the entire time, I am not sure it could have escaped liability, as the notice from Murphy could have been notice under the Murphy policy, too.
Payless was sued in California for making hourly employees work "off the clock." It asked its insurer, Travelers, to defend and indemnify, but Travelers declined, saying that the claim was not covered. Payless settled the claims and then went after Travelers for reimbursement of the settlement and defense expenses. Travelers got summary judgment and the Tenth Circuit affirmed.
See, Payless v. The Travelers.
The Tenth Circuit found that this was a case of a misplaced modifier. The clause at issue excluded certain statutory claims against employers and stated:
The Insurer shall not be liable for Loss on account of any Claim made
against any Insured . . . for an actual or alleged violation of the Fair
Labor Standards Act (except the Equal Pay Act), the National Labor
Relations Act, the Worker Adjustment and Retraining Notification Act,
the Consolidated Omnibus Budget Reconciliation Act of 1985, the
Occupational Safety and Health Act, the Employee Retirement Security
Act of 1974, any workers’ compensation, unemployment insurance,
social security, or disability benefits law, other similar provisions of
any federal, state, or local statutory or common law or any
amendments, rules or regulations promulgated under any of the
foregoing; provided, however, this exclusion shall not apply to any
Claim for any actual or alleged retaliatory treatment on account of the
exercise of rights pursuant to any such law, rule or regulation.
emphasis added.
The question was whether "other similar provisions" modified all the listed exclusions, or just the underlined exclusions. The court found that even though bad grammar was used, the clause excluded all claims arising out of the Fair Labor Standards Act or other similar state law.
The court held that bad grammar did not make the clause ambiguous and even quoted Groucho Marx:
The opinion states:
All this underscores that, while the rules of English grammar often afford a valuable starting point to understanding a speaker’s meaning, they are violated so often by so many of us that they can hardly be safely relied upon as the end point of any analysis of the parties’ plain meaning. So it is that Groucho Marx could joke in Animal Crackers, “One morning I shot an elephant in my pajamas. How he got into my pajamas I’ll never know,” leaving his audience at once amused by the image of a pachyderm stealing into his night clothes and yet certain that Marx meant something very different. In the more mundane task of contract interpretation, we must be no less entitled to acknowledge the parties’ plain meaning without being straight-jacketed by a grammatical rule into reaching a patently unintended result.
Grammar and Groucho in an insurance policy interpretation case. Doesn’t get much better than that!
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