Pollution exclusion applies to carbon monoxide claim 8th Cir Nebraska

In Church Mutual Insurance Co. v. Green, Mrs. Green was injured and her husband died from carbon monoxide while at the church parsonage.  Mr. Green was the parson, and there was apparently a leak in the heater.  When Green demanded policy limits from the insurance company, the insurance company filed a declaratory judgment action, claiming that the pollution exclusion precluded any coverage for Green's claims.  The trial court granted summary judgment to the insurance company, and the 8th Circuit affirmed.  The pollution exclusion was not ambiguous, and therefore applied to the claim. 

Green also claimed that the insurance company was estopped from denying coverage based on a late reservation of rights letter. Under Nebraska law, “the doctrine of estoppel [generally] may not be used to bring within the coverage of a policy risks not covered by its terms, or risks expressly excluded therefrom.” Exceptions to the rule require a showing of prejudice.  In this case, the insurance company hired a lawyer to investigate the incident.  The insurance company said it did not know if Green would make a claim against the Church, and if so, whether it would be under the liability policy or under the workers compensation policy.  But it didn't matter.  Green agreed she would not go after the Church's assets except the insurance policy, and got the Church's rights under that policy.  Thus, the Church suffered no prejudice from any delay in reserving its rights under the policy. 



Reservation of Rights, Duty to Defend, Oklahoma law

In TV v. Columbia National Ins. Co., the insured claimed that the insurance company was estopped to deny coverage because it initially accepted the defense of the action without a reservation of rights.  Columbia notified the insured’s personal counsel three weeks after it received notice of the suit (and 2 weeks after it had opened a separate claim to review coverage) that there were coverage issues and asked for a recorded statement. The insured had waited 45 days after service of the suit to tell Columbia of the suit. The court blamed this late notice for insufficient time for Columbia to investigate its policy defenses; and notes there is no evidence Columbia knew of a coverage defense when it was given late-notice of a case in suit. Less than a month after notice of the suit, Columbia advised there were coverage issues.  A month later, Columbia told its insured there was no coverage and it was withdrawing its defense in 30 days.  Throughout the two months this took, the insured was represented by personally retained counsel, who took over again once Columbia backed out. The insured claimed that an insurance company is categorically estopped from denying coverage if it neglects to reserve its rights at the time it first undertakes its insured's defense. The court rejected this position, finding that Columbia is not estopped by virtue of its delay in reserving its right to deny coverage.

The Court of Civil Appeals held that a delay of a few months in reserving the right to deny coverage would not operate as a bar to such a disclaimer.

Failure to accept checks tendered is not bad faith

In Berendes v. Geico Casualty Co., the 10th Circuit (Utah) (unpublished) affirmed summary judgment in favor of the defendant insurance company on a bad faith claim.  Plaintiff said the insurance company was in bad faith because there was no offer of policy limits within 30 days. Plaintiff sued the tortfeasor, got an excess judgment, and went after the insurance company.  But the insurer HAD offered policy limits, which were rejected by plaintiff’s counsel as conditional, since the insurer asked for a waiver of subrogation from Plaintiffs insurer and requested information on the hospital lien. Rather, it was the plaintiff’s rejection of the settlement checks which caused undue delay; and those actions did not amount to bad faith by the insurer.  

The assignability of tort claims was raised; and the court also found there was no duty of good faith to a third party claimant.



No bad faith where delay in payment was requested by insured Oklahoma law

In Porter v. Farmers Insurance Co., (unpublished decision) the insured, Porter was in a one car accident in 2007.  Porter anonymously called in the accident in 2008, and then identified himself and told Farmers about the accident in 2009.  Porter initially claimed he did not recall the circumstances of the accident, but thought it was a one car accident.  Later, he claimed another car was involved which caused the accident.  Before the accident, Porter added the car to his policy.  Porter said he wanted to add it as an additional car, but the agent replaced the truck Porter had insured with the car.  Porter had previously signed a UM waiver on his truck, but did not sign one on the car.  

Farmers decided that UM coverage was imputed as a matter of law and tendered payment.  Porter's lawyer told Farmers to withhold payment while it was determined whether there were any liens on the payment.  Eventually, in October, 2011, payment was made.  Porter sued for breach of contract and bad faith. Summary judgment to Farmers was affirmed by the Tenth Circuit. The trial court held that to the extent UM coverage was imputed by law, Farmers’ payment of the statutory limit entitled it to summary judgment on the breach of contract claim. Denying Mr. Porter’s bad faith claim, the court held that Farmers’ investigation was adequate and its delayed payment was reasonable.

The Tenth Circuit states:

Mr. Porter’s breach of contract claim fails for two reasons. First, Mr. Porter has not offered evidence from which a reasonable jury could find that Farmers breached its contractual duties—express or implied. Farmers only has a duty to pay UM coverage where its insured suffers damages due to an uninsured motorist or a hit-and-run. In the event of an accident, “notice must be given to [Farmers] promptly” and must include “the time, place and circumstances of the accident.” The first time Mr. Porter gave notice of his UM claim was August 4, 2009—over two years after the accident. Farmers promptly investigated this allegation but found no evidence of a second driver. . . .It was not until his November 2009 EUO that Mr. Porter first mentioned the other vehicle. Less than seven weeks later, Farmers offered full payment of the UM coverage.  Second, Mr. Porter failed to offer evidence of any damages resulting from the alleged breach. Mr. Porter claimed he was entitled to prejudgment interest on the UM payment.  It was Mr. Porter who initially requested a delay in payment, and the later delays were not the fault of Farmers. Accordingly, it would be improper to hold Farmers liable for delays beyond its control.

As to bad faith, the delay in payment was reasonable while Farmers investigated the claim. Also, there was a legitimate dispute as to whether the accident involved an uninsured motorist.  Farmer's decision to seek counsel did not cause unreasonable delay as stated by Porter's expert, Diane Luther.  "Ms. Luther contends that the retention of counsel and subsequent EUO were unnecessary because Farmers already had the information necessary to decide Mr. Porter’s claim. But this conclusion is simply contrary to the facts viewed against a backdrop of the applicable law, and we need not accept it as true." It was in the EUO that Porter mentioned the other car for the first time.  And, the delay in payment was reasonable, since Porter's attorney requested the delay. 

There was no inadequate investigation.  It is unclear whether additional investigation would have uncovered other facts.  There was no duty to investigate based on the telephone call where Mr. Porter failed to identify himself.

Furnished Employee Clause Ambiguous -- Missouri Case

In Mendenhall v. Property and Casualty Insurance Company, the widow of a man killed when a truck overturned while he was working at another man’s farm appeals the trial court’s grant of summary judgment in favor of an insurance company. The Missouri Supreme Court reversed and remanded, finding policy language ambiguous.  Ambiguous language in an insurance policy is construed against the insurer and in favor of the insured. This case turns on whether the man was “furnished to” the farm owner for employment. It is not necessary for a business to have an agency or employment relationship with a person to “furnish” him for other employment. Here, a business owned wholly by the farm owner referred the man to the farm owner, who hired the man solely on the basis of that referral. Under these facts, the man was “furnished to” his employer and, therefore, was a “temporary worker” subject to coverage under the policy.

The dissent disagrees with the majority’s finding that a third party can furnish a temporary worker to an employer merely by recommending or referring the worker and, therefore, would affirm the trial court’s grant of summary judgment. "To furnish" is not synonymous with recommending or referring the worker. By holding a person furnishes an employee to an employer by recommending or referring him, all part-time and seasonal employees who are recommended or referred to their employers will be treated as temporary workers not covered by their employers’ workers’ compensation insurance, which defeats the purpose of the workers’ compensation laws.

Caps on non-economic damages unconstitutional, Missouri law

In Watts v. Lester E. Cox Medical Centers, a woman whose son was born with catastrophic brain injuries filed a medical malpractice suit against the medical center and her doctors for providing negligent health care services. The jury awarded $1.45 million in non-economic damages. It also awarded $3.371 million in future medical damages reduced to a present value of more than $1.747 million. The trial court allowed the providers to pay half the future damages in a lump sum immediately and the other half over 50 years. In a 4-3 decision written by Chief Justice Richard B. Teitelman, the Supreme Court of Missouri found the non-economic damage cap on common law claims violates the right to a jury trial guaranteed by the Missouri constitution since it caps the jury’s award of non-economic damages wholly independently of the facts of the case. As such, it necessarily infringes on the right to trial by jury. Statutory damage caps were not permissible when the constitution was adopted in 1820 and, therefore, remain impermissible. The right to trial by jury cannot “remain inviolate” when an injured party is deprived of the jury’s constitutionally assigned role of determining damages according to the particular facts of the case. To the extent Adams by and Through Adams v. Children’s Mercy Hospital, 832 S.W.2d 898, 907 (Mo. banc 1992), holds that the section 538.210 cap on non-economic damages does not violate the right to trial by jury, it is overruled. Because the trial court here reduced the non-economic damages in reliance on Adams, that aspect of the judgment is reversed.

The court also remanded the determination of the payout for future damages. 


No bad faith for failure to pay life policy in 30 days

Toppins v. Minnesota Life

Mr. Toppins died in an airplane crash within 2 years of taking out a million dollar life insurance policy – i.e., within the 2 year contestable period.  Minnesota Life began a routine investigation because the death occurred within 2 years of the policy.  The investigation included a telephone interview with Mrs. Toppins, the beneficiary, and a request that she sign the investigator’s report and some medical information release forms.    Rather than sign the documents, counsel for Mrs. Toppins demanded immediate payment and disputed Minnesota Life’s right to conduct an investigation.  Suit was filed against Minnesota Life about 35 days after the claim was sent.  Five days later, Minnesota Life was told there were no changes to the report, and Minnesota decided to pay the claim without Mrs. Toppins signature on the report or authorization.  Minnesota Life contacted its reinsurer to confirm the decision, and sent off the check for the face amount of the policy plus interest.  The claim was paid 47 days after it was received.

Summary judgment was later granted to Minnesota Life on Mrs. Toppins claims of breach of contract and bad faith.  The Tenth Circuit affirmed.  

Ms. Toppins argued that Minnesota Life breached its duty of good faith and fair dealing as follows: (1) it delayed payment while waiting for the reinsurer’s confirmation of its decision to pay, (2) it delayed payment while it waited for Ms. Toppins to sign her statement and complete the medical records authorizations, (3) it engaged in a standard practice of conducting underwriting review after an insured’s death, and (4) it did not pay on the policy within 30 days of receipt of the claim.

As to the 4 days delay in payment caused by consulting with the reinsurer, the court said that it was reasonable for an insurer to consult with its reinsurer, and the 4 day delay was not unreasonable. The insurer was entitled to investigate the claim because the insured died within 2 years of the policy inception. As to Mrs. Toppins claim that Minnesota Life was in bad faith for conducting post claims underwriting, the court rejected the claim, saying that “The tort of bad faith breach of an insurance contract must be based upon an insurer’s wrongful denial of a claim; it cannot be based upon the conduct of the insurer in selling and issuing the policy.”  

Oklahoma law says that life insurance claims shall be paid within 30 days after proof of death, otherwise, interest must be added to the amount paid. The failure to pay within 30 days, coupled with the fact that Minnesota Life did not know of the statute was not bad faith.  The payment of the full amount of the life insurance policy, plus interest, 47 days after receipt of proof of death did not constitute bad faith.

Insurer Did Not Act in "Bad Faith" by Delaying Payment of a Settlement Pending Determination of Medicare's Conditional Payment Amount

In Wilson v. State Farm Mutual Automobile Insurance Company, No. 3:10-CV-256-H, 2011 WL 2378190 [2011 U.S. Dist. LEXIS 63430] (W.D. Ky., June 15, 2011), the United States District Court for the Western District of Kentucky ruled that an insurance carrier did not act in "bad faith" by delaying payment of a settlement pending its determination of Medicare's reimbursable conditional payment amount.


In Wilson, the plaintiff filed an uninsured motorist claim which the insurer agreed to settle for the policy limits. However, the insurer delayed tendering payment until after it obtained Medicare's reimbursable conditional payment amount. The plaintiff sued the insurer claiming that the insurer's delay in paying the settlement violated Kentucky's bad faith law. For the reasons more fully discussed below, the court found that the insurer's actions did not constitute bad faith under Kentucky law.

Read about it here


Delay in decision results in de novo review

In Rasenack vs. AIG Life Insurance Company, the Tenth Circuit ruled that AIG’s delays in deciding Rasenack’s claim for benefits under an accidental death and dismemberment policy (ADD policy) were substantial enough to result in a de novo review of the claim by the trial court.  Generally, under ERISA, claims decisions by administrators such as AIG are reviewed by the courts under an arbitrary and capricious standard.  Under the arbitrary and capricious standard, so long as the decision is supported by evidence, it will be upheld, while under a de novo standard, no weight is given to the claims administrator’s decision.  Summary judgment for AIG was reversed, and the case was remanded.

Mr. Rasenack was severely injured as a pedestrian by a hit and run vehicle.  He was in a coma for three weeks and remained hospitalized for months.  He claimed he was entitled to paralysis benefits under the AIG policy because he lost the use of both legs and his left arm.  The plan says that claims will be determined in 90 days, or under special circumstances, within 180 days; AIG took 16 months to deny the claim.  Rasenack appealed.  Appeals were to be decided in 60 days.  Seven months later, with no decision by AIG on the appeal, Rasenack sued.  AIG then denied the appeal.

First the court held that the claims administrator’s decision was entitled to no deference where the decision was made by operation of law, rather than the use of discretion.  Then the court found that the policy was ambiguous.  The policy’s definition of hemiplegia as “complete and irreversible paralysis” is wholly dependent on the meaning of “paralysis,” which the policy does not define. AIG claimed that the definition of hemiplegia carries a plain meaning, i.e., that the entire arm and leg of one side of the body must be “completely paralyzed,” and that “anything less than ‘no movement at all’ would not be ‘complete’ paralysis.”  While complete absence of movement may be a reasonable interpretation of ‘paralysis’, it was not the only interpretation, as found in various medical texts.  And the summary plan description defined hemiplegia as the loss of “use of both upper and lower limb on same side of body.”  The language was strictly construed against AIG, the drafter of the policy.

The court then reviewed the record, finding that there was evidence which supported the claim.  This was important because AIG stated in its denial that there was no evidence to support the claim.  The failure of AIG to consider evidence in support of the claim made the decision fatally one sided: 

Comparing AIG’s explanations of its decision to deny the claim to the information contained in the administrative record, it appears that AIG cherry-picked the information helpful to its decision to deny Mr. Rasenack’s claim and disregarded the contrary opinions of the medical professionals who examined, treated, and interviewed Mr. Rasenack. 

Thus, the Tenth Circuit reversed and remanded the case back to the district court for a de novo review.  It declined to remand the case back to the plan administrator, finding that AIG’s delays made such an option inappropriate.