Breach of fire protective safeguards endorsement negated by insurance company inspection. 4th Cir., NC, unpublished

In Colony Ins. v. Peterson, the insured got insurance for a vacant building. Under an endorsement, the insured was required to keep the utilities on in the building, and have working fire protection. The insurance company had the building inspected, and charged a $250 fee. When inspected, it was found there was no power on at the building. The policy was issued anyway, because the inspection report was not read until after the loss. Since the policy provided fire coverage, the failure to meet the policy endorsements increased the risk, but did not change the risk, thus allowing waiver and estoppel to apply. The jury found for the insured, and the Fourth Circuit affirmed.

A reasonable jury could determine that Colony was not misled because it knew the facts, and that Colony had the right and the duty to act but failed to do so. The court could not say that “the 27 days between the time Colony received the inspection report and the fire was insufficient, as a matter of law, for Colony to take action on the inspection as provided—especially in light of testimony that had the inspection been reviewed, immediate action would have occurred.” The trial court therefore properly submitted the waiver issue to the jury. And since there was evidence to support the verdict, it was upheld on appeal.

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In Porter v. Farmers Insurance Co., (unpublished decision) the insured, Porter was in a one car accident in 2007.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.

UM Rejection on unapproved form still effective

In Davis v. Progressive Northern, 2012 OK CIV APP 98, Davis was a passenger in a car involved in a one car accident. Progressive paid Davis liability limits but did not pay him UM (uninsured motorist) coverage because the named insured had rejected UM coverage and had not paid any premiums for it.  Davis sued Progressive, claiming that the rejection was ineffective because the UM rejection form had not been approved by the insurance department.  Eventually, the trial court dismissed the claim.  The trial court found the selection/rejection form was in complete accord with 36 O.S. §3636(H) and failure to submit the form to the Department of Insurance for approval did not render the form invalid, citing 36 O.S. §3620.

The court of civil appeals affirmed the dismissal.  The form used by Progressive was virtually identical to the required statutory language and was therefore effective to waive UM.


Waiver of Attorney-client Privilege Between Insurer and Reinsurers Incomplete

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.”

The reinsurers urged a broad subject matter waiver, but USF&G asserted that it did not intend to advance an “advice of counsel” defense. Citing Kirschner v. Klemons (2001 WL 1346008, 2001 S.D.N.Y.), the court ruled that in light of USF& G's representation, there is no need to expand the waiver.

“However, the scope of the waiver is narrowed in reliance on USF & G's representation that ‘advice of counsel’ is not at issue,” the court concluded. “Accordingly, the court should strictly enforce this disclaimer at trial, and USF&G should not be permitted to raise this defense to Reinsurers' claims.”

In its Dec. 8 order, the court clarified that its citation to Kirschner “ought to have made it clear that, based on cedant's representation that it did not intend to use ‘advice of counsel’ as a defense, our finding of waiver did not extend to cedant's communications with any other attorneys concerning this subject matter.”

'In view of cedant's concession, however, that it will not raise the “advice of counsel” defense and make any reference to attorney-client communications by cedant at the trial, we agree that the court should not permit cedant to raise this defense to reinsurers' claims, or refer to any such communications,” the court ruled.