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InsuranceLawUpdate
TENTHCIRCUITAuto/UM/CollateralSource(CO)
TheTenthCircuithasruledinAdamscheckv.AmericanFamilyMut.Ins.Co.,No.15-1125(10thCir.Mar.29,
2016)thataColoradoDistrictCourtdidnoterrinrulingthataplaintiff’sworker’scompensationbenefitscould
notbeoffsetagainsttheUIMbenefitstowhichhewasotherwiseentitled.Thecasewasremandedfor
furtherproceedings,however,astheTenthCircuitalsoruledthattheDistrictCourtshouldnothaveexcluded
AmericanFamily’sbiomechanicalengineeringexpertwithoutsettingforththereasons,asrequiredunder
FRE702.
COLORADOTCPA/”Damages”/CoverageB/BroadcastingExclusion
Afederaldistrictcourthasruledthatthe$500statutoryawardfortransmittingunsolicitedfaxesinviolationof
theTCPAareinthenatureofapenaltyandnot“damages”coveredbyaCGLpolicy.InAceAmericanIns.
Co.v.DishNetwork,LLC,13-00560(D.Conn.Mar.28,2016),JudgeBlackburnemphasizedColoradolaw
withrespecttothetreatmentofpunitivedamagesandpenalties,aswellasthefactthattheunderlying
plaintiffsweretheUnitedStatesandseveralstategovernments,noneofwhomwereclaiminganyactual
monetarylossastheresultoftheinsured’sviolationof“DoNotCall”regulationsthroughitstelemarketing
activities.Inanyevent,theDistrictCourtruledthatCoverageBdidnotapply,asDishNetworkisaninsured
inthebusinessof“broadcasting”and“telecasting.”
CONNECTICUTBadFaith
Despite having ruled last year that AIG did not owe coverage for the underlying claims because the
underlying claim was first asserted the insured before National Union’s EPL policy went into effect, Judge
Haighthasissueda45pageopinioninTuckerv.AmericanInternationalGroup,Inc .,No.09‑1499(D.Conn.
April 5, 2016) declining to grant summary judgment toAIG and National Union on the remaining bad faith
claims. Judge Haight ruled that the issue of an insurer’s liability under CUIPA and CUTPA derives from
claimshandlingproscribedbystatuteandnotfromthetermsofthepolicies.Thecourtfoundthatthefacts
concerningAIG's claims handling were "murky and disputed," noting plaintiff's contention that fact that the
claim file was closed early on without any communication to the insured, without a prompt coverage
determination and without adequate investigation. While acknowledging that CUIPA requires proof of a
regularbusinesspracticeandmaynotarisefromasingleact,theDistrictCourtdeclaredthattheplaintiffhad
sustainedthiselementofproofthroughcitationstonumerouscasesfromaroundthecountryinwhichcourts
had criticized various elements of claims handling. Judge Haight declined to rely on anAAJ report entitled
the "10 Worst Insurance Companies in America," finding that plaintiff had not shown which this was not
excludedhearsay.Whiledecliningtograntsummaryjudgmenttotheinsurers,thecourtcautionedplaintiff
that her damages might be limited at best and would not include the $4 million judgment against National
Union’sinsured.
ILLINOISAuto/ChoiceofLaws/PublicPolicy/Waiver
Inadisputebetweenamotorist’spersonalautoinsurerandtheinsurerofthevehiclethatshewasoperating
theAppellateCourthasruledin StateFarmMut.AutomobileIns.Co.v.Burke ,2016ILApp(2d)150642(Ill.
App.Ct.Mar.29,2016)thatatrialcourterredingrantingsummaryjudgmenttoGraniteStatewithrespectto
theapplicabilityofitsUIMcoverageforanIllinoisautoaccident.TheAppellateCourtrejectedStateFarm’s
argument that a Michigan choice of law provision was unenforceable as being contrary to Illinois auto
insurancestatutes.ThecourtruledthatSection143aonlyappliestopoliciesthatare“renewed,deliveredor
issued for delivery” in Illinois and not, as State Farm had argued, to a policy issued in Michigan insured a
vehicle that was “principally garaged” in Illinois. While rejecting State Farm’s statutory and public policy
arguments, theAppellate Court nonetheless sustained State Farm’s suit against Granite State, finding that
GraniteStatehadwaiveditsrighttocontestwhetherthemotoristwasactingwiththescopeofemployment
whenitmaderepresentationsearlierinthecaseacceptingcoverage.
MASSACHUSETTSEstoppel/ReservationofRightsLetters
Afederaljudgehasruledthataprofessionalliabilityinsurerwasnotestoppedtoraisecoverageissuesbyits
failuretoissueasecondreservationofrightsletter.InAmericanGuarantee&LiabilityIns.Co.v.Lamond,
No.13-13168(D.Mass.April4,2016),AGLICissuedareservationofrightsletterconcerningtheplaintiff’s
claimbutfailedtoissueasupplementalletterdiscussingacross-claimfiledbyaco-defendant.Eventhough
thecross-claimincludeda93Aclaimthatwasnotfeaturedintheplaintiff’ssuit,JudgeStearnsruledthatthe
initialRoRputtheinsuredonnoticewithrespecttothefactsthattherewasnocoveragefortheunderlying
conductthatgaverisetobothclaims.Thecourtdeclaredthatiftheinsuredwasuncertainonthispoint,it
shouldhavecontactedAGLICtoclarifywhetheritwascoveredornot.Finally,theDistrictCourtdeclinedto
holdAGLICliablefortheallegedfailuretoappointeddefensecounseltozealouslyargueonitsbehalffor
settlement,holdingthatinsurersarenotvicariouslyliablefortheactionsofdefensecounse.
NEWYORKAuto/NoFault
The New York Court of Appeals has ruled in GEICO v. Avanguard Medical Group , No. 27 (N.Y. Mar. 31,
2016)thatInsuranceLaw§5102doesnotrequirefaultinsurancecarrierstopayafacilityfeetoreimbursea
doctor for the use of his office space for treating insureds. In this case, a doctor had billed insurers for his
fees for providing treatment to patients covered under Article 51 of the New York Insurance Law and had
separately billed for facility's fees associated with his OBS services through Avanguard. The Court of
AppealsrejectedAvanguard'scontentionthatsuchfeesareareimbursable"basiceconomicloss"pursuant
to Section 5102(a)(1), declaring that such a contention would permitAvanguard and other OBS centers to
collect facility fees even though these types of fees are not expressly permitted via statute or payment
schedulesauthorizedthereby.
TEXASProcedure
TheTexasSupremeCourthasruledinInReBent,No.14-1006(Tex.April1,2016)thatatrialcourterredin
grantinganinsured’srequestforanewtrialwithrespecttoahomeowner’ssuitagainstUSAAfordamageto
theirhomefromHurricaneIke.Inholdingthatmeritsreviewofnewtrialordersshouldbesubjecttoanabuse
ofdiscretionstandard,theSupremeCourtgrantedamandamusorderanddirectedthatjudgmententeron
thejury’sfindingthatUSAAdidnotbreachitspolicybutdidviolateSection541oftheTexasInsuranceCode
byfalselyrepresentingthatitspolicydidnotcovertreeremoval.
OTHERDEVELOPMENTSOFNOTE
***InsidetheInsuranceIndustry***
Henri de Castries has announced that he will retire asAXA CEO effective September 1, 2016. He will be
replacedbyThomasBuberl,withDenisDuvernetakingonCastries'roleasChairmanoftheBoard.
TheInsuranceServicesOffice(ISO)haspromulgatednewformstoprovidecoverageforcommercialdrones.
***Bugged***
The owner of three Illinois VW dealerships has sued the German auto giant in federal court in Chicago,
claiming that VW’s fraudulent concealment of auto emissions had damaged his profits and the value of his
franchises.
***FunfortheEntireFamily***
RalphNader’s“AmericanMuseumofTortLaw”hasofficiallyopenedinWinsted,Connecticut.Thewebsite
featuresthemegiftsforsale,includinga“flamingPinto”t-shirt.
***RestatingtheLaw***
The American Law Institute has posted Tentative Draft No. 2 of the Restatement of the Law of Liability
Insurance, comprising Chapters 1, 2 and 3 that will be considered for final approval at the ALI’s annual
meetinginWashington,D.C.onMay17.TDNo.2containsafewsignificantchangessinceCouncilDraft
No. 2 was approved by theALI Council on January 21, 2016. In particular, whereas Section 34 originally
required coverage for punitive damages unless they were explicitly excluded, this draft allows coverage but
declaresthatinsurersshouldbeallowedtopursueclaimsforreimbursementfromtheirinsuredsifthelawof
that state forbids coverage. As with earlier drafts, TD No. 2 criticizes insurer arguments that allowing
coverage for punitive damages would lessen their deterrent effect or increases moral hazard. Additionally,
Section 37’s former across-the board prejudice requirement for breach of policy conditions to coverage has
now been restricted to late notice and cooperation clauses, leaving open the issue of claims involving
voluntarypaymentsandthelike.
***EverythingOldIsNewAgain***
PCBs are back in the news. Last month,Portlandbecame the seventh West Coast city (Berkley,
Oakland, San Diego, San Jose, Seattle and Spokane) to sue Monsanto for water pollution due to PCB
discharges. Meanwhile, parents in Malibuare demanding that the local School District remove PCB from
caulkthattheyclaimareendangeringtheirchildren’shealth.
***AcrosstheBar***
ControversialconservativeJusticeKarenBradleywasreelectedtotheWisconsinSupremeCourtonTuesday
with52%ofthevote.
Long-time reinsurance maven Mary Kay Vyskocil is leaving the Simpson Thacher law firm to serve as a
bankruptcyjudgeintheSouthernDistrictofNewYork.
***Hiring***
Meadowbrook Insurance Group is searching for an experienced lawyer to work in-house, providing coverage
advice, developing policy forms and managing outside counsel in coverage and bad faith litigation. The
position will be in Scottsdale, Arizona or Columbus, Ohio although other company locations might be
considered for the right candidate. Interested candidates should e-mail their resumes to Vicki Roberts at
CenturySurety:[email protected]
***MoreCoverageTools***
TheDRIInsuranceLawCommitteehaspublishedacomprehensivestatebystateanalysisofU.S.lawonthe
duty to defend. In addition to state-by-state case discussions, the DRI Duty to Defend Compendium
containschaptersaddressingdiscreettopicsonkeyissues,includingwhattriggersthedutytodefend,what
isthescopeofthatduty,whenistherearighttoindependentcounselandwhattypesofproceedingsrequire
adefense.
Copiesmaybepurchasedat w w w .dri.org/Store/Product?productCode=2016-01D for $150. For purchases of six or
morecopies(forwhichabulkdiscountisavailable),pleasecallDRIat(312)795-1101andaskforCustomer
Service.
***MoreCoverageTools***
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