Tuesday, April 8, 2014

US District Court holds that suit between insurers should be transferred to district where accident occurred

Ohio Casualty Insurance Company, an excess insurer, sued Twin City Fire Insurance Company, a primary insurer, for breach of the duty of good faith and fair dealing for failing to settle a motor vehicle accident case within the policy limits.


The accident occurred in New York.  Ohio Casualty is an Ohio Corporation with its principal place of business in Boston.  Twin City is an Indiana corporation with its principal place of business in Hartford.


Twin City moved to transfer the case to the Eastern District of New  York.  In Ohio Casualty Ins. Co. v. Twin City Fire Ins., 2014 WL 495650 (D. Mass.), the court allowed the motion.  It noted the only connection of Massachusetts to the dispute is that Ohio Casualty's principal place of business is here, while a substantial amount of the relevant evidence is likely to be located in New York, where the underlying tort and jury trial occurred and where the underlying trial attorneys are located.   

Tuesday, April 1, 2014

Corruption alleged in FEMA flood map changes

According to NBC News, FEMA has changed flood zone maps to drastically lower insurance premiums of owners of ocean-front, flood-prone properties. 

Wednesday, March 12, 2014

Woman who sold vehicle ten days before buyer got into crash not covered by her insurance policy

On August 20, 2005, Judi Bavota sold a Chevrolet Blazer to Leo Callahan and assigned the title to him.  Bavota's license plates remained on the car, and neither party notified the registry of motor vehicles or Bavota's insurer, Liberty Mutual, of the sale. 


On September 1, 2005, while driving the Blazer, Callahan collided with a vehicle driven by Jennifer Vail.  There were no personal injuries, but both vehicles sustained substantial damage.  It was undisputed that Callahan caused the accident.


Vail submitted to Liberty a claim for damage to her car.  Liberty refused to pay the claim on the grounds that the Blazer was not owned by Bavota or insured by Liberty on the date of the accident.


Vail received an arbitration award against Bavota of $23,800.  Liberty paid the claim.  Vail then proceeded with a 93A/176D claim against Liberty. 


The standard auto policy issued by Liberty to Vail provided that the policy automatically terminates 30 days after the insured transfers title to the auto and does not register another auto.  While Liberty did not dispute that the transfer of title extended the term of the policy to encompass September 1, 2005, less than 30 days after the transfer, it argued that the extended coverage did not include Vail's loss.  It relied on a policy provision stating that it will pay a loss if a non-household member "using your auto with your consent is legally responsible for the accident."  It argued that "your auto" means an auto owned by an insured.  As Bavota no longer owned the auto, there would be no coverage.


In Vail v. Bavota, 2014 WL 729876 (Mass. App. Div.), the Massachusetts Appellate Division disagreed.  The term "your auto" is defined in the policy to mean "[t]he vehicle or vehicles described in the Coverage Selection Page."  The Blazer was listed on the coverage selection page. 


The court held, however, that there was no coverage because Callahan was not driving the vehicle with the "consent" of Bavota.  Because Callahan owned the Blazer, Bavota had no authority to approve or consent to his use of it.


While I don't disagree with the decision, it is probably contrary to the arbitration award under which Bavota must have been found to be liable for Callahan's negligence.  I assume that finding was made under Mass. Gen. Laws ch. 231 s. 85A.  That statute provides that the fact that a car involved in an accident is registered in the name of a defendant is prima facie evidence that it is being operated by and under the control of a person for whose conduct the defendant is legally responsible.  Absence of such responsibility is an affirmative defense.  While the prima facie language has stopped many a motion for summary judgment that would otherwise be successful, it is puzzling how the arbitrator found as a matter of fact that Bavota was indeed responsible for Callahan's actions. 


The takeaway:  When you sell a car, make sure you take care of your paperwork immediately. 



Monday, March 10, 2014

Court holds failure to disclose on insurance application potential malpractice claim voids malpractice policy

Joyce Hurley injured her Achilles tendon in 1998 when she tripped on a grate.  Attorney Elizabeth Comproni filed a personal injury action for her in 2001. That case was dismissed for lack of service on July 17, 2001.  By that time the statute of limitations on the claim had run.


Comproni waited more than ten months to file a motion to vacate the dismissal.  The motion was granted on June 11, 2002, and the court gave Hurley 60 days to complete service.  Service was not made.  On March 30, 2004 the court dismissed the case sua sponte.  Comproni filed another motion to vacate, which was denied on October 21, 2004.


A week after denial of the second motion to vacate, Comproni notified her insurer of Hurley's potential malpractice claim.  The malpractice claim was filed almost three years later. 


The policy at issue applied to claims "made and reported" between January 3, 2004 and January 3, 2005.  The policy had a prior acts exclusion endorsement that excluded coverage for claims based on acts and omissions that predated January 3, 2003, the effective date of the initial policy.  When Comproni applied for the initial policy she was required to notify the insurer of any incidents which may give rise to a claim.  The policy stated that it would be void if there were any false or misleading statements in the application. Comproni did not at that time inform the insurer of Hurley's potential claim.


In Hurley v. Comproni, 85 Mass. App. Ct. 1101, 2014 WL 683731  (unpublished), the Massachusetts Appeals Court held that the insurer owes no malpractice coverage for claims based on Comproni's acts or omissions that predated January 3, 2003.  It was undisputed that Comproni had by that date allowed the second service of process deadline to expire. 


Hurley argued that Comproni's inattention to the case continued after January 3, 2003, and that the malpractice claim was based in part on that conduct.  Hurley argued that until the court dismissed the case a second time, there was a possibility that a judge would have allowed a further extension of the service deadline. 


The court held there was no coverage.  An extension of a service deadline is granted for good cause.  No grounds appeared on the record showing that there was good cause to grant a second extension. 


The court also ruled that Comproni's failure to disclose in the application Hurley's potential malpractice voided the policy.


Although it is a slightly different analysis than that done by the court, it is always worthwhile to remember that notice requirements are different in claims-made policies, like Comproni's and most malpractice policies, and occurrence policies, like most general liability policies.  Although occurrence policies generally require notice of a claim "as soon as practicable," under the law of Massachusetts (but not every state) coverage for the claim will not be voided unless the late notice was prejudicial to the insurer.  Not so with claims-made policies, under which late notice will void coverage whether or not there is prejudice. 

Monday, March 3, 2014

Fraternities and insurance

The Atlantic is running an article called "The Dark Power of Fraternities."  The article mostly discusses the dangers -- injuries from binge drinking, hazing, and overall stupidity -- that are an all-too-common feature of frat life. 


The article also contains a discussion of insurance.  As the article describes, liability insurance for fraternities had become "both ruinously expensive and increasingly difficult to obtain." 


Some fraternities banded together to create what the article calls reinsurance (but is more likely excess insurance).  Fraternities also developed a risk-management program.  Under the program a violation of the risk management alcohol program means that the participants are outside the fraternity's regulations and therefore not covered by its insurance. 


The article adds a rather snide aside: "It's a neat piece of logic: the very fact that a young man finds himself in need of insurance coverage is often grounds for denying it to him."


The author apparently believes that insurance policies should never be able to contain exclusions.  Liability policies issued to general contractors should not contain builder's risk exclusions.  Liability policies issued to day care centers should not contain intentional act exclusions.


But the coverage an insured purchases is (or should be ) the result of a risk/benefit analysis.  Fraternities need coverage if they are sued if someone slips and falls on ice on their steps, or if their building is damaged by a tornado.  Coverage for that type of negligence or act of nature has a price.  As the article points out, the price for coverage for injuries caused by irresponsible alcohol use may be  astronomically higher.  It is no shame to either a fraternity or an insurer to enter into a contract under which some events are covered and others are not.  Moreover, according to the article, fraternities inform members clearly that they will not be covered if they don't follow the alcohol policies. 


The other alternative may be to simply shut down fraternities as uninsurable. 


(According to the article, in the absence of coverage from insurance policies issued to fraternities, plaintiffs injured at fraternities go after the homeowner's policies of the parents of fraternity members who are named as defendants.  The article claims that the defendant and his parents then have to pay their costs of defense, but that makes no sense.  If there is coverage under homeowner's policies, then the homeowner's insurers will pay the costs of defense.) 





Monday, February 3, 2014

Superior Court holds worker's comp insurer properly charged premiums for employees who opted out of worker's comp system

Truck Courier is engaged in pick up and delivery services.  Its drivers were individuals who used their own vans and trucks to provide the services to its customers.  Truck Courier classified the drivers as independent contractors, not employees.  Each driver executed an agreement by which they waived their rights to worker's compensation benefits and preserved their rights to bring common law actions against Truck Courier with regard to any injuries they might suffer. 


Granite State Insurance provided worker's compensation coverage to Truck Courier.  Truck Courier paid an estimated premium at the beginning of the policy period, but that premium could be adjusted retroactively after an audit.


Granite State sought a retroactive premium adjustment on the ground that under a 2004 amendment to the Massachusetts Wage Act, the drivers were properly classified as employees.


In Granite Sate Ins. Co. v. Truck Courier, Inc., 2014 WL 316670 (Mass. Super.), Judge Curran of the Superior Court agreed with Granite State that under the statute the drivers were employees, not independent contractors. 


The worker's compensation statute allows an employee to opt out of the worker's compensation system, and the drivers did opt out.  The insurance policies allowed Granite State to include in its calculation all employees engaged in work covered by the policies.  The court noted that under Part II of the policies, for employer's liability, Granite State could have been required to pay claims by the drivers.  "Therefore, the plain language of the policies indicate that all Truck Courier employees should have been included in the calculation of premiums." 


The court denied summary judgment to Granite State on the 93A claim against it, holding that whether Granite State should have reasonably ascertained that the change in the law made the estimated premium substantially inaccurate was a disputed question of fact.