Insurance Coverage Law in Massachusetts

A blog every insurance agent in Massachusetts should be reading

2012-01-23T15:12:00.004-05:00

My colleagues over at ForbesGallagher have a very informative and frequently updated blog, Agency Checklists, aimed at Massachusetts insurance agents. One of the recent articles discusses upcoming changes to the statutorily-mandated commissions that auto insurers pay to agents. Another article describes a recent requirement that homeowner's insurers offer coverage for oil leaks in some circumstances.

Upcoming changes to insurance law

2012-01-11T11:25:00.003-05:00

Van Mayhall at Insurance Regulatory Law has posted an informative article on upcoming federal and state changes to liability insurance regulations.

U.S. District Court finds coverage for Pring-Wilson under umbrella policy but not homeowner's policy

2012-01-04T09:01:00.006-05:00

I have posted previously here and here about the declaratory judgment action over insurance coverage issues in the civil wrongful death case against Alexander Pring-Wilson. Pring-Wilson was a Harvard graduate student who was in a drunken street fight with Michael Colono, resulting in Colono's death. Pring-Wilson pleaded guilty to involuntary manslaughter. Colono's estate filed a civil wrongful death suit against him, resulting in a judgment of $260,000 which is currently under appeal.

Pring-Wilson sought coverage for the wrongful death suit under a homeowner's policy issued by Fire Insurance and an umbrella policy issued by Farmers Insurance to his mother, Cynthia Pring, in Colorado. The insurers filed a declaratory judgment action in the United States District Court for the District of Massachusetts.

After a bench trial, in Fire Ins. Exchange v. Pring-Wilson, __ F. Supp. 2d __, 2011 WL 6396518, Judge Saris ruled that under Colorado law the Fire Insurance policy is not required to indemnify Pring-Wilson, but the Farmers policy must indemnify him.

The Fire Insurance policy defined "insured" as a "permanent resident" of the policyholder's household under the age of 21 or a relative of the policyholder. The Farmers policy covers "the following residents of your household . . . (1) your relatives." "Relative" is defined in the policy as "persons living with you who are related to you by blood, marriage, or adoption."

The judge had ruled earlier that under the Fire Insurance policy Pring-Wilson was a permanent resident of his mother's household.

Farmers argued that Pring-Wilson is not covered under the umbrella policy because he was not "living with" his mother, the policyholder.

The court disagreed, "Pring-Wilson was not physically living with his mother on the date of the accident because he was away at school, but he was living with her in the sense that his school addresses were all temporary and he was a resident of [his mother's] home. He was not yet formally engaged and planned to move home within weeks."

The court held that under Colorado law coverage was excluded in the Fire Insurance policy by an exclusion for damages that resulted "for any occurrence caused by an intentional act of any insured where the results are reasonably foreseeable."

The Farmers policy did not contain that exclusion. Rather, it excluded coverage for damages that are "expected or intended from the standpoint of the insured." The court held that Farmers failed to establish that Pring-Wilson subjectively expected or intended any harm to Colono.

The court finally held that the umbrella policy would drop down to cover the loss where the primary policy did not provide coverage.

Insurance for reality tv shows

2011-12-31T09:45:00.007-05:00

I admit it. I'm a fan of reality tv. Not only that, I don't understand the disdain people hold for that genre. I don't see a bright line between "scripted" and "unscripted" shows. Plenty of so-called scripted shows feature ad libs or at least input by actors. Reality shows are plotted, just by people whose job title is producer rather than writer. I liken the process to eliciting testimony at trial. You can prep your witnesses, you can ask the right questions, but sometimes it's the unexpected answer that leads to magic (or the money shot).

Here's a great article by Emily Holbrook at Risk Management Monitor on insurance issues for reality tv. Best quote:

What types of reality shows spur the most insurance claims?

LM: Many times it’s more of the “walk and talk” shows as opposed to
those with stunts that spur the most claims. Audience members are often hurt
while being moved in and out of the auditorium.

I'm waiting for the lawsuit by the estate and family of Russell Armstrong from Real Housewives of Beverly Hills.

On a related note, here's an article on how game shows insure large prizes.

Happy New Years, Everyone.

2011-12-28T11:15:00.004-05:00

I wanted to post some funny insurance jokes today, but after wasting a lot of time searching the web I couldn't find any that were actually funny. So I asked my ten year old daughter for the best joke she knows. This is what she said:

An alien comes down from Mars. He changes into the form of a human except he doesn't give himself any ears because he thinks they look weird.

He starts a business and puts a "Now Hiring" sign on the window. The first person comes in to ask for a job. The alien asks, "Do you notice anything odd about me?" The person says, "Yes, you don't have any ears." The alien disintegrates him on the spot.

The second person comes in to ask for a job. The alien asks, "Do you notice anything odd about me?" The person says, "Yes, you don't have any ears." The alien disintegrates her.

The third person comes in to ask for a job. The alien asks, "Do you notice anything odd about me?" The person says, "Yes, you're wearing contacts."

The alien says, "How did you know that?"

The person answers, "You can't wear glasses if you don't have any ears."

Appeals court holds judge not required to give jury instruction on presumption of consent to use vehicle if contrary evidence has been offered

2011-12-20T11:14:00.005-05:00

McConnico, an employee of Dollar Rent-A-Car, struck and killed Kohlmeyer, a pedestrian, while he was driving one of Dollar's automobiles.

McConnico's primary responsibility was to deliver automobiles to hotels. On the evening before the accident McConnico took a Dollar vehicle to run a a personal errand. The accident occurred as he was driving the car back to Dollar the next day.

McConnico had signed a written acknowledgement when he was hired that he was prohibited from using company rental vehicles except under the direction of a Dollar manager, and that unauthorized use of a vehicle was grounds for discharge. He was in fact fired on the morning of the accident for violating the policy.

There was evidence that personal use of Dollar automobiles was commonplace and few employees were reprimanded for doing so.

Dollar and its excess carrier filed a declaratory judgment action seeking a declaration that there was no coverage because McConnico did not have express or implied permission to drive the car.
The excess policy provided coverage for liability incurred by Dollar and "anyone . . . using with [Dollar's] permission" an automobile Dollar owned.

After trial the jury returned a verdict that McConnico was an unauthorized driver, thereby finding no coverage.

On appeal, Kohlmeyer's estate argued that under Mass. Gen. Laws ch. 231, § 85C*, McConnico was presumed to be driving with Dollar's express or implied consent. The statute states that in certain circumstances in cases against automobile insurers a driver is presumed to have consent to drive a car.

In United Nat'l Ins. Co. v. Kohlmeyer, 81 Mass. App. Ct. 32 (2011), the Massachusetts Appeals Court held:

The presumption embodied in G. L. c. 231, § 85C is part of a legislative structure
supporting the Commonwealth's compulsory motor vehicle insurance requirements.
Read in the context of the statutes to which § 85C refers, the support structure operates in this fashion. An insurer's liability under an automobile policy “insuring against liability for loss or damage on account of bodily injury or death” becomes absolute when a covered loss occurs and is not conditioned on an insured's payment of the loss to the injured party. See G.L. c. 175 § 112, amended by St.1977, c. 437. If the injured party obtains a judgment against the insured, the injured party is entitled to bring an action against the insurer to reach and apply the insurance proceeds.
See G.L. c. 175 § 113; G.L. c. 214 § 3(9). In an action to reach and apply, the
presumption desired by the estate applies but, as § 85C expressly states, only if the plaintiff is seeking to “reach and apply the proceeds of [a] motor vehicle liability policy, as defined in” G.L. c. 90 § 34A.

The court noted that the statute applied only to compulsory policies, and the policy at issue was excess, not compulsory.

It went on to hold that even if the statute had applied, the presumption would have been enough to meet the estate's burden initially, but it was rebuttable, "and continue[d] only until evidence [was] introduced which would warrant a finding contrary to the presumed fact." Because there was such evidence, the judge was not required to instruct the jury on the presumption.

*This link is to the statutes posted by the Commonwealth of Massachusetts. Massachusetts Lawyers Weekly recently ran an article explaining that this website is not updated frequently, and recent revisions to statutes are not shown.

Gap insurance

2011-12-16T10:33:00.001-05:00

Here's an interesting article at The Frugal Toad on a type of insurance I'd never heard of. I was hoping that Gap Insurance might cover the jeans my kid spilled tomato sauce on just after I bought them. But it actually covers the difference between the actual value of a new car and what you paid for it, since new cars lose their value the instant you drive them off the lot.

Another solution to this problem: Don't buy new cars.

U.S. District Court holds that insurer who wrongfully denied duty to defend must indemnify insured where question of duty to indemnify is in equipoise

2011-12-14T14:18:00.002-05:00

A couple of days ago I wrote about Manganella v. Evanston Ins. Co., 2011 WL 5118898 (D. Mass.), in which Evanston Insurance Company denied coverage for a sexual harassment claim because the misconduct began before the policy period.

At issue was the MCAD claim of Burgess against her employer, Jasmine Company, alleging that she had been harassed by Luciano Manganella since she began her employment a couple of years before the Evanston policy went into effect. At a deposition she clarified that although Manganella had made inappropriate comments prior to the policy period, she had not felt physically or emotionally threatened by him until after the policy period began.

Evanston made an argument that I don't quite understand that it was entitled to rely on readily knowable facts outside the complaint to deny coverage. (I don't understand it because the black letter law it cites states that facts outside the complaint may be used to trigger the duty to defend, not the opposite; and because the facts outside the complaint appear to trigger coverage rather than show no coverage.)

The court rejected Evanston's argument. It went on to hold that because it had breached its duty to defend Jasmine, Evanston is liable for the costs of settlement reached with Burgess. Although a breach of the duty to defend does not provide an automatic right to indemnity, an insurer that has wrongfully declined to defend a claim has the burden of proving that the claim was not within the coverage of the policy. "Because the evidence on this later issue is in equipoise, Evanston has not met its burden of showing coverage did not attach."

U.S. District Court holds that continuing violation doctrine does not apply to insurance coverage disputes

2011-12-10T18:04:00.006-05:00

Luciano Mangenalla owned and, after selling the company in 2005 to Lerner, managed a women's clothing boutique called Jasmine.

In 1998 Jasmine was sued by Sonia Bawa, a former employee, for sexual harassment. In the wake of the lawsuit Manganella caused Jasmine to purchase an Employment Practices Liability Insurance (EPLI) policy from Evanston Insurance Company. The insurance application stated that, except for the Bawa matter, Jasmine was unaware of any outstanding instances, real or alleged, of claims of wrongful employment practices including sexual harassment. Burgess, Jasmine's human resources manager, warranted that the statement was true.

In or after 2005 Manganella was terminated for sexually harassing four Jasmine employees, including Burgess.

In 2007 Burgess filed a complaint against Manganella, Jasmine, and Lerner at the Massachusetts Commission Against Discrimination. She alleged that since she began her employment in 1997, Manganella subjected her to nearly constant physical and verbal sexual harassment, and on five occasions intimidated her into engaging in sexual acts with him.

Evanston denied coverage because the "wrongful Employment Practice" had not occurred entirely during the coverage period.

At a subsequent deposition Burgess testified that she had not felt physically or emotionally threatened by Manganella before the fall of 1999, although he had made inappropriate comments before then.

Evanston argued that the continuing violation doctrine made Manganella's acts before the policy period part of a continuing pattern of harassment, so that even if Burgess did not feel threatened prior to the policy period the harassment began prior to the policy period, precluding coverage.

In Manganella v. Evanston Ins. Co., 2011 WL 5118898 (D. Mass. 2011), the court rejected the argument, noting that the continuing violation doctrine is intended to ameliorate the potentially draconian effects of the relatively short statute of limitations that governs discrimination claims. The court held that the doctrine should not be applied to shrink relief available to an insured.

Cavalcade of Risk #145 is up

2011-12-05T19:02:00.002-05:00

Take a look here for an excellent compilation of blog posts about risk.

Massachusetts now bans personal auto insurers from using credit scores in setting rates

2011-12-01T09:43:00.002-05:00

Property Casualty 360 discusses the development in this article.

U.S. District Court holds that mortgagee can require flood insurance higher than the amount of the mortgage

2011-11-22T11:28:00.005-05:00

In 1994 Susan Lass took out a mortgage on her house, which is an area that is designated under the National Flood Insurance Act as a special flood hazard area. (For older posts on flood insurance legislation, see here and then scroll down.)

As a named plaintiff in a class action lawsuit Lass alleged that Bank of America, the mortgagee, breached her mortgage contract by requiring her to have more flood insurance than was required under the terms of her mortgage and more than BOA's financial interest in the property.

In Lass v. Bank of America, N.A., 2011 WL 3567280 (D. Mass. 2011), the United States District Court for the District of Massachusetts noted that the NFIA prohibits federally-regulated lenders from giving loans secured by real estate in a special flood hazard area in which flood insurance is available unless the property is covered by flood insurance "in an amount at least equal to the outstanding principal balance of the loan or the maximum limit of coverage made available . . . , whichever is less."

Lass's original lender, RMC, required her to maintain insurance in the amount of her loan balance. In 2007 she chose to increase her coverage to $100,000.

RMC transferred the loan to BOA, which required her to increase her flood insurance to $145,086, the replacement value of the improvements to her property. When she did not purchase the additional insurance, BOA purchased it for her and paid for it out of her escrow account.

The court held that BOA did not breach the mortgage contract, because the contract requires Lass to maintain flood insurance "in the amounts and for the periods that Lender requires."

The real question is: Why would a homeowner with property in a flood zone not insure the property to replacement value? Weather patterns are getting more extreme. Insurance protects your investment. We quibble over exclusions and exceptions, but overall: Insurance is good. Make sure you have enough of it.

Fraud on pet insurance increasing in England

2011-11-14T15:43:00.001-05:00

Read all about it here. But only if you want to be outraged and saddened.

Okay -- an insurer should be bound by a mutual mistake over the terms of the policy . . . sometimes

2011-11-09T12:00:00.002-05:00

Last week I wrote a somewhat snide post about a Superior Court decision in Caron v. Horace Mann Ins. Co., a decision that was reported in Massachusetts Lawyers Weekly but that I have not seen. The judge apparently held that an insurance company is bound by a mutual mistake between an insured and an agent over the terms of the policy.

My knee-jerk reaction was that the terms of the policy always trump, and that an insured is presumed to have read and understood the policy. But I can certainly see how a case could be made that if an insured believes that he or she is purchasing certain coverage, and the insurance agent, acting on behalf of the insurer, believes that he or she is selling that coverage, such coverage should be read into the policy.

Such a result could only apply in specific circumstances. Take, for example, Welch Foods, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, __ F.3d __, 2011WL 5027445 (1st Cir.), the other case I discussed in last week's post.

If the insured had said to the agent prior to purchasing the policy, "I want to make sure that there is coverage for claims of deceptive trade practices," and the agent, speaking on behalf of the insurer, had looked at the policy and said, "Yep, there's no exclusion for that," but there actually was such an exclusion hidden under a label "AntiTrust Exclusion," then it would be fair that the insurer be bound by the mutual mistake. And maybe as the insurer is suing the agent for negligence, it could send a memo to its underwriting department to label the policy provisions more accurately.

New Federal Insurance Office to compile financial data on insurers

2011-11-07T12:01:00.000-05:00

Here's a detailed article that explains upcoming changes in the public availability of financial data on insurers.

Keep your policies forever

2011-11-03T11:27:00.003-04:00

I can't say it too often: Keep copies of your insurance policies, forever, in a place you can find them. If at the beginning of your policy year your insurer or agent sends you only the coverage selection (or "declarations") page -- the page that summarizes your coverages -- ask for a copy of the entire policy. Do it immediately or you may never get it. And when you get it, make sure that the policy forms and endorsements provided match the forms and endorsements listed on the coverage selection page.

In almost every insurance coverage dispute I have ever been involved with, whether on the side of the insurer or the insured, the first challenge is obtaining a copy, preferably certified, of the policy. Whichever side I'm representing, it generally takes months.

Don't just keep your most recent policy. Keep all of them. For decades. Forever. If you have an occurrence-based policy and get hit with a Superfund suit -- say a property you owned for five years in the early 1990's has been discovered to be a site of toxic waste -- there might or might not be coverage under policies issued for each year that you owned the property. If the policies differed from one year to another, even if issued by the same insurer, there may be coverage under one year but not others.

Chances are that if the policies were issued not too long ago the insurer can, eventually, provide or recreate a copy. But at some point old documentation, especially but not exclusively from before the advent of computers, is lost. Insureds have the burden of proving coverage under a policy. The easiest way to do that is to provide the court with a copy of the policy, not to guess, "When my grandfather owned the company he was friends with an adjuster at Acme Insurance, so . . ."

Disagreement between First Circuit and Superior Court on whether terms of insurance policy control coverage

2011-11-01T15:11:00.007-04:00

Welch Foods was sued by a competitor and by consumers for placing a label on a three juice blend bottle that pictured mainly pomegranates, even though the juice blend consisted primarily of apple and grape juice. A jury in California found that the label had a tendency to deceive a substantial number of customers. (Really? You really think that a three juice blend will consist primarily of pomegranate juice?)

Welch requested insurance coverage from National Union Fire Insurance Co. of Pittsburgh, PA. National Union denied the claim on the basis of an exclusion labeled "Antitrust Exclusion," which, in addition to excluding antitrust claims, also excluded coverage for unfair competition and deceptive trade practices.

In Welch Foods, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, __ F.3d __, 2011WL 5027445 (1st Cir.), the United States Court of Appeals for the First Circuit found that although the exclusions for unfair competition and deceptive trade practices were listed under the antitrust exclusion, the claims were effectively excluded. The court noted that the policy provided, "the description in the headings of this policy are solely for convenience, and form no part of the terms and conditions of coverage."

The court quoted the familiar language, "an insurance contract is to be interpreted according to the fair and reasonable meaning of the words in which the agreement of the parties is expressed. . . . Every word in an insurance contract must be presumed to have been employed with a purpose and must be given meaning and effect whenever practical."

By contrast, this week's Massachusetts Lawyers Weekly has a cover story on a Superior Court decision drafted by Judge Cornetta, Caron v. Horace Mann Ins. Co., which apparently held that an insurance company is bound by a mutual mistake between an insured and an agent over the terms of the policy, even if -- quoting Eric Parker, who represented the plaintiffs -- "some 50- or 75- page boilerplate policy they've been printing for years says [that different terms apply]. It's going to be changed to reflect the understanding of the parties."

Wedding Insurance?

2011-10-26T07:48:00.000-04:00

This article at Canadian Finance Blog says it all.

Appeals Court finds duty to defend where loss may have arisen out of use of excluded boat and use of a different boat that was excepted from exclusion

2011-10-24T13:01:00.007-04:00

Jeffrey and Nicole Crispo (the Crispos) were aboard their power boat, the MSJC69, and were towing a lobster boat, the Laina Lou, owned by Steven Crispo. Steven and Dana Gagne were aboard the lobster boat. The MSJC69's propeller shaft became entangled on a mooring line. After cutting loose the Crispos were unable to restart the boat because the battery was dead. The Laina Lou dropped anchor and the two boats remained attached by the tow line. The Crispos were unable to use the running lights because of the dead battery.

Approximately ten minutes later a ferry operated by BHC collided with the two vessels.

Steven, Jeffrey, Nicole, and Gagne sued BHC for personal injuries and property damage. BHC asserted claims for indemnification and contribution against the Crispos, alleging that their negligence caused the accident.

The Crispos sought coverage for the counterclaims from Quincy Mutual, their homeowner's insurer, which filed a declaratory judgment action. The policy excluded coverage for losses arising out of use of boats, but the lobster boat fell into an exception to that exclusion.

In Quincy Mut. Fire ins. Co. v. Crispo, 80 Mass. App. Ct 484 (2011), the Massachusetts Appeals Court held that a duty to defend is triggered when a loss "arises out of" both a a use that is excluded from coverage and a use that is excepted from the exclusion.

The court noted that the underlying complaints did not distinguish between the use of the two vessels with respect to which caused the accident. Therefore, the allegations of the underlying complaints "raise the possibility that the claims against the Crispos arose from their use of the Laina Lou."

The court also noted that no anti-concurrent causation clause applies to the exclusion, although such a clause does apply to other parts of the policy. Under Massachusetts law, where an anti-concurrent cause provision is included with reference to exclusions in one part of the policy and omitted with reference to other parts of the policy, the absence of such a provision means that a loss caused by a risk excluded in the section without the provision will be covered if a covered risk also contributed to the loss.

Quincy Mutual argued that the phrase "arising out of" in the exclusion conveyed the same limitation on coverage as an anti-concurrent causation provision. While noting that "arising out of" denotes an intermediate level of causation, the court held that its use in an exclusion, without more, could not reasonably be understood as denying coverage for damages connected to the insured's simultaneous undertaking of an excluded risk and a risk specifically excepted from the exclusion, where both caused the injury.

Coverage for construction defects

2011-10-20T07:47:00.003-04:00

When a construction contractor brings a claim under its general liability policy for coverage of construction defects -- construction that was faulty and needs to be redone, but did not cause injuries to people or damage to other property -- Massachusetts courts generally analyze (and deny) the claim under up to six exclusions, often referred to as the "your work" or, more accurately, "builder's risk," exclusions. In many policies the exclusions have some holes in them, however, depending on when and where the damage occurred and whether the work was done by the insured contractor or by a subcontractor. When I work on such a case I often make a chart which I stare at until I am bleary-eyed.

This article in Insurance Journal notes a wide variation from state to state in how construction defects are analyzed:

On whether faulty workmanship is itself an occurrence, some states say yes, some states say no, some states are undecided, and some states say faulty workmanship is not an occurrence but the resulting damage is. “You also see differences in states in other issues as well."

It should be noted that there are Builder's Risk policies available that will cover contractors for construction defects. I have yet to come across a contractor that actually has such a policy, but that may be because those claims get resolved without the help of counsel.

Appeals Court holds motor vehicle exclusion excludes coverage for social host liability

2011-10-18T11:57:00.004-04:00

Patrick Bernier and Julien Caron were insured under a homeowner's policy issued by MPIUA. They negligently served, supplied or permitted David DiFrancesco, a nonresident minor, to consume alcohol at the insured premises. While under the influence of that alochol, DiFrancesco negligently operated a motor vehicle, getting into an accident that injured Malcolm Berry.

Berry sued Bernier and Caron. MPIUA filed a declaratory judgment action, seeking a declaration that it had no duty to indemnify.

In Massachusetts Property Ins. Underwriting Ass'n v. Berry, 80 Mass. App. Ct. 598 (2011), MPIUA argued that the motor vehicle exclusion applied. The court agreed, on the ground that the motor vehicle exclusion categorically excluded coverage for personal injury arising out of the use of any motor vehicle.

The decision was based on changes in language in homeowner's policies. Under previous editions, coverage was excluded for losses arising only out of a vehicle owned by an insured. The change was apparently made in response to social host liability cases such as this one.

I don't like this change. In this situation -- a homeowner provides alcohol to a minor who drives away in his own car -- the homeowner's insurance is likely to have significantly higher coverage than the minor's vehicle. The homeowners were culpable in giving alcohol to a minor and letting him drive away. If their insurance isn't going to cover the loss, it should at least be because of a social host exclusion, not an automobile exclusion. That would be more straightforward and allow people to negotiate for the coverage they want.

Insurance for data security breaches

2011-10-13T08:08:00.000-04:00

WGA InsureBlog has an interesting article on insurance for data breaches. Although some of the statistics in the article strike me as overblown, the basic point seems about right:

Insurance protection for privacy-related breaches by employees and vendors can be addressed in various types of insurance policies, but not all will protect an insured from all acts of insiders. The variability of insurance coverage for “insider” breaches reflects the polyglot state of affairs in the cyberliability world. Coverage problems can arise from the nature of the particular insurance policy at issue (for example, an E&O policy versus a privacy policy) and from insurers’ inherent aversion to paying for intentional wrongdoing — an aversion that can miss important distinctions among the guilty and the innocent. Companies and their advisors need to be alert to the nuances in policy terms to make sure that insurance insult is not added to injury after a breach caused by an insider.

Appellate Division discusses burdens of proof on PIP claim that was paid late

2011-10-11T08:29:00.004-04:00

Francisco and Gloria Delasnueces were in an accident while in a car insured by Plymouth Rock. They received treatment from Kantorosinski Chiropractic. Plymouth Rock initially paid some of the bills and denied some. It later made a "business decision" to pay all the bills.

In Kantorosinski Chiropractic, Inc. v. Plymouth Rock Assurance Corp., 2011 WL 4529392 (Mass. App. Div.), the Massachusetts Appellate Division held that summary judgment cannot be granted to a PIP insurer on a claim that it delayed payment merely because the insurer asserts that the reason for eventual payment was a business decision. (The remaining issue, once the PIP claim has been paid, is the award of attorney's fees.)

The court then took note of evidence offered by Plymouth Rock that the damage to the insured vehicle was minor and that after an independent medical examination the doctor concluded that there was no objective findings to support the need for further treatment. That evidence was sufficient to shift the burden to Kantorosinski to show that there is a genuine issue for trial.

Kantorosinski met that burden with evidence that at the time the IME doctor opined that there was no further need for treatment, the insureds were still experiencing pain, which improved with additional treatment. The court held that the evidence was sufficient to overcome Plymouth Rock's motion for summary judgment.

How to lower your homeowner's insurance rates

2011-10-06T08:09:00.002-04:00

This article has tips.

U.S. District Court interprets earth movement exclusion

2011-10-04T12:41:00.003-04:00

Habit OPCO leased a building that was damaged by construction at an adjacent site owned by the Greater Boston Food Bank.

The building rested on concreted piles and on fill. On December 7, 2007 GBFB began construction of a new building on the adjacent property. It drove concrete piles to a depth of almost 190 feet. Within a couple of weeks Habit employees noticed damage to its building such as cracked door frames. By mid-February the building had floor heaves, its ceiling tiles were shifting, and walls were cracking.

Habit's insurer, Philadelphia Indemnity, hired an expert who opined that the damage was caused by vibrations from the pile driving on the GBFB property.

Philadelphia Indemnity denied the claim for structural damage, citing the policy's earth movement exclusion. Habit argued that the earth movement exclusion bars coverage only for damage from naturally occurring earth movements and not from man-made events.

In Mulhern v. Philadelphia Indem. Co., __ F. Supp. 2d __, 2011 WL 3563126 (D. Mass.), the United States District Court for the First Circuit noted that the exclusion includes loss from "improperly compacted soil," which is a man-made condition. The court held that Philadelphia Indemnity was entitled to judgment to the extent that Habit is precluded from arguing that the policy covers damages caused by defects in the fill.

Philadelphia Indemnity argued that the anti-concurrent causation clause in the earth movement exclusion precluded coverage under Habit's theory that shock waves generated by the pile driving caused the structural damage to the building. The court denied summary judgment on that issue because there was a disputed issue of fact as to whether improperly compacted soil was a cause of damage or whether vibrations emanating from the pile driving were the exclusive cause.

Finally, the court held there was no coverage under the collapse clause of the policy because the damage to the building was not "an abrupt falling down or caving in of a building or any part of a building with a result that the building cannot be occupied for its intended purpose, because the claim was the the roof split, leaving a gap of .75 inches, and then cracked.

Vote for me!

2011-09-26T09:07:00.003-04:00

LexisNexis is inviting comments on its nominees for the 2011 Top 50 Insurance Law Blogs. If you enjoy my blog, please let them know. You can post comments here.

Appeals Court holds insureds should raise public policy issue at arbitration

2011-09-16T11:54:00.006-04:00

Congratulations to my friend Marie Cheung-Truslow at Smith & Brink, who just won a nice victory in the Massachusetts Appeals Court. Marie is a fabulous attorney who frequently represents insurers on large loss subrogation matters and in reference proceedings, and who I have often turned to for advice.

Marie's client, Northern Assurance, provided a yacht insurance policy covering a yacht called "Blaze of Glory." The yacht was destroyed in a fire. Fire investigators concluded that the fire was intentionally set and that its point of origin was the Blaze of Glory. (The Appeals Court decision doesn't state whether the yacht's name was a clue in the case.)

The insureds made an insurance claim for the fire loss. They appeared for an examination under oath and provided numerous documents but, according the Northern, not all the documents that were requested. Northern denied coverage on the grounds that the insureds had failed to cooperate. It filed a declaratory judgment complaint. The insureds responded with a demand for arbitration, as they were entitled to do under the policy.

The arbitrator ruled in favor of Northern. The insureds filed a motion to vacate the arbitration award on the ground that the arbitrator had exceeded her authority and contravened public policy by shifting the burden of proof on the cooperation issue from Northern to the insureds. The trial judge agreed with the insureds and vacated the arbitrator's award.

In Northern Assurance Co. of Am. v. Payzant, 80 Mass. App. Ct. 23 (2011), the Massachusetts Appeals Court overturned the decision of the trial court judge. It held that the insureds had waived their burden-shifting argument by not raising it at arbitration and by affirmatively asserting at arbitration that the burden-shifting clause of the insurance policy applied.

The court held that the proper procedure would have been for the insureds to challenge the legality of the burden-shifting clause of the policy before the arbitrator. The arbitrator would have ruled on this issue, and the right to a judicial determination would have been preserved. Alternatively, the insureds could have refrained from demanding arbitration.

US District Court holds medical review by PIP carrier not required when carrier disputes bill

2011-09-13T14:18:00.004-04:00

McGovern Physical Therapy Associates provided physical therapy to a patient insured by Metropolitan for injuries he sustained in an auto accident. It submitted a request for PIP payment of $176 to Metropolitan.

Metropolitan paid McGovern $142.58, $34.42 less than the amount requested. It stated that "the amount allowed is based on provider charges within the provider's geographic region."

McGovern sued on behalf of itself and other providers, seeking reimbursement in all instances in which Metropolitan failed "to challenge the request for payment on its merits."

In McGovern Physical Therapy Assocs., LLC v. Metropolitan Property & Casualty Ins. Co., , the United States District Court for the District of Massachusetts denied McGovern's request to certify the case to the Supreme Judicial Court of Massachusetts. It held that the plain language of the PIP statute and the opinions of lower courts in Massachusetts "provide sufficient guidance" that its decision will not be "merely conjectural."

The court rejected McGovern's claim that the PIP statute requires review by a licensed practitioner, or a physical examination of the patient, whenever there is a dispute over the reasonableness of the charges. It held that a more plausible reading of the statute is that the review requirement applies only when the insurer denies a claim based upon an alleged lack of medical necessity for the services provided.

Appeals Court holds insurer is full of hot air

2011-09-05T16:08:00.006-04:00

John Hanratty and Mary Blake Newman owned adjacent condominium units. Hanratty's air conditioner projected through the wall and into a yard area over which Newman held an exclusive easement. After her complaints were repeatedly ignored, Newman duct taped the air conditioner to make it unusable. Hanratty filed suit against her, seeking to restrain her from interfering with his air conditioner and to require her to stay ten yards away from him and his family. Newman counterclaimed for nuisance, trespass, and defamation, and sought an order that the air conditioner be removed.

Hanratty forwarded the counterclaim to his homeowner's insurer, Citation, which defended him under a reservation of rights. Hanratty exercised his option to select his own attorney, Michael Fee, but Citation was unwilling to agree his $260 per hour rate. Eventually the parties agreed that Fee would bill at $260 an hour, Citation would pay $130 an hour, and Hanratty would retain the right to seek the difference from Citation.

Citation filed a motion for declaratory judgment, seeking a determination that its policy did not provide coverage for the counterclaims. Hanratty counterclaimed, asserting that Citation breached the policy and its duty of good faith and fair dealing by refusing to pay Fee's full rate.

Hanratty and Newman settled the underlying case when Hanratty installed central air conditioning. (Was that so hard?) Hanratty assigned to Newman his counterclaim against Citation.

A Superior Court judge granted summary judgment to Citation on its declaratory judgment action, and a second judge dismissed the counterclaim against Citation. Newman appealed.

In Citation Insurance Co. v. Newman, 80 Mass. App. Ct. 143 (2011), the Appeals Court reversed the summary judgment decision. It held that the incursion of the air conditioner into Newman's yard constituted loss of use of tangible property. It also held that an easement is "tangible property."

Welcome to the Cavalcade of Risk!

2011-08-24T08:21:00.006-04:00

Welcome to the Cavalcade of Risk. This is the 138th time that the Cavalcade of Risk has gathered blog postings from around the web on topics relating to risk.

The submissions to this Cavalcade were across-the-board thoughtful and informative. I've put them in order from the most general risk (for example, world-wide collapse) to most personal risk (for example, your own insurance rates going up).

The global risk of too much investment diversification:

Jason Shafrin goes against conventional wisdom and argues that on the large scale investment diversification increases risk: When does diversification Increase Risk posted at Healthcare Economist.

The risk from too few women in power at insurance companies and elsewhere:

At Risk Management Monitor, Morgan O'Rourke presents an excerpt of an interview with Bermuda Premier Paula A. Cox, Bermuda Premier Paula A. Cox on the Lack of Women Leaders in insurance and government. Although the article does not address insurance issues per se, it contains a link to a more comprehensive piece in which Cox talks about Bermuda's efforts to retain captive and reinsurance business and the effect of the many recent natural catastrophes on Bermuda's insurance industry.

The risk from insurers failing to recognize improvements in healthcare technology:

Jaan Sidorov at Disease Management Care Blog writes about "Software Eating the World of Healtcare." He reflects on the implications of a software-based health care world. It sounds pretty good to me.

The risk to disability and other insurers from failing to recognize changes in demographics:

Russell Hutchinson presents Insuring Older Lives: It's about employment, pricing, and claims management posted at Chatswood Consulting Moneyblog.
Hutchinson considers the termination age of 65 for a number of insurance benefits to be too young in the light of continuous improvements in mortality and an increasing number of people working past age 65. He considers other ways insurers could design the product termination.

The risks that have caused rising worker's comp insurance rates and what business owners can do to keep their own rates down:

Nancy Germond has a comprehensive post on why worker's comp rates are rising, and how business-owners can keep their costs down: Are work comp costs eating your lunch? posted At Risk Management for the 21st Century.

The risk to mental health workers of inadequate workplace protections:

Julie Ferguson presents Inadequate: Protections for mental health workers posted at Workers' Comp Insider.

The risk of your auto insurance premiums increasing as a result of accidents that may or may not be your fault.

On Dough Roller there's a very informative post on How Do Points Affect Your Auto Insurance Rate? The article points out the wide variation from one state to another about how both at-fault and not-at-fault accidents can hike your rates.

The risk of assuming you don't have insurance coverage

Free Money Finance posts Your Insurance May Cover More than You Think It Does. The moral of this post: Don't assume your insurance doesn't cover a specific loss. If the cost is high enough, it's worth asking if the company will pay.

The risk of having a really bad day

And, finally, ending with a smile, my favorite post of this Cavalcade: Henry Stern, LUTCF, CBC presents Why you need disability insurance posted at InsureBlog.

The next Cavalcade of Risk will be hosted by Emily Holbrook at Risk Management Monitor.

For all you civil procedure buffs . . .

2011-08-16T12:47:00.003-04:00

Greg Straughn filed a lawsuit alleging that he was injured in a construction site accident while employed by James Czech because the general contractor, Williams Building Company, failed to maintain safe conditions.

Western World Insurance Company had issued a general liability policy to Czech under which Williams was an additional insured. It sought a declaratory judgment that it had no duty to defend or indemnify Williams because Czech had stated on his policy application that he had no employees. Williams filed a counterclaim seeking a declaration that Western World is obligated to defend it.

Czech did not answer the declaratory judgment complaint and was defaulted. Western World moved to dismiss Williams' counterclaim on the ground that the default judgment established that Czech's misrepresentation on his application caused the policy to be rescinded.

Williams opposed the motion on the grounds that the default judgment was improperly entered by the clerk rather than the court, and that the default judgment is interlocutory in nature.

In Western World Ins. Co. v. Czech, __ F.R.D. __, 2011 WL 2460934 (D. Mass.), the court held that a motion for declaratory judgment on the issues of defense and indemnity under an insurance policy are not for a "sum certain," and therefore the clerk was not empowered to enter the default judgment. It also held that in a multi-defendant case a court should withhold granting a default judgment against one defendant until a decision is reached on the merits against the remaining defendants.

History lesson

2011-07-30T18:07:00.002-04:00

Here's a really interesting article on the history of insurance.

US District Court holds that due process claims regarding tax lien "arose from" prior litigation regarding the lien

2011-07-25T14:43:00.003-04:00

In my last post I wrote about Saugus v. Zurich Am. Ins. Co., __ F.2d __, 2011 WL 2311873 (D. Mass.),in which the town of Saugus sought insurance coverage for claims that it had wrongfully demolished a house after a fire and collected costs associated with the demolition.

In addition to the Zurich policy discussed in the last post, the town had also been issued a claims-based policy by Maryland Casualty. That policy contained an exclusion for claims "arising from all pending or prior litigation as of the policy effective date and all future claims arising from such litigation." Maryland asserted that the exclusion applied because the underlying plaintiffs had sought relief from the Board of Assessors, the Appellate Tax Board and the Massachusetts Appeals Court on matters relating to the costs of demolition.

The town argued that due process claims alleged by the underlying plaintiffs under §1983 were different from and unrelated to the prior litigation involving tax abatement. The underlying plaintiffs alleged that the town demolished the remains of the property without proper notice, imposed an illegal lien on the property, added non-existent debt to the real estate tax bill, forced them to pay an illegal special assessment, and refused to return the special assessment.

The United States District Court held that the § 1983 claims 'arose from" the prior litigation, so that the exclusion applied.

US District Court holds that continuing violation of rights occurred at the time of the original violation

2011-07-21T13:36:00.003-04:00

In 2006, a house owned by the underlying plaintiffs was damaged by a fire. They later filed a complaint against the town of Saugus alleging that the town unlawfully demolished the house and in 2007 illegally collected costs associated with the demolition. The town sought coverage for the claim from Zurich Casualty, who denied any duty to defend.

The Zurich policy was an occurrence policy in effect from July 1, 2009 to July 1, 2010. The town argued that there was a claim of an independent due process violation (failure to abate the costs paid by the underlying plaintiffs to the town).

In Saugus v. Zurich Am. Ins. Co., __ F.2d __, 2011 WL 2311873 (D. Mass.), the United States District Court for the District of Massachusetts held that the occurrence was the actions of the town shortly after the fire, and continuing claims arising out of that occurrence did not affect the date of the occurrence. (I would have to give some thought to how that fits into a triggers of coverage analysis.) It also held that the claims were a known loss when the policy period began.

Appeals Court holds that 93A claim can proceed after insurer rectifies failure to pay PIP damages

2011-07-06T11:38:00.008-04:00

Marie Chery was injured in a car accident while she was a passenger in a car insured by Metropolitan. She submitted her PIP claim to Met, which failed to pay the medical bills within the time prescribed by Mass. Gen. Laws ch. 90 § 34M. Chery then sued for breach of the statute and Mass. Gen. Laws ch. 93A.

Six months later Met paid the medical bills. It then moved for summary judgment on the ground that an insured cannot prevail on a PIP claim if the disputed amount is paid prior to judgment entering; and that the 93A claim should be dismissed because Chery suffered no damages.

Chery did not dispute the first assertion. (See my post on that issue here.) She argued that Met had not paid a bill she submitted after she filed the complaint. That argument was ineffective because she had never amended the complaint to include reference to that bill.

In Chery v. Metropolitan Prop. & Cas. Ins. Co., 79 Mass. App. Ct. 697 (2011), the Massachusetts Appeals Court held that her 93A claim could survive summary judgment. It held that Metropolitan has caused her injury by failing to settle her claim after its liability was reasonably clear and forcing her to bring suit to receive benefits to which she was entitled.

The court also found support in the record for the claim that Chery had suffered emotional distress from having to prosecute the lawsuit and concern for the effect the unpaid bills would have on her credit.

Risks of car-sharing

2011-07-01T15:18:00.001-04:00

Hank Stern at InsureBlog has posted on the risks to car-owners who sign up with car-sharing companies, which coordinate the very short-term rental of private individuals' cars to local people who need to, say, make a grocery run. (These companies should not be confused with Zipcar, which rents out its own cars.)

I strongly agree with Hank's basic point, which is that you should be cautious about insurance issues before signing up with a car-sharing company, because there may be no coverage under your policy if the car is involved in an accident while rented out.

Hank points out that one car-sharing company states that it provides liability coverage to renters, and therefore presumably not to the owners. If he's right then the car-sharing company has demonstrated a shocking lack of judgment, and no one should sign up with it. It is not worth the risk.

Appeals Court holds that advance payments from insurer to insured must be returned if there is no coverage

2011-06-28T18:18:00.001-04:00

In my last post I discussed French King Realty Inc. v. Interstate Fire & Cas. Co., 79 Mass. App. Ct. 653 (2011), in which the Massachusetts Appeals Court held that coverage for a fire loss was excluded because the insured knew that its fire suppression system was suspended or impaired and because the system was not maintained in complete working order.

Interstate, the insurer, had made an advance payment to the insured, French King. French King argued that it was not required to return the advance payment because Interstate did not reserve it rights and defenses in connection with the payment.

The court disagreed. It followed other jurisdictions that have reasoned that an insurer is entitled to reimbursement for an erroneous payment when coverage does not exist under the policy and the insured was unjustly enriched and did not change position to its detriment in reliance on the payment.

Appeals Court holds that word maintain in coverage means keep in place, not keep in working order

2011-06-24T16:31:00.008-04:00

French King Restaurant, insured by Interstate, had in place had a dry chemical fire suppression system.

The insurance policy contained a "protective safeguards endorsement," or PSE, which required French King "to maintain" the fire suppression system. The policy excluded coverage for loss or damage caused by by or resulting from fire if French King "knew of any suspension or impairment" in the system or failed to maintain the system "in complete working order."

In 2002 Kidde, the manufacturer of the fire suppression system, issued a bulletin advising that it would no longer support dry chemical systems. Kidde had previously recommended that dry chemical systems be upgraded to wet chemical systems. As of 2002, the dry system could no longer be inspected, serviced, recharged, or repaired.

In 2003, the company French King hired to inspect its fire protection system warned it that the system was not in accordance with current requirements.

In 2004 the Executive Office for Public Safety announced that dry systems needed to be upgraded to wet systems.

After the subject insurance policy was issued in 2005, the private fire inspector again informed French King that to be in compliance with current standards a wet fire suppression system was required. That same month, the city's building inspector informed French King that he could not issue a certificate of inspection until the system had been fixed.

In October, 2005 there was a fire at the restaurant. The fire suppression system failed to function. Interstate declined to pay the loss on the grounds that French King had failed to "maintain" the fire suppression system and that exclusions relating to the fire suppression system applied.

In French King Realty Inc. v. Interstate Fire & Cas. Co., 79 Mass. App. Ct. 653 (2011), the Massachusetts Appeals Court held that the word "maintain" was ambiguous and must be interpreted in a manner favorable to French King as meaning merely having a fire suppression system in place.

The court ruled that coverage was excluded by the exclusion for loss or damage if the insured knew of any suspension or impairment in the fire protection system. It held that the record showed clearly that French King knew that the fire suppression system was impaired. It ruled that coverage was also excluded because French King failed to maintain the system "in complete working order."

First the birth certificate thing and now this . . .

2011-06-16T07:18:00.005-04:00

Tred Eyerly discusses a new statute in Hawaii on his blog Insurance Law Hawaii.

According to Eyerley, the statute provides that an "occurrence" in a liability policy "shall be construed in accordance with the law as it existed at the time that the insurance policy was issued."

The statute was apparently passed in response to a court decision holding that construction defects are not occurrences.

I don't have any additional information on the new statute, but if it's as broad as Eyerly describes there could be some insurance coverage attorneys in Hawaii who will make a great (if unexciting) living off of it. Let's say there's an environmental coverage case in which a pollutant seeped into the ground from 1935 to 1975. When the insurance coverage aspect comes up, as it inevitably will, the parties will be arguing the definition of occurrence in each policy year. Maybe -- and I have no idea -- there was a decision by the highest state court in Hawaii in 1934 giving a clear definition of occurrence. (It's not very likely, but it could be.) If one of the policies was issued outside of Hawaii, assuming that Hawaii follows the usual choice of law rules, the history of occurrence litigation in that state will come into play.

And let's not forget that the definitions of occurrence given in standard policy forms have evolved over the years.

And finally, as a philosophical matter, what does it mean to "construe" a concept "in accordance with the law as it existed at the time that the insurance policy was issued." For example, if a court of a particular state makes a ruling on triggers of coverage for the first time in 1972, and holds that the manifestation trigger applies, does that mean that the manifestation trigger does not apply to policies issued before 1972? Or would the manifestation trigger apply all the way back because if the word occurrence was construed that way in 1972 then logically it always had to be construed that way?

Everything you ever wanted to know about IDL coverage but were afraid to ask

2011-06-14T08:18:00.001-04:00

Here's an article on a type of coverage I had never heard of: independent director liability, or IDL coverage.

This supplements directors and officers (D&O) coverage. My first thought was why such supplemental coverage would be necessary; why not just purchase higher policy limits on D&O coverage. The reason is given at the end of the article: IDL coverage provides peace of mind for outside directors. If a D&O policy is depleted by an Enron-type meltdown, the directors will still have coverage.

If I were an insurance agent or a risk manager I would need to take a hard look at both the D&O coverages and the proposed IDL coverage before I would make a recommendation about whether a corporation should buy the IDL coverage. But, as the article points out, if I were an outside director (who wasn't paying for the policy from my own funds), of course I'd want it because, hey, why not.

California Federal District Court sharply curtails Cumis doctrine

2011-06-10T07:26:00.001-04:00

The widely-accepted doctrine that an insured has a right to independent counsel of its choosing if an insurer is defending it under a reservation of rights is frequently called the Cumis counsel doctrine, after a case from California, San Diego Fed. Credit Union v. Cumis Ins. Society, Inc., 162 Cal. App. 3rd 358 (1984).

A federal district court in California has now sharply curtailed the application of that doctrine under California law, essentially holding that because insurance defense counsel has an obligation to the insured, any potential conflict of interest between the insurer and the insured cannot affect the defense.

Centex Home is a general contractor against whom several homeowners filed lawsuits alleging construction defects. Centex sought coverage for some of the claims as an additional insured on policies Travelers Property had issued to Centex's subcontractors. Travelers agreed to defend subject to a full reservation of rights. It agreed that the attorneys already retained by Centex could continue to represent it.

Nine months later Travelers informed Centex that it would hire new counsel of its own choosing, and retained two law firms to defend Centex. Centex refused to accept those firms unless Travelers showed that they could provide a conflict-free defense. It also claimed a right to independent counsel due to Travelers' reservation of rights.

Travelers stopped paying defense costs and filed a suit for declaratory judgment on the grounds that Centex breached its duty to cooperate.

In Travelers Property v. Centex Homes, The United States District Court for the Northern District of California noted that under California statute and case law:

[a] conflict exists "when an insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel . . . retained by the insurer for the defense of the claim." . . . However, if the coverage issue is "independent of, or extrinsic to, the issues in the underlying case," then independent counsel is not required. . . . Where the interest of the insured and insurer are aligned in defending against the underlying action, a conflict does not exist."

The court held that Travelers' reservation of rights did not give rise to a conflict of interest. One of the rights that Travelers reserved was the right to deny coverage if the damages alleged occurred outside the policy periods. Centex had asserted a statue of limitations defense in the underlying cases. It argued that Travelers would attempt to focus liability outside the policy periods, which would harm the statute of limitations defense.

The court rejected that argument because the conflict is a "merely potential" one.

[Centex] provides no evidence that [Travelers'] appointed counsel could shift the focus of liability outside of [Travelers'] policy periods. More importantly, whether damages occurred before, during, or after the policy period is a factual issue outside of counsel's control. . . . [Centex] and [Travelers] have the same interest in minimizing liability by establishing that any damages occurred at a time early enough for the statute of limitations defense to apply.

Furthermore, any counsel [Travelers] appoints also has legal and ethical obligations and a fiduciary duty to [Centex]. . . . Although [Travelers] might have an interest in continuing an investigation into its potential for coverage, this is irrelevant to the ability of [Travelers'] appointed counsel to control the issue of when any covered liability occurs.

Massachusetts Attorney General alleges nearly $1 billion overcharge on commercial auto insurance

2011-06-08T10:07:00.003-04:00

Massachusetts Attorney General Martha Coakley has issued a press release alleging that businesses in the state have been overcharged by nearly $1 billion on commercial auto insurance in the past seven years.

Coakley cited data showing that insurers' underwriting profits were significantly higher in Massachusetts than the national average. She has requested that the Commissioner of Insurance reduce insurance rates so that they comply with a statute forbidding rates that are "excessive" or "unreasonably high."

Summer, and the rantin' is easy

2011-06-06T15:33:00.002-04:00

A while back I posted about my annoyance with a day camp that required parents to sign a release acknowledging that the camp did not carry liability insurance.

New summer, new camp, new rant.

This camp requires parents to sign a release of the camp and every affiliated person or entity from all negligence claims. (In oversimplified terms, negligence means you made a mistake that caused someone else to get hurt.)

First, I want to acknowledge that this particular camp is priced and has additional financial aid to allow participation by kids from families of all income levels. It is possible the release lowers the price of its liability insurance, or that the camp administration believes (wrongly) that the release eliminates the need for such insurance. I do not in any way intend to minimize the effect of the cost of insurance, and the effect it might have on the camp's ability to serve all populations.

But . . . I am sending my elementary-school aged child to you. As I have written many times before, accidents happen. If an accident happened because you made a mistake -- and I'm not going to list all of the possible mistakes you can make while caring for a bunch of little kids -- and as a result a kid is permanently disabled, unable to work, unable to care for himself -- you have a moral obligation to defray the expenses for care that will follow the kid for the rest of his life. The good news is, you don't have to pay it yourself, you can get insurance. That's what it's there for.

Having adequate insurance is simply the responsible thing to do.

Take a look at the new Cavalcade of Risk

2011-06-02T15:30:00.002-04:00

You can find it here.

For newbies, the Cavalcade of Risk rotates among insurance and other risk blogs, and provides links to blog posts on those topics.

History lesson

2011-05-27T15:05:00.002-04:00

Here are Part I and Part II of a really interesting article on the history of insurance regulation.

Hold on to all of your insurance policies forever

2011-05-25T08:37:00.005-04:00

One of the very first steps in every insurance coverage case, large or small, is obtaining a copy, preferably certified, of the applicable insurance policy. It's also often one of the hardest and most time-consuming steps, even for a recent loss under which coverage of only a single policy is triggered.

In occurrence-based policies, every policy that was in effect during a loss potentially provides coverage. In long-tail losses such as environmental or asbestos claims where the exposure took place over decades, it is sometimes difficult to identify what insurer issued the policies for each year, much less to obtain a copy of them.

Not surprisingly insureds frequently have no idea what insurer provided coverage to them fifty years ago. And if you go back far enough, even if an insured knows the name of the insurer, it can be difficult to determine the applicable policy forms. Some cases address whether it is acceptable to make an educated guess as to the terms of the policy.

In House of Clean, Inc. v. St. Paul Fire & Marine Ins., Co., __ F.2d __, 2011 WL 1321197 (D. Mass), the United States District Court for the District of Massachusetts held that the insured bears at least some responsibility for knowing what policies were historically issued to it.

House of Clean operated a dry cleaning business from 1967 to 2007. In 2005, chemical pollutants used in the cleaning process were detected in nearby soil and groundwater. Neighbors sued and the Department of Environmental Protection issued a notice of responsibility. House of Clean sought coverage from its insurer, St. Paul. When a coverage dispute arose, it sued St. Paul for declaratory judgment and breach of contract.

House of Clean subsequently sought to amend its complaint. One of the new allegations was that during discovery, St. Paul provided over 10,000 pages of disorganized documents which included two insurance policies from 1981-1982. House of Clean had been previously unaware of those policies. It sought to amend the complaint to add allegations of coverage under those policies.

The court denied House of Clean's motion to amend the complaint. It held that the motion to amend was untimely given that it would require the addition of two new defendants (insurers related to St. Paul). It stated, "The Court acknowledges that HOC was unaware of those policies before October, 2010, but notes that it bore at least some responsibility for maintaining records of insurance policies it had purchased."

The lesson: Keep full copies of your occurrence-based insurance policies forever. Really, forever.

It's not too late for Rapture Insurance

2011-05-21T09:30:00.004-04:00

You can buy it on ebay here. Act now, because by 6:05 tonight the Rapture will be a known loss and no longer insurable.

Here's a great blog post on other Rapture-related insurance issues.

Mass. Appellate Division holds that insurer's non-specific denial to allegation of complaint does not preclude summary judgment for insurer

2011-05-17T11:31:00.006-04:00

Commerce Insurance Company insured a car which was struck by a motorcycle. Belizaire, a passenger in the car, made a claim for PIP coverage. Commerce eventually denied the claim on the basis of non-cooperation.

Lynn Physical Therapy sued Commerce, claiming it was entitled to payment for treatment it had provided to Belizaire. Summary judgment was granted to Commerce on the ground that Belizaire's failure to cooperate precluded coverage.

On appeal to the Massachusetts Appellate Division, Lynn PT argued that summary judgment should be reversed because Commerce never acknowledged that it insured the vehicle in which Belizaire was a passenger. Lynn PT based that assertion on the answer to the complaint and a response to a request for admission. In both instances Commerce denied a lengthy statement which included, among many other facts, the assertion that the vehicle was insured by Commerce.

In Lynn Physical Therapy Inc. v. Commerce Ins. Co., 2011 WL 1744225 (Mass. App. Div.), the court disagreed, noting that Commerce had admitted during the course of discovery that it insured the vehicle.

For some reason the court did not make the most obvious point: If Commerce did not issue the policy, it would not be liable for PIP payments. If it did issue the policy, it was entitled to deny the claim (according to the trial court's findings) because of Belizaire's noncooperation. In either event, Lynn PT would not be entitled to PIP payments.

SJC rules on statute of limitations, penalties for insurance agency hiring unlicensed broker

2011-05-09T15:11:00.007-04:00

Last year I published a number of posts on the Appeals Court decision in Anawan Ins. Agency v. Div. of Ins. (Click on the link and then scroll down to see those posts.) The case concerned an insurance agency that had employed an unlicensed broker.

In Anawan Ins. Agency v. Div . of Ins., 2011 WL 1588424 (Mass.) the Supreme Judicial Court has affirmed in part and reversed in part the decision of the Appeals Court.

The SJC held, first, like the Appeals Court, that the four year statute of limitations of Mass. Gen. Laws ch. 260 §5A applied, rather than the two year statute of limitations of Mass. Gen. Laws ch. 260 §5. §5A applies to "actions arising on account of violations of any law intended for the protection of consumers." The court held that Mass. Gen. Laws ch. 175 §177, which prohibits an insurance company from paying an individual who is not a licensed insurance agent, is a statute intended for the protection of consumers.

The SJC then overturned the decision of the Appeals Court with respect to the discovery rule, holding that the discovery rule does apply to an action by the Division of Insurance to enforce Mass. Gen. Laws ch. 175 §177.

Finally, the SJC overturned the decision of the Appeals Court that the only fine that could be imposed was a fine under Mass. Gen. Laws ch. 175 §177, and that a fine under Mass. Gen. Laws ch. 176D §7 could not be imposed. The SJC held that separate penalties under both statutes could be imposed.

Appeals Court holds that multiple intentional rammings of vehicle is one occurrence

2011-04-28T13:32:00.002-04:00

In my last post I wrote about Mass. Homeland Ins. Co. v. Walsh, 2011 WL 1344554 (Mass. App. Ct.) (unpublished), in which the Appeals Court held that compulsory auto coverage provides coverage for intentional acts.

Apparently the insured rammed the claimant's vehicle multiple times. The court held that although there were multiple discrete collisions, there was only one occurrence; the claimant's injuries arose from "a single continuous episode of ramming of his vehicle that occurred in a short spatial and temporal span."

Appeals Court holds that compulsory auto insurance provides coverage for intentional acts, even in PIP claims

2011-04-26T10:23:00.004-04:00

The issue in Mass. Homeland Ins. Co. v. Walsh, 2011 WL 1344554 (unpublished) was whether an auto insurer must indemnify its insured against liability for injuries sustained by a claimant as a result of an intentional vehicular assault by the insured.

The court noted that the primary purpose of compulsory insurance is protection of travelers on the highway. It held that coverage is required whether the conduct of the insured is intentional or merely negligent.

The court implied that PIP coverage is also available for injuries arising out of the intentional act of the insured.

U.S. District Court denies summary judgment to Pring-Wilson's insurer

2011-04-20T13:39:00.003-04:00

I posted here about the declaratory judgment complaint filed by Fire Insurance Company seeking interpretation of the homeowner's policy by which it insured Alexander Pring-Wilson's mother. Pring-Wilson, a Harvard graduate student, had pleaded guilty to involuntary manslaughter of Michael Colono in Massachusetts. Colono's estate filed a wrongful death action against him, and he sought coverage under the homeowner's policy issued to his mother in Colorado.

In Fire Ins. Exchange v. Pring-Wilson, 2011 WL 1162913 (D. Mass.), the United States District Court for the District of Massachusetts has denied the insurer's motion for summary judgment, on the grounds that there were facts supporting the propositions that Colono's death was an accident, and that his death was not reasonably foreseeable under the Colorado law of insurance coverage.

According to the opinion, Pring-Wilson was walking late at night and Colono was parked in a car with two friends, including Sammy Rodriguez. Words were exchanged and Colono got out of the car and began to fight with Pring-Wilson. Rodriguez then got out of the car and joined the fight. Pring-Wilson pulled out a knife he habitually carried and began flailing it in front of him, cutting Colono in five places. Colono and Rodriguez got back in their car, and apparently neither of them at first realized that Colono had been cut. When Rodriguez realized that Colono was injured he sought help. Colono died in a hospital that night.

The fight had taken little more than a minute. As soon as the other two men drove away, Pring-Wilson called 911. Although he denied that he was involved in the fight he reported that he had seen a man get stabbed.

In the civil wrongful death trial, the state superior court judge had concluded that Wilson had not sought help from a nearby store and therefore and not availed himself of all reasonable alternatives to combat, and that Pring-Wilson had employed more force than was reasonably necessary to repel the attack. He also concluded that Pring-Wilson did not intend to kill or inflict serious injury with his knife, but only to drive the other two men away.

The U.S. District Court examined whether Colono's death was an accident (and therefore an occurrence) within the meaning of the policy and under Colorado law. It held that some facts supported the conclusion that Colono's death was accidental, including that Pring-Wilson had not intended to kill or seriously harm Colono; that the fight was quick and confused; that Colono was not aware that he had been wounded; and that at least four of the five knife wounds were very shallow.

The court then examined whether the intentional acts exclusion excluded coverage. It held that the exclusion did not apply because under Colorado law Colono's death was not reasonably foreseeable given Pring-Wilson's conduct.

Appellate Division holds that insurer's withholding of evidence does not shift burden of proof in PIP case

2011-04-15T07:25:00.002-04:00

Excel Physical Therapy sued Commerce Insurance for reimbursement of costs of treatment of Hayes. Hayes claimed she was injured when riding as a passenger in a car insured by Commerce. Commerce denied the claim, asserting that Hayes was not in the car when the accident occurred. (That type of insurance fraud is called a "jump in.")

During discovery Excel had requested Commerce's claims logs. In response, Commerce provided a claim note that was extensively redacted.

At trial Excel argued that Commerce's improper discovery response shifted to Commerce the burden of proving the affirmative defense that Hayes was not in the insured vehicle when the accident occurred. The trial judge agreed and directed a verdict to Excel.

In Excel Physical Therapy, Inc. v. Commerce Ins. Co., 2011 WL 1167214 (Mass. App. Div.) the Appellate Division overturned the trial judge's decision. It noted, "It is elementary that a claimant under a policy of insurance has the initial burden of proving that he or she is covered under the policy. . . . Commerce was not required to prove its alleged defense to Excel's PIP claim before Excel proved the claim." It was Excel's burden to prove that Hayes was entitled to PIP benefits because she occupied a vehicle insured by Commerce.

The court held that the proper remedy for withholding evidence based on privilege during discovery is the exclusion at trial of the withheld evidence, not a shifting of burdens.

Ever wonder about the insurance aspects of celebrity breakdowns?

2011-04-11T13:40:00.000-04:00

Property Casualty 360 explains it all here.

Effect of possibility of insurance on jurors

2011-04-08T07:00:00.000-04:00

Although the existence of insurance cannot be discussed or even alluded to at civil trials, pretty much every trial attorney assumes that a juror will bring up the fact that damages will be paid by an insurer, whether or not that is true. Here's an article from the wonderfully (or just weirdly) named Jury Research Blawg Konnectionn that discusses research into the issue.

U.S. District Court holds that fee dispute between law firm and former associate is not covered by malpractice insurance

2011-04-07T12:12:00.008-04:00

Law firm Freedman, DeRosa & Rondeau (FDR) sued a former associate, Adam Clermont, for a portion of fees he collected from clients he continued to represent after leaving FDR. Clermont sought coverage from his legal malpractice insurer, Continental.

The policy covered claims "the Insured shall become legally obligated to pay as damages and claim expenses because of a claim . . . by reason of an act or omission in the performance of legal services by the insured."

"Claim" was defined in the policy as "a demand . . . arising out of: (1) an act or omission, . . . in the rendering or failure to render legal services."

"Legal services" was defined in the policy as "those services . . . performed by an Insured for others as a lawyer, arbitrator, mediator, as well as a notary public, or as a title agent."

"Damages" was defined in the policy as "judgments, awards and settlements." The definition excluded "legal fees, costs and expenses paid or incurred or charged by the Insured," and "injunctive or declaratory relief."

In Clermont v. Continental Cas. Co., 2011 WL 1235389 (D. Mass. 2011), the court held that a fee dispute did not come within the policy's definition of "legal services." It also held that the dispute fell within the exclusion to the definition of damages.

More on why it's good to comparison shop for insurance

2011-04-05T11:47:00.004-04:00

This article also demonstrates how the rich are different from us.

Shopping for coverage can pay off

2011-04-01T11:03:00.004-04:00

Although the couple that writes this blog, Sustainable Personal Finance, is Canadian, their point in this post on insurance agents is well-taken here as well: it never hurts to shop around.

As with all things in life, however, the cheapest coverage is not necessarily what you need. What is included in the coverage? What is excluded? What is the reputation of the insurer with respect to paying or fighting fair claims? What is the deductible? Does the property coverage provide replacement cost or present value? Do attorney's fees reduce the coverage limits? Is the insurer in danger of going out of business?

U.S. District Court finds no coverage for agency that provided therapy to girl who was abused in foster care

2011-03-30T12:12:00.004-04:00

The tragic case of a girl in foster care who at age 11 was beaten nearly to death by her aunt and stepfather has been periodic front page news for years. The abuse put the child into a coma in 2005. Over the opposition of her stepfather, who purportedly sought to avoid a murder conviction, the Department of Social Services brought suit to allow her doctors to terminate life support, as she was in a vegetative state from which there appeared to be no hope of recovery. The Supreme Judicial Court ruled in favor of DSS. The child, however, began to breathe on her own and eventually recovered to the point that she could talk. The aunt committed suicide and the stepfather is in jail.

And now we move on to the insurance issues.

The child's current guardian sued a clinic that provided therapy to the child when some of the abuse took place. The defendant's insurer, Valley Forge Insurance Company, filed suit seeking a declaratory judgment that its policy does not cover the allegations.

The policy contained an exclusion for the "actual or threatened sexual or physical abuse or molestation by anyone to any person while in the care, custody or control of the insured."

At issue is the meaning of "in the care of." The insureds argued that the phrase means "physically in the care."

In Valley Forge Ins. Co. v. The Carson Center for Human Servs., Inc., 2011 WL 884802 (2011) the United States District Court for the District of Massachusetts disagreed. Finding little case law on point, the court turned to the dictionary definition of "care" to find that physical proximity is not required. Rather, the phrase means "under the supervision or charge of the insured."

The court held that the provision of bi-weekly therapy was sufficient to meet this definition.

The court also noted that in the underlying complaint the child's guardian alleged that she was in the care of the insured. "The word cannot carry one meaning for the purposes of liability and a different one for the purposes of coverage."

Republicans in Congress working on flood insurance

2011-03-14T07:42:00.001-04:00

I write periodically about the imminent expiration/actual expiration/retroactive extension of the National Flood Insurance Program, or NFIP. NFIP is a program of the Federal Emergency Management Agency ("FEMA") that issues standard flood insurance policies, mostly through private insurers. NFIP is created by statute, and was originally set to expire in October, 2008. Congress has issued several short-term extensions to it.

Even though there is now a whopping six months until NFIP expires again, this time round, according to this article in Insurance Journal, one side of the aisle is already working on the issue. The Republican draft of legislation will phase out subsidies (and therefore the entire program; the whole point of NFIP is to provide subsidies).

Coming soon: dog exclusions

2011-03-10T07:34:00.002-05:00

According to this article in Claimsjournal.com, the American Association of Insurance Services (AAIS), which develops policy forms, has drafted endorsements for homeowners and umbrella policies which exclude coverage for damages caused by dogs owned by the policyholders.

Given the range of lawsuits that are brought against dog owners (I recall a case in which a dog barked from an enclosed lawn, startling the plaintiff and making her fall) and the high damages that can be awarded in dog bite cases, I recommend that dog owners avoid these endorsements even if it means paying higher premiums.

Appeals Court holds that judicial estoppel doctrine bars assignment of some claims to prevailing plaintiff

2011-03-08T14:01:00.005-05:00

Stephen Hanlon sued Becky Sandman for injuring him when she was driving while intoxicated.

At trial Hanlon received a judgment of approximately $17 million.

Hanlon, as the assignee of Sandman's rights, then sued Sandman's insurer, Homeland, for breach of its duty to defend and breach of Mass. Gen. Laws chs. 93A and 176D. He alleged that the insurer and the insurance defense attorney failed to adequately prepare for and defend at trial, exposing Sandman to an excess judgment; and that they failed to explore settlement opportunities and convey them to Sandman.

Hanlon later substituted Sandman as the plaintiff. Homeland moved to dismiss on the basis of judicial estoppel. That motion was allowed, on the ground that Hanlon was the real party in interest regardless of the substitution of Sandman as the named plaintiff.

In Sandman v. McGrath, 78 Mass. App. Ct. 800 (2011), the Massachusetts Appeals Court noted that judicial estoppel "is an equitable doctrine that precludes a party from asserting a position in one legal proceeding that is contary to a position it had previously asserted in another proceeding." The court held that the doctrine must be applied to the real party in interest.

The court held that the doctrine of judicial estoppel bars Hanlon from bringing claims reqardng the adequacy of preparation for and actions at trial, because in the underlying action he had successfully argued that the damages award was not exessive.

The court held that the doctrine does not apply to claims regarding failure to pursue settlement opportunities. Hanlon's claim that he would have settled the underlying lawsuit is not inconsistent with the argument that Sandman was negligent and liable to him for damages.

2010's ten most significant insurance decisions

2011-03-02T11:25:00.002-05:00

This article is both funny and informative.

As so often, thanks to Mike Tracy at Rudolph Friedmann for forwarding it to me.

New Cavalcade of Risk

2011-02-22T13:52:00.000-05:00

A little late, but here's the the most recent Cavalcade of Risk, in which Jaan Sidorov in his Disease Management Care Blog links to a number of interesting posts on various blogs about various aspects of risk.

Jaan linked to my post on why gun insurance won't work.

I pointed out in that post that liability insurance by its nature cannot provide coverage for intentional acts. Jaan responded:

Yet, thinks the DMCB, health insurance covers intentional injuries and what about the person who knowingly continues with a lifestyle that is harmful.....?

While it's true that health insurance provides coverage for lung cancer for smokers and carpal tunnel syndrome for people who play too many computer games, that's not quite the right analogy. Liability insurance does generally provide coverage for harm incurred from risky behavior. There is no exclusion from motor vehicle coverage if the insured is speeding or from medical malpractice insurance if the doctor has scheduled more operations in a day than can be considered optimally safe.

The true analogy would be health insurance for a suicide attempt, which is intentional harm to oneself, not just the losing side of a risk. But then one gets into a semantic discussion: did the insured intend to become depressed or mentally ill? It's interesting to note that life insurance generally excludes coverage for suicide.

In any event, one must be careful not to analogize too much between medical insurance and liability insurance, mostly because I just don't know all that much about medical insurance.

Mass. Appeals Court holds that insurer must pay market rate to Cumis counsel

2011-02-17T13:10:00.002-05:00

When an insurer defends a case under a reservation of rights, the insured has the option of choosing his or her own attorney (often called Cumis counsel after a California case) and having the insurer pay the reasonable charges of that attorney. What has been undetermined, until now, is whether the insurer is obligated to pay that attorney's usual hourly rate, or if it may pay the generally much lower rate it would pay to its usual insurance defense panel counsel.

In Northern Security Ins. Co., Inc. v. R.H. Realty Trust, 78 Mass. App. Ct. 691 (2011), the Appeals Court held that reasonable rates must be based on market rates rather than panel counsel rates.

The court also held that where an attorney agrees to accept a discounted rate from the insured, he or she cannot recover more than that rate from the insurer.

Thanks to Mike Tracy of Rudolph Friedmann LLP for bringing this case to my attention.

Title insurance

2011-02-15T13:17:00.002-05:00

Here's an informative article about title insurance.

When my husband and I bought our house, on the advice of our real estate attorney we opted against title insurance. He told us that since the property is registered land, there could be no claim against the title. Not long thereafter I was involved in a case involving title to land and added our lack of title insurance to my list of things to wake up in the middle of the night worrying about. When we refinanced we purchased the insurance. I still don't know whether it's really necessary for registered land, but it sure makes me feel better.

Superior Court notes lack of standard for imminent threat of offsite migration of contaminants

2011-02-07T14:41:00.008-05:00

From 1853 to 1952 FG&E owned and operated a plant that manufactured gas. The manufacturing process generated hazardous materials at the site.

FG&E filed a lawsuit seeking a declaration that several primary liability policies issued by OneBeacon and Travelers provide coverage for cleanup costs.

The insurers, relying on an owned property exclusion, argued that coverage is triggered for any policy period only if there was off-site property damage during that policy period.

In Fitchburg Gas & Elec. Light Co. v. OneBeacon Am. Ins. Co., 2010 WL 5490148 (Mass. Super.), Judge Neel of the Massachusetts Superior Court noted that under Massachusetts law coverage is triggered for a cleanup designed to prevent further migration of contaminants to off-site property, even when such migration has not yet occurred. However, there is no standard by which such a threat of migration is to be measured.

This case, however, would not set that standard. Noting that there were competing expert affidavits about whether the contaminants have or would migrate offsite, Judge Neel denied summary judgment to both sides.

Thoughts on umbrella coverage

2011-02-01T10:22:00.000-05:00

Kiplinger, a personal finance magazine, has an interesting article on why people with income of over $100,000 or assets over $1 million should purchase umbrella coverage.

Umbrella coverage is coverage above your regular insurance. For example, you might have an auto policy and a homeowner's policy that each have a limit of $300,000. An umbrella policy would kick in if the damages exceed that amount.

The article states that umbrella insurance will cover your legal fees if you get sued. In most cases that is incorrect. Generally, your primary insurance (such as auto or homeowner's) will cover your legal fees, although there are some rare cases when primary insurance does not apply and umbrella insurance does apply. There are also some primary policies in which legal fees deplete the coverage limit.

SJC seeks amicus briefs on MedPay question

2011-01-28T11:48:00.001-05:00

The Supreme Judical Court of Massachusetts is seeking amicus briefs in Golchin v. Liberty Mut. Ins. Co., docket no. SJC-10794. According to the SJC's blurb,

This case presents important issues concerning the Commonwealth's coordination of benefits among health insurance, PIP and MedPay: whether the Commissioner of Insurance has properly mandated that insureds claiming MedPay must first make a demand on their health insurers, and may only make demand on MedPay after denial by health insurers, which denial must be provided to the MedPay insurer before any payment.

Why gun insurance won't work

2011-01-26T13:26:00.004-05:00

The New York Times published an interesting letter to the editor last week.

To the Editor:

In “How Many Deaths Are Enough?” (column, Jan. 18), Bob Herbert recommends stricter licensing and registration of guns, more vigorous background checks and a ban on assault weapons. I agree.

And I have another suggestion: gun insurance. Mandatory liability insurance for gun owners sounds to me like an idea whose time has come. With this approach, we can respect what many interpret as a constitutional right to bear arms, while at the same time making those who possess and use weapons pay for the risk that they pose to the rest of us.

Caroline Herzenberg
Chicago, Jan. 18, 2011

While it's an interesting idea, I can see a number of problems with mandatory insurance for gun-owners. First, you can't get insurance for intentional acts. That's because insurance insures against risk -- meaning accidents -- while intentional acts are not risks, they are certainties. The standard Massachusetts auto policy, for example, insures only against "accidents," which it defines as as "an unexpected, unintended event." Thus, the insurance will provide coverage if the insured driver skids on ice and injures a pedestrian, but it will not provide coverage if the driver purposefully aims for the pedestrian and runs him down.

Gun insurance might provide coverage for a hunting accident, but it wouldn't provide coverage for intentionally shooting someone.

Even if there could be gun insurance for intentional assaults, the administration of it would be quite difficult. Would the insurance be purchased annually, like car insurance, as long as the person owned the gun? What about the large percentage of gun crimes that are committed with stolen guns? Would the original owner -- or the gun store -- be responsible for insurance ad infinitum after the gun was stolen?

Thanks to my friend Nomi Herbstrom for bringing the letter to my attention.

Appeals Court holds arbitrator exceeded authority in ruling underinsurance claim premature until third-party claim resolved

2011-01-19T11:44:00.004-05:00

In 2001 Dorcas Weiner was involved in two separate car accidents. She sought underinsured motorist coverage from Commerce for both accidents. Those claims were consolidated and went to arbitration as required by the standard Massachusetts automobile insurance policy.

The arbitrator held that the compensation Weiner received from the other driver in the first accident was sufficient to cover her losses from that accident. He held that arbitration was premature as to the second accident because the claim against the other driver in that accident had not been resolved.

Weiner and her husband won a motion in Superior Court to vacate the arbitration award, on the ground that the arbitrator had exceeded his authority in deciding that arbitration for the second accident was premature.

The case was arbitrated again with a new arbitrator. The second arbitrator awarded damages for both accidents, and that award was confirmed by the Superior Court. Commerce appealed, arguing that the first arbitration award should not have been vacated and that the matter should have been submitted for reconsideration to the first arbitrator.

In Weiner v. Commerce Ins. Co., 78 Mass. App. Ct. 563 (2011), the Appeals Court affirmed.

The court held that the first arbitrator plainly erred when he concluded that the claim for the second accident was premature, because it is well settled that an insurer must arbitrate an underinsurance claim regardless of the pendency of a third-party claim. The arbitrator made clear an intention to rely on the damages award in the third-party claim, but the policy required damages to be determined by the arbitrator. He thereby exceeded his authority.

The Appeals Court also held that the Superior Court judge was allowed by statute to appoint the second arbitrator to determine the claim.

Superior court holds that insurer's mistaken belief that one policy period applies does not estop it from recovery under the correct policy period

2011-01-12T10:11:00.004-05:00

Jacob Hanks suffered brain damage as a result of complications during his birth at UMass Medical Memorial Center, an affiliate of UMMHC. For some reason his parents filed three separate actions against UMMHC personnel in three different years. Those claims settled for $4.9 million. Defense costs totalled $1,034,140.

UMMHC had claims-made insurance policies. Its primary provider was CPAC, a captive insurer of UMMHC. UMHHC's excess policies were with other carriers.

In a claims made policy the policy providing coverage is the one in effect when the insurer was notified of the claim. (This is in contrast to an occurrence policy, in which the policy providing coverage is the one in effect when the underlying incident occurred.)

While the lawsuits were pending, UMMHC believed it had given notice of the claim to the excess insurers during the 2003-2004 policy period, when the CPAC policy had a limit of $5 million. It later came to light that the excess carriers may have been notified in the 2001-2002 policy period, when the policy limit was $2.5 million.

UMMHC then sued the excess carriers to recover the additional $2.5 million, the difference between the underlying limits of the two policy years.

In UMass Memorial Health Care, Inc. v. Lexington Ins. Co., 2010 WL 5071868 (Mass. Super.) the Massachusetts Superior Court ruled on the motion for summary judgment of excess carrier First Specialty.

First Specialty argued that UMMHC had suffered no loss within the meaning of the policies because between CPAC and the excess carriers it actually received more than the loss amount.

UMMHC responded that amounts paid by CPAC are not a recovery by UMMHC, because UMMHC funds CPAC itself and is essentially self-insured.

The court held that under the language of the policy, whether loss below the excess policy was paid by a captive insurer, self-insurance, or a regular insurer was irrelevant.

The court held, however, that indemnity under an underlying policy is not a recovery for the purposes of determining UMMHC's loss, because doing so would count the same amount twice -- first as the underlying policy limit and then as a recovery.

It also held that UMMHC did not "elect" to use the later policy period; it merely made a claim under the policy it believed applied. In fact, the earlier policy applied, and First Specialty's obligations needed to be determined under that policy.

Appellate Division holds that Medpay does not create a right to double recovery

2011-01-05T11:38:00.002-05:00

Bernadette Lawton was in an automobile accident. Her auto insurer, Hanover, paid $2,000 in medical expenses under PIP. Her health insurer, Blue Cross, paid her remaining medical bills.

Lawton then sought $5,000 in medpay benefits from Hanover - as reimbursement for medical bills that had already been paid by Blue Cross.

In Lawton v. Hanover Ins. Co., 2010 WL 5238623 (Mass. App. Div.), the Massachusetts Appellate Division held that Lawton was not entitled to the medpay benefits: "Lawton's argument is inconsistent with both a rational construction of the standard automobile policy and the compensatory character of insurance proceeds."

SJC holds that separate limits apply to family members seeking coverage under Massachusetts Insurers Insolvency Fund

2010-12-29T15:49:00.005-05:00

I wrote here about the Superior Court decision in Mass. Insurers Insolvency Fund v. Smith, which held that the statutory claim limit of $299,999 applies separately to individual family members seeking primary and loss of consortium damages from the Massachusetts Insurers Insolvency Fund.

In 458 Mass. 561 (2010) the Supreme Judicial Court affirmed that decision. The court held that allowing only one limit would substitute the word "occurrence" for the word "claim" in the statute.

Superheroes require super insurance

2010-12-24T12:12:00.000-05:00

This blog post discusses insurance issues in the superhero world.

Happy holidays, everyone.

Appeals Court holds that ch. 176D applies to captive insurer

2010-12-22T12:46:00.005-05:00

Lemos was injured in 2001 as a result of defects in a lawnmower manufactured by Electrolux. He obtained a jury award of $550,500. He then brought an action against Electrolux's captive insurer, Equinox, alleging that it engaged in unfair claim settlement practices in breach of Mass. Gen. Laws chs. 176D and 93A.

As explained by the court in Lemos v. Electrolux North Am., Inc., 78 Mass. App. Ct. 376 (2010), a captive insurance company is formed to bear the risks of the parent company. Premiums paid to a captive may be tax-deductible, and a captive has the potential to produce lower insurance costs.

Electrolux was the parent and sole shareholder of of Equinox. The director of risk management at Electrolux, who was also the president of Equinox, stated that Equinox had no employees, only a board of directors. Its role was purely that of a funding vehicle for the reimbursement of Electrolux for claims that are paid by Electrolux.

Equinox argued that because it is a captive company, Electrolux is in effect a self-insurer, and that Equinox is therefore not engaged in the business of insurance so that the requirements of ch. 176D to not apply to to it.

The Superior Court agreed and granted summary judgment to Equinox.

The Appeals Court reversed. It noted that Equinox is a separate, for-profit entity that calculates the premiums it charges based on loss experience and costs, calls itself an insurance company, and issued a policy that states it provides commercial general liability and other coverage. It also noted that Electrolux receives a financial benefit from using a captive insurer rather than being self-insured.

The real downside to the secondary mortgage market: consecutive mortgagees can't get their paperwork to insurer

2010-12-16T10:22:00.006-05:00

WMC was the mortgagee of property in Athol, Massachusetts. (Reminder: the mortgagee is the entity such as a bank to whom the homeowner makes mortgage payments.) MPIUA issued a homeowners policy for the property which provided coverage to both the homeowner, Brohl, and WMC.

WMC transferred the mortgage note to UBS. UBS retained Ocwen to service the loan. The MPIUA policy was amended to add Ocwen as a mortgagee.

On January 25, 2007, Brohl notified MPIUA that the property had sustained water damage. On February 4, 2007, there was a fire at the property.

On June 12, 2007, Ocwen sent MPIUA a notice of claim seeking damages under the policy. The letter defined Ocwen as "the mortgagee." (Meanwhile, Brohl was being foreclosed upon.)

MPIUA requested documents from Ocwen. On July 16, 2007, the mortgage note was sold back to WMC, and Ocwen never provided MPIUA with the requested documents.

On December 20, 2007, WMC resold the mortgage loan to Credit Suisse. SPS serviced the loan for Credit Suisse.

On June 19, 2008, SPS submitted a claim to MPIUA on behalf of SPS "as the insured mortgagee under the policy." SPS enclosed with the letter a number of documents regarding the transfer of the loan. MPIUA responded with a request for documentation showing SPS' or Credit Suisse's status as proper claimants, including a paper trail from WMC to SPS. It also requested documents showing that SPS had notified MPIUA of its mortgagee status or any efforts to amend the declarations page of the policy.

SPS provided documentation regarding the mortgage transaction, and stated that it was unaware of notices to MPIUA regarding the change in mortgagees.

MPIUA responded to SPS that the documentation it provided was insufficient, and requested copies of the agreements assigning the mortgage from WMC to any subsequent mortgagee. SPS did not provide the requested information.

On September 28, 2008, WMC repurchased the loan from Credit Suisse.

WMC did not notify MPIUA that it had repurchased the mortgage. Instead, on March 23, 2009, it sued MPIUA, claiming that MPIUA breached its contract by failing to pay WMC’s mortgagee claim and had engaged in unfair settlement practices.

After the lawsuit was filed MPIUA continued to request evidence of WMC’s status as mortgagee. On September 22, 2009, WMC produced documents proving that it was now (again) the mortgagee. However, MPIUA did not pay the loss.

MPIUA argued that it was entitled to summary judgment because prior to filing suit WMC and its predecessors failed to provide satisfactory proof of their right and title as mortgagees. In WMC Mortgage Corp. v. Mass. Property Ins. Underwriting Ass’n, 2010 WL 3734120 (D. Mass.), the court held that MPIUA was entitled to summary judgment on the claim that it failed to act in good faith when it refused to provide coverage without additional documentation.

The court also held that MPIUA could not avoid coverage of the loss. Under Mass. Gen. Laws ch. 175 §97, a statute regulating fire insurance, MPIUA’s obligation to provide coverage to a mortgagee named in the policy arose upon satisfactory proof of the mortgagee’s rights and title as a mortgagee.

WMC was named as a mortgagee in the policy, and after the lawsuit commenced it provided sufficient evidence to establish its status as the current owner of the mortgage.

Finally, the court found that the various mortgagees breached the duty to cooperate when they failed to comply with MPIUA’s requests for information and that MPIUA was thereby prejudiced. The court held that the prejudice would be remedied by an order directing WMC to pay MPIUA’s attorney’s fees and costs incurred in the lawsuit.

First Circuit holds that bouncer's unintentional injury to bystander comes within assault or battery exclusion

2010-12-08T11:50:00.003-05:00

Zachary Eaton was minding his own business at a nightclub in Maine called Ushuaia. Another patron got into a skirmish with a bouncer. The bouncer kicked open a glass-and-aluminum door, which struck and injured Eaton.

Eaton sued Ushuaia, which submitted to judgment and assigned its rights against its insurer, Penn-America, to Eaton. Eaton then sued Penn-America to satisfy the judgment.

Penn-America denied coverage on the basis of an exclusion for "damages resulting from assault or battery or physical altercations."

In Eaton v. Penn-Am Ins. Co., __ F.3d __, 2010 WL 472287 (1st Cir.), the United States Court of Appeals determined the coverage issue under the law of Maine.

The court held, first, that while it is acceptable for appellate decisions to be pretentious, they should not "wax longiloquent." (Okay, to be fair, that was just dicta.)

It then held that because the door was dislodged in the course of the assault, Eaton's injuries resulted from the assault and the exclusion applies. It further held that the fact that the bouncer did not intend to injure Eaton was irrelevant to the exclusion, which does not have the same definition as assault and battery in a criminal context.

Welcome to the Cavalcade of Risk

2010-12-01T06:00:00.005-05:00

I am honored to be hosting the Cavalcade of Risk, a blog carnival dedicated to all types of risk.

Liability insurance posts:

Tred Eyerly discusses a new case from Washington state about one of my favorite topics: triggers of coverage for a long-tail loss. The case he discusses held that coverage for water infiltration was triggered when the damages manifested: Policy Language Restricts Ongoing Damage to One Occurrence posted at Insurance Law Hawaii.

Posts about keeping personal documents safe:

Miranda Marquit at Moolanomy posts about keeping personal identification documents safe.

Edward Webber discusses obtaining and keeping safe a UTR, or Unique Taxpayer Reference number (I assume this is the same as a TIN, or taxpayer identification number): UTR Numbers For the Self Employed posted at UTR.org.uk.

Financial posts:

Free Money Finance writes about protecting your job and money against the possibility of being laid off: Career Insurance: Insuring Your Most Valuable Asset posted at Free Money Finance.

Health Insurance posts:

Freefrombroke posts about reimbursement for over-the-counter medication.

Hank Stern argues that medical insurers should not cover birth control: Medical Necessity vs (Stupid) Mandates posted at InsureBlog. Although I completely disagree with his post I include it here as a courtesy because Hank runs the Cavalcade of Risk. And because, unlike the last three posts I've considered for this Cavalcade, his post prsents information and a point of view rather than an advertisement. (Sometimes I think I would like to have a separate blog that discusses only medical insurance issues. Not, like my regular blog, having anything to do with what I do for a living or can write knowledgeably about. Just the trials and travails of my family dealing with health insurance when my husband and I are both self-employed and over-income for any government help. I'm sure there would be a post in that imaginary blog about how all health insurance plans should fully cover everything that helps society as a whole--such as birth control, Hank!)

Jaan Sidorov notes the consistency between the Genetic Information Non Discrimination Act (GINA – or the law that keeps insurers from collecting genetic information) and the recent Transportation Security Administration kerfuffle. In his estimation, our national distaste for profiling leads to everyone being treated equally badly: Can't Trust Health Insurers or Government With Private Data: The Irony of the Genetic Information Non-Discrimination Act & Airport Security Pat Downs

David Williams discusses how Google makes money from free healthcare sites: The downside of free health care sites posted at Health Business Blog.

Life Insurance posts:

Silicon Valley Blogger writes about the different types of life insurance policies: Comparing Whole Life Insurance vs Term Life Insurance posted at The Digerati Life.

Random posts

Jason Shafrin at HealthCare Economists discusses The Drunkard's Walk, a book about randomness and, oh yeah, the price of car insurance. The Drunkard?s Walk posted at Healthcare Economist. Snark alert: If you get irritated when someone says "two categories" and then lists three categories, skip this post.

SJC holds that workers' compensation self-insurance group is an insurer

2010-11-26T09:16:00.006-05:00

I posted here about a Superior Court decision in Mass. Care Self-Ins. Group, Inc. v. Mass. Insurers Insolvency Fund . That case held that a worker's compensation self-insurance group, Mass Care, is an insurer within the meaning of Mass. Gen. Laws ch. 175D, which creates a fund that provides insurance benefits when an insurer that would otherwise provide coverage has become insolvent.

Mass Care provided coverage up to a self-insured retention limit to an injured employee of one of its members. The group had an excess carrier over the SIR that had become insolvent. When the damages paid to the injured employee exceeded the SIR, the group sought coverage from the fund.

The Superior Court held that the group was not entitled to reimbursement, because the Fund does not reimburse insurers.

In Mass. Care Self-Ins. Group, Inc. v. Mass. Insurers Insolvency Fund, 458 Mass. 268 (2010), the SJC affirmed.

The SJC adopted the dictionary definition of insurer as "[o]ne who agrees, by contract, to assume the risk of another's loss and to compensate for that loss." The court noted that Mass Care accepts premiums in exchange for the provision of workers' compensation coverage, and described its functions as including many operations ordinarily associated with the insurance business. Without more, Mass Care would be considered an insurer.

The court then turned to the enabling statute, Mass. Gen. Laws ch. 152 §§25E-25U, under which Mass Care and other worker's compensation self-insurance groups are created. It noted that §25E states that self-insurance groups are not to be deemed insurers, and that the reason is to prevent such groups from being subject to the traditional framework of insurance regulation. However, the definitions section of the statute, Mass. Gen. Laws ch. 152 §1(7), makes self-insurance groups subject to consumer laws and regulations applicable to workers' compensation insurers.

The court reconciled the clauses and concluded that Mass Care is a member of the insurance industry whom ch. 175D was not intended to benefit.

U.S. District Court holds that unsigned insurance application makes policy voidable

2010-11-16T15:50:00.004-05:00

In RLI Ins. Co. v. Santos, __ F. Supp. 2d __, 2010 WL 4183836, RLI issued an umbrella policy to Beli Lima. Lima's 17 year old son was involved in an automobile accident. RLI denied coverage, in part on the ground that Lima had never signed the insurance application.

Lima had submitted an insurance application in July, 2006. RLI rejected it because it was incomplete. In August, 2006, RLI received an application by fax. Lima testified that she does not recall seeing the August form, completing it, or signing it. She testified that the signature on it was not hers. The implication is that the application was filled out and signed by the insurance agent. The application form included the statement, "APPLICATIONS WILL NOT BE ACCEPTED WITHOUT APPLICANT'S ORIGINAL SIGNATURE."

RLI issued to Lima an umbrella policy in September, 2006. When Lima sought coverage for the accident, the court ruled that the policy was voidable by RLI as a matter of law because the signature was a condition precedent to the insurance contract.

The court held in part,

There is no question that a reasonable insurer would consider an applicant's original signature important to its intelligent decision to issue a policy. An original signature assures the insurer that the applicant has attested to the verity of her answers and that she consents to entering into the insurance contract.

Insurance Library looking for donations of insurance-related fiction

2010-11-06T07:49:00.003-04:00

At the end of its latest email newsletter, the Insurance Library, one of my favorite resources, announced:

We have started a fiction section in our collection. So far, we've got the entire collection of Sue Grafton mysteries starring the former claims adjuster turned detective Kinsey Millhone. If you have any insurance fiction looking for a home, we'd welcome your donation!

I can't think of any liability insurance fiction at the moment, probably because I'm not a big fan of mysteries. But in the movie/tv category there's the great Double Indemnity; this Partridge Family episode; and wasn't there a Brady Bunch episode where Mike threw a briefcase in the courtroom and made the plaintiff ignore his fake neck brace and turn around?

Anyone know of any pop culture liability insurance plots that don't revolve around insurance fraud?

Appeals Court affirms that subrogation agreement does not transfer ownership

2010-11-03T07:35:00.005-04:00

About a year and a half ago I wrote about a Superior Court decision in Apthorp v. OneBeacon Ins. Group, LLC. In that case an insurer had paid a claim of $25,000 for a stolen painting. Decades later the painting was found and had increased in value to between $400,000 and $800,000. The insurer claimed ownership of the painting, because the insured subrogated to the insurer all its right, title and interest in the property. Judge Garsh disagreed, stating that subrogation of rights and transfer of ownership are not the same.

The Massachusetts Appeals Court has affirmed the decision in 78 Mass. App. Ct. 115 (2010), adopting the reasoning of Judge Garsh.

First Circuit holds that company is entitled to coverage for claim against its directors and officers for unfair stock redistribution

2010-10-26T06:45:00.005-04:00

About a year ago I wrote several posts about Genzyme Corp. v. Fed. Ins. Co., 657 F.Supp.2d 282 (D. Mass. 2009) , a case concerning coverage for settlement of a shareholder claim for unfair stock redistribution. Judge Gertner of the U.S. District Court held that there was no coverage.

In Genzyme Corp. v. Fed. Ins. Co., __ F.3d __, 2010 WL 3991739, the First Circuit has reversed in part, and remanded. It disagreed with Judge Gertner's conclusion that coverage for the loss is barred as a matter of public policy. It also held that while the policy's "Bump-Up" clause does not cover the amount paid by the corporation to settle the claims against it, the policy does cover any settlement amounts paid under an indemnification obligation with respect to the directors and officers. Because a portion of the claim may have been paid to settle claims against directors and officers, the First Circuit remanded the case to the District Court to consider the question of allocation.

U.S. District court holds that Automatic Extended Reporting Period requires that claims be reported but not made during extended period

2010-10-19T11:46:00.006-04:00

NEET is a small environmental consulting business. It purchased from American Safety consecutive claims-made policies, with the policy periods ending on March 2 of each year.

A claims-made policy provides coverage if a claim is made and reported during the policy period, regardless of when the loss occurred. That's in contrast to the more usual occurrence-based policy, which provides coverage if the loss occurred during the policy period, regardless of when the claim was made.

The policies contained an Automatic Extended Reporting Period which provided that they will cover a claim made and reported to American Safety within 30 days of the end of the policy period, but only if no other similar insurance is in force during that time.

In February, 2008, NEET received a demand that it pay for remediation of an oil spill caused by heating oil tanks NEET allegedly installed improperly. NEET forwarded the demand detter to its insurance agent on March 6, 2008.

In a motion for summary judgment American Safety argued that for the Extended Reporting Period to apply the claim had to be both made and reported to the insurer during the 30 days after the policy expired. In New England Environmental Tech. v. Am. Safety Risk Retention, __ F. Supp. __, 2010 3622250 (D. Mass.) the court disagreed, holding that the policy could reasonably be construed to require only that the claim be reported to the insurer within 30 days after the policy expired. It also held that denying coverage to claims reported within the 30 day period would not assist the goal of claims-made policies of setting future premiums.

American Safety then argued there was no coverage because NEET had "other similar coverage" (the next consecutive American Safety policy) in effect for the policy period beginning on March 3, 2008. In somewhat convoluted logic the court held that the consecutive policy was not "other similar coverage." The heart of its decision is that failure to provide coverage because a consecutive policy was in place "is counterintuitive to a reasonable insured."

The court granted summary judgment to American Safety on NEET's 93A and 176D claims, on the grounds that American Safety's interpretation of the policy was plausible and there was no evidence it had acted in bad faith.

Another decision finding wiggle room for attorney's fees in PIP case after insurer tenders payment of medical bills

2010-10-13T08:12:00.005-04:00

I wrote here about a recent Appellate Division case, Metro West Med. Assocs. v. Amica Mut. Ins. Co., which held that payment of outstanding PIP bills by an insurer does not necessarily prevent the award of attorney's fees under the PIP statute. Another Appellate Division decision has come to the same conclusion.

Howard Physical Therapy provided medical services to Joel DaSilva for injuries he suffered in a motor vehicle accident. Howard submitted to DaSilva's insurer, Premier, a request for PIP reimbursement of medical expenses. Premier paid some of the bills and refused to pay the remainder, asserting that the balance was unreasonable "upon review by an outside company."

Howard took no further action for more than four years, when it filed suit. Two weeks after Howard filed suit, Premier offered to pay the balance plus costs incurred by Howard in filing and serving the complaint. Howard rejected the offer. Premier then sent Howard a check for only the unpaid bill amounts, and moved for summary judgment. The District Court allowed the motion for summary judgment.

In Howard Physical Therapy, Inc. v. Premier Ins. Co., 2010 WL 3855302 (Mass. App. Div.) the Appellate Division reversed the summary judgment decision. It cited Metro West for the proposition that "the mere payment of the balance, in and of itself, would not justify summary judgment for Premier." Rather, the insurer must show that it had "a valid reason not to pay, and that it paid an invalid claim for reasons unrelated to its merits."

The court noted that although Premier had based its original decision, not to pay the full bill, on a review of the bill by "an outside company," there was no indication that the bill was reviewed by a registered or licensed practitioner in the same field as the practitioner submitting the bills, as required by statute. For that reason the Appellate Division reversed the District Court's summary judgment decision.

The court held, however, that Howard could not amend the complaint to add a count for breach of G.L. c. 93A, where Howard had not sent a demand letter prior to suit and Premier made a reasonable offer of settlement within 30 days after suit was filed.

Appeals Court addresses exclusion for residential construction work

2010-10-05T09:02:00.003-04:00

FSS Automatic Sprinkler Corporation subcontracted with CB Construction Company to install fire protection sprinklers at the Stoneleigh Condominium project. The project converted the former Norfolk County Jail into a building of luxury condominium units. (I find that to be the most interesting thing about this case.)

In April, 2003, a sprinkler pipe leaked and caused water damage. FSS's insurer, Tudor, declined coverage, citing an exclusion for residential construction work.

In FSS Automatic Sprinkler Corp. v. Tudor Ins. Co. 77 Mass. App. Ct. 1122, 2010 WL 3629579 (unpublished), the Massachusetts Appeals Court held that the exclusion was ambiguous and therefore does not exclude coverage.

The decision does not quote the entire exclusion, and its discussion of it is so confusing that I can't figure out what the exclusion actually says. (That appears to be a result of the court's drafting, not the policy's.)

So, I can't provide an analysis. If you're dealing with an exclusion for residential construction work, this case might provide guidance in context.

Appellate Division discusses wiggle room for attorney's fees in PIP cases

2010-09-28T15:22:00.001-04:00

Although the PIP statute allows attorney's fees in cases against a PIP insurer, such fees may only be awarded if a judgment is recovered from the insurer on the PIP claim. That rule has been generally understood to mean that an insurer can avoid attorney's fees by paying the disputed amount at any time, even after trial has begun. (Of course, attorney's fees can still be awarded on a 93A claim, but a violation of 93A is much harder to prove.)

In Metro West Medical Assocs., Inc. v. Amica Mut. Ins. Co., 2010 WL 3118636 (Mass. App. Div.), the Appellate Division discussed wiggle room for attorney's fees in a PIP claim.

Metro West alleged that it provided medical services to Cuevos, who was entitled to PIP benefits from Amica. Amica paid some of the bills but rejected the additional bills on the grounds that the services were unreasonable and unnecessary. A few weeks later Amica sent a check for the amount it had originally rejected. Metro West's attorney returned the check and demanded payment for attorney's fees under the PIP statute.

The court stated that it would not be inconsistent with prior case law "to require that the insurer on the § 34M [PIP] claim show more on summary judgment than simply that the bills have all been paid. It should also have to show that there is no genuine issue of fact concerning whether it had a valid reason not to pay, and that it paid an invalid claim for reasons unrelated to its merits, for example, to avoid the cost of litigation or to remove a potential liability off its books."

The court held open the possibility that an insured could reject a tender of late payment from an insurer. "In this light, a check for the balance of bills could be viewed as an offer of settlement, which could be rejected, and not a tender of full payment."

The court granted summary judgment to Amica. Amica had submitted an affidavit in which its claim supervisor averred that the disputed bills were not reasonable and necessary and that Amica paid them as a result of a business decision. "That was sufficient, albeit without a lot to spare" to shift the burden to Metro West to show that there would be a genuine issue at trial concerning the necessity of the services and the reasonableness of the bill." Metro West failed to do so.

Insured really has to send a 93A letter

2010-09-26T14:56:00.003-04:00

It is standard practice for insurers and insurance defense counsel to deny that a demand letter met the requirements for a 93A demand letter. 93A suits are dismissed from time to time because the demand letter failed to provide enough information for the insurer to assess liability or damages.

In Robotham v. LaFortaine, 2010 WL 3327826 (Mass. Super.), the Superior Court dismissed a suit against an insurer because a pre-suit letter did not mention at least one of the following six factors:

1) express reference to 93A;

2) express reference to the consumer protection act;

3) assertion that the rights of the claimants as consumers have been violated;

4) assertion that the insurer acted in an unfair or deceptive manner;

5) assertion that the insured anticipated a settlement offer within 30 days; or

6) assertion that the claimant will pursue multiple damages should the claim be denied.

Underinsurance coverage

2010-09-21T07:33:00.001-04:00

I've been reviewing my auto coverage policy to make sure that I have the proper coverages for my family's circumstances. I've been looking specifically at underinsured coverage. Underinsurance coverage is when your own insurer pays your loss if you are injured due to the negligence of another driver who has insufficient insurance to cover your damages.

Underinsurance pays only if your underinsurance limit is higher than the limit of the other driver's liability coverage. So if you have $50,000 underinsurance coverage, the other driver has $100,000 liability coverage, and your damages are $120,000, your underinsurance will not kick in.

Even if your underisinsurance limit is higher than the other driver's liability limit, underinsurance will only pay the difference between the two limits. If you have $50,000 in underinsurance coverage, the other driver has a $20,000 liability limit, and your damages are $90,000, you will receive $20,000 from the other driver's policy and $30,000 from your own policy.

Appeals Court holds that policy endorsement does not have to be grammatically correct to be effective; underwriters dance in streets

2010-09-17T13:47:00.003-04:00

Michael Daigle was hired to put a new roof on a building in Maine, and to seal two windows. Lavigne visited the job site and, looking for Daigle, climbed up on scaffolding that Daigle's crew used to access the roof. When a portion of the scaffolding snapped, Lavigne fell and broke his neck.

Daigle had a general liability policy with Penn-America. Penn-America denied coverage for Lavigne's claim, and a declaratory judgment lawsuit followed. At issue whether an endorsement effectively precluded coverage for claims arising from roofing.

The endorsement contained preprinted language at the top of the form offering three introductory phrases, each with a box for a checkmark. The phrase that was checked read, "In consideration of the premium charged, it is understood and agreed that . . ."

The form then listed nineteen items, such as "premium" and "coverage," none of which were checked in their corresponding boxes. Below that were four alternative actions, such as "is corrected to read as listed below" and "is amended and changed to read as listed below." None of those boxes were checked.

Finally, typed in bold was the phrase "EXCLUDING ANY AND ALL CLAIMS ARISING FROM ROOFING."

Below that phrase were spaces for a date and initial, both of which were blank.

In Penn-Am. Ins. Co. v. Lavigne, __ F.3d __, 2010 WL 3307367 (1st Cir.), the United States Court of Appeals for the First Circuit held that under the law of Maine the endorsement effectively excluded coverage for claims arising from roofing.

The checked and added phrases read in their entirety, "In consideration for the premium charged, it is understood and agreed that EXCLUDING ANY AND ALL CLAIMS ARISING FROM ROOFING[.]" The court noted that that language is not a complete sentence nor a comprehensible fragment of one.

The court held, however, that the test for interpretation of an insurance policy is not whether the policy is grammatically correct, but whether it is reasonably susceptible of different interpretations. The court held that disregarding the endorsement, as urged by Lavigne, would not "construe the endorsement strictly against the insurer, but rather [] render it meaningless." It held that an ordinary person in the shoes of the insured would understand that the endorsement excluded coverage for claims arising from roofing.

Superior Court applies Boston Gas rule to asbestos case

2010-09-15T12:40:00.001-04:00

A little more than a year ago the Supreme Judicial Court adopted in Boston Gas Co. v. Century Indem. Co., 454 Mass. 336 (2009) pro rata time-on-the-risk allocation for long tail losses.

In New England Insulation Co., Inc. v. Liberty Mut. Ins. Co., 2010 WL 3219436 (Mass Super.), Judge Fabricant of the Superior Court applied that rule to an asbestos case. Although her decision does not discuss the facts, one can infer from reading it that a company that (for reasons not addressed by the court) does not have significant insurance available and was a "relatively minor contributor to the injury" is being hit with a large portion of the damages due to the insolvency of other companies.

U.S. District Court adopts broader definition of "part" in collapse coverage

2010-09-13T10:48:00.001-04:00

A wall in a building in Holyoke owned by Puerta de la Esperanza settled between six and ten inches, with resulting damage to floors, walls, and plumbing fixtures. The settling was caused by the collapse of a load-bearing brick pier.

Puerta de la Esperanza requested coverage from its insurer, Middlesex, who sought a declaratory judgment that the pier's failure was not a "collapse." The policy defined collapse as "an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose[.]"

The pier was a component of the building but not an area of the building. Middlesex argued that the word "part" refers only to a physical area but not a structural component of the building. Puerta de la Esperanza argued that the term "part" can mean either an area or a component of the building.

In Middlesex Mut. Ass. Co. v. Puerta de la Esperanza, LLC, ___ F. Supp. 2d ___, 2010 WL 2639859 (D. Mass), the United States District Court adopted the broader definition of "part," and held that there was coverage because the pier, a component of the building, collapsed.

Jury awards $12 million against car owners who removed driver from their auto insurance policy

2010-09-09T15:05:00.002-04:00

Andrew Caplan of Gilbert & Renton, LLC brought to my attention yet another cautionary tale about why adequate insurance is important. In this article Massachusetts Lawyers Weekly describes a case, Silverio v. Gentile, in which a $12 million jury verdict was awarded in a motor vehicle accident suit in which the defendants did not have auto insurance. (The link to the article will only work if you have a password for the Lawyer's Weekly website).

According to the article, Vittorio Gentile, Jr., 26 years old at the time, was driving his grandparents' SUV when he caused a head-on collision for which he has been found criminally responsible.

The jury found that Gentile's grandparents were liable, because they allowed him to drive the car after they were aware of his extensive driving record. Gentile had been hit with so many surcharges that the grandparents had removed him from their insurance policy even though other grandchildren were still covered and permitted to use their vehicles. The jury found that the grandparents were negligent in their failure to secure the car from Gentile because they routinely left the keys out in the open. The plaintiffs convinced the jury that Gentile had their tacit consent to use the vehicle.

Like the case I posted about here, the injuries in this case were tragic. The plaintiffs were two brothers, Joseph and Douglas Homsi, in their 60's. Before the accident Douglas acted as a caretaker for Joseph, who has mental disabilities. In the accident Joseph suffered broken bones and internal injuries. Douglas incurred more serious injuries, and was left unable to breathe, eat, or speak on his own.

Because Gentile is not covered by insurance and the grandparents were found negligent, if the $12 million verdict stands they will have to pay it out of their personal assets. Early in the case plaintiffs' counsel placed an attachment on their real estate, including their home. Plaintiffs' counsel also obtained an injunction to keep the grandparents from transferring their assets.

The moral:

1. Make sure that anyone who will drive your car is covered by your insurance. Under the standard Massachusetts auto policy, you can lend your car to a friend for an afternoon, but if your friend regularly drives your car they must be added to your policy. Doing so will not affect your premiums if your friend has a clean driving record.

2. Don't drive drunk.

3. Don't let anyone use your car who will drive drunk.

Appeals Court affirms $1,007,342.58 award against Arbella for unfair settlement on $20,000 policy

2010-09-04T13:13:00.006-04:00

A cautionary tale for adjusters:

On August 30, 1998 Angelina Dattilo was seriously injured when her car was struck by a car driven by Anthony Caban. Caban had an auto insurance policy with Arbella with a per person limit of $20,000.

Both Dattilo's attorney and Arbella investigated the accident and concluded that Dattilo was not negligent. It was clear that the damages significantly exceeded the policy limits.

Dattilo's attorney sent a letter to Arbella demanding that Arbella tender within 30 days the $20,000 policy limit to Dattilo. The attorney offered to release Caban and Arbella from all additional liability in exchange for the $20,000.

Other than a voicemail message left on the attorney's answering machine, Arbella did not respond to the demand letter for five months. Nor did it notify Caban of Dattilo's demand and offer to release additional liability.

Seven months after the demand letter Arbella offered to settle Dattilo’s claims for $20,000 in exchange for a release. Dattilo refused.

Several months later Dattilo and Caban agreed that a judgment was to be entered against Caban for $450,000. Caban assigned to Dattilo his rights against Arbella for unfair settlement practices. Dattilo agreed not to execute the judgment against Caban. Arbella was aware of the negotiations and waived in writing any claim against Caban for noncooperation under the policy.

Dattilo then sent a 93A demand letter to Arbella demanding $1.4 million to settle the unfair settlement practices claim. Arbella responded with an offer of $23,966. After a jury waived trial, a Superior Court judge awarded Dattilo $1,007,342.58, which included compensatory damages, multiple damages, interest, and costs. Arbella appealed.

In Gore v. Arbella Mut. Ins. Co., 77 Mass. App. Ct. 518 (2010), issued last week, the Massachusetts Appeals Court affirmed the verdict. The decision contains a good review of 93A liability and damages. Of note, the court held that the judgment agreed to by Caban and Dattilo constituted a judgment, not a settlement, for the purpose of calculating 93A damages. (As I discussed here, where a 93A case goes to verdict the actual damages is the verdict amount. Where a 93A case settles, actual damages is lost interest on the settlement.)

It is also worth noting that the court was not unsympathetic to Arbella's claim that it needed more time than the initial 30 days given to it to determine how to proceed. The court noted that the issue was that Arbella never communicated that need to Dattilo's attorney.

Court rules that insurer is not liable for low settlement offer in low impact case, or for not conceding liability

2010-09-02T12:05:00.000-04:00

One constant area of contention between personal injury attorneys and insurers is damages from low impact collisions. A low implact collision is one in which there is contact between the vehicles but it is so slight that it often results in little or no damage to the cars. Plaintiffs' attorneys contend that despite the seemingly minor nature of the accidents, severe back injuries can nevertheless result. Insurers are dubious of such claims.

In Lanton v. Lin, 2010 WL 3038719 (Mass. Super.), Superior Court Judge Fremont-Smith held that an insurer did not violate Mass. Gen. Laws ch. 93A by offering $1,500 to settle a low impact case, especially where the jury had found that the plaintiff had not suffered any damages.

The plaintiff contended that the insurer had violated 93A on a second ground, because it did not concede liability even though the plaintiff had been rear-ended. That failure caused the plaintiff to incur additional attorney's fees to prove that the insured defendant was at fault. Judge Fremont Smith ruled in favor of the insurer on this issue as well. He held, first, that there were no damages because liability was not contested at trial and, second, that the plaintiff had not demanded in his 93A demand letter that the insurer concede damages and so it had no obligation to do so.

Nicholas Ellis, disbarred for insurance fraud, has been reinstated to Massachusetts bar

2010-08-31T12:10:00.000-04:00

In In re Nicholas J. Ellis, 45 7 Mass. 413 (2010), the Supreme Judicial Court ruled last month that Nicholas Ellis, who had been disbarred in 1997 for insurance fraud, could be reinstated to the practice of law.

Ellis had been disbarred for knowingly submitting fraudulent medical records to insurance companies. His actions were part of a larger scheme by his personal injury law firm, Ellis & Ellis, to defraud insurance companies.

The SJC has found that Nicholas has been rehabilitated.

The court found that when Nicholas joined Ellis & Ellis he was new to the practice of law. The firm was established by his father and "tightly controlled" by his brother. Nicholas' wrongdoing was minor compared to the wrongdoing of the firm and his brother.

The court weighed Nicholas' wrongdoing against his post-disbarment activities, which included being the at-home parent to his children while his wife worked, attempting to become a teacher (he was unable to obtain employment because of his convictions), coaching youth teams, and charitable work through his church. He also expressed remorse about his wrongdoing.

I have mixed feelings about the ruling. It irks me that Nicholas gets brownie points for staying home with his kids. If he were a woman, would the SJC give him rehabilitation points for doing that, or for coaching a kid's team, or for doing volunteer work with a church? And I'm not too impressed with his studying to be a teacher when no school in its right mind would hire him.

It also bothers me that the SJC states that his new practice areas are sufficiently distinct from his old personal injury practice. One of his new practice areas is social security disability law. Forged medical records work just as well with the government as with insurance companies.

On the other hand, I like the idea of rehabilitation. I applaud the notion that each of us can grow beyond whatever stupid, wrong or unethical ideas we were indoctrinated with by our families, even if that growth comes in middle age.

So I give Nicholas the benefit of the doubt. Welcome back to the practice of law. I hope you prove worthy.

New York trial court orders reinsurers to pay USF&G $246 million plus interest

2010-08-26T18:02:00.009-04:00

Insurance attorneys talk about reinsurance cases in the same manner that divorce attorneys talk about probate court: it's a world unto itself, with its own language, rules and folkways, and not a place where one necessarily wants to wander without a guide.

Reinsurance is insurer's insurance. An insurer purchases reinsurance to protect itself from unusually high losses. For example, an insurer providing property coverage to many insureds in an area devastated by a hurricane might turn to its reinsurer to cover aggregate losses over a certain amount.

This week a major reinsurance decision was issued by a New York trial court. Although Massachusetts law is not discussed, I am writing about it here because the case illustrates issues that often come up in long-tail loss cases, including lost policies, business successions, allocation and trigger disputes, and cost-benefit analyses by insurers about when to stop fighting and start settling. And because anyone interested in the insurance world should be aware of a case in which a court orders this much money to change hands from one insurer to another.

Between 1948 and 1960 insurer USF&G issued a number of liability policies to Western Asbestos, which sold products containing asbestos.

In the mid-1960's, Western MacArthur purchased most of the assets of Western Asbestos and took over its business.

In the late-1970's, individuals injured by asbestos began suing Western MacArthur in its own right and as successor to Western Asbestos.

In 1993 Western MacArthur inititated in California a coverage action against USF&G and two other insurers, seeking coverage for the asbestos cases.

USF&G argued that Western MacArthur did not have standing to assert coverage under policies issued to Western Asbestos. To defeat that argument, Western MacArthur found a former officer of Western Asbestos and persuaded him to sign an assignment of insurance rights to Western MacArthur. Western MacArthur also convinced a California court to "revive" the long-defunct Western Asbestos to ratify the agreement. Western Asbestos intervened in the coverage litigation as plaintiff. The court ruled that USF&G lacked standing to challenge the purported assignment of insurance rights to Western MacArthur.

Neither Western MacArthur nor USF&G could locate the policies at issue. The plaintiffs presented "secondary evidence" that USF&G's lost policies provided products coverage without aggregate limits.

As a side note, Michael Aylward of Morrison Mahoney LLP circulated this fascinating, quirky article on how the plaintiffs proved coverage under lost policies.

At that point USF&G decided to engage in global settlement discussions.

In June, 2002 the parties reached a settlement agreement under which USF&G agreed to pay $975 million plus interest.

USF&G then sought coverage from its reinsurers, American Re and ECRA. That brings us to state court in New York, in the case of United States Fid. & Guar. Co. v. Am. Re-Ins. Co..

This week the court denied summary judgment to the reinsurers and granted summary judgment to USF&G, and ordered the reinsurers to pay USF&G $246 million plus 60 percent interest.

Although I'm not going to discuss the court's reasoning, I would be happy to forward a copy of the decision to anyone who wants it (thanks again to Mike Aylward who forwarded it to me and the rest of the people on the Massachusetts Reinsurance Bar Association email list).

First Circuit holds that under Maine law, a claim for reimbursement of educational expenses is a claim for money damages

2010-08-24T08:52:00.004-04:00

Andrew Caplan of Gilbert & Renton, LLC sent me this case, decided by the First Circuit Court of Appeals last week:

In School Union No. 37 v. United Nat'l Ins. Co., __ F.3d __, 2010 WL 3260113 (1st Cir.), the court decided the scope of an Educator's Liability Policy.

The plaintiff, School Union 37, sought from its insurer costs incurred in defending a claim for reimbursement of non-tuition expenses, such as room, board and transportation, under the federal Individuals with Disabilities Education Act (IDEA).

The insurance policy required the insurer to "pay on behalf of the Insureds loss and defense expenses . . . for any claim due to a Wrongful Act to which the policy applies." The policy defined "claim" as "any written demand for money damages to which the policy applies."

At issue was whether the third-party claim for reimbursement was a claim for "money damages," which was undefined in the policy.

The court first held that the common law definition of money damages under IDEA is irrelevant to the definition of money damages in an insurance policy. Rather, the definition would be determined by the Maine law of contract interpretation.

The court held that, interpreting ambiguous language against the insurer, the term "money damages" encompassed the reimbursement at issue. The insured was therefore entitled to the attorney's fees it incurred.

Massachusetts Appeals Court holds that foreclosing mortgagee is not entitled under mortgagor's policy to lost rent

2010-08-21T07:06:00.008-04:00

Pereira owned a multi-unit rental property. Greenpoint was the mortgagee. (For those of you who have trouble keeping straight which is the mortgagor and which is the mortgagee, as my property law professor used to say, "The mortgagEE [the bank] has the monEY.")

A fire rendered all of the rental units uninhabitable. GreenPoint subsequently transferred and assigned the mortgage and associated agreements to Casco Bay. The decision does not address whether Casco Bay was aware that it was acquiring the mortgage of a destroyed property.

Pereira defaulted on his mortgage loan. Casco Bay foreclosed and purchased the property. Unsurprisingly, a large deficiency remained.

Casco Bay sought to recover lost rent on the property from Pereira's business owner's insurance policy. In Casco Bay Fin. Co., LLC v. Quincy Mut. Fire Ins. Co., 77 Mass. App. Ct. 913 (2010, the Massachusetts Appeals Court held that the standard mortgage clause, mandated by Mass. Gen. Laws ch. 175 § 88, Twelfth, does not provide coverage to a mortgagee for lost rent where the mortgagor has executed an assignment of rent to the mortgagee. The mortgage clause provides, "We will pay for covered loss of or damage to real estate to each mortgageholder . . . " The court held that rent is not included in the meaning of "real estate."

The court also held that Casco Bay could not recover under the policy's coverage for loss of business income. It held that that coverage is limited to loss of business income sustained by Pereira and was for his benefit only. Pereira's assignment of rents to the mortgagee did not give the mortgagee the right to recover, because the policy provides that the insured's rights and duties may not be transfered without the insurer's written consent.

Thanks to Mike Tracy of Rudolph Friedmann LLP for bringing this case to my attention.