Tuesday, September 12, 2017

I'd like to thank my kindergarten teacher, my wonderful colleagues, my family, and . . .

especially Randy Maniloff of Coverage Opinions for giving me a prize for coming up with one of the best vanity license plates that only others in the insurance coverage world would understand.  (If you don't feel like clicking on the link, my submission was QMIS CSL.) 
 
My kids were incredibly impressed by the pen that accompanied the prize.  It's possible that I am more excited by my forthcoming free copy of Randy's book, General Liability Insurance Coverage: Key Issues in Every State. 
 
It is a thrill and an honor to be associated with Coverage Opinions, one of the best and most interesting publications on coverage issues. 
 
 

Tuesday, August 29, 2017

Insurers will use drones to assess Hurricane Harvey damage

I wrote here a couple of years ago about the increasing use of drones in assessing property damage after large weather events.  At the time I was concerned that use of drones would actually decrease efficiency in assessing claims. 

Slate has an article here about the planned use of drones after Hurricane Harvey.  It does look like the use of drones will allow insurers to more quickly assess external damage to numerous properties than would be possible with adjusters being present for each inspection.  An important feature of the use of drones is that they can take pictures where it would be unsafe for adjusters to venture.  But, as the Slate article points out, there is also a downside: since the adjusters will not be physically present at the property, the face to face interaction between the insurer and the policyholder is lost.  Given the scale of destruction expected from Harvey, that seems like a reasonable tradeoff for speed and safety of damage assessments.

Wednesday, August 23, 2017

Invitation: Come to my September 12 panel discussion on lawyer's professional liability insurance and what happens if you get sued



On Tuesday September 12, 2017 at 7:30 AM John Torvi of Landy Insurance and I will be speaking at the Business Lawyer’s Network in Waltham, Massachusetts on the topic of Your Lawyer’s Professional Liability Policy and What Happens If You Get Sued.  This program is free and should be of interest to attorneys from all practice areas.  You do not need to be a member of BLN to attend.  
Here’s a full description of the panel discussion and a link to sign up: 
Your Lawyer’s Professional Liability Policy and What Happens if You Get Sued 
Date: Tuesday, September 12, 2017, at 7:30 am
Place:  Morse, Barnes-Brown & Pendleton, P.C. City Point, 230 Third Avenue, 4th Floor, Waltham, MA 02451
You can sign up at  https://bln-prof-liability.eventbrite.com  Click on “Register.”  It is not necessary to print tickets.
Learn about  your legal malpractice insurance plan, the scope of protection, and insurance defense and coverage issues in a claim or lawsuit.
•             Dissecting a Lawyer’s Professional Liability Insurance Policy, including whether what  is written  in  the annual application matters, the declarations page, who and what                 is  covered, and the optimal limits and deductibles.
•             Insurance issues that may arise when there is a claim against you, including the duties of the insurer and insured, declinations to defend or a defense under a “reservation of rights,” and settlement.
•             Simple risk management techniques to avoid malpractice claims.
Speakers:
Attorney Nina Kallen, a member of the Business Lawyers Network, is a solo practitioner in MA who specializes in insurance coverage and bad faith litigation.  She also drafts dispositive motions and appellate briefs on a subcontract basis for other attorneys in all areas of civil litigation. Attorney Kallen is a graduate of Northeastern University School of Law and Yale University.  Attorney Kallen authors an award‐winning blog, Insurance Coverage Law in Massachusetts, http://insurancecoveragemassachusetts.blogspot.com. You can learn more about Attorney Kallen at her website, www.kallenlawyer.com.
John Torvi is the Vice President of Marketing & Sales at the Herbert H. Landy Insurance Agency of Needham, MA. John has been in the insurance industry, focusing on the needs of business owners, for almost 25 years. He is a frequent speaker and contributor to professional journals and conferences for the legal industries.  The Landy Agency is a national leader in providing professional insurance services for attorneys, real estate professionals and accountants. John can be reached at 781‐292‐5417 or johnt@landy.com. Or visit www.landy.com for more information.

Business Lawyers Network (BLN) is comprised of lawyers concentrating in complementary disciplines such as corporate, securities, commercial contracts, government contracts, secured lending, taxes, litigation, import/export, immigration, real estate, environmental, patents, trademarks, licensing, etc. Non-lawyer business professionals are also welcome, but the topic and focus of discussion will be on lawyers and the legal profession.
I hope to see you there.

Saturday, August 19, 2017

How I spent my summer vacation

There was a lot of jogging on the beach at dawn, walking at sunset, and comparing lobster rolls from different takeout windows.  But there was also some channel surfing (a clicker all to myself -- that's a luxury I rarely get), and I came across this US Senate hearing on insurance issues.  I was immediately sucked in by lawmakers talking about insurance other than medical insurance -- indeed, liability insurance.  Here's the link.

I was particularly interested by questions from Senator Blumenthal of Connecticut.  He accused  homeowner's insurers of fraud because they changed policy terms to exclude specific losses without adequately informing the policyholders.  His questions start at around the 47 minute mark. 

One of the responses from the panel was to the effect of, "We don't know how to get homeowners to read their policies before they experience a loss."  I can only imagine.  I was just going over my own homeowner's renewal policy.  Sure, I'll talk to my agent about the limit on the mold endorsement, which I want to be higher.  And I skimmed through at least the titles of the endorsements.  But even I -- an insurance coverage geek who regularly litigates homeowner's policy issues -- could not bring myself to read the policy closely.  And really, what good would it do me?  Other than the limits, what can I negotiate in the policy?  What should I?  How can I anticipate every possible loss and every possible way that it may not be covered?

Senator Blumenthal complained specifically about policy exclusions that exclude damage to foundations as a result of faulty building material.  One of the responses from the panel was that the proper claim is against the manufacturer of the defective product, not the homeowner's insurer.  Yeah, sure, if you can figure out who the manufacturer was, it still exists, you can find it, you can afford to pay an attorney and you can find one to take your case, there's no applicable statute of limitations or statute of repose, and you can wait the several years it will take to resolve a third-party claim.

I'm not opposed to policy exclusions, not even major ones for construction defects.  But I do think that representatives of the insurance industry should be straightforward about why they exist.  After all, the fact that a third party may ultimately be liable for a loss is not in and of itself a good enough reason to exclude a type of claim.  All other things being equal, the homeowner's insurer can pay the loss and then bring a subrogation action against the manufacturer.   The exclusion exists because paying those claims are expensive and the insurers don't want to underwrite that type of risk.  Just be straightforward about it.  No policy covers everything. 

Thursday, July 27, 2017

First Circuit examines McCarran-Ferguson Act, Nebraska Law, and Federal Arbitration Act to affirm arbitrator's decision that dispute over insurance fees was not arbitrable

Mountain Valley Property (MVP) purchased from Applied Underwriters a comprehensive insurance package that included multiple lines of insurance.  As part of the package it entered into a three-year Reinsurance Participation Agreement  (RPA) with AUCRA, a company related to Applied Underwriters.  The RPA contained a mandatory arbitration clause and a Nebraska choice-of-law clause.

MVP sued Applied Underwriters and its related companies, asserting that the package was overpriced and that it was charged unlawful fees in premiums and in amounts claimed to be due under the RPA. 

The United States District Court for the District of Maine referred the claims against AUCRA to arbitration for a determination of their arbitrability.  The arbitrator ruled that the case was not arbitrable and had to be adjudicated in court. 

The arbitrator noted that a Nebraska statute provides that a written contract to submit to arbitration a controversy thereafter arising between the parties is enforceable, except when the written contract "is an agreement concerning or relating to an insurance policy."

Section 1012(b) of the McCarran-Ferguson Act, 15 U.S.C. §§1011-1015 provides, "No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance . . . unless such Act specifically relates to the business of insurance."

Therefore, the arbitrator concluded, the Federal Arbitration Act, which provides generally that arbitration clauses in contracts are enforceable, is "reverse-preempted" by the Nebraska statute.

AUCRA moved to vacate the arbitration award.  That motion was denied.  AUCRA appealed the denial of the motion to vacate.

In Mountain Valley Property, Inc. v. Applied Risk Services, Inc., __ F.3d __, 2017 WL 2981798 (1st Cir. 2017), the court did not determine whether the decision of the arbitrator was correct.  It held that it was enough under the Federal Arbitration Act that the arbitration award did not demonstrate a manifest disregard for the law. 


Thursday, July 20, 2017

US District Court holds that Bill Cosby's homeowner's insurer has a duty to defend him in cases asserting he defamed alleged sexual assault victims by denying the assaults

I've posted here and here about the declaratory judgment action by AIG, Bill Cosby's homeowner's and umbrella insurer, seeking a declaration that it has no duty to defend or indemnify him in three defamation lawsuits against him.  Those lawsuits allege that Cosby lied when he denied the plaintiffs' accusations that he raped them.  They allege defamation rather than assault because the statute of limitations has run on assault claims  The defamation allegations are not barred because the statements were made at a later period in time.  (A criminal trial against Cosby for sexual assault ended in a mistrial as a result of a deadlocked jury.) 

AIG contended that the defamation allegations come within an exclusion in the homeowner's policy  for sexual misconduct excluding "liability . . . for  . . . personal injury arising out of any actual, alleged, or threatened by any person: (a) sexual molestation, misconduct or harassment; . . . or (c) sexual, physical or mental abuse." The umbrella policy has a similar but not identical exclusion.  

AIG had filed a declaratory judgment  action in California with respect to a separate civil lawsuit by a plaintiff making the same allegations against Cosby.  The California court granted Cosby's motion to dismiss.  Applying California law, the California court held that AIG has a duty to defend Cosby because the sexual misconduct exclusions do not unambiguously bar coverage.  It held that under that state's law the phrase "arising out of" can be interpreted broadly or narrowly.  Under a narrow interpretation, the plaintiff's injuries arose out of Cosby's statements, not sexual misconduct.

In a recent decision in the Massachusetts case, AIG Property Casualty Co. v. Green, 217 F.Supp.3d 415 (D. Mass. 2016), the first issue before the United States District Court for the District of Massachusetts was whether AIG was judicially estopped from arguing that Massachusetts law differs from California law in the interpretation of "arising out of."  In California AIG had argued that there was no difference between Massachusetts and California law because both states interpret the phrase broadly.  In Massachusetts it was now arguing that there was a difference and that Massachusetts law should apply.

Let me say that as a litigator the discussion of judicial estoppel made my stomach hurt.  The AIG attorneys in California had to argue that under both California and Massachusetts law the phrase "arising out of" is broadly construed.  The only other alternative would be to concede that in one of the states the phrase is construed narrowly, and the court should apply the law of the state construing it broadly.  Unless it was incontestably true that California construes "arising out of" narrowly, the latter argument would border on malpractice.  When the California court held that "arising out of" should be construed narrowly in the context of the case before it, should AIG no longer be allowed to argue that Massachusetts construes the phrase broadly?  In my view that would simply be unfair. 

The US District Court agreed with me and declined, in its discretion, to apply the doctrine of judicial estoppel.  It held that there was no evidence that AIG was attempting to defraud or mislead either court.  It merely argued in California that coverage was barred under the law of either state.  AIG would gain no unfair advantage by arguing in Massachusetts that the laws of California and Massachusetts conflict. (The court did not say this, but the conflict of law arose, or at least became more obvious, as a result of the California decision.)

That ruling became moot, however, because the court then held that the exclusions did not apply under Massachusetts law either.  The court quoted a number of cases that vaguely define "arising out of" as requiring an intermediate level of causation, between proximate (or direct) cause but more than causation in fact (but for X happening, Y could not have happened).  The court found that the sexual misconduct exclusions are "at least ambiguous."  It held, "while no doubt related to and setting the stage for the defamation claims, the alleged sexual misconduct is multiple steps removed from the defamatory injury-causing statements." 

AIG has appealed the decision.  Stay posted. 

Thursday, July 13, 2017

US District Court denies summary judgment to insurer in bad faith claim on the basis of statements made by its attorney

In Continental Western Ins. Co. v. Preferred Mut. Ins. Co., 2016 WL 6434081 (D. Mass.), the United States District Court for the District of Massachusetts chose not to recite the facts, which were undisputed.  So I'm guessing a little here, and I have no idea what the underlying case was about.   

This appears to be a subrogation case.  A subrogation case is one where an insurer paid a loss, and then sued the tortfeasor or other liable party for reimbursement of the amount it paid.  In this case, the defendant in the subrogation case was covered by insurance, so it's an insurer versus insurer dispute.  Preferred Mutual Insurance Company was the insurer seeking subrogation.  Continental Western Insurance insured the individual sued by Preferred Mutual. 

Continental turned the tables on Preferred Mutual and sued it, alleging that it engaged in unfair and deceptive trade practices by filing claims against Continental's insured without conducting a reasonable investigation based on all available information.  Preferred Mutual moved for summary judgment, meaning that it asked the court to rule prior to trial that there were no facts in support of Continental's claim.

It lost, because of communications between its attorney and its claims specialist.  Those statements included:
The evidence that Mr. Lodigiani was actually engaged in a partnership with Elvins Brantley appears thin.

Preferred Mutual would have difficulty in sustaining the burden of proving Mr. Lodigiani was involved in a partnership with Elvins Brantley.

The law is clear, it is the facts that are in short supply.

It is likely we must ignore facts that cut against coverage and give Mr. Lodigiani the benefit of the disputed facts, among them his assertion that he was not in a partnership.  
 None of which is to say that Preferred Mutual can't prevail at trial.  These may be isolated statements in a slew of evidence pointing to liability.  But they are enough to require a trial where all the facts can be considered.