Monday, June 24, 2019

Rant: One of the benefits of liability insurance is that it encourages safe practices

In this Pacific Standard article writer Jack Denton  complains that the insurance industry will bring about the downfall of football.  Why?  Because "with the cost of concussion and CTE [a degenerative brain disease caused by concussions] lawsuits mounting, the NFL has been unable to find a company to provide general-liability insurance to cover head injuries, and struggled mightily to find workers' compensation coverage -- only securing it at tremendous cost."

Not only that, but insurers don't want to provide coverage to football helmet manufacturers and youth leagues.

Why do insurers not want to insure football teams and the related industries?  Because the cost benefit analysis done by an industry that specializes in cost benefit analyses leads to the conclusion that the cost of the injuries caused by football is too high for the premiums it can charge.

The obvious takeaway for me is that . . . football, in its current incarnation, is too dangerous.

The article comes to a different conclusion:  "Insurance coverage" (not the dangers inherent in the sport) "is arguably the biggest threat to football."

Why?  Because the evil insurance industry seeks "to significantly reshape Americans' behavior in the interest of their bottom line."  How dare it?  Apparently insurers should be required to insure all behaviors, regardless of the risk . . . And presumably do so with affordable premiums.  But also manage to not go out of business.

If the football industry can't get insurance because the sport is so dangerous that it's not a good risk, and the industry does not want to make the sport safer for its players, it can choose to self-insure.  But that's unlikely, for the same reason that it can't get coverage:   if the insurance industry expects to lose money paying out concussion claims then the football industry certainly doesn't want to put its own profits at risk.

Self-insurance is not the solution suggested by the article.  Instead, the players -- actually, the parents of youth league players -- should sign waivers so that if they are injured they can't recover from anyone!

If you are a regular reader of this blog, you know how much I hate liability waivers.  You also know that I understand the need for them in some circumstances.  As I have said many times, if I sign my kid up for a gymnastics program, I don't mind signing a waiver of liability stating that I won't sue if she falls off a balance beam.  But I do not want to sign a waiver saying that I won't sue if a balance beam falls on her.  Falling off a balance beam is a risk of participating in gymnastics, not a feature of it.  Concussions seem to be a feature of football. 

The article includes this old chestnut about an alcohol exclusion in fraternity liability policies:  "The very fact that a young man finds himself in need of insurance coverage is often grounds for denying it to him."

That sentiment demonstrates a complete misunderstanding of the purpose of insurance and how policies work.  If the fraternity member slipped on a loose brick on the steps leading to the frat house, his injuries would be covered.  If he started a fire while trying to make French toast in the frat house kitchen, the property damage would be covered.  The fact that the insurance excludes coverage for alcohol-induced injuries does not mean that the policy does not protect him.

The article ends with a complaint that insurers should not take over regulatory functions.  "Who is protected by these decisions?  It's the insurance companies."  Or, maybe, it's the players who never get a concussion because the sport is made safer in response to a business decision by insurers.

Friday, June 21, 2019

Ransomware Insurance

Ransomware "kidnaps" data on a computer system and holds it hostage until the owner of the system pays a ransom.  Slate has an interesting article on the pros and (in Slate's view, mostly) cons of insurance coverage for ransomware. 

Thursday, April 11, 2019

A homebuyer's nightmare

The plaintiffs discovered heating oil had contaminated a residential property they had just purchased.  They sued the sellers, alleging that they had concealed the spill.  A default judgment entered.  The plaintiffs then sued Arbella, the sellers' homeowner's insurer. 

Arbella denied the claim, asserting that the source of the plaintiffs' injury was the sellers' concealment of the oil, which is not an occurrence under the policy.  The Superior Court agreed with Arbella. 

In Creamer v. Arbella Insurance Company, 95 Mass. App. Ct. 56 (2019), the Massachusetts Appeals Court remanded the case to the Superior Court for further analysis.  The Appeals Court held that the spill itself was the occurrence with respect to a claim under Mass. Gen. Laws ch. 21E (which sets forth responsibility among various parties for environmental contamination), because ch. 21E imposes liability based on ownership status without regard to fault. 

However, the Appeals Court held that there was a genuine issue of material fact as to whether the loss was excluded by an exclusion for property damage expected or intended by the insured.  The court noted that for the exclusion to apply the sellers must have intended the damage itself, not just the act causing the damage.  To have expected it, they must have known with substantial certainty that the damage would result. 

The court held that once the sellers discovered the oil spill, they must have known with substantial certainty that property damage would result.  From that point forward, any further property damage came within the exclusion.  However, the record did not establish when the sellers discovered the spill or whether the period of concealment caused additional property damage.  The court remanded the case for further proceedings on that issue. 

Tuesday, April 9, 2019

Show your appreciation for the Insurance Library

The Insurance Library, one of the best resources for insurance professionals from experienced coverage litigators to new adjusters, is asking for messages about how it has helped you.  The earliest responders get prizes!  Here's the link for more information. 

Tuesday, March 26, 2019

Great website on insurance issues in car-sharing programs

I first posted about insurance risks in car-sharing programs back in 2011.  Car-sharing programs allow car owners to rent their own cars out to others.  They differ from Uber (which was in its infancy in 2011) and Lyft (which did not exist then) in that the vehicle owners do not drive passengers themselves -- they hand their cars over to others.  Some of the obvious insurance issues include whether or not the owners have adequate insurance, whether or not the renters have adequate insurance, and whether or not passengers have adequate insurance. 

It is always a thrill to find like-minded people.  Here's a link to a website called CareShareProtect, which is dedicated to educating people about insurance issues in car-share programs.  It will tell you state by state, by type of program, where there might by an insurance gap.

Thursday, March 14, 2019

Massachusetts health clubs may not demand that customers sign waivers of liablity

Frequent readers of this blog know that I abhor waivers of liability, especially (but not only) waivers that parents have to sign so that their minor children can participate in activities such as summer camps or public school field trips.  Waivers of liability are the written forms you are sometimes required to sign stating that if you get hurt (or your child gets hurt) because the company making you sign the waiver did something wrong you cannot sue that company.  Here's a link to some of my posts on the subject.

A Massachusetts statute makes it illegal for a health clubs to require waivers of liability.  Massachusetts General Laws ch. 93 §80 provides:

No contract for health club services may contain any provisions whereby the buyer agrees not to assert against the seller or any assignee or transferee of the health club services contract any claim or defense arising out of the health club services contract or the buyer's activities at the health club.

A health club is not just a gym.  It is defined in Massachusetts General Laws ch. 93 §78 as:

each facility or location or group or chain of facilities or locations, in which any person, firm, corporation, partnership, unincorporated association, franchise or other business enterprise offers facilities for or instruction, training or assistance in the preservation, maintenance, encouragement or development of physical fitness, conditioning or well being. Such term shall include, but not be limited to, health spas, sports, tennis, racquet ball, platform tennis and health clubs, figure salons, health studios, gymnasiums, weight control centers or studios, martial arts and self-defense schools, or any other similar course of physical training. 

There's not a lot of caselaw interpreting the definition.  It is not a stretch to say that it includes, among my kids' various sporadic activities, providers of instruction or facilities for rock climbing, trampolining, gymnastics, and ice skating.  One could argue that  the definition of health club is broad enough to include any organization that has as part of its mission physical well being.  Could summer camps be included?  Petting zoos?  Afterschool programs?  School camps?

Whether or not such organizations are included in the definition (and unless the legislature clarifies the law, only the courts can determine that), no company should require waivers of liability.  The proper response to the potential for injured patrons is adequate insurance or self-insurance.  Any other solution is unethical.

(Let me be clear, however, that I do not believe that a gym should be liable simply because someone gets hurt using the facilities.  I am not interested in suing if my child falls off a balance beam at gymnastics camp.  But I do want my child to be fairly compensated if a balance beam falls on her.) 

Wednesday, January 30, 2019

Court holds that insurer that breached duty to defend must pay policy limits after default judgment against policyholder

A union's Pension and Annuity Funds ("the Funds") alleged that the Wellesley Advisory Realty Fund  (WARF) had mismanaged and squandered a $5 million investment.  WARF put the money into various real properties such as hotels.  The properties were foreclosed upon or lost all their value due to unpaid taxes and mortgages. The Funds sued WARF for negligence and ERISA violations.

WARF's insurer, Scottsdale Insurance Company, declined to defend it under a Business and Management Indemnity Policy, asserting that exclusions applied.  A default judgment entered against WARF.  WARF assigned to the Funds its rights in the insurance policy.

Scottsdale relied on three exclusions.  The Professional Services Exclusion excluded claims that "arose out of" or "involved" "real estate development, property management, the purchase of real property, or the arrangement of financing on real property."

In Scottsdale Insurance Co. v. Byrne, __ F.3d __, 2019 WL 211420 (1st Cir.), the United States Court of Appeals for the First Circuit held that Scottsdale had breached its duty to defend.  Although some of the Funds' allegations pertained to WARF's actions as a property manager for one of the hotels, there were other allegations that did not necessarily pertain to property management.

Scottsdale also argued that an ERISA exclusion applied.  There was no dispute that that exclusion applied to the ERISA claim.  Scottsdale argued that it also applied to the negligence claim because it arose from the same set of facts as the ERISA claim.  The court disagreed, holding that, interpreting ambiguous terms in the the policy against the insurer, the ERISA exclusion did not extend to a negligence action.  

Scottsdale argued that even if it had a duty to defend, a conduct exclusion excluded its duty to indemnify.  The court noted that while some of the allegations would come within the conduct exclusion, others would not. Scottsdale had not made any attempt to allocate losses that fell within the conduct exclusion from losses that were outside of it.  A default judgment had already entered.  The court held that there was no basis to relieve Scottsdale of its obligation to pay the policy limit.