Thursday, April 30, 2009

Massachusetts passes legislation allowing appeals of auto insurance premium surcharges

For a while it looked as though the state insurance commission would take away the right of vehicle owners to appeal an insurer's decision to add a surcharge to their auto insurance. However, Governor Patrick has signed legislation reversing that decision.

Insurers may raise insurance rates if an insured has been at-fault in an accident.
The legislation amended Mass. Gen. Laws. ch. 175E § 1. It allows an insured who is aggrieved by a decision of the insurer with respect to a surcharge to file a written complaint with the Board of Appeals on Motor Vehcile Policies and Bonds within 30 days. Either side may appeal the decision to the Superior Court.

Monday, April 27, 2009

NFIP extended through September 30, 2009

I wrote here that the National Flood Insurance Program was set to expire in March. As expected, the program has been extended by Congress through September 30, 2009.

Thursday, April 23, 2009

U.S. Court of Appeals defines "temporary worker" exception to leased worker exclusion

In Scottsdale Ins. Co. v. Torres, a recent decision of the United States Court of Appeals for the First Circuit, the court considered the "leased worker" exclusion to a CGL policy. Like most CGL policies, the policy at issue excluded personal injury claims of employees of the insured (because employees are covered by the worker's compensation law). The policy defines employees as including "leased workers."

Pursuant to an exception to the exclusion, "temporary workers" are not considered "leased workers." The policy defines temporary workers as workers "furnished to [the insured] . . . to meet seasonal or short-term workload conditions."

The court held that the actual length of time the worker ends up working for the insured is irrelevant to that definition; what matters is whether, at the time that the worker was originally furnished to the insured, the intent was that the worker fulfill short-term workload conditions.

The court also held that a placement that was for an indefinite period of time is not necessarily incompatible with the possibility that the worker was furnished to address a short-term workload condition. The court denied summary judgment to both sides, and remanded the case for resolution of the question of how the injured worker's placement fit within the insured's ordinary course of business and the nature of its workflow.

Tuesday, April 21, 2009

U.S. District Court discusses loss of use damages

In Vicor Corp. v. Vigilant Ins. Co., a decision handed down last month by the United States District Court for the District of Massachusetts, the court turned to California case law for the parameters of loss of use damages.

The court held that the trial judge had correctly instructed the jury that loss of use damages include, but are not limited to, the rental value of a replacement; they also include "those reasonably understood emergency response costs to get the system up and running." Loss of use damages do not include increased maintenance and operating costs.

Friday, April 17, 2009

Welcome to the Massachusetts Reinsurance Bar Association

A group of prominent reinsurance attorneys has recently formed the Massachusetts Reinsurance Bar Association. (Reinsurance is purchased by insurers against the risk that they have to pay more than a chosen amount on policies they issue.) President Bill Erickson of Robins Kaplan Miller & Ciresi invited me to their meeting this week. The meeting included a very interesting discussion led by Jim Harrington, also of Robins Kaplan Miller & Ciresi, about the unique issues faced by reinsurance litigants in the arbitration process, and the pros and cons of early mediation.

MReba is planning a symposium in the fall. Stay tuned.

Thursday, April 9, 2009

First Circuit distinguishes policy condition regarding knowledge of existing claim from known loss doctrine

In my last post I discussed the recent First Circuit decision in Employers Reinsurance Corp. v. Globe Newspaper Co, Inc., which held that a likely loss is not a known loss.

Although the court found that coverage for the Globe was not barred by the known loss doctrine, it went on to state in dicta that coverage may be barred by a condition of the prior acts endorsement of the policy. That condition required that the Globe not have had, prior to the new policy, "notice or knowledge" of the claim in question or of "circumstances that would give rise to such claim." The court distinguished that condition from the known loss doctrine, stating that the condition "bars insurance not for a known loss but merely where there is notice on the insured's part, not conveyed to the insurer, of 'circumstances which would give rise to such claim.'"

Tuesday, April 7, 2009

First Circuit holds that "likely loss" is not a "known loss"

In Employers Reinsurance Corp. v. Globe Newspaper Co., Inc., the United States Court of Appeals for the First Circuit held last month that the known loss doctrine, which I discussed here, here, and here, does not bar coverage for a libel claim against a newspaper that knew a loss was "likely" at the time that it purchased insurance, but not that the loss was "substantially certain."

The Boston Globe ran an article in March 1995 which wrongly stated that Dr. Ayash had countersigned a medicine dosage order that resulted in two patients receiving overdoses. An attorney contacted the Globe on behalf of Dr. Ayash. The Globe printed a correction. Dr. Ayash did not withdraw her demand for damages.

That was the state of affairs when the Globe applied for insurance. In its insurance application the Globe listed past and present litigation but did not list the dispute with Dr. Ayash. The Globe stated in its application that it received many threats from people seeking to have the Globe print more favorable information about them, and that it was difficult to separate the inconsequential threats from the serious ones.

Dr. Ayash subsequently sued the Globe and was awarded more that $2 million in damages.

The United States Court of Appeals held that coverage for the Globe was not barred by the known loss doctrine, stating, "The loss here may have been likely, but it was not substantially certain or known by the Globe to be so when the policy was obtained."

Friday, April 3, 2009

More on Sterlin and 93A damages

This is my fourth and final post on Sterlin v. Commerce Ins. Co.

In my last post I discussed the 93A damages awarded by the judge, correctly based on the lost interest resulting from the delay in settlement.

Pierre took out a loan against the settlement. He sought 93A damages for the loss of the payment of $4,855 in loan origination fees and interest through the time the offer of settlement was made. The court denied this claim on the grounds that he had failed to prove his damages--Pierre testified about the loan, but did not support his testimony with documentary evidence.

By leaving open the possibility of paying such damages if proven, the judge has widened the scope of 93A/176D damages beyond lost interest on a settlement, to all damages resulting from the inconvenience of not having funds available. Should Pierre receive 93A damages for extra medical costs he personally incurred as a result of not being able to pay for health insurance? What if the bank had foreclosed on his house because he couldn't pay his mortgage?

Wednesday, April 1, 2009

Superior Court correctly awards 93A damages based only on lost interest

Update: See this post for a clarification.

In my last two posts I have discussed the recent Superior Court decision in Sterlin v. Commerce Insurance Company. As I noted, Commerce was slapped with 93A damages for ignoring overwhelming evidence that a car accident was the fault of its insured driver.

The plaintiffs' damages in that case were enough to make even a cold-hearted over-analytical lawyer like myself feel a twinge of sympathy. The car that was hit had three occupants. The woman who spent two weeks in a body cast was not the worst-injured. Rather that was Pierre, who suffered a degloving injury to his dominant right hand, and various fractures of his hand, fingers, and wrist. He was hospitalized for 16 days and had a total of four operations. His thumb was amputated. Eventually his pinky was amputated and reattached in his former thumb's position.

In addition, because he could not work he lost his job and his medical insurance. His wife also lost her job. After maxxing out help from charities, friends, family, and credit cards, he received a loan against the expected proceeds of the lawsuit.

With a $500,000 policy limit to be divided among Pierre and two other occupants of the car, he received $275,000 in settlement of the underlying claim.

The court held that the 93A damages would start to run from a month after the insurer received complete medical records, and would be cut off at the time that it finally made a reasonable offer of settlement, a period of about five months.

The court noted that unjust delay in reaching a settlement subjects a claimant to costs and frustrations that are encountered when litigation must be instituted. It continued, "Moreover, when an insurer wrongfully withholds funds from a claimant, it is depriving that claimant of the use of those funds." The court held that the loss of use of money constitutes actual damages, consisting of the interest that would have been earned on that money at a rate of five percent. Therefore, the judge held, the actual damages were $5,733.75. He trebled that amount pursuant to the punitive damages provision of 93A, to $17,201.25.

The judge correctly calculated the 93A damages. This case is a good reminder that no matter how egregious an insurer's actions are, damages are based on lost interest, not the amount of the settlement or verdict.

The judge also awarded costs and attorney's fees, to be determined at a later hearing.