Monday, April 26, 2010

Creditors' rights endorsements removed from title insurance

Here's an article in REBA News by Joel Stein about changes to title insurance. (REBA News is the trade journal for the Real Estate Bar Association for Massachusetts.)

According to the article the American Land Title Association, or ALTA, has withdrawn Endorsements 21 and 21/06 as official forms, effective March 8, 2010. Those endorsements provided "creditors' rights coverage," providing coverage to mortgage lenders who lose their interest in a property due to the bankruptcy of someone in the chain of title.

Friday, April 23, 2010

Massachusetts Appellate Division holds that insured may not recover against tortfeasor after receiving uninsured motorist coverage award

In Johnson v. Lapan, 2010 WL 1170254 (Mass. App. Div.), claimant Sylanda Johnson was injured when she was a passenger in a car that collided with a vehicle operated by Marc Lapan.

Johnson pursued two routes of recovery: she submitted a claim for uninsured motorist coverage to ELCO, the insurer of the vehicle in which she was a passenger, and she filed suit against the Lapans.

The uninsured motorist claim went to arbitration and Johnson was awarded $16,791.24 for pain and suffering and medical expenses.

The Massachusetts Appellate Division held that the doctrine of issue preclusion required that Johnson's claim against the Lapans be dismissed. The arbitrator had awarded to Johnson damages for her injuries, and that award fixed the damages in the suit against the Lapans arising from the same injuries. Johnson could recover such damages pursuant to an uninsured motorist policy (which she did) or from the tortfeasor, but not from both. Otherwise she would receive a double recovery.

Wednesday, April 21, 2010

Seeking attorneys who represent insureds in coverage litigation

I receive a number of calls from insureds seeking representation in coverage disputes. I am frequently conflicted out by my direct or indirect representation of the insurer on other matters. (By indirect I mean that I work on a subcontract basis for attorneys who represent the insurer.)

I would like to have a database of attorneys I can refer these people to. If you specialize in representing insureds in coverage disputes and would be interested in receiving referrals, send me an email with your contact information, experience generally and with respect to insurance coverage disputes, and what, if any, types of policies or disputes you specialize in.

I am not seeking and would not accept a referral fee for these cases. I also don't screen them. Once I find out I have a conflict I want to give them a name and move on.

Monday, April 19, 2010

Massachusetts Appeals Court holds that claimant can recover for breach of 93A and 176D even when there is no coverage under the policy

In my last post I discussed Vt. Mut. Ins. Co. v. Eldridge, 76 Mass. App. Ct. 1122, 2010 WL 1253170 (unpublished opinion), in which the Massachusetts Appeals Court held that coverage under a homeowners policy was voided by the insureds' failure to disclose the ownership of two bull mastiffs on their insurance application even though the application asked if they kept any animals on the premises.

Even though the court found that coverage was voided under the policy, it affirmed the denial of summary judgment to the insurer on a claim that the insurer breached Mass. Gen. Laws chs. 93A and 176D.

The claimant, Gagnon, alleged that the insurer violated those statutes by "failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies," in violation of Mass. Gen. Laws ch. 176D § 3(9)(b). The court held:

[A] court will not find unfair or deceptive acts or practices where there was no inordinate or unreasonable delay, or if there was no resulting prejudice or harm caused by the delay. . . .

On this record, we also cannot say that Gagnon has no reasonable expectation of proving an essential element of her claim at trial.

Thus, we conclude that the trial judge correctly denied summary judgment, leaving the determination of unreasonable delay and resulting prejudice to the fact finder.

When I first read this opinion, I assumed that Gagnon had brought the motion for summary judgment on the 93A/176D count, in which case it would have made common sense to affirm the denial of the motion, since the court had found that the policy did not provide coverage for her claim. Upon rereading the decision, however, it appears that it was the insurer who brought the motion for summary judgment on the 93A/176D claim. If that is so, then the court is saying that an insurer can be liable for breach of 93A and 176D even when there is no coverage under the policy. That is contrary to many opinions which simply dismiss 93A/176D claims after finding no coverage.

Wednesday, April 14, 2010

Appeals court holds that nondisclosure of ownership of dogs on homeowners application voided coverage

In Vt. Mut. Ins. Co. v. Eldridge, 76 Mass. App. Ct. 1122, 2010 WL 1253170 (unpublished opinion), the Massachusetts Appeals Court held that nondisclosure of ownership of dogs on an application for homeowners insurance was a material misrepresentation that voided coverage under the policy.

In their application for homeowners insurance the Eldridges, defendants in the declaratory judgment action, had answered "no" to the question "are there any animals or exotic pets kept on the premises?" In fact, they were keeping two bull mastiffs on the premises.

The court held that the question on the application was not ambiguous. It overturned the holding of the trial court that the Eldridges could have reasonably concluded that it only asked for the disclosure of pets if they were exotic pets. The Appeals Court held that the failure of the Eldridges to disclose their ownership of the dogs constituted a misrepresentation.

The court then held that the misrepresentation was material and defeated coverage.

Misstatements shall be deemed material and "defeat or avoid the policy" only where such statements were "made with actual intent to deceive, or . . . increased the risk of loss" to the insurer. G.L. c. 175, § 186. "A material fact, measured by an objective standard, is one which would naturally influence the judgment of an underwriter in making the contract at all, or in estimating the degree and character of the risk."

The insurer received notice that the Eldridges owned the dogs before it received notice of the claim that the dogs had caused an injury. Upon receipt of the notice of ownership of the dogs the insurer informed the Eldridges that coverage would not have been forthcoming had the application disclosed the dogs. The insurer proceeded to terminate coverage. The court held that was proof that the nondisclosure was material.

Monday, April 12, 2010

United States District Court holds that an all risk marine policy covers loss with unknown cause

In Markel Am. Ins. Co. v. Pajam Fishing Corp., __ F.2d __, 2010 WL 742485 (D. Mass.), Markel provided an all risk marine insurance policy to Pajam. The policy included coverage for "accidental, direct, physical loss" to a fishing vessel called the Miss Sonya.

The Miss Sonya sank on March 24, 2008 and could not be examined. The men on the ship observed water splashing about in a compartment on the stern of the ship and followed the instructions of the coast guard to abandon the ship. The ship had been in good condition. They men felt no impact on the ship but there could have been an impact that was disguised by choppy conditions.

The policy did not define the term "accidental physical loss." The court held that the word "accident" is synonymous with "fortuitous," and that a loss is fortuitous unless it results from an inherent defect, ordinary wear and tear, or intentional misconduct of the insured. It held that the loss of the Miss Sonya was an accidental physical loss for which there was coverage.

The court rejected the insurer's argument that the insured must prove the cause of the sinking. The court held, "To establish a fortuitous loss it is generally sufficient for the insured to show only that the loss occurred." This was probably an overstatement by the court, since it went on to hold that the insured had established "that the vessel was well maintained, and that there was no intentional misconduct which caused the vessel to sink. This is sufficient 'to prove a fortuitous loss of the covered property' and the insured 'need not prove the cause of the loss.'"

Wednesday, April 7, 2010

Massachusetts Appeals Court holds that only fine under Mass. Gen. Laws ch. 175 s. 177 applies where insurance agency employed unlicensed broker

I have been discussing Anawan Ins. Agency, Inc. v. Division of Ins., 76 Mass. App. Ct. 447 (2010), in which an insurance agency was accused of employing an unlicensed broker.

In paying the unlicensed broker, the insurance agency had violated both Mass. Gen. Laws ch. 175 § 177, the statute prohibiting payment to unlicensed brokers, and Mass. Gen. Laws ch. 176D, § 2, which prohibits unfair or deceptive acts or practices in the business of insurance.

Violation of Mass. Gen. Laws ch. 175 § 177 was punishable by a fine (prior to the inapplicable amendment to the statute) of "not less than twenty nor more than two hundred dollars."

Pursuant to § 7 of ch. 176D, violation of ch. 176D is punishable by a fine of "not more than one thousand dollars for each and every act or practice."

The court held that only the fine under § 177 could be assessed, because § 7 of ch. 176D is a statute of general application to all unfair practices in the insurance industry, but § 177 of ch. 175 applies specifically to transactions with unlicensed brokers. As a matter of statutory interpretation, the more specific statute must govern.

Monday, April 5, 2010

Massachusetts Appeals Court holds that amendment to Mass. Gen. Laws ch. 175 s. 177 does not apply retroactively

I have been discussing Anawan Ins. Agency v. Division of Ins., 76 Mass. App. Ct. 447 (2010), in which an insurance agency was accused of employing an unlicensed broker.

The applicable statute, Mass. Gen. Laws ch. 175, § 177, which prohibits payments to unlicensed brokers, was amended in 2002 by inserting the word "knowingly" in the sentence, "Whoever knowingly violates a provision of this section shall be punished by a fine of not less than $50 nor more than $500."

The court noted that an amendment to a statute applies retroactively where the amendment is a clarification or a fine-tuning of the earlier provision. It held that the word "knowingly" was not a clarification or fine-tuning and would not apply retroactively.