Friday, July 30, 2010

Appellate Division holds that failure of insured to submit PIP package does not void PIP coverage due to noncooperation

In Advanced Spine Centers, Inc. v. Pilgrim Ins. Co., 2010 WL 2225530 (Mass. App. Div.), the PIP insurer mailed to the insured a PIP package following her injury in an automobile accident. The packet had been created by the insurer and included a PIP application form, an authorization to obtain medical and wage information, and a health insurance affidavit form.

The insured never filled out and returned the paperwork. The insured's attorney sent the insurer a copy of the operator's report for the accident, and a notice of her PIP claim. Her chiropractor submitted treatment notes and reports, an affidavit of no health insurance, and an authorization signed by the insured permitting the chiropractor to release the medical information necessary to process her PIP claim.

The court held that the insurer was required to pay the PIP benefits despite the failure of the insured to fill out and return the forms provided by the insurer, because the insurer had received all the material information it sought. It had therefore not been prejudiced.

Wednesday, July 28, 2010

Superior Court limits amount recoverable under worker's compensation lien

In Curry v. Great Am. Ins. Co., 2010 WL 1795375, the Superior Court held that the recovery under a lien of a worker's compensation carrier in a wrongful death case was limited to the portion of damages allocated to loss of net expected income of the next of kin of the deceased. The worker's compensation carrier was not entitled to the portions of the damages allocated to conscious pain and suffering or loss of consortium. Its recovery was so limited because damages for loss of net expected income represented benefits "that are duplicated by the worker's compensation benefits."

The court also held that the insurer and the plaintiffs must each pay their proportionate share of the legal fees and costs in the wrongful death action.

Monday, July 26, 2010

No 93A damages for mistaken interpretation of policy

I have been discussing Fundquest Inc. v. Travelers Cas. & Sur. Co., 2010 WL 2223301 (D. Mass.). The United States District Court for the District of Massachusetts held that there was coverage under an employee dishonesty clause of a policy where the human resources department of the company accidentally deposited the bi-monthly salary of the CEO into the bank account of a low-level employee, and such deposits continued after the employee left the company.

The court held that the insurer's denial of part of the claim on the ground that there was no coverage for deposits after the employee left the company was not a breach of Mass. Gen. Laws ch. 93A. Although the court ultimately agreed with the company, the company had been unable to marshal any case law supporting its position on the novel issue, and the one seemingly relevant case arguably pointed in the other direction. "Despite Travelers' ultimately erroneous interpretation of the Bond, the court does not believe that . . . a reasonable insurer could not have deemed the issue one open to reasonable debate, particularly given the court's own struggle to see through the insurance-ese in which the Bond is written."

Thursday, July 22, 2010

The incompetence continues

I have been discussing FundQuest Inc. v. Travelers Cas. & Sur. Co., 2010 WL 2223301 (D. Mass.), in which a company sought insurance after its human resources department accidentally deposited for fourteen months the CEO's salary into a low-level employee's bank account, even after the employee left the company.

FundQuest sought insurance coverage on under an additional policy provision providing coverage for "[l]oss of property resulting directly from (a) . . . misplacement."

FundQuest lost that argument. Why? Because when it filled out its Proof of Loss form for submission to the insurer, it failed to check a box for a claim for "Mysterious Disappearance/Misplacement." It thereby waived the claim.

Tuesday, July 20, 2010

Company gets insurance coverage for paying former employee the CEO's salary

Answering the question from my last post:

Yes. Which makes me wonder whether underwriters should start thinking about an exclusion for -- I don't know, reckless indifference to not receiving your salary for over a year? Or more generally, radical stupidity? Or gross negligence where the claim is a first-party claim? I realize that such exclusions would lead to endless litigation over definitions, but still . . . In any event, the actual policy clauses at issue were much more mundane.

In my last post I described the facts of FundQuest Inc. v. Travelers Cas. & Sur. Co., 2010 WL 2223301 (D. Mass), in which Curran, a low-level employee, managed to embezzle the CEO's salary for sixteen months when the human resources department accidentally began direct depositing the salary into Curran's bank account.

FundQuest attempted to recover its loss through a Financial Institution Bond issued by Travelers. Travelers agreed to reimburse FundQuest for the amount placed in Curran's account while Curran remained employed by FundQuest. It denied coverage for the amount FundQuest placed in Curran's account after Curran left FundQuest.

The United States District Court for the District of Massachusetts held that FundQuest was entitled to be reimbursed for the entire amount.

The insuring agreement provided coverage for "[l]oss resulting from dishonest or fraudulent acts committed by an Employee . . ." Another section of the policy provided coverage for "[l]oss of property resulting directly from . . . (b) theft, false pretenses, common-law or statutory larceny, committed by a person present in an office or on the premises of the Insured . . ."

"Employee" was defined as "a natural person in the service of the Insured at any of the Insured's offices or premises covered hereunder whom the Insured compensates directly by salary or commissions and whom the Insured has the right to direct and control while performing services for the Insured."

The court held that the "acts that gave life to the machinery that caused the loss" occurred while Curran was employed by FundQuest. Curran's "dishonest passivity - maintaining his silence after learning that he was receiving a grossly inflated paycheck - began at FundQuest and simply continued uninterrupted after he left."

Friday, July 16, 2010

The most fun insurance case to come our way in a while

As I have frequently written, including in my last post, we all make mistakes, and sometimes those mistakes hurt other people. That is why liability insurance is a great thing. But in general my various rants address third-party claims; that is, person A made a mistake and person B was injured as a result. Person A's liability insurance will provide money to pay for the loss person B suffered.

First-party insurance is insurance that pays the policyholder. For example, homeowner's insurance includes property damage coverage. If your house burns down, the insurance you pay for will reimburse you for the financial damage you suffered.

There is generally no coverage under homeowner's insurance if your house burned down because you committed arson. There is more likely going to be coverage if you accidentally caused a fire that burned your house down. But what if you accidentally burned your house down because of an act of incredible stupidity? I'm not talking smoking in bed. I'm talking not noticing that your kids are building a campfire in the middle of your living room.

In FundQuest Inc. v. Travelers Cas. & Sur. Co., 2010 WL 2223301 (D. Mass.), the court addressed an analogous situation in an employee dishonesty policy.

FundQuest, a financial advisory firm (you'll see how ironic this is in a moment) had an employee named John Curran who had a low level IT support position. Curran submitted a request to transfer direct deposit of his paycheck to a new bank.

A human resources employee accidentally inserted the payroll information of FundQuest's founder, president, and CEO, Robert Del Col. As a result, the company began depositing Del Col's paychecks in Curran's account. The court described the paycheck as "appreciably larger" than Curran's. The human resources department had made a stupid mistake, somewhat akin to falling asleep while smoking in bed.

Curran did not notify FundQuest of the mistake. Instead--and you have to give him credit for chutzpah--he complained of not receiving his own paycheck.

FundQuest did not respond by looking into the paperwork and noticing that Curran was receiving his CEO's paycheck. Instead, it merely began adding Curran's own paycheck to his direct deposit account. Another stupid mistake, somewhat akin to noticing that a pan on the stove is on fire and assuming that the fire will burn itself out.

Curran received both paychecks for two months, when he quit working for FundQuest. I would love to know why he quit and if he guessed what would happen next: although his own paycheck stopped when he left the employment of FundQuest, he continued to receive Del Col's paycheck.

More than a year later, Del Col noticed that he had not been paid for sixteen months. Why did he notice at that point? I can only guess that it was because it was January, 2009, which was right around the time we all realized that the tanking of the economy was not going to be a mere blip. Suddenly, every $258,964.27--the amount of salary he was not paid-- must have begun to matter to Del Col. In other words, he must have suddenly started to care that his kids were burning down his living room, because he might actually have to live in it.

Not surprisingly, since Del Col was president and CEO and all, FundQuest promptly reimbursed Del Col the amount he was owed in back salary.

I know you're all wondering: Did Fundquest get reimbursed by its insurer? Find out here on Tuesday, July 20, at 1:30 PM, when my next post will be published.

Wednesday, July 14, 2010

Another rant about why you should have liability insurance

A few months ago I posted about my irritation with the decision of my mechanic to not purchase liability insurance. Same issue with my eight-year old daughter's day camp, only this time it's more like fury.

I learned that the camp does not have insurance months after I signed her up (and, as any of you who are parents will know, long after the time to make decent alternate plans had passed), as I was filling out additional paperwork. Among that paperwork was a release requiring me to forgo any claims my daughter might have if she is injured at the camp, and to acknowledge that the camp does not have insurance.

So, let me get this right: I am paying (a lot) for you to have my daughter in your care for eight hours a day. If you make a mistake that results in my daughter getting hurt--and because I'm superstitious I'm not going to list all the possible mistakes that you could make in the course of taking care of fifty elementary-school aged kids, or all the possible injuries I can imagine--you are going to say, "Oops, so sorry," and walk away.

Let me say this again: Liability insurance is a cost of doing business. No one enjoys paying it. Everyone who has a business in which there is a decent likelihood that someone could be injured as a result of a mistake the business makes needs to have it.

Saturday, July 10, 2010

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