Friday, November 26, 2010

SJC holds that workers' compensation self-insurance group is an insurer

I posted here about a Superior Court decision in Mass. Care Self-Ins. Group, Inc. v. Mass. Insurers Insolvency Fund . That case held that a worker's compensation self-insurance group, Mass Care, is an insurer within the meaning of Mass. Gen. Laws ch. 175D, which creates a fund that provides insurance benefits when an insurer that would otherwise provide coverage has become insolvent.

Mass Care provided coverage up to a self-insured retention limit to an injured employee of one of its members. The group had an excess carrier over the SIR that had become insolvent. When the damages paid to the injured employee exceeded the SIR, the group sought coverage from the fund.

The Superior Court held that the group was not entitled to reimbursement, because the Fund does not reimburse insurers.

In Mass. Care Self-Ins. Group, Inc. v. Mass. Insurers Insolvency Fund, 458 Mass. 268 (2010), the SJC affirmed.

The SJC adopted the dictionary definition of insurer as "[o]ne who agrees, by contract, to assume the risk of another's loss and to compensate for that loss." The court noted that Mass Care accepts premiums in exchange for the provision of workers' compensation coverage, and described its functions as including many operations ordinarily associated with the insurance business. Without more, Mass Care would be considered an insurer.

The court then turned to the enabling statute, Mass. Gen. Laws ch. 152 §§25E-25U, under which Mass Care and other worker's compensation self-insurance groups are created. It noted that §25E states that self-insurance groups are not to be deemed insurers, and that the reason is to prevent such groups from being subject to the traditional framework of insurance regulation. However, the definitions section of the statute, Mass. Gen. Laws ch. 152 §1(7), makes self-insurance groups subject to consumer laws and regulations applicable to workers' compensation insurers.

The court reconciled the clauses and concluded that Mass Care is a member of the insurance industry whom ch. 175D was not intended to benefit.

Tuesday, November 16, 2010

U.S. District Court holds that unsigned insurance application makes policy voidable

In RLI Ins. Co. v. Santos, __ F. Supp. 2d __, 2010 WL 4183836, RLI issued an umbrella policy to Beli Lima. Lima's 17 year old son was involved in an automobile accident. RLI denied coverage, in part on the ground that Lima had never signed the insurance application.

Lima had submitted an insurance application in July, 2006. RLI rejected it because it was incomplete. In August, 2006, RLI received an application by fax. Lima testified that she does not recall seeing the August form, completing it, or signing it. She testified that the signature on it was not hers. The implication is that the application was filled out and signed by the insurance agent. The application form included the statement, "APPLICATIONS WILL NOT BE ACCEPTED WITHOUT APPLICANT'S ORIGINAL SIGNATURE."

RLI issued to Lima an umbrella policy in September, 2006. When Lima sought coverage for the accident, the court ruled that the policy was voidable by RLI as a matter of law because the signature was a condition precedent to the insurance contract.

The court held in part,

There is no question that a reasonable insurer would consider an applicant's original signature important to its intelligent decision to issue a policy. An original signature assures the insurer that the applicant has attested to the verity of her answers and that she consents to entering into the insurance contract.

Saturday, November 6, 2010

Insurance Library looking for donations of insurance-related fiction

At the end of its latest email newsletter, the Insurance Library, one of my favorite resources, announced:

We have started a fiction section in our collection. So far, we've got the entire collection of Sue Grafton mysteries starring the former claims adjuster turned detective Kinsey Millhone. If you have any insurance fiction looking for a home, we'd welcome your donation!

I can't think of any liability insurance fiction at the moment, probably because I'm not a big fan of mysteries. But in the movie/tv category there's the great Double Indemnity; this Partridge Family episode; and wasn't there a Brady Bunch episode where Mike threw a briefcase in the courtroom and made the plaintiff ignore his fake neck brace and turn around?

Anyone know of any pop culture liability insurance plots that don't revolve around insurance fraud?

Wednesday, November 3, 2010

Appeals Court affirms that subrogation agreement does not transfer ownership

About a year and a half ago I wrote about a Superior Court decision in Apthorp v. OneBeacon Ins. Group, LLC. In that case an insurer had paid a claim of $25,000 for a stolen painting. Decades later the painting was found and had increased in value to between $400,000 and $800,000. The insurer claimed ownership of the painting, because the insured subrogated to the insurer all its right, title and interest in the property. Judge Garsh disagreed, stating that subrogation of rights and transfer of ownership are not the same.

The Massachusetts Appeals Court has affirmed the decision in 78 Mass. App. Ct. 115 (2010), adopting the reasoning of Judge Garsh.