Wednesday, December 29, 2010

SJC holds that separate limits apply to family members seeking coverage under Massachusetts Insurers Insolvency Fund

I wrote here about the Superior Court decision in Mass. Insurers Insolvency Fund v. Smith, which held that the statutory claim limit of $299,999 applies separately to individual family members seeking primary and loss of consortium damages from the Massachusetts Insurers Insolvency Fund.

In 458 Mass. 561 (2010) the Supreme Judicial Court affirmed that decision. The court held that allowing only one limit would substitute the word "occurrence" for the word "claim" in the statute.

Friday, December 24, 2010

Wednesday, December 22, 2010

Appeals Court holds that ch. 176D applies to captive insurer

Lemos was injured in 2001 as a result of defects in a lawnmower manufactured by Electrolux. He obtained a jury award of $550,500. He then brought an action against Electrolux's captive insurer, Equinox, alleging that it engaged in unfair claim settlement practices in breach of Mass. Gen. Laws chs. 176D and 93A.

As explained by the court in Lemos v. Electrolux North Am., Inc., 78 Mass. App. Ct. 376 (2010), a captive insurance company is formed to bear the risks of the parent company. Premiums paid to a captive may be tax-deductible, and a captive has the potential to produce lower insurance costs.

Electrolux was the parent and sole shareholder of of Equinox. The director of risk management at Electrolux, who was also the president of Equinox, stated that Equinox had no employees, only a board of directors. Its role was purely that of a funding vehicle for the reimbursement of Electrolux for claims that are paid by Electrolux.

Equinox argued that because it is a captive company, Electrolux is in effect a self-insurer, and that Equinox is therefore not engaged in the business of insurance so that the requirements of ch. 176D to not apply to to it.

The Superior Court agreed and granted summary judgment to Equinox.

The Appeals Court reversed. It noted that Equinox is a separate, for-profit entity that calculates the premiums it charges based on loss experience and costs, calls itself an insurance company, and issued a policy that states it provides commercial general liability and other coverage. It also noted that Electrolux receives a financial benefit from using a captive insurer rather than being self-insured.

Thursday, December 16, 2010

The real downside to the secondary mortgage market: consecutive mortgagees can't get their paperwork to insurer

WMC was the mortgagee of property in Athol, Massachusetts. (Reminder: the mortgagee is the entity such as a bank to whom the homeowner makes mortgage payments.) MPIUA issued a homeowners policy for the property which provided coverage to both the homeowner, Brohl, and WMC.

WMC transferred the mortgage note to UBS. UBS retained Ocwen to service the loan. The MPIUA policy was amended to add Ocwen as a mortgagee.

On January 25, 2007, Brohl notified MPIUA that the property had sustained water damage. On February 4, 2007, there was a fire at the property.

On June 12, 2007, Ocwen sent MPIUA a notice of claim seeking damages under the policy. The letter defined Ocwen as "the mortgagee." (Meanwhile, Brohl was being foreclosed upon.)

MPIUA requested documents from Ocwen. On July 16, 2007, the mortgage note was sold back to WMC, and Ocwen never provided MPIUA with the requested documents.

On December 20, 2007, WMC resold the mortgage loan to Credit Suisse. SPS serviced the loan for Credit Suisse.

On June 19, 2008, SPS submitted a claim to MPIUA on behalf of SPS "as the insured mortgagee under the policy." SPS enclosed with the letter a number of documents regarding the transfer of the loan. MPIUA responded with a request for documentation showing SPS' or Credit Suisse's status as proper claimants, including a paper trail from WMC to SPS. It also requested documents showing that SPS had notified MPIUA of its mortgagee status or any efforts to amend the declarations page of the policy.

SPS provided documentation regarding the mortgage transaction, and stated that it was unaware of notices to MPIUA regarding the change in mortgagees.

MPIUA responded to SPS that the documentation it provided was insufficient, and requested copies of the agreements assigning the mortgage from WMC to any subsequent mortgagee. SPS did not provide the requested information.

On September 28, 2008, WMC repurchased the loan from Credit Suisse.

WMC did not notify MPIUA that it had repurchased the mortgage. Instead, on March 23, 2009, it sued MPIUA, claiming that MPIUA breached its contract by failing to pay WMC’s mortgagee claim and had engaged in unfair settlement practices.

After the lawsuit was filed MPIUA continued to request evidence of WMC’s status as mortgagee. On September 22, 2009, WMC produced documents proving that it was now (again) the mortgagee. However, MPIUA did not pay the loss.

MPIUA argued that it was entitled to summary judgment because prior to filing suit WMC and its predecessors failed to provide satisfactory proof of their right and title as mortgagees. In WMC Mortgage Corp. v. Mass. Property Ins. Underwriting Ass’n, 2010 WL 3734120 (D. Mass.), the court held that MPIUA was entitled to summary judgment on the claim that it failed to act in good faith when it refused to provide coverage without additional documentation.

The court also held that MPIUA could not avoid coverage of the loss. Under Mass. Gen. Laws ch. 175 §97, a statute regulating fire insurance, MPIUA’s obligation to provide coverage to a mortgagee named in the policy arose upon satisfactory proof of the mortgagee’s rights and title as a mortgagee.

WMC was named as a mortgagee in the policy, and after the lawsuit commenced it provided sufficient evidence to establish its status as the current owner of the mortgage.

Finally, the court found that the various mortgagees breached the duty to cooperate when they failed to comply with MPIUA’s requests for information and that MPIUA was thereby prejudiced. The court held that the prejudice would be remedied by an order directing WMC to pay MPIUA’s attorney’s fees and costs incurred in the lawsuit.

Wednesday, December 8, 2010

First Circuit holds that bouncer's unintentional injury to bystander comes within assault or battery exclusion

Zachary Eaton was minding his own business at a nightclub in Maine called Ushuaia. Another patron got into a skirmish with a bouncer. The bouncer kicked open a glass-and-aluminum door, which struck and injured Eaton.

Eaton sued Ushuaia, which submitted to judgment and assigned its rights against its insurer, Penn-America, to Eaton. Eaton then sued Penn-America to satisfy the judgment.

Penn-America denied coverage on the basis of an exclusion for "damages resulting from assault or battery or physical altercations."

In Eaton v. Penn-Am Ins. Co., __ F.3d __, 2010 WL 472287 (1st Cir.), the United States Court of Appeals determined the coverage issue under the law of Maine.

The court held, first, that while it is acceptable for appellate decisions to be pretentious, they should not "wax longiloquent." (Okay, to be fair, that was just dicta.)

It then held that because the door was dislodged in the course of the assault, Eaton's injuries resulted from the assault and the exclusion applies. It further held that the fact that the bouncer did not intend to injure Eaton was irrelevant to the exclusion, which does not have the same definition as assault and battery in a criminal context.

Wednesday, December 1, 2010

Welcome to the Cavalcade of Risk

I am honored to be hosting the Cavalcade of Risk, a blog carnival dedicated to all types of risk.

Liability insurance posts:

Tred Eyerly discusses a new case from Washington state about one of my favorite topics: triggers of coverage for a long-tail loss. The case he discusses held that coverage for water infiltration was triggered when the damages manifested: Policy Language Restricts Ongoing Damage to One Occurrence posted at Insurance Law Hawaii.

Posts about keeping personal documents safe:

Miranda Marquit at Moolanomy posts about keeping personal identification documents safe.

Edward Webber discusses obtaining and keeping safe a UTR, or Unique Taxpayer Reference number (I assume this is the same as a TIN, or taxpayer identification number): UTR Numbers For the Self Employed posted at

Financial posts:

Free Money Finance writes about protecting your job and money against the possibility of being laid off: Career Insurance: Insuring Your Most Valuable Asset posted at Free Money Finance.

Health Insurance posts:

Freefrombroke posts about reimbursement for over-the-counter medication.

Hank Stern argues that medical insurers should not cover birth control: Medical Necessity vs (Stupid) Mandates posted at InsureBlog. Although I completely disagree with his post I include it here as a courtesy because Hank runs the Cavalcade of Risk. And because, unlike the last three posts I've considered for this Cavalcade, his post prsents information and a point of view rather than an advertisement. (Sometimes I think I would like to have a separate blog that discusses only medical insurance issues. Not, like my regular blog, having anything to do with what I do for a living or can write knowledgeably about. Just the trials and travails of my family dealing with health insurance when my husband and I are both self-employed and over-income for any government help. I'm sure there would be a post in that imaginary blog about how all health insurance plans should fully cover everything that helps society as a whole--such as birth control, Hank!)

Jaan Sidorov notes the consistency between the Genetic Information Non Discrimination Act (GINA – or the law that keeps insurers from collecting genetic information) and the recent Transportation Security Administration kerfuffle. In his estimation, our national distaste for profiling leads to everyone being treated equally badly: Can't Trust Health Insurers or Government With Private Data: The Irony of the Genetic Information Non-Discrimination Act & Airport Security Pat Downs

David Williams discusses how Google makes money from free healthcare sites: The downside of free health care sites posted at Health Business Blog.

Life Insurance posts:

Silicon Valley Blogger writes about the different types of life insurance policies: Comparing Whole Life Insurance vs Term Life Insurance posted at The Digerati Life.

Random posts

Jason Shafrin at HealthCare Economists discusses The Drunkard's Walk, a book about randomness and, oh yeah, the price of car insurance. The Drunkard?s Walk posted at Healthcare Economist. Snark alert: If you get irritated when someone says "two categories" and then lists three categories, skip this post.