Friday, May 27, 2011

Wednesday, May 25, 2011

Hold on to all of your insurance policies forever

One of the very first steps in every insurance coverage case, large or small, is obtaining a copy, preferably certified, of the applicable insurance policy. It's also often one of the hardest and most time-consuming steps, even for a recent loss under which coverage of only a single policy is triggered.

In occurrence-based policies, every policy that was in effect during a loss potentially provides coverage. In long-tail losses such as environmental or asbestos claims where the exposure took place over decades, it is sometimes difficult to identify what insurer issued the policies for each year, much less to obtain a copy of them.

Not surprisingly insureds frequently have no idea what insurer provided coverage to them fifty years ago. And if you go back far enough, even if an insured knows the name of the insurer, it can be difficult to determine the applicable policy forms. Some cases address whether it is acceptable to make an educated guess as to the terms of the policy.

In House of Clean, Inc. v. St. Paul Fire & Marine Ins., Co., __ F.2d __, 2011 WL 1321197 (D. Mass), the United States District Court for the District of Massachusetts held that the insured bears at least some responsibility for knowing what policies were historically issued to it.

House of Clean operated a dry cleaning business from 1967 to 2007. In 2005, chemical pollutants used in the cleaning process were detected in nearby soil and groundwater. Neighbors sued and the Department of Environmental Protection issued a notice of responsibility. House of Clean sought coverage from its insurer, St. Paul. When a coverage dispute arose, it sued St. Paul for declaratory judgment and breach of contract.

House of Clean subsequently sought to amend its complaint. One of the new allegations was that during discovery, St. Paul provided over 10,000 pages of disorganized documents which included two insurance policies from 1981-1982. House of Clean had been previously unaware of those policies. It sought to amend the complaint to add allegations of coverage under those policies.

The court denied House of Clean's motion to amend the complaint. It held that the motion to amend was untimely given that it would require the addition of two new defendants (insurers related to St. Paul). It stated, "The Court acknowledges that HOC was unaware of those policies before October, 2010, but notes that it bore at least some responsibility for maintaining records of insurance policies it had purchased."

The lesson: Keep full copies of your occurrence-based insurance policies forever. Really, forever.

Saturday, May 21, 2011

It's not too late for Rapture Insurance

You can buy it on ebay here. Act now, because by 6:05 tonight the Rapture will be a known loss and no longer insurable.

Here's a great blog post on other Rapture-related insurance issues.

Tuesday, May 17, 2011

Mass. Appellate Division holds that insurer's non-specific denial to allegation of complaint does not preclude summary judgment for insurer

Commerce Insurance Company insured a car which was struck by a motorcycle. Belizaire, a passenger in the car, made a claim for PIP coverage. Commerce eventually denied the claim on the basis of non-cooperation.

Lynn Physical Therapy sued Commerce, claiming it was entitled to payment for treatment it had provided to Belizaire. Summary judgment was granted to Commerce on the ground that Belizaire's failure to cooperate precluded coverage.

On appeal to the Massachusetts Appellate Division, Lynn PT argued that summary judgment should be reversed because Commerce never acknowledged that it insured the vehicle in which Belizaire was a passenger. Lynn PT based that assertion on the answer to the complaint and a response to a request for admission. In both instances Commerce denied a lengthy statement which included, among many other facts, the assertion that the vehicle was insured by Commerce.

In Lynn Physical Therapy Inc. v. Commerce Ins. Co., 2011 WL 1744225 (Mass. App. Div.), the court disagreed, noting that Commerce had admitted during the course of discovery that it insured the vehicle.

For some reason the court did not make the most obvious point: If Commerce did not issue the policy, it would not be liable for PIP payments. If it did issue the policy, it was entitled to deny the claim (according to the trial court's findings) because of Belizaire's noncooperation. In either event, Lynn PT would not be entitled to PIP payments.

Monday, May 9, 2011

SJC rules on statute of limitations, penalties for insurance agency hiring unlicensed broker

Last year I published a number of posts on the Appeals Court decision in Anawan Ins. Agency v. Div. of Ins. (Click on the link and then scroll down to see those posts.) The case concerned an insurance agency that had employed an unlicensed broker.

In Anawan Ins. Agency v. Div . of Ins., 2011 WL 1588424 (Mass.) the Supreme Judicial Court has affirmed in part and reversed in part the decision of the Appeals Court.

The SJC held, first, like the Appeals Court, that the four year statute of limitations of Mass. Gen. Laws ch. 260 §5A applied, rather than the two year statute of limitations of Mass. Gen. Laws ch. 260 §5. §5A applies to "actions arising on account of violations of any law intended for the protection of consumers." The court held that Mass. Gen. Laws ch. 175 §177, which prohibits an insurance company from paying an individual who is not a licensed insurance agent, is a statute intended for the protection of consumers.

The SJC then overturned the decision of the Appeals Court with respect to the discovery rule, holding that the discovery rule does apply to an action by the Division of Insurance to enforce Mass. Gen. Laws ch. 175 §177.

Finally, the SJC overturned the decision of the Appeals Court that the only fine that could be imposed was a fine under Mass. Gen. Laws ch. 175 §177, and that a fine under Mass. Gen. Laws ch. 176D §7 could not be imposed. The SJC held that separate penalties under both statutes could be imposed.