Sunday, December 21, 2014

Senate fails to renew TRIA

The United States Senate has failed to renew the Terrorism Risk Insurance Act (TRIA) before its expiration on December 31, 2014. 
I offered my suggestions for amendments to TRIA here

Here's a sampling of articles on the effect of the failure to renew TRIA: 

Monday, December 15, 2014

Payroll expenses are not part of gross revenue; why policies are impossible to understand

Gene Killian at New Jersey Insurance Coverage Litigation has blogged about a Massachusetts Appeals Court case, Verrill Farms LLC v. Family Farm Cas. Ins. Co., 86 Mass. App. Ct. 577 (2014).  The case addressed business interruption coverage and held that payroll expenses should be deducted from gross revenue in the calculation of profit or loss to determine loss of business income. 

Killian wonders why insurance policies are so badly written.  I disagree with both of his hypotheses: that the underwriters think the nature of the risks they seek to cover is complicated, or that they think that if they write the policies in an arcane and convoluted manner they'll have wiggle room when coverage disputes arise.

Policies are complicated because they are written reactively rather than proactively.  They react to court decisions that interpret them. 

Say there's an exclusion that provides, "This policy excludes damage to trees."  A court holds the exclusion does not apply to apples that have fallen from trees.  (For those of you who did not grow up near orchards, such apples are used for cider.) 

The next version of the exclusion will provide, "This policy excludes damage to trees and to the product of any tree that has not yet been harvested." A court  holds that that exclusion does not apply to damage to apples sitting in a wheelbarrow under a tree, because they have been harvested. 

The next version of the exclusion will provide, "This policy excludes damage to trees and to the product of any tree that has not yet been harvested, and to the product of any tree that has been harvested that remains on the insured property."  A court decision holds that "the product of any tree that has been harvested" applies only when the the tree itself has been harvested (such as for lumber) and not when its fruit has been harvested.

The next version of the exclusion will provide, "This policy excludes damage to trees and to any tree that has not been harvested and to any product that has not yet been harvested that grows on trees on the property and to any tree that has been harvested and remains on the property and to any product that grows on trees that has been harvested and remains on the property." 

By now no one can read through the exclusion without their eyes crossing, much less figure out what it purports to exclude.  Combine it with a few policy definitions and maybe an anti-concurrent causation clause, and . . . welcome to a modern insurance policy. 

Wednesday, December 3, 2014

Massachusetts Appeals Court continues trend of PIP decisions against insurers

On April 7, 2007 a passenger was injured in an automobile accident.  Pilgrim was the PIP carrier.  Bryan Hartunian provided orthopedic treatments to the insured.  Pilgrim paid some of the bills from the treatment but withheld payment of $990 on the ground that the charges exceeded an amount that was reasonable in comparison to other medical providers in the same geographic area.  However, it did not notify Hartunian  within ten days of its intention not to pay. 

After twelve months of demanding payment, Hartunian sued Pilgrim in the Massachusetts District Court.  In addition to the unpaid portion of his bill he sought damages under Mass. Gen. Laws ch. 93A.  Pilgrim then issued payment of $990 and filed a motion for summary judgment on all counts of the complaint.  The motion was denied with respect to the 93A count.  Pilgrim was found liable for breach of 93A after a bench and subsequently appealed.

In Hartunian v. Pilgrim Ins. Co.,  __ N.E.3d __, 2014 WL 6607866 (Mass. App. Ct.), Pilgrim argued that its refusal to make payment was not an unfair business practice because it disputed the obligation to pay in good faith.  The court held that that argument ignored the fact that an insurer must, by statute, make PIP payments within ten days or notify the submitting physician or claimant of its intention not to pay. 

Pilgrim also argued that it did not act in bad when  it had an independent medical exam conducted by a physical therapist (apparently a common thing now) rather than a practitioner licensed in the same medical specialty as Hartunian. While not dismissing out of hand the use in all circumstances of a physical therapist for an IME, the court held that whether such use is in good faith raises a factual issue. 

Similarly, the court held that review of the bills by a billing program is not automatically a bad faith act by an insurer but that "its use as a substitute for a practitioner's review of billing statements and underlying services provides an additional basis for an inference of Pilgrim's lack of good faith." 

Tuesday, November 4, 2014

Appeals Court sidesteps question of whether PIP carriers can have IME conducted by physical therapist

 Judith Ortiz was injured in an automobile accident. She sought PIP benefits from Commerce. 

Commerce sent Ortiz a notice indicating that she would have an independent medical examination conducted by a physician named Eugene Boeglin.  Ortiz attended the examination.  When Commerce sent her lawyer a copy of the IME report, she learned that Boeglin was not a medical doctor but a "doctor of physical therapy."  (Side note:  I have read hundreds of plaintiffs' physical therapy notes in my career.  Since the notes were all more or less the same I had come to assume that PT was bogus -- until I was referred to PT a few years ago for a pinched nerve.  Those people are miracle workers with knowledge that goes extremely deep.) 

Ortiz sued Mass Medical Services, apparently Boeglin's employer, for violation of the privacy statute, Mass. Gen. Laws ch. 214 s. 1B and of ch. 93A. 

In Ortiz v. Mass Medical Services, Inc., 86 Mass. App. Ct. 1116, 2014 WL 5326511 (unpublished), the Massachusetts Appeals Court affirmed dismissal of the privacy act claim for failure to comply with the statute of limitations. 

The court dismissed the 93A claim because the allegedly unfair and deceptive act -- the fact that Boeglin was a physical therapist, not a medical doctor -- caused no adverse consequences or loss. 

The court did not address whether Commerce itself was in violation of any statute or acting in bad faith by having the IME conducted by a physical therapist. 

Wednesday, October 29, 2014

It's a whole new ballgame in PIP litigation, thanks to an SJC decision

I have written before, here, about why it is difficult to sue PIP carriers who fail to pay claims.  PIP claims are by their nature small: generally not more than $2000 and never more than $8000.  The PIP statute provides that the insurer must pay the claimant's attorney's fees if a judgment against the carrier enters.  Up until now, an insurer could avoid paying those fees if it forced a claimant to file suit, conduct discovery and go to trial and then, minutes before judgment enters, paid the claim.  Of course if the claimant proved bad faith in the insurer's actions then attorney's fees were available under Mass. Gen. Laws ch. 93A, but bad faith is harder to prove than mere failure to pay a claim when due.  Although some wiggle room was found by various decisions of the Massachusetts Appellate Division (a court that does not set precedent), see here and here, PIP cases in general were simply a bad risk. 

The Supreme Judicial Court of Massachusetts has changed all that.

In Barron Chiropractic & Rehabilitation, P.C. v. Norfolk & Dedham Group, 469 Mass. 800 (2014), the SJC has held that an unpaid party who has brought suit may refuse the insurer's tender of PIP amounts due, proceed with suit, and obtain a judgment for those amounts as well as its costs and attorney's fees. 

The plaintiff, Barron Chiropractic & Rehabilitation, provided chiropractic services to Nicole Jean-Pierre after an auto accident.  Jean-Pierre's PIP carrier was Norfolk & Dedham. 

Jean Pierre's chiropractor at Barron and Norfolk & Dedham disagreed about the length of treatment made necessary by the accident and about the proper price for her treatment.  The disputed amount was $1,544.05. 

Barron sued Norfolk & Dedham in District Court.  Norfolk & Dedham determined that its anticipated litigation costs would substantially exceed the amount of the disputed medical fees.  Six days prior to trial it sent Barron a check for the disputed amount with an attached check stub that stated "full and final settlement."  Barron's counsel returned the check to Norfolk's counsel with a letter stating that its offer of settlement was rejected.

The SJC held that under contract law Barron was not required to accept the tender of settlement for the amount due after the time for payment under the PIP statute had passed.  It also held that it would be unfair and against the purpose of the PIP statute to allow the insurer to escape costs and attorney's fees by paying the PIP amount that was due after forcing the claimant to file suit. 

Thursday, October 23, 2014

Insurance and global warming

The New York Times has an article about the reaction (and non-reaction) of insurers to higher risk of property damage as a result of global warming.

My guess is that the government will find itself more and more in the property insurance business. Just as it entered the flood insurance market through the National Flood Insurance Program, the government will have to make a choice about whether to abandon owners of property now at high risk for hurricanes and other disasters or to subsidize them. 

My vote would be a gradually phased-out subsidy, perhaps with an income-based component.  Just as I don't think that taxpayers should have to pay to protect the houses of people who choose to build on unstable lands prone to falling into oceans or canyons, I don't think that over the long-term taxpayers should have to pay to protect property that is highly likely to be destroyed by relatively predictable weather disasters.  But I also don't want to see those property owners suffer a unilateral loss as a result of global warming, an event we have all caused and should all bear responsibility for.  And I want to see poorer people with more protections for their limited assets.   

Saturday, October 11, 2014

Appeals Court reminds us that when it comes to insurance, it's usually Buyer Beware

In Kleycamp v. USAA Casualty Ins. Co., 86 Mass. App. Ct. 1113, 2014 WL 4799608 (unpublished), the Massachusetts Appeals Court affirmed summary judgment to a defendant insurer that had not recommended that the plaintiffs purchase underinsured coverage with their auto policy.

The plaintiffs had never specifically inquired of the insurer about underinsured coverage, and the insurer never made any specific assertions or representations about the adequacy of the plaintiffs' coverage. 

The court noted that the general rule in Massachusetts is that insurers and their agents do not have a general duty to recommend insurance coverage, or to guarantee that insurance policies are adequate for a particular insured's needs.  There is an exception only for special circumstances, such as reliance on specific assertions or representations concerning the adequacy of coverage. 

In a footnote the court noted that the same analysis might not apply to homeowner's policies.

In my view, underinsured and uninsured coverages are among the most important insurance you can buy.  They can't protect you against the risk that another driver's carelessness will injure you; but they do protect you against the risk that that careless driver doesn't have enough insurance to cover your injuries. 

Friday, July 25, 2014

Appeals Court holds pollution exclusion in auto policy of oil delivery service applies to overfilled oil tank

United Energy Oil Company, an oil delivery service, delivered oil from a truck to an oil tank in  a building owned by National Equity Properties.  It overfilled the tank and caused oil to seep into the ground. 

The truck was covered by a business auto insurance policy issued by Hanover Insurance.  Hanover determined that damages over $5000 came within the policy's pollution exclusion. 

A declaratory judgment action over the meaning of the pollution exclusion followed.  It was undisputed in that action that heating oil is a pollutant within the meaning of the pollution exclusion.

The first policy clause at issue in Izdebski v. Hanover Ins. Group, Inc., 86 Mass App. Ct. 1102, 2014 WL 2973681 (unpublished) was one that made the pollution exclusion applicable to property damage arising out of the actual discharge, release, or escape of pollutants:
a.  That are, or that are contained in any property that is:
(1)  Being transported or towed by, handled, or handled for movement into, onto or from, the covered 'auto.'
The Massachusetts Appeals Court held that the clause excluded coverage because the spill happened as the polluting oil was being delivered by the pump from the tank to its intended destination.    The plaintiffs argued that the oil had reached its final destination before it seeped into the ground, or that the oil that seeped into the ground was already in the tank before United began to fill it.  The court held that those interpretations ignored the meaning of "arising out of" in the exclusion. 

The second policy clause at issue was an exception.  The exclusion was for  damage arising out of the actual discharge, release, or escape of pollutants once they have been finally delivered. The exception applied to accidents with respect to pollutants not in a covered auto if
(1)  The pollutants or any property in which the pollutants are contained are upset, overturned or damaged as a result of the maintenance or use of a covered auto; and
(2)  The discharge, dispersal, seepage, migration, release or escape of the pollutants is caused directly by such upset, overturn or damage.
The phrase "upset, overturned or damages" was not defined.  The court held that a fair reading of the exception is that it applies to an accidental oil spill only  if United's truck is upset, overturned or damaged.  That doesn't make a lot of sense to me, as the exception plainly says that it is the pollutants "or any property in which they are contained" that must be upset, overturned, or damaged.  If it was only the covered auto that could be upset, overturned or damaged, the policy would have said so.  On the other hand, it does not seem that an overflow or seepage of oil comes within the definition either. 

Tuesday, July 15, 2014

Why reserves matter

A reserve is the amount of funds that an insurance company sets aside as the probable payout on an unresolved claim.  Over at the AMAXX Workers Comp Resource Center, Michael Stack has posted an interesting article on the risks to an insurer from failing to set accurate reserves. 

Friday, July 11, 2014

US District Court holds uninsured motorist coverage proceeds go to relatives of decedent insured, not estate

Michael Furlong was driving a pick-up truck southbound onto the Sagamore Bridge.  He swerved across the center line to avoid hitting  a vehicle that was merging.  He crashed into a minivan driven by Amnon Bogomolski.  Both men died as a result of the accident. 

Furlong's auto policy included $100,000 in uninsured motorist coverage.  Commerce had tendered the limits of the policy to settle Furlong's wrongful death claim against the unknown driver of the vehicle that was merging. 

Bogomolski's estate filed a wrongful death suit against Furlong's estate, and moved for what it called an attachment or to reach and apply the proceeds of the uninsured motorist insurance policy.  (The court noted that a motion for attachment or to reach an apply was technically premature until there was a judgment.  It treated the action one for preliminary injunction to restrain Commerce or the administrator of Furlong's estate from disposing of the property pending the outcome of the action.) 

The issue before the United States District Court in Bogomolsky v. Furlong, 2014 WL 29452927 (D. Mass. 2014) was whether the proceeds of the Commerce uninsured motorist policy were the property of Furlong's estate or of his daughter as his closest relative.  If the former, then the plaintiff could reach and apply the proceeds; otherwise, it could not. 

The court noted that under the Massachusetts Wrongful Death statute, the money recovered in a wrongful death claim is not a general asset of the estate, but constitutes a statutory trust fund held by the administrator of the estate as trustee for distribution to the statutory beneficiaries.   (In other words, under the wrongful death statute close relatives of the decedent can recover damages even if they are not included in the decedent's will and even if the decedent's debts exceed his assets.) 

Similarly, proceeds from a claim for ininsured or underinsured motorist insurance operates flow to the presumptive takers (i.e., the close relatives listed in the wrongful death statute), not to the estate.

The court held that Furlong's daughter, not his estate, was entitled to the proceeds of the uninsured motorist policy.  Therefore Bogomolski's estate could not reach and apply those proceeds. 

Friday, May 16, 2014

U.S. District Court holds no bad faith sanctions in subrogation action where insured spoliated evidence

Fireman's Fund Insurance Company brought a products liability subrogation action against Bradford-White Corporation.  It alleged that a design defect in a water heater manufactured by Bradford White caused a leak that damaged the property of its insured, Bell Partners, Inc. 

After the leak was discovered, Fireman's requested that Bell retain the subject water heater.  However, Bell disposed of the water heater without contacting Fireman's and before Bradford-White had an opportunity to inspect or test it. 

Fireman's expert asserted that other water heaters in the same building were similar to the subject water heater.  Bradford-White contested that, arguing that they were manufactured earlier and kept in outside closets instead of inside closets. 

Bradford-White moved that the case against it be dismissed on the ground of spoliation of evidence, or, at the least, that the court preclude Fireman's from arguing at trial that any evidence or test results obtained from the other supposedly similar water heaters is relevant to the condition of the subject heater.

In Fireman's Fund Ins. Co. v. Bradford-White Corp., 2014 WL 1515266 (D. Mass.), the United States District Court for the District of Massachusetts held that Fireman's Fund did not act in bad faith.  It had asked Bell to retain the heaters and Bell did not contact it before removing the heater.  Fireman's failure to take additional steps to secure the heater was at most negligent.  The court held that the appropriate spoliation sanction is an instruction to the jury that it may draw a spoliation inference against Fireman's Fund. 

The court utilized a straightforward spoliation analysis.  I was surprised that it did not address an argument that an inference can be drawn against Fireman's Fund because as the subrogee of Bell it stands in Bell's shoes.  If Bell had brought its own claim against Bradford-White, would the court have analyzed the sanctions differently?  I don't know offhand if there are any Massachusetts decisions on the issue, but it is certainly where I would have started. 

Tuesday, May 6, 2014

Superior Court holds that contractual choice of law clause does not apply to case over validity of policy term

Catlin Specialty Insurance issued two consecutive claims-made Professional and Pollution Legal Liability Insurance policies to AMSC and its subsidiary Windtec.  The first policy had a policy period of April 1, 2010 to April 1, 2011.

On December 6, 2010, Ghodawat notified the insured that it was terminating a 2008 license agreement between the two due to technical problems with the wind turbine that was the subject of the agreement and that the insured  had supplied and installed.  Ghodawat leveled an accusation of gross negligence and stated that it would pursue a claim unless an amicable resolution was reached.  Settlement discussions followed in February 2011. 

In the meantime, the insured submitted an application for a second year of coverage with Catlin.  In the application it denied any claim, suit, notice or action had been brought or that it was aware of any other circumstances or incidents which may result in a claim being filed against it.  A new policy was issued without Catlin being informed of the Ghodawat allegations.

On May 12, 2011 Ghodawat commenced arbitration proceedings against the insured.  The insured requested coverage from Catlin. 

In Catlin Specialty Is. Co. v. Am. Superconductor Corp., 2014 WL 840693 (Mass. Super.), the Superior Court held that there was no coverage for the claim under either policy because the policy provided coverage only if a claim was both made and reported during the same policy period.  The claim was made in the first policy period and reported in the second policy period. 

The court noted that the purpose of the requirement that notice of a claim be given within the policy period is fairness in rate setting.  Therefore an inquiry into whether an insurer has been prejudiced with respect to the particular claim, relevant to an occurrence policy, is irrelevant to a claims-made policy. 

AMCS argued that under New York law coverage can be denied for breach of the notice provision only if there is prejudice.  The court did not reach that issue because it held that under Massachusetts conflict of law doctrine Massachusetts law applies to the coverage dispute. 

The court held that a choice of law clause in the policies, providing that the "policy shall be subject [to] interpretation under the law of the State of New York" did not apply because the disputed issue is not one of policy interpretation but the validity of  the policy clause requiring that claims be made and reported in the policy period. 

Tuesday, April 8, 2014

US District Court holds that suit between insurers should be transferred to district where accident occurred

Ohio Casualty Insurance Company, an excess insurer, sued Twin City Fire Insurance Company, a primary insurer, for breach of the duty of good faith and fair dealing for failing to settle a motor vehicle accident case within the policy limits.

The accident occurred in New York.  Ohio Casualty is an Ohio Corporation with its principal place of business in Boston.  Twin City is an Indiana corporation with its principal place of business in Hartford.

Twin City moved to transfer the case to the Eastern District of New  York.  In Ohio Casualty Ins. Co. v. Twin City Fire Ins., 2014 WL 495650 (D. Mass.), the court allowed the motion.  It noted the only connection of Massachusetts to the dispute is that Ohio Casualty's principal place of business is here, while a substantial amount of the relevant evidence is likely to be located in New York, where the underlying tort and jury trial occurred and where the underlying trial attorneys are located.   

Tuesday, April 1, 2014

Corruption alleged in FEMA flood map changes

According to NBC News, FEMA has changed flood zone maps to drastically lower insurance premiums of owners of ocean-front, flood-prone properties. 

Wednesday, March 12, 2014

Woman who sold vehicle ten days before buyer got into crash not covered by her insurance policy

On August 20, 2005, Judi Bavota sold a Chevrolet Blazer to Leo Callahan and assigned the title to him.  Bavota's license plates remained on the car, and neither party notified the registry of motor vehicles or Bavota's insurer, Liberty Mutual, of the sale. 

On September 1, 2005, while driving the Blazer, Callahan collided with a vehicle driven by Jennifer Vail.  There were no personal injuries, but both vehicles sustained substantial damage.  It was undisputed that Callahan caused the accident.

Vail submitted to Liberty a claim for damage to her car.  Liberty refused to pay the claim on the grounds that the Blazer was not owned by Bavota or insured by Liberty on the date of the accident.

Vail received an arbitration award against Bavota of $23,800.  Liberty paid the claim.  Vail then proceeded with a 93A/176D claim against Liberty. 

The standard auto policy issued by Liberty to Vail provided that the policy automatically terminates 30 days after the insured transfers title to the auto and does not register another auto.  While Liberty did not dispute that the transfer of title extended the term of the policy to encompass September 1, 2005, less than 30 days after the transfer, it argued that the extended coverage did not include Vail's loss.  It relied on a policy provision stating that it will pay a loss if a non-household member "using your auto with your consent is legally responsible for the accident."  It argued that "your auto" means an auto owned by an insured.  As Bavota no longer owned the auto, there would be no coverage.

In Vail v. Bavota, 2014 WL 729876 (Mass. App. Div.), the Massachusetts Appellate Division disagreed.  The term "your auto" is defined in the policy to mean "[t]he vehicle or vehicles described in the Coverage Selection Page."  The Blazer was listed on the coverage selection page. 

The court held, however, that there was no coverage because Callahan was not driving the vehicle with the "consent" of Bavota.  Because Callahan owned the Blazer, Bavota had no authority to approve or consent to his use of it.

While I don't disagree with the decision, it is probably contrary to the arbitration award under which Bavota must have been found to be liable for Callahan's negligence.  I assume that finding was made under Mass. Gen. Laws ch. 231 s. 85A.  That statute provides that the fact that a car involved in an accident is registered in the name of a defendant is prima facie evidence that it is being operated by and under the control of a person for whose conduct the defendant is legally responsible.  Absence of such responsibility is an affirmative defense.  While the prima facie language has stopped many a motion for summary judgment that would otherwise be successful, it is puzzling how the arbitrator found as a matter of fact that Bavota was indeed responsible for Callahan's actions. 

The takeaway:  When you sell a car, make sure you take care of your paperwork immediately. 

Monday, March 10, 2014

Court holds failure to disclose on insurance application potential malpractice claim voids malpractice policy

Joyce Hurley injured her Achilles tendon in 1998 when she tripped on a grate.  Attorney Elizabeth Comproni filed a personal injury action for her in 2001. That case was dismissed for lack of service on July 17, 2001.  By that time the statute of limitations on the claim had run.

Comproni waited more than ten months to file a motion to vacate the dismissal.  The motion was granted on June 11, 2002, and the court gave Hurley 60 days to complete service.  Service was not made.  On March 30, 2004 the court dismissed the case sua sponte.  Comproni filed another motion to vacate, which was denied on October 21, 2004.

A week after denial of the second motion to vacate, Comproni notified her insurer of Hurley's potential malpractice claim.  The malpractice claim was filed almost three years later. 

The policy at issue applied to claims "made and reported" between January 3, 2004 and January 3, 2005.  The policy had a prior acts exclusion endorsement that excluded coverage for claims based on acts and omissions that predated January 3, 2003, the effective date of the initial policy.  When Comproni applied for the initial policy she was required to notify the insurer of any incidents which may give rise to a claim.  The policy stated that it would be void if there were any false or misleading statements in the application. Comproni did not at that time inform the insurer of Hurley's potential claim.

In Hurley v. Comproni, 85 Mass. App. Ct. 1101, 2014 WL 683731  (unpublished), the Massachusetts Appeals Court held that the insurer owes no malpractice coverage for claims based on Comproni's acts or omissions that predated January 3, 2003.  It was undisputed that Comproni had by that date allowed the second service of process deadline to expire. 

Hurley argued that Comproni's inattention to the case continued after January 3, 2003, and that the malpractice claim was based in part on that conduct.  Hurley argued that until the court dismissed the case a second time, there was a possibility that a judge would have allowed a further extension of the service deadline. 

The court held there was no coverage.  An extension of a service deadline is granted for good cause.  No grounds appeared on the record showing that there was good cause to grant a second extension. 

The court also ruled that Comproni's failure to disclose in the application Hurley's potential malpractice voided the policy.

Although it is a slightly different analysis than that done by the court, it is always worthwhile to remember that notice requirements are different in claims-made policies, like Comproni's and most malpractice policies, and occurrence policies, like most general liability policies.  Although occurrence policies generally require notice of a claim "as soon as practicable," under the law of Massachusetts (but not every state) coverage for the claim will not be voided unless the late notice was prejudicial to the insurer.  Not so with claims-made policies, under which late notice will void coverage whether or not there is prejudice. 

Monday, March 3, 2014

Fraternities and insurance

The Atlantic is running an article called "The Dark Power of Fraternities."  The article mostly discusses the dangers -- injuries from binge drinking, hazing, and overall stupidity -- that are an all-too-common feature of frat life. 

The article also contains a discussion of insurance.  As the article describes, liability insurance for fraternities had become "both ruinously expensive and increasingly difficult to obtain." 

Some fraternities banded together to create what the article calls reinsurance (but is more likely excess insurance).  Fraternities also developed a risk-management program.  Under the program a violation of the risk management alcohol program means that the participants are outside the fraternity's regulations and therefore not covered by its insurance. 

The article adds a rather snide aside: "It's a neat piece of logic: the very fact that a young man finds himself in need of insurance coverage is often grounds for denying it to him."

The author apparently believes that insurance policies should never be able to contain exclusions.  Liability policies issued to general contractors should not contain builder's risk exclusions.  Liability policies issued to day care centers should not contain intentional act exclusions.

But the coverage an insured purchases is (or should be ) the result of a risk/benefit analysis.  Fraternities need coverage if they are sued if someone slips and falls on ice on their steps, or if their building is damaged by a tornado.  Coverage for that type of negligence or act of nature has a price.  As the article points out, the price for coverage for injuries caused by irresponsible alcohol use may be  astronomically higher.  It is no shame to either a fraternity or an insurer to enter into a contract under which some events are covered and others are not.  Moreover, according to the article, fraternities inform members clearly that they will not be covered if they don't follow the alcohol policies. 

The other alternative may be to simply shut down fraternities as uninsurable. 

(According to the article, in the absence of coverage from insurance policies issued to fraternities, plaintiffs injured at fraternities go after the homeowner's policies of the parents of fraternity members who are named as defendants.  The article claims that the defendant and his parents then have to pay their costs of defense, but that makes no sense.  If there is coverage under homeowner's policies, then the homeowner's insurers will pay the costs of defense.) 

Monday, February 3, 2014

Superior Court holds worker's comp insurer properly charged premiums for employees who opted out of worker's comp system

Truck Courier is engaged in pick up and delivery services.  Its drivers were individuals who used their own vans and trucks to provide the services to its customers.  Truck Courier classified the drivers as independent contractors, not employees.  Each driver executed an agreement by which they waived their rights to worker's compensation benefits and preserved their rights to bring common law actions against Truck Courier with regard to any injuries they might suffer. 

Granite State Insurance provided worker's compensation coverage to Truck Courier.  Truck Courier paid an estimated premium at the beginning of the policy period, but that premium could be adjusted retroactively after an audit.

Granite State sought a retroactive premium adjustment on the ground that under a 2004 amendment to the Massachusetts Wage Act, the drivers were properly classified as employees.

In Granite Sate Ins. Co. v. Truck Courier, Inc., 2014 WL 316670 (Mass. Super.), Judge Curran of the Superior Court agreed with Granite State that under the statute the drivers were employees, not independent contractors. 

The worker's compensation statute allows an employee to opt out of the worker's compensation system, and the drivers did opt out.  The insurance policies allowed Granite State to include in its calculation all employees engaged in work covered by the policies.  The court noted that under Part II of the policies, for employer's liability, Granite State could have been required to pay claims by the drivers.  "Therefore, the plain language of the policies indicate that all Truck Courier employees should have been included in the calculation of premiums." 

The court denied summary judgment to Granite State on the 93A claim against it, holding that whether Granite State should have reasonably ascertained that the change in the law made the estimated premium substantially inaccurate was a disputed question of fact.