Tuesday, March 28, 2017

United States District Court holds insurer has duty to defend allegation of defective product

Michael Ladas alleged in a suit against IMS that it had manufactured non-compliant and defective components of a product made for the United States army, in violation of the federal False Claims Act.  (What that product was, as well as other facts, has been redacted from the publicly available version of the court's opinion.)  The underlying suit eventually settled, after IMS had spent more than $400,000 in legal fees. 

IMS had sought coverage from its insurer, All America.  All America denied a duty to defend or indemnify.  In Innovative Mold Solutions, Inc. v. All America Ins. Co., Inc., 2016 WL 3814774 (D. Mass. 2016), the United States District Court held that All America had violated its duty to defend.

Because of the redactions it is somewhat difficult to follow the court's analysis.  The first question before it was whether the damage alleged was covered property damage.  The issue was whether the damage was to property that belonged to someone other than IMS, since faulty workmanship to an insured's own product is not covered.  The court held that there was a duty to defend because the underlying complaint alleged that faulty epoxy potentially caused damage to components that were supplied by other entities.

The next issue was whether the underlying complaint alleged an occurrence within the meaning of the policy.  All America argued that IMS changed the composition and application of epoxy, which was an intentional act and not an occurrence.  IMS asserted that the injury was an occurrence because it had not intended the injury.  The court agreed with IMS.

Finally, the court held that the faulty workmanship exclusions did not apply.  Exclusion j(6) does not apply to property damage included in the products-completed operations hazards, which means that it does not apply to property damage that occurs away from premises owned or rented by the insured.  The other faulty workmanship exclusions do not apply to damage to property owned by someone other than IMS. 

Wednesday, March 15, 2017

Massachusetts Appeals Court holds that auto insurer does not have to pay sales tax for replacement vehicle if no such taxes have been incurred

The standard Massachusetts auto policy includes a provision that damages for a vehicle totalled by the insured "include any applicable sales tax."

In Ramirez v. Commerce Ins. Co., 91 Mass. App. Ct. 144 (2017), the Massachusetts Appeals Court held that that provision applies only if the claimant has actually purchased a replacement vehicle on which sales tax was assessed.  

Wrbasy Ramirez was involved in a collision with a car driven by Edith McGuinness, who was insured by Commerce. Ramirez's vehicle was declared a total loss.  Ramirez chose to retain ownership of it, so Commerce was liable to him for the actual cash value less the salvage value.

Ramirez accepted Commerce's calculation as far as it went, but objected to the omission of Massachusetts sales tax in the amount of his loss.  Commerce informed him that he would be reimbursed for sales tax upon proof that he purchased a replacement vehicle and incurred the tax.

The Massachusetts Appeals Court agreed that Commerce did not have to pay the sales tax.  It reasoned that such tax does not constitute an element of damages if Ramirez did not actually incur the tax by purchasing another vehicle.  

Thursday, March 9, 2017

Massachusetts Appeals Court distinguishes slander of title from slander

Wayne and Cynthia Robbins were sued for slander of title.  The underlying plaintiff alleged that they published false claims with respect to the ownership of land that was owned by him.

The Robbinses sought insurance coverage from their homeowner's insurer, Hingham Mutual Fire Insurance Company.  Hingham declined to defend or indemnify, asserting that the policy did not provide coverage for slander of title.

In Robbins v. Hingham Mutual Fire Ins. Co., 91 Mass. App. Ct. 1108, 2017 WL 729749 (unpublished), the Massachusetts Appeals Court agreed with Hingham.  It held that although the policy provides coverage for slander, slander of title is a different tort.  Slander encompasses "a publication of a false and defamatory statement by spoken words of and concerning the plaintiff."  Slander of title involves "disparagement of a person's title to real or personal property."

There's no good reason why slander of title shouldn't be a covered loss, as long as the standard exclusions apply.  Seems like its time to amend the personal injury coverage in homeowner's policies.