As I discussed here, the Massachusetts legislature had been considering a bill creating retroactive insurance coverage for business income losses due to the pandemic, with losses adjusted by insurers and paid by the commonwealth. The Massachusetts Senate has voted against the bill.
The Insurance Library in Boston is a phenomenal resource for anyone who ever needs a deeper understanding of any insurance issue from commonplace to obscure. From educational programs to absolutely top-notch reference librarians to insurance-related social events like a screening of Double Indemnity to an opportunity (in non-pandemic times, at least) to just soak in the historical insurance artifacts, maps, policies, and books available at the library, this institution is a gem for the insurance cognoscenti and wannabes alike.
I am thrilled to be presenting a Zoom Lunch & Learn for the Library on insurance bad faith issues, "The Good Faith, the Bad Faith and the Ugly," on December 17, 2020 from 12:30 to 1:30.
You can register for the Lunch & Learn here.
Here's a full description:
I recently put together a panel on Insurance Issues for New Insurance Defense Attorneys for the Boston Bar Association's subcommittee on Insurance Law. I was thrilled to find panelists who were knowledgeable and engaging. In light of a commitment I have made to look for opportunities to amplify voices of people of color, I had hoped to find an additional panelist who was an attorney of color at an insurance defense firm interested in an opportunity to educate newer associates.
I reached out to affinity groups at bar associations, senior partners at insurance defense firms, and more general networking groups. A couple of names popped up -- the same names over and over again. I reached out to those people and did not hear back, I can only assume because they are so overwhelmed with people who want them to add diversity to panels and the like that they simply can't respond to all the offers.
This situation is a shame. Early in my career I was lucky enough to work for two excellent insurance defense firms. Racial diversity among the attorneys was virtually non-existent -- but that was a long time ago. I am disheartened that the situation does not appear to have changed.
Here's the thing: insurance defense is a fantastic start to a practice in civil litigation. Associates can expect to be arguing in court within a few weeks of starting out and to take depositions within a few more weeks. Trial work (increasingly hard to come by in civil practice) follows. I had oral argument in the US Court of Appeals as a second year associate. Big firms don't offer these opportunities. Many plaintiffs' side firms spend a large percentage of their time on pre-litigation activities. I constantly recommend to law students and young attorneys that they consider insurance defense firms.
The hiring partners at insurance defense firms should be actively recruiting, and making a plan to hire, young associates who are people of color. It's good for a firm that represents diverse people (anyone who gets sued after a car accident will have an insurance defense firm representing them) to have a diverse staff. It's good for the profession to provide excellent litigation opportunities to everyone. And, in this day and age (in every day and age), it's just the right thing to do.
The Boston Bar Association's Insurance Subcommittee (which I co-chair) is hosting a panel on Wednesday, October 7, 2020 at 10 AM on Insurance Issues for New Insurance Defense Attorneys. You can register here.
Here's the blurb:
New insurance defense associates quickly learn how to evaluate liability and damages in claims against the defendants they represent. But the insurance company is also their client. Associates need to understand the implications of this “tripartite relationship” and how it affects their representation. This webinar will cover the basics, including:
· The difference between the duty to defend and the duty to indemnify.
· How an attorney should handle a case that the insurer is defending under a “reservation of rights.”
· The attorney’s duty to both the insured and the insurer, and conflicts of interest that may arise.
· The responsibility of the insurer (and insurance defense counsel) to protect the interests of the insured, and how that plays out in defending a case and negotiating settlement.
This webinar is intended for attorneys who have been working as insurance defense associates for 0 to 4 years, but is also a refresher for more experienced attorneys.
Speakers:
TanyaT. Austin of Boyle / Shaughnessy Law
Alexis P. Theriault of Conn Kavanaugh Rosenthal Peisch & Ford, LLP
And I'll be moderating.
Strega Realty
Trust, which was operated by Linda Cappuccio, rented property in Salem to Red
Lulu Salem for the purpose of Red Lulu operating a restaurant there. However, Red Lulu never opened the restaurant. In 2012 Strega Realty sued Red Lulu. That lawsuit settled, with the provision that
Red Lulu would vacate the premises by October 31, 2013.
Red Lulu’s proprietors
vandalized the property around the time that they vacated the premises. Cappuccio informed Raymond Kameras, the
president of its insurance brokerage, Allan Insurance.
Cappuccio and Kameras
discussed filing an insurance claim to recover the damage. They now dispute whether Kameras suggested
filing a claim with both Strega Realty’s own policy and with Selective Insurance,
Red Lulu’s policy, but Cappuccio notified
only Selective. Selective denied
coverage because its policy excluded coverage for vandalism committed by its
insured.
On November 6,
2015, Cappuccio submitted a claim for the property damage to Public
Service. Public Service issued a reservation
of rights letter asserting that Cappuccio had failed to notify the company of
the loss within two years. The policy
also had a vandalism exclusion.
Cappuccio then sued both Public Service and Allan Insurance. In Cappuccio v. Public Service Ins. Co., 2020 WL 4581672 (Mass. Super.), the Essex County Superior Court granted both defendants' motionis for summary judgment.
Allan Insurance Company’s motion for
summary judgment
Insurance broker had no duty to secure
specific coverage
The court noted
that generally an insurance broker is not under a duty to secure a policy that
includes adequate coverage for the insured’s needs – but there are circumstances
that might create such a duty. Such
circumstances can include a prolonged business relationship, frequent contact
between the broker and the insured, and a broker’s advice with respect to the
complexity of the policies. The court
held that no special circumstances existed between Cappuccio and Allan
Insurance. They had a new business relationship,
there were no complex issues with respect to the coverage she wanted to
purchase, and they did not have an in-depth discussion. Cappuccio told Allan Insurance she wanted to
renew her policy, and Allan Insurance did so.
Cappuccio pointed
to statements on Allan Insurance’s website setting forth that its agents were experts and
would provide the best policy to fit the customer’s individual needs. The court held that Cappuccio had offered no
evidence that she relied on such statements or was even aware of them.
The court also held that Cappuccio had offered no evidence of breach of duty. She did not establish that Allan Insurance could have secured a policy for her that would have covered acts of vandalism by a tenant.
No damage from failing to advise Cappuccio to file claim with Public Service, because coverage was excluded by the vandalism exclusion
The court also
granted summary judgment to Allan Insurance on the claim that it negligently
advised Cappuccio not to file her claim with Public Service when she discovered
the vandalism. Allan Insurance denied
giving such advice, but argued that even if it had there was no harm because
the policy excluded criminal acts by anyone to whom the insured entrusted its property. The court held that that exclusion unambiguously
applied to vandalism by a tenant even after eviction proceedings had begun.
Public Service’s motion for summary judgment: Notification to broker is not notification to insurer
Cappuccio alleged
that Public Service failed to resolve her claim for roughly 3 ½ years after she
notified Allan Insurance of the loss, a delay which constituted a bad faith
settlement practice.
Public Service argued that Cappuccio’s notification to Allan Insurance was not a notification to Public Service, and that it was not notified of the loss until more than two years after the occurrence. The court agreed that notification to the insurance broker did not constitute notification to the insurer, as the undisputed facts showed that Allan Insurance was not an agent of Public Service.
Takeaways
Short limitations period for first-party property damage claims
This
case highlights a trap for the unwary: almost all Massachusetts insurance
policies have a two year contractual limitations period for first-party
property damage claims (a claim filed by the policyholder against its own
insurer, not against a tortfeasor or tortfeasor’s insurer). This limitations period applies to homeowners' policies as well as general liability policies. Although not made clear by the decision, this
is not the time limit for bringing a claim to the attention of the insurance
company; it is the period by which a lawsuit against the insurer
for breach of the policy must be filed in court. Unlike with a bad faith settlement practices
claim under Mass. Gen. Laws chs. 93A and 176D, the time does not begin running
on the date that the policyholder should reasonably know that the insurance
company is not adequately adjusting the claim; it begins on the date of loss. This is obviously significantly shorter
than the six year statute of limitations that applies to most breach of
contract claims.
Property policies have other quirky provisions, such as the requirement of a reference proceeding – a type of arbitration – for disputes over the amount of loss. I would advise anyone who has a property damage claim against their own insurer to speak with an attorney who really understands the nitty-gritty of these policies.
Limited duty of insurance broker
Another
issue highlighted by this case is that an insurance broker does not have a
general duty to secure a policy that includes, as the court put it, adequate coverage for the insured’s
needs. That seems counterintuitive – you
expect your broker to help you get the policy that you need. But most policies have standard language and,
as the court pointed out, an insurer is unlikely to be willing to negotiate
over whether or not a relatively low value policy will include a vandalism
exclusion.
There
can, however, be special circumstances when the insurance broker’s duty is
expanded. Those circumstances include a
prolonged business relationship with the client, frequent contact between the
client and the agent, and when a client relies on the advice of the agent
because of the complexity of the policy.
Essentially, as you move into a
higher value policy there is more negotiation between the policyholder
(through the broker or a risk management company, generally) and the
insurer.
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