Massachusetts Appellate Division holds that insurer did not violate 93A when it relied on IME opinion to deny PIP benefits

I reported here on the Salem District Court case of Genest v. Commerce Ins. Co., 2010 WL 1740605 (Mass. App. Div.), in which an insurer was held not to have violated Mass. Gen. Laws ch. 93A when it failed to pay PIP benefits.

The Massachusetts Appellate Division has affirmed that ruling. 2010 WL 1740605 (Mass. App. Div.).

Genest, the insured, was injured in an automobile accident. She sought PIP benefits from Commerce. Commerce paid medical expenses but cut off additional payments on the advice of an independent medical examiner, who opined that injuries caused by the accident had resolved.

The Appellate Division held that Commerce's reliance on the IME was reasonable, and that its subsequent decision to pay the medical bills was merely a business decision. Because Commerce's liability to pay the medical expenses was not reasonably clear, it was not liable for breach of 93A.

Superior Court holds that post-arbitration interest of twelve percent applies in context of uninsured and underinsured coverage

In my last post I started discussing the Superior Court case of Meaney v. OneBeacon Ins. Co., 2010 WL 1253600 (Mass. Super.), which concerns post-arbitration interest in the context of uninsured and underinsured motorist coverage.

Judge Neel held that post-award interest in an arbitration case is twelve percent. His reasoning was that two SJC decisions affirmed awards at that rate without addressing whether the rate was appropriate.

Superior Court holds that three year statute of limitations applies to post-arbitration interest on uninsured and underinsured motorist coverage

In Meaney v. OneBeacon Ins. Co., 2010 WL 1253600 (Mass. Super.), brought to my attention by Mike Tracy of Rudolph Friedmann LLP, the plaintiffs sought post-arbitration interest from the defendant insurance companies in the context of uninsured and underinsured motorist coverage. In an earlier decision the Superior Court had ruled that they were entitled to such interest under common law.

In the current decision Judge Neel ruled that, like all 93A claims, the claim for violation of Mass. Gen. Laws ch. 93A was governed by a four year statute of limitations.

The court held that the gist of the common law counts were tort claims, not contract claims, so that the three year statute of limitations for torts applied to them.

Massachusetts Appeals Court holds that your work exclusion does not apply to trespass damages unrelated to a contractual relationship

In a recent post I discussed Porter v. Clarendon Nat'l Ins. Co., 76 Mass. App. Ct. 655 (2010), in which insurers argued that there was no coverage for a claim that its insured had built a retaining wall and two parking lots on an abutter's property, resulting in continuing trespass.

The insurers argued that the claim was excluded by the "your work" exclusion, because it was the insured who erected the retaining wall and paved the parking spaces. The Massachusetts Appeals Court disagreed.

The exclusion excludes work for "[w]ork or operations performed by you or on your behalf." The court noted that the exclusion "operates to exclude repair or replacement costs for faulty workmanship by the insured that it has been contracted or otherwise hired to perform." The reason for the exclusion is that the general liability policies in which it is found provide coverage "for tort liability for physical damages to others and not for contractual liability of the insured for economic loss because the product or completed work is not that for which the damaged person bargained."

The court held:

The complaint here was not brought by someone involved in a contract or project with the insured, seeking repair or replacement costs for faulty work on the damaged property. Rather, an abutter to the insured, with no contractual or other business relationship with the insured, sought trespass damages. Consequently, the exclusion does not apply.

Massachusetts Appeals Court holds that exclusion for property you own rent or occupy does not apply to third-party claim

In Porter v. Clarendon Nat'l Ins. Co., 76 Mass. App. Ct. 655 (2010), the underlying plaintiff, Porter, and defendant, Clarendon (the insured), owned abutting property. Porter alleged that Ryan had built a retaining wall and two parking spaces on Porter's property, resulting in continuing trespass. Ryan defended on the ground of adverse possession.

Ryan's insurers asserted that coverage was excluded by an exclusion for property damage to "property you [the insured] own, rent, or occupy." The insurers argued that because Ryan "occupied" the disputed property, there was no coverage.

The Massachusetts Appeals Court disagreed, stating:

That exclusion prevents the insured from using the general liability policy as property insurance. . . . "What the exclusion means is that the [general liability] policy was intended to cover only liability of the insured to third parties and not [damage to] the property of the insured." Here, the damage caused by the trespass was to at third party's property, not property of the insured.

SJC holds that Massachusetts Insurers Insolvency Fund is subject to 93A liability

In Wheatley v. Mass. Insurers Insolvency Fund, 456 Mass. 594 (2010), the Supreme Judicial Court of Massachusetts held that the Massachusetts Insurers Insolvency Fund is subject to suits for breach of Mass. Gen. Laws ch. 93A when it breaches Mass. Gen. Laws ch. 176D, § 3(9). (See here for an explanation of the statutory scheme.)

The Insolvency Fund is an entity created by statute to provide insurance coverage when the insurer on the risk is no longer in business.

The court held that it was subject to 93A liability to the same extent as insurance companies because of statutory language of 93A and 176D.

Creditors' rights endorsements removed from title insurance

Here's an article in REBA News by Joel Stein about changes to title insurance. (REBA News is the trade journal for the Real Estate Bar Association for Massachusetts.)

According to the article the American Land Title Association, or ALTA, has withdrawn Endorsements 21 and 21/06 as official forms, effective March 8, 2010. Those endorsements provided "creditors' rights coverage," providing coverage to mortgage lenders who lose their interest in a property due to the bankruptcy of someone in the chain of title.

Massachusetts Appellate Division holds that insured may not recover against tortfeasor after receiving uninsured motorist coverage award

In Johnson v. Lapan, 2010 WL 1170254 (Mass. App. Div.), claimant Sylanda Johnson was injured when she was a passenger in a car that collided with a vehicle operated by Marc Lapan.

Johnson pursued two routes of recovery: she submitted a claim for uninsured motorist coverage to ELCO, the insurer of the vehicle in which she was a passenger, and she filed suit against the Lapans.

The uninsured motorist claim went to arbitration and Johnson was awarded $16,791.24 for pain and suffering and medical expenses.

The Massachusetts Appellate Division held that the doctrine of issue preclusion required that Johnson's claim against the Lapans be dismissed. The arbitrator had awarded to Johnson damages for her injuries, and that award fixed the damages in the suit against the Lapans arising from the same injuries. Johnson could recover such damages pursuant to an uninsured motorist policy (which she did) or from the tortfeasor, but not from both. Otherwise she would receive a double recovery.

Seeking attorneys who represent insureds in coverage litigation

I receive a number of calls from insureds seeking representation in coverage disputes. I am frequently conflicted out by my direct or indirect representation of the insurer on other matters. (By indirect I mean that I work on a subcontract basis for attorneys who represent the insurer.)

I would like to have a database of attorneys I can refer these people to. If you specialize in representing insureds in coverage disputes and would be interested in receiving referrals, send me an email with your contact information, experience generally and with respect to insurance coverage disputes, and what, if any, types of policies or disputes you specialize in.

I am not seeking and would not accept a referral fee for these cases. I also don't screen them. Once I find out I have a conflict I want to give them a name and move on.

Massachusetts Appeals Court holds that claimant can recover for breach of 93A and 176D even when there is no coverage under the policy

In my last post I discussed Vt. Mut. Ins. Co. v. Eldridge, 76 Mass. App. Ct. 1122, 2010 WL 1253170 (unpublished opinion), in which the Massachusetts Appeals Court held that coverage under a homeowners policy was voided by the insureds' failure to disclose the ownership of two bull mastiffs on their insurance application even though the application asked if they kept any animals on the premises.

Even though the court found that coverage was voided under the policy, it affirmed the denial of summary judgment to the insurer on a claim that the insurer breached Mass. Gen. Laws chs. 93A and 176D.

The claimant, Gagnon, alleged that the insurer violated those statutes by "failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies," in violation of Mass. Gen. Laws ch. 176D § 3(9)(b). The court held:

[A] court will not find unfair or deceptive acts or practices where there was no inordinate or unreasonable delay, or if there was no resulting prejudice or harm caused by the delay. . . .

On this record, we also cannot say that Gagnon has no reasonable expectation of proving an essential element of her claim at trial.

Thus, we conclude that the trial judge correctly denied summary judgment, leaving the determination of unreasonable delay and resulting prejudice to the fact finder.

When I first read this opinion, I assumed that Gagnon had brought the motion for summary judgment on the 93A/176D count, in which case it would have made common sense to affirm the denial of the motion, since the court had found that the policy did not provide coverage for her claim. Upon rereading the decision, however, it appears that it was the insurer who brought the motion for summary judgment on the 93A/176D claim. If that is so, then the court is saying that an insurer can be liable for breach of 93A and 176D even when there is no coverage under the policy. That is contrary to many opinions which simply dismiss 93A/176D claims after finding no coverage.

Appeals court holds that nondisclosure of ownership of dogs on homeowners application voided coverage

In Vt. Mut. Ins. Co. v. Eldridge, 76 Mass. App. Ct. 1122, 2010 WL 1253170 (unpublished opinion), the Massachusetts Appeals Court held that nondisclosure of ownership of dogs on an application for homeowners insurance was a material misrepresentation that voided coverage under the policy.

In their application for homeowners insurance the Eldridges, defendants in the declaratory judgment action, had answered "no" to the question "are there any animals or exotic pets kept on the premises?" In fact, they were keeping two bull mastiffs on the premises.

The court held that the question on the application was not ambiguous. It overturned the holding of the trial court that the Eldridges could have reasonably concluded that it only asked for the disclosure of pets if they were exotic pets. The Appeals Court held that the failure of the Eldridges to disclose their ownership of the dogs constituted a misrepresentation.

The court then held that the misrepresentation was material and defeated coverage.

Misstatements shall be deemed material and "defeat or avoid the policy" only where such statements were "made with actual intent to deceive, or . . . increased the risk of loss" to the insurer. G.L. c. 175, § 186. "A material fact, measured by an objective standard, is one which would naturally influence the judgment of an underwriter in making the contract at all, or in estimating the degree and character of the risk."

The insurer received notice that the Eldridges owned the dogs before it received notice of the claim that the dogs had caused an injury. Upon receipt of the notice of ownership of the dogs the insurer informed the Eldridges that coverage would not have been forthcoming had the application disclosed the dogs. The insurer proceeded to terminate coverage. The court held that was proof that the nondisclosure was material.

United States District Court holds that an all risk marine policy covers loss with unknown cause

In Markel Am. Ins. Co. v. Pajam Fishing Corp., __ F.2d __, 2010 WL 742485 (D. Mass.), Markel provided an all risk marine insurance policy to Pajam. The policy included coverage for "accidental, direct, physical loss" to a fishing vessel called the Miss Sonya.

The Miss Sonya sank on March 24, 2008 and could not be examined. The men on the ship observed water splashing about in a compartment on the stern of the ship and followed the instructions of the coast guard to abandon the ship. The ship had been in good condition. They men felt no impact on the ship but there could have been an impact that was disguised by choppy conditions.

The policy did not define the term "accidental physical loss." The court held that the word "accident" is synonymous with "fortuitous," and that a loss is fortuitous unless it results from an inherent defect, ordinary wear and tear, or intentional misconduct of the insured. It held that the loss of the Miss Sonya was an accidental physical loss for which there was coverage.

The court rejected the insurer's argument that the insured must prove the cause of the sinking. The court held, "To establish a fortuitous loss it is generally sufficient for the insured to show only that the loss occurred." This was probably an overstatement by the court, since it went on to hold that the insured had established "that the vessel was well maintained, and that there was no intentional misconduct which caused the vessel to sink. This is sufficient 'to prove a fortuitous loss of the covered property' and the insured 'need not prove the cause of the loss.'"

Massachusetts Appeals Court holds that discovery rule does not apply to allegation that insurance agency employed unlicensed broker

In my last post I discussed Anawan Ins. Agency, Inc. v. Division of Ins., 76 Mass. App. Ct. 447 (2010), in which an insurance agency was accused of employing an unlicensed broker.

After determining that a four year statute of limitations applied, the court held that the discovery rule does not apply. The discovery rule tolls the statute of limitations until a plaintiff knew or should have known that he or she may have a cause of action. For example, in a medical malpractice claim, under the discovery rule in certain circumstances the statute of limitations may be tolled until the plaintiff develops symptoms putting him or her on notice of the malpractice.

In Anawan, in 1999 the division of insurance received anonymous letters stating that Anawan had illegally opened a second location. The division investigated and learned that Prum was doing business at the second location under an expired broker's license. On June 23, 2004, Anawan's director confirmed in writing that it had paid commissions to Prum.

The Massachusetts Appeals Court held that the discovery rule did not apply to punitive civil statutes including the one prohibiting an insurance agency from employing an unlicensed broker. In support of its determination the court quoted 3M Corp. v. Browner, 17 F.3d 1453, 1455 (D. C. Cir. 1994), which stated:

In an action for a civil penalty, the government's burden is to prove the violation; injuries or damages resulting from the violation are not part of the cause of action; the suit may be maintained regardless of damages.

Massachusetts Appeals Court holds that four year statute of limitations applies to allegation that insurance agency employed unlicensed agent

In Anawan Ins. Agency, Inc. v. Division of Insurance, 76 Mass. App. Ct. 447 (2010), the Division of Insurance alleged that Anawan Insurance Agency paid compensation to Kuntthy Prum at a time that Prum was not licensed as an insurance agent.

The first issue addressed by the Massachusetts Appeals Court was which statute of limitations applied. Mass. Gen. Laws 260 § 5 states that the statute of limitations on actions for penalties or forfeitures is either one or two years. By its terms, that statute does not apply if § 5A applies.

Mass. Gen. Laws 260 § 5A states that the statute of limitations for actions arising on account of violations of "any law intended for the protection of consumers" is four years.

The court held that Mass. Gen. Laws ch. 175 § 177, which prohibits payments to unlicensed brokers, is a statute intended to protect consumers, and that therefore the four year statute of limitations applies.

Good article on the meaning of "collapse" in property damage policies (national scope)

I posted here and here on the Massachusetts interpretation of "collapse," which is generally an undefined term in property damage policies. Massachusetts takes the narrow view that coverage is limited to the actual falling down of a covered structure.

Here's an interesting article, Insurance Coverage for Collapse - How Has It Changed and Why? in Adjusting Today, a publication of Adjusters International, Inc., a public adjusting company. The article covers the history and interpretation of "collapse" nationally.

Catastrophe Insurance Bill criticized as subsidizing development in environmentally unstable areas

Here's an interesting article by Arthur D. Postal in National Underwriter about the Homeowner's Defense Act, H.R. 255, which would create a new federal reinsurance program for state catastrophe funds.

According to the article, critics claim the bill would only help "stupid, rich people who want to build mansions on sand dunes" at the expense of all other taxpayers.

The effect of global warming on insurance coverage issues

Mike Tracy of Rudolph Friedmann LLP forwarded a copy of this interesting article by Robert Redfearn, Jr. of Simon, Peragine, Smith & Redfearn about the likely effects that global warming will have on the insurance industry.

The article talks about claims alleging that corporations are liable for damages because their practices have contributed to global warming.

More broadly, global warming has already begun to impact insurance coverage litigation. As just one example, litigation arising out of Hurricane Katrina led to extensive interpretation of "anti-concurrent causation" or ACC, clauses in insurance policies. Those clauses exclude coverage whenever an excluded peril and a covered peril combine to damage a dwelling or personal property. Insurers denied coverage under homeowner's policies on the basis of those clauses where damage was caused by a combination of wind (a covered peril) and water (an excluded peril).

U.S. Court of Appeals affirms that implied coinsurance doctrine applies to resident of retirement home

I posted last year about a decision of the United States District Court for the District of Massachusetts in Fed. Ins. Co. v. Commerce Ins. Co., 2008 WL 4873959 (D. Mass.), in which the court held that the doctrine of implied coinsurance barred an insurer of the owner of a retirement community from bringing a subrogation action against a resident who negligently started a fire.

The implied coinsurance doctrine states that a residential tenant is an insured on a landlord's insurance even if the policy does not state that the tenant is an insured. Under that doctrine, a landlord's insurer is barred by the anti-subrogation rule from seeking reimbursement from a tenant for damages caused by the tenant. (The anti-subrogation rule bars an insurer from seeking from its own insured reimbursement of funds the insurer paid on a loss.)

The United States Court of Appeals for the First Circuit has affirmed the District Court's decision in Fed. Ins. Co. v. Commerce Ins. Co., __ F.3d ___, 2010 WL 716412 (1st Cir.)

The court first held that the lease was a residential lease so that, absent an exception, the implied coinsurance doctrine would apply.

The court then held that an exception to the implied coinsured doctrine where a lease has an express provision establishing a tenant's liability for loss from a negligently started fire did not apply. The court held that if the landlord intended to include such a provision in the lease, "it needed to be crystal clear in requiring that the tenants maintain fire insurance."

Although the lease at issue mentioned a tenant's liability for damages caused by the resident, it had no express language establishing liability for fire damages. The lease mentioned insurance, but could interpreted as making tenants liable only for losses to their personal property. Neither of the clauses explicitly mentioned fire liability.

Contrary to article by conservative lobbying group, Massachusetts does not have "anti-steering" legislation

Stephen Richer, director of outreach of conservative lobbying group The Washington Legal Foundation, has sent me a link to an article protesting so-called anti-steering legislation that prohibits auto insurers from recommending particular body shops to insureds.

According to the article, six states, including Massachusetts, prohibit this practice. I was puzzled to read this as insurers have recommended auto body shops to me on the several occasions that my car has suffered property damage.

The Massachusetts statute cited by the article, Mass. Gen. Laws ch. 90, § 34O, does not "prohibit insurers from 'steering' policyholders to body shops with unsolicited recommendations," as claimed by the article.

To the contrary, the statute states that the insurance commissioner may require that insurers give to insureds "a list of at least five registered repair shops, geographically convenient for the insured, from which the insured may at his or her option selected a shop . . . "

Invitation to Insurance Attorneys Women's Networking Group

The first meeting of the Insurance Attorneys Women’s Networking Group (suggestions for a name with a better acronym welcome) will be on Tuesday March 16 from 5:30 to 6:30 PM at Legal Seafoods in Chestnut Hill:

http://www.legalseafoods.com/index.cfm/page/Chestnut-Hill-Shopping-Center-Chestnut-Hill/pk/content/cd/location/pid/0/cdid/11839

The purpose of this group is to get to know other women who practice insurance law--insurance defense, coverage, subrogation, and business.

Please RSVP to me at ninakallenlaw@hotmail.com by noon on Monday, March 15 if you plan to attend.