Welcome back to the Cavalcade of Risk!

I am once again honored to be hosting the Cavalcade of Risk, a gathering of blog posts about various types of risk from around the web.

Life insurance

Russell Hutchinson at Chatswood Consulting has asked insurance companies to come up with old stock brochures and advertisements. In this post, check out the print ad “Could father be mother too?” as an insurer of yesterday tried to plug into the fears of at-home mums. While the mother's schedule speaks to a mythical past devoid of personal ambition or Valium, an updated version of the ad could work today. An occupational hazard for me as an attorney is that I am often confronted with the worst happening to others. As a result I make sure I have enough life insurance that if the worst happens in my family there will be enough money not just to make up for lost income, but for babysitters, housekeepers, and all the other sundry employees that would be necessary to make up for the things we do for our kids other than provide income to our family.

Personal risk

My Wealth Builder posts about a choice to treat high cholesterol with diet and exercise rather than drugs.

Perhaps he should try a coffee diet? Hank Stern at InsureBlog discusses a study showing that coffee drinkers live longer.

Free Money Finance offers advice on insurance and related topics. While much of the post is solid, I disagree with the advice about wills. If you care what will happen to your estate or if you want to prevent a big hassle for your closest relatives you should have a will, and you should have an attorney draft it.

Modest Money issues a reminder not to post personal information in blogs, as such posts can put you at risk for identity theft.

Investing

Here's a post for those of you who are already saving for retirement on a level that shows you’ll reach a comfortable amount of income-producing savings by the time you retire and do a good job of saving for holiday gifts, a vacation or two, and a new car every five years, and are saving for college for your kids, and have adequate insurance. For those of you who are still with us who are somehow nevertheless confused about how to save money, PT Money writes about strategies for long-term non-retirements savings.

At Risk Management Monitor, Emily Holbrook writes about The Good, The Bad, and The Ugly of the Facebook IPO.

The Financial Industry

Van Mayhall, at Insurance Regulatory Law, discusses arguments that credit default swaps are insurance transactions that should be regulated as such, and that “deregulation” of credit default swaps was a major cause of the financial crisis in the late 2000s.

Health Insurance

Jason Shifrin at Healthcare Economist writes in his post, "Heroes without Health Insurance" about about the sad phenomenon of U.S. veterans without health insurance.

Jay Norris at Colorado Health Insurance Insider writes about How Individual Health Insurance Measures Up. He writes that in Colorado the average premium for group coverage for a family in Colorado in 2010 was almost three times the national average for family coverage purchased in the individual market. He points out that the significant chunk of the premiums usually paid by the employer is not free money. If health insurance were less expensive, employee wages would likely be higher – the money has to come from somewhere, whether it’s paid directly from the employee in the form of payroll deduction, or by the employer. But people paying for their own insurance often gravitate towards lower-cost policies with higher out-of-pocket exposure in an effort to keep the premiums as low as possible.

While Jay points out the danger of low premium, high deductible plans, in my experience those plans can be excellent for someone who is aware of the risk. I had one of those plans for my family for a while. It cost a quarter of my current plan -- the cheapest legal plan now available in Massachusetts, which costs more than my mortgage -- and covered basically nothing under the first $10,000 of health care costs in a year. It worked for us because in Massachusetts we have had a law since the 1980's that people can switch health plans at will, regardless of preexisting conditions. That meant that we could accept the risk of a tragic sudden event -- a car accident requiring emergency room treatment, for example -- because we could switch to a regular plan with just a few days notice. We switched when my daughter needed to get her tonsils out, and then couldn't go back to our high deductible plan because the plan is no longer legal here.

Jaan Sidorov at Disease Management Care Blog describes some problematic similarities between Facebook and Accountable Care Organizations and asks if either entity has a business model that is built to last.

That's our carnival. The next one will be hosted by My Wealth Builder.

Coverage for innocent attorneys -- when their partners aren't so innocent

What happens when one lawyer at a law firm engages in fraudulent or criminal conduct, and his or her partners are sued even though they were unaware of the conduct? The American Bar Association Journal has an analysis of the insurance coverage issues here.

U.S. District Court holds that exclusion for earth movement does not apply to damages from burst pipe

A ceiling pipe in a warehouse owned by Espedito Realty burst. The break was not noticed for several days. The water pooled against a wall and eventually seeped down between the concrete floor and exterior wall. As a result, the sub-base below the concrete floor subsided, and the warehouse floor sank.

Espedito's insurer, National Fire Insurance Company of Hartford, paid some of the damages, but it refused to pay for the repair of the sunken floor. It asserted that an exclusion for "earth movement" applied.

The earth movement exclusion excludes coverage for damages arising from earthquake, landslide, mine subsidence, volcanic eruption, and "earth sinking, rising or shifting, including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty."

Espedito's experts opined that water from the broken pipe penetrated the ground underneath the floor, resulting in a subsidence of wasting away of the soil that caused the floor to sink.

National Fire argued that the cause of the earth movement was irrelevant.

In Espedito Realty, LLC v. Nat'l Fire Ins. Co. of Hartford, __ F. Supp. 2d __, 2012 WL 1014176 (D. Mass.) the court held that the exclusion does not apply:

The unavoidable fact is that pipes burst rather frequently. It is a
rare property owner who has not dealt with the problem, or at least suffered
anxiety over the possibility, and it is hardly intuitive that an "earth
movement" exclusion would bar coverage for the homely situation where a pipe
bursts and a floor sinks as a result. No objectively reasonable insured
reading the policy would think so, especially when the only reference to the
impact of water is to "water flowing underground." If the policy truly
intended to cover this commonly recurring situation, it should have said
so.

Appeals Court holds that per person rather than aggregate limit determines how much underinsurance individuals can recover

Steven and Angelica Blackburn were in an auto accident. Angelica incurred medical bills and lost wages in excess of $241,000 and Steven incurred medical bills and lost wages in excess of $80,000.

The other vehicle was driven by Helen Vieira. Vieira's insurance policy with Travelers had a bodily injury limit of $50,000 per person and $100,000 per accident. It paid Angelica and Steven $50,000 each.

The Blackburns sought additional coverage from their own carrier,Commerce, with which they had underinsurance coverage of $100,000 per person and $300,000 per accident. They asserted that they were each entitled to $100,000, because they were jointly entitled to the difference between the $100,000 per accident coverage limit o f Vieira's coverage and the $300,000 per accident limit of their policy. Commerce asserted they were each entitled to only $50,000 (the $100,000 per person limit less the $50,000 they had already received.)

In Commerce Ins. Co. v. Blackburn, 81 Mass. App. Ct. 519 (2012), the court agreed with Commerce, citing policy language providing that recovery is subject to the per person limit.

My first thought was that under this analysis there is more than $100,000 of illusory coverage. If the accident were caused by someone with no insurance, the optional uninsured coverage would apply, not the underinsured coverage. In Massachusetts the statutory minimum per person coverage for injury to someone else is $20,000 (although I believe there are states that do not have minimum coverage). Therefore, the most either Steven or Angelica could recover under the underinsured coverage, if they are injured by someone insured in Massachusetts, is $80,000 (the $100,000 per person limit minus the $20,000 they would receive from the tortfeasor's insurance), or a combined total of $160,000. That would leave a gap of $140,000 in the per accident limit they could never get.

So I looked at the standard Massachusetts auto policy. The underinsurance coverage covers the named insureds, as well as, in certain circumstances, any household member and anyone occupying the insured's vehicle.

On a related note, I strongly recommend that everyone purchase as much underinsured and uninsured coverage as they can afford. Don't rely on other drivers to have adequate insurance to cover your loss if they injure you in an accident.

Appeals Court holds insurer must defend additional insured where primary insured not named in complaint

A Greyhound bus was involved in an accident resulting in five fatalities and numerous injuries. Unicco was responsible by contract for tire maintenance on the bus.

Suits were filed against Greyhound alleging that Greyhound negligently inspected and maintained tires on the bus. One of the suits named Unicco as a defendant, and Greyhound brought third-party suits against Unicco where it was not named.

Unicco had a GL policy from Travelers under which Greyhound was an additional insured "only with respect to liability arising out of [Unicco's] ongoing operations performed for [Greyhound]" and, in a different endorsement, except with respect to "liability arising out of the independent acts or omissions of [Greyhound]."

It was undisputed that Greyhound was entitled to coverage under the ongoing operations endorsement. Travelers declined to defend or indemnify Greyhound, although it is not clear why.

In Greyhound Lines, Inc. v. Travelers Property Casualty Co. of Am., 2012 WL 987515 (Mass. App. Ct.) (unpublished), the court held that Greyhound is also entitled to coverage under the second endorsement. The complaint in the suit naming Unicco alleged that Unicco's negligent performance under the tire maintenance agreement caused or contributed to the accident.

In what is either a typo or very poor phrasing, the court stated, "the duty to defend is not . . . an all or nothing proposition." Luckily the court went on to explain that the duty to defend is, in fact, an all or nothing proposition (at least in Massachusetts). "An insurer's broad duty to defend generally extends to all counts of a complaint, even those not specifically covered by the policy." Since at least some of the counts were covered, Travelers had a duty to defend Greyhound for all counts.

The court also held that Travelers had a duty to defend Greyhound in the lawsuits in which Unicco was not named, because of "the facts reasonably known to Travelers from the lawsuits in which Unicco is named as a direct defendant and is alleged to be liable for the accident, and because similar claims for negligence with respect to the maintenance and the inspection of tires are alleged against Greyhound."

What my 7 year old daughter says about insurance

I think it is good to have insurance in case of a hurricane or tornado, or someone robs your house.

I couldn't have said it bettery myself!

The insurance industry is doing just fine, apparently

Van Mayhall, consistently one of the most interesting bloggers on big-picture insurance issues (and, no, I'm not trying to damn with faint praise), has done it again. Over at Insurance Regulatory Law he has written this post asserting that in contradiction to public perception the insurance industry has suffered few losses in recent years.