The first guy to ever sell insurance

 Ryan George pretty much gets it:  

 

Invitation to Boston Bar Associaton panel I'm moderating on reference proceedings

 It's on Monday, April 5, 2021 from noon to 1 PM.  You can register here.

 Here's the blurb:

BBA Webinar: Reference Proceedings: What Attorneys Need to Know about Handling First-Party Property Insurance Claims

Monday, April 5, 2021 12:00 PM to 1:00 PM
On-Line

To register for this event, please log in to the Boston Bar web site.

Description:

The BBA presents live webinars and virtual events via Zoom. Please register for this program through your BBA account at least two hours before the start time of the program to receive the Zoom webinar link. 

Your client’s commercial building or house has been damaged or destroyed by a fire, tornado, water infiltration from a storm, or other event.  Or you represent the building owner’s property insurer.  The two sides are far apart on their view of the amount of damages.  Under state law and Massachusetts property insurance policies, that dispute is resolved by a reference proceeding. 

This webinar will discuss:

• The reference proceeding process.
• What does a reference proceeding determine?  What does it not determine?
• Vocabulary:  What is actual cash value, replacement cost value, and depreciation? 
• Trap for the unwary:  the contractual limitations period for demanding reference.
• Other deadlines that affect coverage.

Registration Categories:
BBA Member – Free. Included as part of your membership.
Non-Member - $100.00

 

 

First Circuit holds Total Pollution Exclusion does not apply where an endorsement may provide separate grant of coverage

 

I wrote here about Performance Transp., Inc. v. General Star Indemnity Co., 419 F.Supp. 3d 199 (D. Mass. 2019), a case in which the United States District Court for the District of Massachusetts held that a total pollution exclusion excluded coverage despite a grant of coverage in a separate endorsement.  

The United  States Court of Appeals for the First Circuit has overturned that case, holding that the endorsement was ambiguous as to whether the pollution exclusion applied to it.  983 F.3d 20 (2020). 

 

The plaintiff, PTI, transports petroleum products.  On February 19, 2019, a tanker truck owned by PTI overturned in New York.  It spilled 4,300 gallons of fuel onto the roadway and into a nearby reservoir.  PTI and the New York State Department of Environmental Conservation undertook remediation work.  The cost for the work exceeded the coverage limit on PTI's primary insurance policy. 

 

PTI sought additional coverage from its umbrella carrier, General Star Indemnity Company.  The umbrella policy included a standard total pollution exclusion.  It also contained an endorsement, Endorsement 13, labeled “special hazards and fluids limitation endorsement.”  Endorsement 13 provided:

This policy does not apply to ultimate net loss or costs from any event arising out of, contributed by or relating to any Special Hazard described in this endorsement and resulting from the ownership, maintenance or use of any auto. Special Hazards: A. Radiation Hazard[;] B. Underground Hazard[;] C. Drilling Fluids Unloading Hazard[.] However, this exclusion does not apply to an event arising out of the unloading of drilling fluids from an auto covered by this policy and covered by the controlling underlying insurance for the total limits of the underlying insurance, if the unloading of drilling fluids resulted directly from any of the following: 1. Heat, smoke or fumes from a hostile fire; 2. Upset or overturn of such auto; 3. A collision between such auto being used in your business and another object; or 4. A short term drilling fluid event, provided that coverage under this item 4: a. Will be available to bodily injury or property damage, but not damage to real property or to a body of water or to any other natural resource; and b. Will not be available unless written notice of the short term drilling fluid event is given to us or the controlling underlying insurance company as soon as practicable, but no more than thirty (30) days after the shipment of the drilling fluids was entrusted to your care. If any other limit, such as a sublimit, is specified in the underlying insurance, then paragraphs 1. and 2. above will not apply unless that limit is specified in the SCHEDULE OF UNDERLYING INSURANCE.

 (Bold added.)

 

General Star disclaimed coverage on the basis of the total pollution exclusion. PTI argued that even if the pollution exclusion applied there was coverage under the Special Hazards Endorsement which was not excluded by the pollution exclusion.  The United States Court of Appeals for the First Circuit agreed, on the ground that the Special Hazards endorsement was ambiguous as to whether the pollution exclusion applied to it.

 

The court noted, first, that the endorsement provides that “coverage under this item 4: . . . will be available to bodily injury or property damage, but not damage to real property or to a body of water or to any other natural resources.”  PTI argued that the clause qualifies as a coverage guarantee if the circumstances apply.  General Star argued that the endorsement does not provide coverage if an exclusion elsewhere in the policy excludes coverage.  The court noted that an in-between interpretation is that the language creates a limited coverage guarantee applicable only to item 4. (That seems to be an adoption of PTI's argument, not an in-between interpretation.) 

 

Second, the endorsement is titled a “limitation” but later refers to itself as an exclusion. 

 

Third, unlike other exclusions in the policy, the endorsement itself did not provide that it did not create coverage for injury or damage otherwise excluded.

 

Fourth, there was substantial overlap between the total pollution exclusion and other policy terms.  The total pollution exclusion had standard language disclaiming coverage for any request, demand, or order that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants.  It defines pollution as including any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalies, chemicals and waste.  But the policy contained specific exclusions for cleanup costs that appear to come within that definition.  Therefore, the court held, it could not rely on the total pollution exclusion to resolve the ambiguity in the text of the special hazards endorsement. 

 

The court concluded that since the policy was ambiguous, the endorsement must be construed in favor on the insured as a separate grant of coverage to which the pollution exclusion did not apply.   

The main takeaway from this case is that insurance policies have to be read as a whole.  The basic procedure in determining whether a loss is covered is to look at the grant of coverage in the policy, then any exclusions to the coverage, then exceptions to the exclusions.  But, as in this case, it is often not clear whether a policy clause is a grant of coverage, an exclusion, or an exception.  Here, the court held that at least arguably the Special Hazards and Fluids Endorsement was a separate grant of coverage for the drilling fluids unloading hazard.  That matters because then (again, arguably) exclusions that apply to the main grant of coverage do not apply to the endorsement. 

The court may have overstated the maxim that ambiguous clauses in an insurance policy are interpreted against the insurer.  There is an exception to that rule if the policy was negotiated on a more equal footing between the insurer and a business (as opposed to a consumer).  Here, the court referenced negotiations of the policy terms. 

This umbrella policy is a little unusual because most umbrella policies are “follow form” policies:  if there is coverage under the primary policy there is coverage under the umbrella policy.  This policy clearly stated that it would include additional terms not in the primary policy – such as the absolute pollution exclusion.  That is something that a policyholder purchasing an umbrella policy should watch out for.

 Massachusetts Lawyers Weekly quotes me in an article about the case.  

 

 

I learned a new word today!

 

I received a letter from my professional liability insurer informing me of changes to my policy in my next policy year.  Among them: in the definition of "professional services"  "pro bono" services will be replaced with "eleemosynary" services.  This is not a typo.  It means "relating to or dependent on charity; charitable."  

The Oxford English Dictionary explains its origins:    

Late 16th century (as a noun denoting a place where alms were distributed): from medieval Latin eleemosynarius, from late Latin eleemosyna ‘alms’, from Greek eleēmosunē ‘compassion’ (see alms).

 

 

 

Massachusetts legislature votes down bill that would have provided retroactive insurance coverage for business losses from the pandemic

 

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.  

 

 

Invitation to Insurance Library Lunch & Learn on December 17 where I'll be presenting: The Good Faith, The Bad Faith, and the Ugly

 

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:

The Good Faith, the Bad Faith, and the Ugly! 

 

About this Event 

 

The requirement that insurance companies act in good faith with respect to policyholders and claimants--codified in Massachusetts in Chapters 93A and 176D of the Massachusetts General Laws--can raise issues that are nuanced and complex. Veteran lawyer Nina Kallen, a specialist in insurance coverage and bad faith cases, will lead a discussion covering such topics as how an insurer should respond to a demand for coverage when coverage is questionable, or a demand for settlement when liability or damages are unclear and what are common pitfalls in responding to a 93A demand letter. 

 

How do I attend the event? 

 

The Library will send you a link to the Zoom login prior to the event. 

 

Do I have to have video? 

 

We think video will make the event feel more like an in-person gathering, so we are encouraging people to share video. We plan to record the event and make it available to members who are unable to attend the live event. We will also take screen shots during the event and may use them on our website and in social media posts after the event. 

 

If I can’t attend the event in real time, can I still submit a question I might have? 

 

Attendees appreciate the organic discussion that occurs during our virtual events. If you have a question you’d like addressed but you are unable to make it to the live meeting, please send it in advance and we will do our best to ask your question for you, email: shart@insurancelibrary.org. 

 

How can I contact the organizer with any questions? 

 

Email Sarah Hart at: shart@insurancelibrary.org

 

 

 

A plea to insurance defense firms to do better on diversity

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.