Massachusetts Appeals Court interprets alcohol exclusion in PIP coverage

Margarita Rodriguez was injured in an auto accident. A police report indicated that an occupant of the other vehicle said that Rodriguez's car "came out of nowhere."  The report did not provide any other statements with respect to causation.  It did not indicate whether alcohol was involved in the crash.

 

Rodriguez was taken to the hospital.  Hospital records indicated that she was intoxicated. 

 

Rodriguez's insurer was Commerce. Commerce refused to reimburse a medical provider under PIP coverage, citing an exclusion applicable if the insured "contributed to his or her injury by operating an auto while under the influence of alcohol." 

 

The Massachusetts Appeals Court overturned the granting of summary judgment to Commerce.  In Dorchester Chiropractic & Rehab Centers Inc. v. Commerce Ins. Co., 2018 WL 2247343 (Mass. App. Ct.) (unpublished), the court held that the exclusion required that two distinct elements be met: (1) the insured was operating under the influence of alcohol, and (2) the insured's conduct contributed to her injury.

 

The court held that there was no evidence showing how the car accident occurred, or of how Rodriguez contributed to it.  Therefore, the second element necessary for the exclusion to apply was not met. 

 

The court also held that whether or not Rodriguez was under the influence of alcohol at the time of the accident was a disputed question of fact, since the police officer who had interacted with her at the accident scene did not mention alcohol in the police report. 

Massachusetts Appeals Court holds that under New Hampshire law insurer can settle claim over objection of insured

Dr. Ellen Johnson was sued for medical malpractice.  She was insured by Proselect.  A jury found against Johnson and awarded her patient $5 million in damages. 

 

The Proselect policy gave Proselect the right to settle a case after verdict without the consent of the insured.  Proselect chose not to file post-trial motions or to appeal.  Instead, it settled the case for $3.75 million, an amount within Johnson's $4 million coverage limit. 

 

Johnson then sued Proselect, alleging that it breached its duties to her by settling the case without her consent.  She asserted that the settlement harmed her professional reputation and her career prospects and caused her emotional distress. 

 

In Johnson v. Proselect Ins. Co., 92 Mass. App. Ct. 1118, 2017 WL 6327844 (unpublished), the Massachusetts Appeal Court affirmed summary judgment to Proselect.  Applying New Hampshire law, it held that the duty of reasonable care in the defense of a claim applies only where the insurer's misconduct exposes an insured to personal liability.  Because the settlement extinguished the excess judgment, Proselect had met its duty of reasonable care and did not violate the covenant of good faith and fair dealing. 

The lesson here:  If you want to have control over whether or not a case against you will be settled, buy a policy that gives you that control.   

I'd like to thank my kindergarten teacher, my wonderful colleagues, my family, and . . .

especially Randy Maniloff of Coverage Opinions for giving me a prize for coming up with one of the best vanity license plates that only others in the insurance coverage world would understand.  (If you don't feel like clicking on the link, my submission was QMIS CSL.) 

 

My kids were incredibly impressed by the pen that accompanied the prize.  It's possible that I am more excited by my forthcoming free copy of Randy's book, General Liability Insurance Coverage: Key Issues in Every State. 

 

It is a thrill and an honor to be associated with Coverage Opinions, one of the best and most interesting publications on coverage issues. 

 

 

Insurers will use drones to assess Hurricane Harvey damage

I wrote here a couple of years ago about the increasing use of drones in assessing property damage after large weather events.  At the time I was concerned that use of drones would actually decrease efficiency in assessing claims. 

Slate has an article here about the planned use of drones after Hurricane Harvey.  It does look like the use of drones will allow insurers to more quickly assess external damage to numerous properties than would be possible with adjusters being present for each inspection.  An important feature of the use of drones is that they can take pictures where it would be unsafe for adjusters to venture.  But, as the Slate article points out, there is also a downside: since the adjusters will not be physically present at the property, the face to face interaction between the insurer and the policyholder is lost.  Given the scale of destruction expected from Harvey, that seems like a reasonable tradeoff for speed and safety of damage assessments.

Invitation: Come to my September 12 panel discussion on lawyer's professional liability insurance and what happens if you get sued

On Tuesday September 12, 2017 at 7:30 AM John Torvi of Landy Insurance and I will be speaking at the Business Lawyer’s Network in Waltham, Massachusetts on the topic of Your Lawyer’s Professional Liability Policy and What Happens If You Get Sued.  This program is free and should be of interest to attorneys from all practice areas.  You do not need to be a member of BLN to attend.  

Here’s a full description of the panel discussion and a link to sign up: 

Your Lawyer’s Professional Liability Policy and What Happens if You Get Sued 

Date: Tuesday, September 12, 2017, at 7:30 am

Place:  Morse, Barnes-Brown & Pendleton, P.C. City Point, 230 Third Avenue, 4th Floor, Waltham, MA 02451

You can sign up at  https://bln-prof-liability.eventbrite.com  Click on “Register.”  It is not necessary to print tickets.

Learn about  your legal malpractice insurance plan, the scope of protection, and insurance defense and coverage issues in a claim or lawsuit.

•             Dissecting a Lawyer’s Professional Liability Insurance Policy, including whether what  is written  in  the annual application matters, the declarations page, who and what                 is  covered, and the optimal limits and deductibles.

•             Insurance issues that may arise when there is a claim against you, including the duties of the insurer and insured, declinations to defend or a defense under a “reservation of rights,” and settlement.

•             Simple risk management techniques to avoid malpractice claims.

Speakers:

Attorney Nina Kallen, a member of the Business Lawyers Network, is a solo practitioner in MA who specializes in insurance coverage and bad faith litigation.  She also drafts dispositive motions and appellate briefs on a subcontract basis for other attorneys in all areas of civil litigation. Attorney Kallen is a graduate of Northeastern University School of Law and Yale University.  Attorney Kallen authors an award‐winning blog, Insurance Coverage Law in Massachusetts, http://insurancecoveragemassachusetts.blogspot.com. You can learn more about Attorney Kallen at her website, www.kallenlawyer.com.

John Torvi is the Vice President of Marketing & Sales at the Herbert H. Landy Insurance Agency of Needham, MA. John has been in the insurance industry, focusing on the needs of business owners, for almost 25 years. He is a frequent speaker and contributor to professional journals and conferences for the legal industries.  The Landy Agency is a national leader in providing professional insurance services for attorneys, real estate professionals and accountants. John can be reached at 781‐292‐5417 or johnt@landy.com. Or visit www.landy.com for more information.

Business Lawyers Network (BLN) is comprised of lawyers concentrating in complementary disciplines such as corporate, securities, commercial contracts, government contracts, secured lending, taxes, litigation, import/export, immigration, real estate, environmental, patents, trademarks, licensing, etc. Non-lawyer business professionals are also welcome, but the topic and focus of discussion will be on lawyers and the legal profession.

I hope to see you there.

How I spent my summer vacation

There was a lot of jogging on the beach at dawn, walking at sunset, and comparing lobster rolls from different takeout windows.  But there was also some channel surfing (a clicker all to myself -- that's a luxury I rarely get), and I came across this US Senate hearing on insurance issues.  I was immediately sucked in by lawmakers talking about insurance other than medical insurance -- indeed, liability insurance.  Here's the link.

I was particularly interested by questions from Senator Blumenthal of Connecticut.  He accused  homeowner's insurers of fraud because they changed policy terms to exclude specific losses without adequately informing the policyholders.  His questions start at around the 47 minute mark. 

One of the responses from the panel was to the effect of, "We don't know how to get homeowners to read their policies before they experience a loss."  I can only imagine.  I was just going over my own homeowner's renewal policy.  Sure, I'll talk to my agent about the limit on the mold endorsement, which I want to be higher.  And I skimmed through at least the titles of the endorsements.  But even I -- an insurance coverage geek who regularly litigates homeowner's policy issues -- could not bring myself to read the policy closely.  And really, what good would it do me?  Other than the limits, what can I negotiate in the policy?  What should I?  How can I anticipate every possible loss and every possible way that it may not be covered?

Senator Blumenthal complained specifically about policy exclusions that exclude damage to foundations as a result of faulty building material.  One of the responses from the panel was that the proper claim is against the manufacturer of the defective product, not the homeowner's insurer.  Yeah, sure, if you can figure out who the manufacturer was, it still exists, you can find it, you can afford to pay an attorney and you can find one to take your case, there's no applicable statute of limitations or statute of repose, and you can wait the several years it will take to resolve a third-party claim.

I'm not opposed to policy exclusions, not even major ones for construction defects.  But I do think that representatives of the insurance industry should be straightforward about why they exist.  After all, the fact that a third party may ultimately be liable for a loss is not in and of itself a good enough reason to exclude a type of claim.  All other things being equal, the homeowner's insurer can pay the loss and then bring a subrogation action against the manufacturer.   The exclusion exists because paying those claims are expensive and the insurers don't want to underwrite that type of risk.  Just be straightforward about it.  No policy covers everything. 

First Circuit examines McCarran-Ferguson Act, Nebraska Law, and Federal Arbitration Act to affirm arbitrator's decision that dispute over insurance fees was not arbitrable

Mountain Valley Property (MVP) purchased from Applied Underwriters a comprehensive insurance package that included multiple lines of insurance.  As part of the package it entered into a three-year Reinsurance Participation Agreement  (RPA) with AUCRA, a company related to Applied Underwriters.  The RPA contained a mandatory arbitration clause and a Nebraska choice-of-law clause.

MVP sued Applied Underwriters and its related companies, asserting that the package was overpriced and that it was charged unlawful fees in premiums and in amounts claimed to be due under the RPA. 

The United States District Court for the District of Maine referred the claims against AUCRA to arbitration for a determination of their arbitrability.  The arbitrator ruled that the case was not arbitrable and had to be adjudicated in court. 

The arbitrator noted that a Nebraska statute provides that a written contract to submit to arbitration a controversy thereafter arising between the parties is enforceable, except when the written contract "is an agreement concerning or relating to an insurance policy."

Section 1012(b) of the McCarran-Ferguson Act, 15 U.S.C. §§1011-1015 provides, "No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance . . . unless such Act specifically relates to the business of insurance."

Therefore, the arbitrator concluded, the Federal Arbitration Act, which provides generally that arbitration clauses in contracts are enforceable, is "reverse-preempted" by the Nebraska statute.

AUCRA moved to vacate the arbitration award.  That motion was denied.  AUCRA appealed the denial of the motion to vacate.

In Mountain Valley Property, Inc. v. Applied Risk Services, Inc., __ F.3d __, 2017 WL 2981798 (1st Cir. 2017), the court did not determine whether the decision of the arbitrator was correct.  It held that it was enough under the Federal Arbitration Act that the arbitration award did not demonstrate a manifest disregard for the law.