Claims And Issues

AFFIRMATIVE COVERAGE DEFENSES "EVERYBODY KNOWS," LIKE PIPES FREEZE IN INDIANA.

 In Manago v. Auto-Owners Ins. Co., No.:2:16-CV-267-RL-JEM, 2018 WL 1704465 (N.D. Ind. April 9, 2018) (Martin, USMJ), the plaintiff policyholder filed a motion to strike certain affirmative defenses raised by her first-party insurance carrier.  The plaintiff claimed coverage and also bad faith.  However, this article will focus on the affirmative defenses which the carrier raised against the coverage claim in particular, and the Magistrate Judge's rulings finding them legally sufficient in this case.

As you read through this article, bear in mind what the plaintiff-policyholder "had to know," at least in the eyes of the Magistrate Judge.  The issue consistently in question here was whether the insurance carrier had pled enough facts in its affirmative defenses in this particular case.

The insurance carrier in this case affirmatively defended against the plaintiff's coverage claim and against that part of the plaintiff's claim for attorney's fees in particular, with these generalized statements:

Defendant’s first affirmative defense is a statement that the complaint “fails to state a claim upon which relief can be granted.” The eighth is similar, but focuses solely on attorney’s fees, reading, “Plaintiff’s prayer for attorney’s fees and costs fails to state a claim upon which relief may be granted because Plaintiff is not entitled to recover attorney’s fees to establish or contest insurance coverage.”

Since at one time the Federal Rules of Civil Procedure previously authorized a generalized statement that the complaint fails to state a claim upon which relief can be granted, the U.S. Magistrate Judge deciding these issues ruled that the carrier's defense to a coverage claim was legally sufficient and would not be stricken.  Manago v. Auto-Owners Ins. Co., No.:2:16-CV-267-RL-JEM, 2018 WL 1704465, at *1 (N.D. Ind. April 9, 2018).

By the same token, or by a parity of reasoning if you prefer, the Magistrate Judge ruled that the very similar generalized statement that the plaintiff's particular claim for attorney's fees did not state a claim was similarly legally sufficient.

In that case, the carrier also raised certain exclusions in the policy, which the plaintiff contended were not sufficiently alleged as affirmative defenses because they were raised only as conclusions without facts.

The Magistrate Judge disagreed with the plaintiff and denied the plaintiff's motion to strike the following defenses which included an exclusion in this case for freezing pipes in Indiana:

15. There is no coverage for the claims alleged in Plaintiff’s complaint under the [carrier's] Policy because the claims are excluded under the Policy’s express exclusion of coverage for damages caused by or contributed to by any power, heating, or cooling failure or interruption.
16. There is no coverage for the claims alleged in Plaintiff’s complaint under the [carrier's] Policy because the claims are excluded under the Policy’s express exclusion of coverage for any loss caused by or contributed to by the freezing of plumbing systems while the building is vacant or unoccupied when the insured does not shut off the water supply and drain the systems and appliances.
17. There is no coverage for the claims alleged in Plaintiff’s Complaint under the [carrier's] Policy because the claims are excluded under the Policy’s express exclusion of coverage for any loss caused by or contributed to by the freezing of plumbing systems while the building is unoccupied when the insuredfails to maintain heat in the building.

    While certain facts in these affirmative defenses are not specifically pled, the defenses themselves contain sufficient detail to put Plaintiff on notice as to what facts Defendant will seek to prove in its defense. These defenses will therefore not be stricken.

Manago v. Auto-Owners Ins. Co., No.:2:16-CV-267-RL-JEM, 2018 WL 1704465, at *3 (N.D. Ind. April 9, 2018).

The Magistrate Judge was by no means done.  The plaintiff's motion to strike the carrier's affirmative defense simply that the plaintiff had other insurance was also denied.  Far from being conclusory, in the eyes of the Magistrate Judge, this affirmative defense was legally sufficient to put the plaintiff on notice of the facts that the carrier would prove in support of this defense.  The carrier alleged that the plaintiff had no coverage from the defendant “'to the extent that the insured has other valid and collectable insurance or other insurance available to the insured'[.]”   This defense was sufficient for the Magistrate Judge because the plaintiff would be in a position to know whether she had other insurance:

Given that the existence or identity of any additional policy of insurance held by the insured is a fact more likely to be in Plaintiff’s control than in Defendant’s, the Court finds that this affirmative defense is sufficiently pled.

Manago v. Auto-Owners Ins. Co., No.:2:16-CV-267-RL-JEM, 2018 WL 1704465, at *3  (N.D. Ind. April 9, 2018).

Those who have knowledge already, at least in the eyes of the Court, are not likely to be successful in such cases by arguing that allegations assuming their knowledge are conclusions only, and nothing more.  As in this case, a Magistrate Judge quite possibly will be convinced in such a case that mere conclusions are legally sufficient affirmative defenses under the circumstances.

Please Read The Disclaimer.  © 2018 by Dennis J. Wall.  All Rights Reserved.  

COVERAGE FOR NATIONAL GUARD "JUST FOLLOWING ORDERS" VERSUS UNDOCUMENTED IMMIGRANTS?

After 9:00 at night, the Administration issued a Memo dated Tuesday, April 4, 2018, "SUBJECT:  Securing the Southern Border of the United States."  I had a hard time finding it.  Eventually I found it the other day on Jurist, a blog run by law professors and law students at the University of Pittsburgh.  Apparently reporters for corporate media either are not interested or do not understand how these things work.  The Feds don't just declare that the National Guard will go to the U.S.-Mexican border, there has to be a proclamation federalizing the National Guard detailing the reasons as required by law.  Assume that this Memo does that.

At least 6 times the Memo purports to tell the National Guard enlisted personnel what they are supposed to do at the border, phrases like the subject line of the memo:  "the defense of our borders," or "securing the southern border," or "protect our southern border," and other variations on those words.  What does "securing the southern border" mean that National Guard enlisted personnel are being asked to do?

• Round people up?
• Put children, women, and men in jail?
• Machine gun any undocumented aliens who refuse to go back south of the border, God forbid?

But what does "securing our borders" mean exactly, to a kid in a National Guard uniform?  All of these are unlawful orders (not just the last one).

Assuming that they are not pardoned or immune from liability, and whether "just following orders" would or would not be a good defense to liability, it wouldn't mean a thing in an insurance coverage case.

There is no coverage for "just following orders."

Please Read The Disclaimer.  © 2018 by Dennis J. Wall.  All Rights Reserved.

IF SECRETARY JAMES MATTIS FOLLOWED AN UNLAWFUL ORDER: DEFENSES TO COVERAGE?

Suppose Secretary of Defense James Mattis was given an unlawful order?   Other names for unlawful orders include "illegal orders" and "unjust orders".  When I was growing up, the standard question was whether a German soldier who was given an unlawful order to round up people and put them into concentration camps and kill them should obey or if the German soldier stood on high moral ground by refusing to obey those unjust orders.

Nowadays the question is forward-looking, not backward-looking.  The question is posed in modern times more immediately as well, such as orders to bomb Tehran in Iran, or to bomb with a missile strike launched against Pyongyang, North Korea?  The question in these cases is really whether starting a so-called preventive war to eliminate a long-term future threat based on currently perceived, unchanged conditions would constitute an unlawful order? 

To try to answer that question from an insurance coverage perspective, which is after all what we do here on this blog, let's first assume that the official is not immune from liability or suit.

Would insurance policies potentially cover following an illegal order like this?

To answer this insurance coverage question, let's move beyond the James Mattis of the title to this article.  Let's move beyond him personally, even in a hypothetical case like this one, to any official or officer and ask the same question:  Would insurance policies available to the official potentially cover the official for following an unlawful order such as bombing Tehran or Pyongyang based only on the current world situation?

Here are some issues that would arise under any insurance policy that may be available to the official who obeys an unjust order.

Is it "fortuitous" as affording "all risk" coverage?  As I will explore more deeply in a forthcoming article, judges often say that there is a good reason to deny coverage for "all risks" if the event that causes damage was not "fortuitous."

By using this word, courts mean that it is not fortuitous on its face when the event that caused the damage claim was inherent in the thing itself, such as an opal which becomes cracked which is an apparently normal and usual event.

Judges in other courts and other cases, and even the same judges in the same cases, also use the word to mean that if the event that caused the damage was not due to an external cause but instead was due to an inherent defect in the thing itself rather than an external cause, such as where the insured brings it about by her or his own act.  In such a case, they hold, there can be no insurance coverage.

Following an unjust order to begin an unprovoked unjust war can legitimately be held up as the opposite of fortuitous, and so uninsurable in any case.

Is it an accident causing damage neither expected nor intended from the standpoint of the insured?  Courts unfamiliar with first-party insurance concepts like "all risks" coverage often analogize the insurance requirement that a loss be "fortuitous," to the third-party requirement that the risk insured must be an "accident." 

If third-party policies were available to the official who follows an order to nuke Tehran or Pyongyang right now, then just as the resulting damages can legitimately be held up as the opposite of fortuitous under an all-risks first-party policy, so the official's conduct should legitimately be held the opposite of a covered "accident" under a third-party policy.

Would the "war risk" exclusion apply?  This is an interesting question.  The war risk exclusion probably applies to damages from war.  Arguably it should not apply to damages resulting from a decision to follow someone else's unlawful order even if following that order means war.

If this construction were followed in our hypothetical situation, the war risks exclusion probably would be held inapplicable to the official's decision to follow the unlawful order.

Public policy.  This is not a path that most courts are happy to follow when considering insurance coverage questions.  Courts generally shy decisively away from public policy questions in the context of passing on insurance coverage questions.

However, as can be seen from our brief discussion here of "fortuitous," the very nature of insurance coverage itself is involved in this particular question.  When judges say that a risk or damage is "fortuitous" or not, they are really passing on whether the risk or damage was insurable in the first place.

Further, the Florida Supreme Court has held that intentional religious discrimination is something that cannot be insured as a matter of public policy.  Ranger Ins. Co. v. Bal Harbour Club, Inc., 549 So. 2d 1005 (Fla. 1989).

It is not much of a leap from that decision to also declare that the decision to bomb Tehran or Pyongyang under present conditions ought not to be insurable as a decision to follow an unlawful order.

Hopefully, these hypothetical questions will all remain only theoretical, as they are now.

Please Read The Disclaimer.  ©2018 by Dennis J. Wall.  All Rights Reserved.

OPEN THE EVIDENCE ENVELOPE, PLEASE.

In an Amended Order in Multidistrict Litigation against pharmaceutical manufacturers, one judge unintentionally perhaps highlighted the need for disclosure, not concealment, of evidence.  Insurance coverage questions may become difficult if not impossible to decide if this pattern continues.

The Amended Order came in this MDL case:  In Re:  Abilify (Aripiprazole) Product Liability Litigation, No. 3:16-md-2734, 2018 WL 1357914 (N.D. Fla. March 15, 2018).  It was an opinion denying motions for summary judgment because the Court ruled that there were genuine issues of material fact.

"Plaintiffs allege that, after taking Abilify as prescribed, they developed impulsive and irrepressible urges to engage in certain harmful behaviors, including impulsive gambling, eating, shopping, and sex.  Defendants deny the allegations and maintain that Abilify could not, and did not, cause Plaintiffs' impulse control problems."  In Re:  Abilify (Aripiprazole) Product Liability Litigation, No. 3:16-md-2734, 2018 WL 1357914, at *1 (N.D. Fla. March 15, 2018).

The Court held that there were genuine issues of material fact surrounding these allegations and denials in a huge record of apparently conflicting evidence:

Now, having carefully considered the law, the voluminous record, and the parties' arguments, the Court concludes that Plaintiffs have satisfied their burden to demonstrate that a genuine dispute of material fact exists as to whether Abilify can cause uncontrollable impulsive behaviors in individuals taking the drug.

In Re:  Abilify (Aripiprazole) Product Liability Litigation, No. 3:16-md-2734, 2018 WL 1357914, at *1 (N.D. Fla. March 15, 2018).

The problem is that the public cannot possibly know what the apparently conflicting evidence actually was.  The opinion is riddled with holes for redacted evidence, like this one:  "Moreover, the record reflects [*** REDACTED ***]."    In Re:  Abilify (Aripiprazole) Product Liability Litigation, No. 3:16-md-2734, 2018 WL 1357914, at *26 (N.D. Fla. March 15, 2018).  Say again, please; what is it that the record reflects?

We simply do not know a lot of what witnesses testified and documents revealed.  "Portions of the briefing and record in this matter were filed under seal. This redacted version of the Court's Order omits references to information included in sealed materials."  In Re:  Abilify (Aripiprazole) Product Liability Litigation, No. 3:16-md-2734, 2018 WL 1357914, at *1 n.1 (N.D. Fla. March 15, 2018).  If a judge omits references to evidence, yet tells us that the Court's ruling is based on what appears to the Court to be contradictory evidence, what value does that serve and whose?

Arguably not the value of the public, who pay to maintain the judicial system.

In particular, how can insurance coverage questions be resolved in this situation?  Does the blacked-out evidence show that consequences or side-effects from using this drug were perhaps neither expected nor intended from the standpoint of the pharmaceutical companies, and thus not a covered "accident" or "occurrence"?

Is it possible that there is an exclusion applicable to this evidence?

How can we know answers to questions like these without seeing the evidence?

And whose interests are served by blacking out the evidence in cases like this?

Please Read The Disclaimer.  ©2018 by Dennis J. Wall.  All Rights Reserved.

ARE LOSSES FROM CLIMATE CHANGE "FORTUITOUS"?

Insurance carriers have denied claims and are facing more claims for losses "related to accelerating climate-related disasters, such as California's fires last fall, and lawsuits that target fossil fuel companies as some of the world's largest greenhouse-gas emitters."  Reportedly, not one penny has been paid out in insurance proceeds in lawsuits alleging damage from climate change.

Don't hold your breath (unless you're standing outside, in certain areas), but newly filed lawsuits may affect that outcome, including a new lawsuit filed "by California cities and based on public nuisance law, seeks to hold Exxon, BP, and other oil companies accountable for flooding caused by sea level rise."  Jacques Leslie, "Insurers Are Backing Fossil Fuel Companies and Then Charging You For Climate Change Risks" (Los Angeles Times Online, Tuesday, March 13, 2018).

If insurance carriers routinely and successfully deny claims for damage allegedly caused by climate change, how can Exxon, BP, and other oil companies sued in the reported new lawsuit as "accountable for flooding caused by sea level rise," claim that these losses are "fortuitous"?  That they were all the results of an "accident"?

Or that an act of humanity ought to be treated by insurance law as an act of God?

Please Read The Disclaimer.  ©2018 by Dennis J. Wall.  All Rights Reserved.

DEATH AND COVERAGE IN FLORIDA: A CONTINUING STORY.

First installment, "They Called But No-One Came:  Liability Insurance Coverage Questions":  Monday, 09.18.17.  The second of three installments focused on liability insurance coverage questions regarding the Florida power company, "IS YOUR GENERATOR WORKING?" also at http://insuranceclaimsissues.typepad.com/insurance_claims_and_issu/2017/09/is-your-generator-working-the-first-installment-they-called-but-no-one-came-liability-insurance-coverage-questions-monda.html .  In this the final installment, we will address liability insurance coverage questions concerning the Florida nursing home.

Here is the story that continues to develop behind our insurance coverage questions.  I cautioned from the beginning of the first installment that this is a developing story,  that we do not know all the facts, and that much more remains to be reported as time goes on.

Those cautions have been borne out in the past week since I posted my first article in this series.  There are now eleven people who reportedly died after Hurricane Irma struck Florida and specifically struck a Florida nursing home.   The nursing home's air conditioning went out.  It got hot.  Very hot.

Eleven people have died from the heat.

A number of people and corporations played a role in this story.  Together we addressed liability insurance coverage questions regarding the Florida governor in the first installment, and in the second installment we addressed some liability insurance coverage questions surrounding the Florida power company.  In this last installment, together we will address liability insurance coverage questions involving the Florida nursing home.  To write again what I wrote at the outset:  What follows is from the reporting so far on what happened.   The reporting is not complete even now.  There are competing stories on lots of points.  As yet, only some things have been finalized, but they are enough to see the outlines of some important liability insurance coverage questions.

The focus of this series of articles is not on whether there may be any good claims of potential liability, but on whether there are claims to potential liability insurance coverage.

1. The Florida nursing home: Questions of Liability.

The Florida nursing home seems to be a target of opportunity for placing blame on what went wrong at the nursing home that resulted in eleven people dying when the nursing home's air conditioning failed during Hurricane Irma.  Yet it should never be overlooked that there are many actors in this play.

"Somewhere in between, the misery of a nursing home teetering toward tragedy was reported to every official channel, but no attempt was made to transfer the residents to a safer place, or even to the air-conditioned hospital practically next door."  Ellen Gabler, Sheri Fink & Vivian Yee, "At Florida Nursing Home, Many Calls for Help, But None That Made a Difference" (New York Times online, posted Saturday, September 23, 2017), also available at https://www.nytimes.com/2017/09/23/us/nursing-home-deaths.html?hpw&rref=us&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well.

After so many people died, the Florida governor insisted that his Florida Agency for Health Care Administration adopt emergency rules requiring nursing homes to have backup generators.  But that is not the way it was before Irma and before so many people died.

There were calls to require emergency backup generators at Florida nursing homes long before Hurricane Irma was a little breeze somewhere in the Atlantic Ocean.  The expense of operating a Florida nursing home caused these calls to go without any meaningful response.  To put it another way, money talked and people in power listened.

"Very few nursing homes had generators powerful enough to keep the air-conditioning running. In 2006, Florida lawmakers considered requiring nursing homes to maintain generators to ensure comfortable temperatures during disasters. But the industry raised concerns about the cost, according to The Miami Herald, and the bill died. Last week, after the Hollywood Hills deaths, Mr. Scott announced new rules requiring those generators."  Ellen Gabler, Sheri Fink & Vivian Yee, New York Times supra.

Certainly, the Florida nursing home is experiencing its share of allegations that it was either the sole cause or a contributing cause of these people's horrible deaths.  The current owners of the Florida nursing home have run a facility that received below-average ratings from Medicare even before Irma.  And they have experienced allegations related to Medicare and nursing homes before Irma, as well, including allegations of kickbacks.  See Ellen Gabler, Sheri Fink & Vivian Yee, New York Times supra (reporting that the current owners of the Florida nursing home "were among defendants who paid $15.4 million in 2006 to settle federal and state civil claims that they had paid kickbacks to doctors in exchange for patient admissions.").

No evidence of previous wrongdoing including kickbacks, even if admissible, would prove the allegations of wrongdoing now.  What evidence there is to prove the allegations now will depend in the end on what evidence is uncovered or introduced in the inevitable lawsuits that are the result of these tragic deaths.  See, e.g., "Report:  Before Deaths, Nursing Home Called Rick Scott's Emergency Number Three Times, To No Avail" (Tampa Bay Times staff, posted online on Friday, September 15, 2017), also available at http://www.tampabay.com/news/politics/stateroundup/report-nursing-home-called-rick-scotts-emergency-number-three-times-to-no/2337665.

("On Friday, a Miami law firm filed a complaint against the Hollywood facility ....); "'Red Flag' Calls Signaled Post-Irma Deaths at Nursing Home" (Associated Press copyrighted story published online in The New York Times on Saturday, September 16, 2017), also accessible at https://www.nytimes.com/aponline/2017/09/16/us/ap-us-hurricane-irma-nursing-home-deaths-.html (reporting that a family member of a surviving resident "hired an attorney after her 93-year-old mother became severely dehydrated on Wednesday.").

Our focus here remains on the liability insurance coverage questions arising from this tragedy.  In this final installment of a continuing series of articles, our particular focus here is on liability insurance coverage questions which confront the Florida nursing home.

2. Liability Insurance Coverage Questions and the Florida nursing home.

The liability insurance coverage questions surrounding the Florida nursing home in this circumstance are similar to the liability insurance coverage questions that surround the Florida power company which were previously asked here.

The questions that follow are not all the questions that can or will be raised concerning the Florida nursing home's liability insurance coverages.  Some of these questions may not apply.

"Occurrence":  Was there an accident neither expected nor intended from the standpoint of the insured, in this instance, neither expected nor intended from the standpoint of the Florida nursing home?  This is where the history of Medicare inspections and evaluations of the Florida nursing home may prove relevant.

In the context of Directors and Officers coverage if any for the operators of the Florida nursing home:  Is there any covered conduct at issue on the part of the Florida nursing home's directors and officers?  Alternatively or additionally, is any potentially "covered conduct" excluded because of the availability of liability insurance coverage, if any, under other liability insurance policies available to the directors and officers?

The number of occurrences, if any.  Was there one or were there 11 or more "occurrences," if any?  Was there one occurrence (if any) because, say, there was at least arguably one practice and procedure at the Florida nursing home which resulted in the damages that might be complained of here?  Or were there at least 11 occurrences (again, if any) because so far 11 people have died?  Or if there were any occurrences under the insurance policies at issue, were there more than 11, counting all the people who were injured but who have not died?

Time will tell, and it bears repeating:   Over time the answers to liability insurance coverage questions like these will likely be given by the Florida courts.

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

MARYLAND'S HIGHEST COURT: NO LATE NOTICE AS MATTER OF LAW.

"According to Maryland law, an insurer providing a liability insurance policy may disclaim coverage if an insured breached the policy by giving late notice of a claim and establishes by a preponderance of the evidence that late notice resulted in actual prejudice to the insurer."  National U. Fire Ins. Co. v. Fund For Animals, Inc., ___ A.3d ___, No. 18, 2017 WL 383453, under Court's "Actual Prejudice" heading, page numbers not yet available from Westlaw (Md. January 27, 2017) (STATED NOT RELEASED FOR PUBLICATION IN PERMANENT LAW REPORTS AND UNTIL THEN, SUBJECT TO REVISION OR WITHDRAWAL).

"This Court has rejected a per se approach, which would allow the finding of actual prejudice for any breach by the insured—instead, the actual prejudice must be a consequence of the breach."  National U. Fire Ins. Co. v. Fund For Animals, Inc., ___ A.3d ___, No. 18, 2017 WL 383453, under Court's "Actual Prejudice" heading, page numbers not yet available from Westlaw (Md. January 27, 2017).

Applying these rules in this case, the Maryland Court of Appeals held that notice of what might be called a secondary lawsuit -- a lawsuit in which the policyholder was sued, but which grew out of an earlier lawsuit filed by the policyholder -- given to the carrier some two years after the suit was filed was not late as a matter of law.

The Maryland high court held in pertinent part that the carrier could not have done anything to affect the outcome of the first suit anyway.  Accordingly, notice of the second suit did not cause the carrier actual prejudice as a consequence of any potential breach of the notice condition in the liability policy.  National U. Fire Ins. Co. v. Fund For Animals, Inc., ___ A.3d ___, No. 18, 2017 WL 383453, under Court's "Actual Prejudice" heading, page numbers not yet available from Westlaw (Md. January 27, 2017).

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved. 

"INSURANCE CLAIMS AND ISSUES," THE BOOK: COMING IN 2016!

 

 Storm Clouds lined up over the Gulf of Mexico.  Photograph and text copyright 2015-2016 by Dennis J. Wall.

I am hard at work on an anthology of the best blogs from "Insurance Claims and Issues."  The anthology I submit to my publisher will keep all hyperlinks intact, including links to the Insurance Claims and Bad Faith Law blog.  When articles posted on Insurance Claims and Bad Faith Law blog are important to the anthology of "Insurance Claims and Issues," I am including them in the anthology too.

As each previously posted article is updated, the posted articles will remain just as available here as they always have been.  New articles will benefit from me being better informed and better equipped to discuss future insurance claims and issues.

I have contracted with Thomson Reuters (West Publishing Company to those fortunate to have the experience) to publish "Insurance Claims and Issues," the Book, in the late Spring or early Summer of 2016.  Best wishes to everyone for a joyous and Happy New Year!

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Insurance Claims and Issues" (forthcoming Thomson Reuters 2016).  All rights reserved.

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FROM NO JURISDICTION OF M-J, TO NO JUDICIAL ESTOPPEL.

Christmas Pluto.  Image by NASA.

 

In Tennenbaum v. Arizona City Sanitary Dist., No.  CV-10-02137-PHX-GMS, 2015 WL 7731820 (D. Ariz. December 1, 2015), the plaintiff Tennenbaum sued the District and its lawyers including one Slavin.  The first issue disposed of by the District Court in the current ruling was the nature of what the District Judge called "an 'Order'" signed by the Magistrate Judge.  The District Judge wrote that the Magistrate did not have the authority to enter such an Order, but only a Report and Recommendation to the District Judge who would then dispose of the report with an Order.  The District Judge renamed the Magistrate Judge's "'Order'" a Report and Recommendation accordingly, and went on to address other issues in the case.  "The Court orders that the 'Order' entered by Magistrate Judge Mark E. Aspey (Doc. 242) shall be designated a Report and Recommendation (R & R). The Court adopts the R & R in part and rejects it in part."  Tennenbaum v. Arizona City Sanitary Dist., No.  CV-10-02137-PHX-GMS, 2015 WL 7731820, at *1 (D. Ariz. December 1, 2015).

The main issue presented in this case concerned the effects of a so-called Arizona "Morris agreement" on insurance coverage.  In Arizona, the insured has a right to settle its underlying liability when its liability carrier reserves rights to deny all coverage on certain grounds.  The resulting settlement agreement made between the policyholder and the claimant is called a "Morris agreement."

However, admissions and recitations of fact made in a Morris agreement are binding on the liability carrier when, among other things, the admissions and recitations of fact are necessary to establish the policyholder's underlying liability and not when they only affect the determination of insurance coverage.  In this case, the policyholder was sued for defamation and invasion of privacy torts which, the District Court held, require evidence of actual malice.

The insured denied both actual malice and intent in the settlement agreement here.  Under Arizona law applied by the District Court, this denial of intent and the agreement's recitation of facts simply established the actual malice necessary to underlying liability of the policyholder for actual malice in making the offensive statements.  The issue of whether the policyholder's conduct was an excluded intentional act remains open in that case and so the District Court denied competing motions for summary judgment on that coverage issue.  (Technically the District Court accepted the Magistrate Judge's recommendation to deny the parties' cross-motions for summary judgment.)   Tennenbaum v. Arizona City Sanitary Dist., No.  CV-10-02137-PHX-GMS, 2015 WL 7731820, at *4-*6 (D. Ariz. December 1, 2015) 

In the course of its opinion in this case, the District Court provided a treatise on the treatment of judicial estoppel in the case law:

• “Judicial estoppel, sometimes also known as the doctrine of preclusion of inconsistent positions, precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position."

• “It is an equitable doctrine invoked by a court at its discretion.”

• Judicial estoppel “is intended to protect the integrity of the judicial process by preventing a litigant from playing fast and loose with the courts.”

• In determining whether to apply the doctrine, a court “typically consider[s] (1) whether a party’s later position is clearly inconsistent with its original position; (2) whether the party has successfully persuaded the court of the earlier position, and (3) whether allowing the inconsistent position would allow the party to derive an unfair advantage or impose an unfair detriment on the opposing party.”

Tennenbaum v. Arizona City Sanitary Dist., No.  CV-10-02137-PHX-GMS, 2015 WL 7731820, at *7 (D. Ariz. December 1, 2015).

Although the Magistrate-Judge ultimately rejected the argument that judicial estoppel applied here, the District Judge said that the Magistrate rejected it for the wrong reasons.  "The magistrate judge began with the premise that “Plaintiff vigorously argued in defending against the motions for [summary judgment] before Judge Snow that Defendant’s statements were defamatory" and made with actual malice.  The District Court pointed out that when as here a party contests that there was actual malice in the course of contesting the insured's underlying liability, is not the same as contending that there was, or was not, intent to harm the plaintiff.  Further, although the plaintiff did allege actual malice in the complaint at bar, he also alleged in the alternative that the policyholder acted with knowledge of falsity or with reckless disregard of whether the alleged statements were false.

That, said the District Judge, was the real reason that judicial estoppel did not apply here:  The record established that the issue of actual malice was litigated, but that the separate issue important to insurance coverage -- intent to cause injury, and to the plaintiff -- was not litigated.  Tennenbaum v. Arizona City Sanitary Dist., No.  CV-10-02137-PHX-GMS, 2015 WL 7731820, at *7 (D. Ariz. December 1, 2015).

Please Read The Disclaimer.  ©2015 by Dennis J. Wall.  All rights reserved.

LATE NOTICE IN TWO STEPS.

Indiana Statehouse.  Image provided by Library of Congress.

The two steps are reasonableness in the delay and prejudice in the lateness of the notice.

These are the steps summarized by the Supreme Court of Appeals of West Virginia in a recent case involving questions of late notice under a liability insurance policy.  The Court summarized its long-standing rules on this subject into the aforementioned two steps:

Thus, it is apparent that a two-step inquiry determines whether late notice precludes coverage. First, we must consider the length of the delay and whether the delay was reasonable. If the delay was not reasonable, the inquiry ends, and coverage will be foreclosed. However, if the delay was reasonable, then the burden shifts to the insurer under the second part of the analysis. If the insurer can demonstrate prejudice from the late notice, coverage is precluded. If the insurer cannot show that it was prejudiced by the late notice of its insured’s claim, though, coverage is not barred by the insured’s failure to provide timely notice.

 Travelers Indem. Co. v. U.S. Silica Co., ___ S.E.2d ___, 2015 WL 7045391, under the Court's heading, "III. Discussion" (W.Va. November 10, 2015)(page numbers not provided by Westlaw before citation).  [Emphasis added.]

The Court left no doubt in this case that its two-step analysis of late notice is progressive, meaning that if the first step of this condition precedent is not satisfied, that ends the matter and the second step is never reached in such a case.  The case at bar was such a case, the Court said:

In the case sub judice, we conclude that U.S. Silica has failed to demonstrate that its explanation for its significant delay in notifying Travelers of the silica claims was reasonable—both because the delay was substantial and because its proffered reason to excuse its delay, i.e., that it was unaware of the subject policies, is not reasonable. Absent a demonstration of reasonableness, the burden does not shift to the insurer to prove that it was prejudiced by the delayed notice, and the inquiry necessarily ends with a finding that coverage is precluded by the insured’s failure to comply with the policy’s notice provision.

Travelers Indem. Co. v. U.S. Silica Co., ___ S.E.2d ___, 2015 WL 7045391, see concluding paragraphs at the end of the Court's "III. Discussion" (W.Va. November 10, 2015)(page numbers not provided by Westlaw before citation).  [Italics by the Court.]

 

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with 2015 Supplements).  See in particular § 5:14, "Coverage or Policy Defenses" to Bad Faith Settlement Claims, § 5:24 "Coverage or Policy Defenses" to Wrongful Refusal or Failure to Defend Claims, and § 5:49 "Coverage or Policy Defenses" to Inadequate Defense Claims.  All rights reserved.  

Insurance Issues For the Ride-Selling, Room-Renting Economy.

There are an increasing number of reports raising questions about the extent of sellers' liability in the new ride-selling, room-renting economy.

Share these concerns?  In this climate, insurance issues are well worth a close examination given so many questions of liability in so many situations. A large top-tier law school is considering a symposium on the insurance issues shared by the potential liabilities of our new ride-selling, room-renting economy.  Let's leave it up to them to make their own announcement of who, when, and where.

Please Read The Disclaimer.  Copyright 2015 by Dennis J. Wall.  All rights reserved.

Related articles

What's in a Claim? A Defense, Possibly.

UNKNOWN FEDERAL AGENTS STOP DEFAMATION LAWSUIT. INSURANCE CLAIM DENIED ALSO?

               In May, 2013, a nonprofit corporation called “American Coalition Against Nuclear Iran” a/k/a “United Against Nuclear Iran” (“UANI”) wrote a public letter to Mr. Victor Restis alleging that Mr. Restis and his shipping company illegally participated in exporting “Iranian oil in violation of international sanctions.”  Next, the Coalition united to write and disseminate press releases, and “postings on social media” including its Facebook page “and on UANI’s website,” all repeating the alleged libel that Mr. Restis and his shipping company participated in these illegal actions.  Victor Restis v. American Coalition Against Nuclear Iran, Inc., No. 13 Civ 5032 (ER), Doc. 316, Opinion and Order filed March 23, 2015, at pp. 2-3 (S.D.N.Y.).  Later in 2013, Mr. Restis and his company filed suit.  Download Victor Restis v. American Coalition Against Nuclear Iran, Doc. 316, Filed 03.23.15 (S.D.N.Y. No. 13 Civ. 5032 (ER)).

               In 2014, an unknown, unnamed agency of the Federal Government requested and received permission to intervene in the civil defamation case.  The Federal Government demanded that the lawsuit had to be dismissed because of “the state secrets privilege.”  (The agency is unknown because the Federal Judge did not name it on the ground of national security.)

               The Federal Judge explained the states secret privilege after he had two ex parte meetings with unknown, unidentified Federal agents.  As the Federal Judge explained the states secret privilege, it “is a common law evidentiary rule that allows the government to withhold information from discovery when disclosure would be inimical to national security.”    Victor Restis v. American Coalition Against Nuclear Iran, Inc., No. 13 Civ 5032 (ER), Doc. 316, Opinion and Order filed March 23, 2015, at p. 4 (S.D.N.Y.).  (The Federal Judge’s admission to the two ex parte meetings with the unidentified Federal agents is on page 7 of his Opinion and Order.)

               The Federal Judge’s Opinion and Order in this civil case went beyond “a common law evidentiary rule that allows the government to withhold information from discovery,” however.  In it, the Federal Judge ordered that the private plaintiffs’ defamation claim be dismissed because the state secrets privilege required dismissal here.  The Federal Judge explained his ruling of dismissal on the basis that Federal Courts have ordered that claims must be dismissed where evidence as to claims or defenses necessarily carried an inherent and unacceptable risk of exposing state secrets.  That this was the first dismissal of a civil case involving purely private litigants in which the Federal Government had demanded dismissal, did not change the view of this case in the Federal Judge’s eyes.  “[T]he Court is convinced,” he wrote, “that further litigation of this action would impose an unjustifiable risk of disclosing state secrets.”  This was so even if the case were tried in his chambers.  Victor Restis v. American Coalition Against Nuclear Iran, Inc., No. 13 Civ 5032 (ER), Doc. 316, Opinion and Order filed March 23, 2015, at pp. 12-13 (S.D.N.Y.).

               In sum, even if the plaintiffs could prove actionable defamation in this case without using the “state secrets” but only putting on non-privileged evidence available in the public domain, still this case presented an “unacceptable risk,” an “unjustifiable risk,” of exposing state secrets.  Accordingly, the Federal Government’s demand had to be followed and this civil defamation case was dismissed.

               Since the plaintiffs no longer have a pending prosecution of their defamation claim in suit at the present time, what if the plaintiffs pursue their claim against the defendants without a lawsuit.  (The defendants in the civil defamation suit included not just the nonprofit corporation but also individuals associated both with that company and with the alleged defamation.)  If the plaintiffs pursue their claim without their defamation lawsuit, the question becomes whether the defendants’ insurance companies, if any, can now deny coverage on the ground that to allow the claim to proceed against their policyholders would necessarily pose an “unacceptable risk” and an “unjustifiable risk” of exposing state secrets?

               Another question arises, too, of course:  Can defendants, whether operating through nonprofit corporations or otherwise, raise the shield of “state secrets” every time they allegedly libel or slander someone?

Please Read The Disclaimer.  ©2015 by Dennis J. Wall.  All Rights Reserved.  No Claim to Original U.S. Government Works.

"Late Notice" Conditions Interpreted and Applied: What the Law Means.

SIMILAR NOTICE CONDITIONS INTERPRETED BASED ON THE ACTUAL POLICY LANGUAGE BEFORE THE COURTS DECIDING THE LATE NOTICE ISSUE:

• Notice condition (from Slominski v. Citizens Prop. Ins. Corp., 99 So. 3d 973, 974 (Fla. 4th DCA October 3, 2012)):
  
  The contractual post-loss duties required the Slominskis, in a case of loss to their property, to “[g]ive prompt notice to [Citizens].”

HELD:  Summary Judgment for Insurance Carrier of No Coverage due to Late Notice of a Property Claim.

 Florida law:  Rebuttable Presumption of Prejudice from Late Notice.

 Here Late Notice Presumption not rebutted.

 The Policyholders argued that they believed that the cost of repairing the damage would not exceed their deductible as their justification for allegedly late reporting of their claim.

 Their argument was supported by Affidavits from a Contractor and an Engineer.  (Therein lies a tale, as they say.  The Affidavits came after their Depositions were taken and contradicted their Deposition Testimony.  Or would have, if the Trial Judge had not stricken the Affidavits and refused to consider them.) 

• Notice condition (from Pfeffer v. Harleysville Grp., Inc., 2012 WL 5392933 (2d Cir. November 6, 2012)):

          Policy:  provide “prompt notice of the loss or damage.”

 

HELD:  Summary Judgment for Insurance Carrier of No Coverage due to Late Notice of a Property Claim.

There, too, the Court rejected the legally insufficient contention that Late Notice could be justified by a belief that there was no Coverage, therefore the Policyholder(s) did not timely report their Coverage claim.

 BUT THE REASON FOR DECISION IN THE SECOND CIRCUIT WAS THAT THE INSURANCE POLICY CAN (AND THERE, DID) CONTAIN LANGUAGE THAT TRUMPS SUBSTANTIVE LAW:

 The policy in that case provided in addition that Notice was a condition precedent to making any claim under the policy.

 Otherwise, the New York law of Late Notice appears to be like Florida's, resulting in a rebuttable presumption of prejudice, and is certainly more favorable the Court pointed out, than the policy provision that notice is an explicit "condition precedent".

This article is posted from a Seminar presented on the subject of "Forensic Examination of Insurance Policies:  Conditions and Exclusions," on Wednesday, December 19, 2012 to the Orange County Bar Association in Orlando, Florida.

Merry Christmas and Happy Holidays to All in 2012, and a Happy New Year to All in the year to come!

Please Read The Disclaimer.

LATE NOTICE COVERAGE DEFENSE: RECENT FLORIDA CASES, NEW YORK LAW.

            In three recently decided cases Courts applied Florida law to claims based on damage caused by Hurricane Wilma.  The results in these cases are instructive, particularly for those concerned with making and responding to Claims under Florida Insurance Law.

            The general rules governing the Late Notice Coverage Defense in Florida were outlined in detail in Slominski v. Citizens Property Insurance Corp., 2012 WL 4511322 *2 (Fla. 4th DCA October 3, 2012).  In that case, Citizens' Motion for Summary Judgment was granted because the Policyholders did not rebut the presumption of prejudice to Citizens which accrued from the Policyholders' Late Notice.  The Policyholders argued that they believed that the cost of repairing the damage would not exceed their deductible as their justification for allegedly late reporting of their claim.  Their argument was supported by Affidavits from a Contractor and an Engineer.  Slominski v. Citizens Property Insurance Corp., 2012 WL 4511322 *3-*4 (Fla. 4th DCA October 3, 2012).

            However, both the Contractor and the Engineer were deposed previously.  Their Deposition testimony each contradicted their testimony in their later-filed Affidavits, and this the Court would not permit.  The Florida Appellate Court held that the Policyholders "were not entitled to rely upon [the Affidavits] in opposition to summary judgment.  Without these affidavits, the [Policyholders] failed to meet their burden of proving lack of prejudice to Citizens."  Slominski v. Citizens Property Insurance Corp., 2012 WL 4511322 *4 (Fla. 4th DCA October 3, 2012).

            In another Hurricane Wilma case involving Late Notice,  a Federal Court applying Florida law presented an outstanding analysis of Florida Statute Section 627.409, Florida's Rescission Statute, and Post-Loss Conditions, in addition to the Judge's masterful discussion of the Late Notice Condition (or Coverage Defense).  The Court denied both sides' Motions for Summary Judgment as to Late Notice, because in that case there is a fact issue as to what the Policyholder under a Commercial Property Insurance Policy, a Condominium Association, told its Insurance Company about which buildings in the Condominium complex were damaged by Hurricane Wilma and thus part of the Insurance Claim.  Aspen Specialty Insurance Co. v. River Oaks of Palm Beach Homeowner's Ass'n, 2012 WL 3260398 *6 (S.D. Fla. August 8, 2012).   Applying the same legal standards, a different Federal Judge in the same District Court in Florida granted the same Property Insurance Company's Motion for Summary Judgment as to "replacement cost claims" because the Florida presumption of prejudice from Late Notice to the Insurance Company was not rebutted on the record of that case.  Oriole Gardens Condominium Ass'n I v. Aspen Specialty Insurance Co.,  2012 WL 2854331 *4 (S.D. Fla. July 12, 2012).

            In something of a change of pace, another recent decision on Late Notice was made under New York Law by a Federal Appeals Court in Pennsylvania.  Adding to the change of pace, the Late Notice Defense was raised by a Reinsurer, in the case of Pacific Employers Insurance Co. v. Global Reinsurance Corp. of Am., 2012 WL 3871588 (3d Cir. September 7, 2012).   The Clerk's list of the parties' Counsel of Record does not show any Law Firms based in New York representing Pacific Employers, whereas it appears that the lead Law Firm for Global Reinsurance Corporation is from New York, New York.  The decision, perhaps not coincidentally, was for Global Reinsurance Corporation under New York Law, which the parties apparently altered in their contract.  The  Third Circuit panel announced the parties' Reinsurance agreement as to notice, at the beginning of its opinion in this case as follows:

[Under the Reinsurance Certificate notice condition,] PEIC must provide Global with a definitive statement of loss ("DSOL") on a subset of claims or occurrences, specifically those that involve a death, serious injury, or lawsuit.  When must PEIC do this?  We believe it is promptly after someone reports such a claim or occurrence to it, not promptly after it demands indemnity from Global.  If PEIC dawdles, the consequences can be severe.  PEIC's compliance with this provision is a condition precedent to Global's duty to reinsure ....

  Pacific Employers Insurance Co. v. Global Reinsurance Corp. of Am., 2012 WL 3871588 *1 (3d Cir. September 7, 2012).   Applying the contract provision that the parties to this Reinsurance Certificate themselves put in their agreement, the Third Circuit reversed and remanded with instructions for the entry of "a judgment of nonliability" in favor of Global Reinsurance Corporation.  Pacific Employers Insurance Co. v. Global Reinsurance Corp. of Am., 2012 WL 3871588 *20 (3d Cir. September 7, 2012).

            A rule of conduct resulting from all these decisions, and resulting from others like them, is 'When in doubt, provide notice' to preserve and protect a Claim to Insurance Coverage.

Please Read The Disclaimer.

FAA Transfer From Hawaii to Texas ... And "Nonbinding" SIR Observations.

   In Download Lexington Insurance Co. v. Centex Homes (D. Hawaii Case No. 10.00655, Order Transferring Venue Filed June 13, 2011) PUBLIC ACCESS, also published as 2011 WL 2416473 (D. Hawaii June 13, 2011)(authorized password required to access Westlaw) the Chief Judge of the United States District Court for the District of Hawaii transferred venue to a Federal Court in Texas for the Texas Court to consider whether to compel Arbitration of an Insurance Coverage dispute.  The Chief Judge viewed her ruling as impelled by the Federal Arbitration Act ("FAA") and the parties' express Arbitration provision in their insurance contract.

    "The Policy is a 'claims made' policy ...."  Lexington Insurance Co. v. Centex Homes, 2011 WL 2414673 at * 1, *10.  Lexington issued the Policy to Centex, a builder of houses.  Centex began to receive claims from Homeowners that water was leaking in the houses that Centex built.  Lexington sued for Declaratory Relief in Federal Court in Hawaii, claiming that it had no Coverage under various theories.  Centex responded with a Motion to Dismiss and, alternatively, a Motion to Stay and to Compel Arbitration in Dallas, Texas "the forum specified by the parties' arbitration agreement."  Id. at *2.  Centex's address on the Policy is in Dallas, Texas.  Id. at *1.

   While granting Centex's Motion by transferring venue to a Federal Court in Texas where Arbitration was to take place, the Chief Judge in Hawaii did and said much more.  The Federal Court in Hawaii noted that "[t]he Policy has a self-insured retention amount ('SIR' or 'Retained Amount') of $150,000."  Id.  Lexington's Duty to Defend would not incept or begin "'unless and until the Retained Amount is exhausted'".  Id.  One of Lexington's contentions against Arbitrating at all in this case was that satisfaction of the SIR or Retained Amount was a condition precedent to Arbitration as well as to Lexington's Duty to Defend and, since the SIR had not yet been met in this case, there could be no Arbitration, Lexington contended.

   Centex did not disagree with this argument concerning Lexington's Duty to Defend under the Lexington Policy.  "Centex does not contest that it is required to meet the SIR before Lexington is obligated to defend Centex against claims."  Id. at *10.  Although the issue was not free from doubt, the Chief Judge in the Federal Court in Hawaii clearly would have had a difficult time accepting Lexington's argument had the case remained in Hawaii:

This court, while not persuaded on the present record that the arbitration provision is subject to a condition precedent that Centex prove it has expended $150,000 on the underlying claims, leaves the ultimate decision to the court in Texas.

Id. at *10.  [Emphasis added.]

   The 'nonbinding' observations about SIR provisions in this decision are likely to long outlast the transfer of this case to Texas, including that it is highly unlikely that there is a condition precedent of exhausting the SIR amount in order to Arbitrate under a Policy, even where the Duty to Defend expressly and admittedly does not incept or begin until the SIR or Retained Limit is reached.

For a discussion of related issues, see generally  Insurance Law Hawaii Blog and in particular the post there of July 11, 2011..

Please Read The Disclaimer.

California Bad Faith Stampede: First-Party, Third-Party Summary Judgment ...

... in Same Case.

   In Download Gaylord v. Nationwide Mut. Ins. Co. (E.D. Cal. Case No. 1.10.CV.620, Order on Defendants' Motion for Summary Judgment Filed March 4, 2011) PUBLIC ACCESS, also published as 2011 WL 836459 (E.D. Cal. March 4, 2011) (authorized password required to access Westlaw), the Court was confronted with claims both for First-Party Bad Faith and for Third-Party Bad Faith.   The Court granted the Insurance Companies' motion for summary judgment on all the Bad Faith Claims.

   The Federal Court listed many hornbook rules of law in a lengthy opinion, including these rules of California Insurer Bad Faith law:

 If a loss is not covered and no benefits are due, there can be no tort liability for breach of the implied covenant, even if the investigation was negligent. Benavides v. State Farm General Ins. Co., 136 Cal.App.4th 1241, 1250-51 (2006). The “ultimate test” in bad faith liability claims is whether the insurer's denial/conduct was unreasonable. See Nieto, 181 Cal.App.4th at 86. Where there is a “genuine issue” or “genuine dispute” as to the “insurer's liability under the policy for the claim asserted by the insured, there can be no bad faith liability imposed on the insurer for advancing its side of that dispute.”

Id. at *17.  Most if not all Courts in other jurisdictions also apply these rules to Insurer Bad Faith claims; however, while "reasonableness" is a hallmark of First-Party Bad Faith exposure, Third-Party Bad Faith does not depend on "reasonableness" for its "ultimate test".  The Federal Court apparently applied these rules to both sets of claims in this case, those based on assertions of First-Party Bad Faith and those involving alleged Third-Party Bad Faith.

   It is also significant to Insurer Bad Faith Law that this case involved reliance on Expert opinions which the Insurance Companies received in connection with their denial of a First-Party Claim and in connection with their refusal to defend a Third-Party Claim against the insured.  In this case, their reliance was reasonable in the eyes of the Federal Court, in fact, so reasonable that it was part of the reason that the Court granted the motion for summary judgment.

Please Read The Disclaimer.

 

Post-Settlement Notice Bars Coverage Under Pennsylvania Businessowner's Policy.

   In Download Nationwide Mut. Fire Insurance Co. v. Nova Real Estate LLC (E.D. Pa. Case No. 09.0303, Memorandum [Opinion] Filed March 1, 2011) PUBLIC ACCESS, also published as 2011 WL 721475 (E.D. Pa. March 1, 2011)(authorized password required to access Westlaw), a Federal Court held that Pennsylvania Insurance Law precluded all Coverage in a case of post-settlement first notice to a Businessowner's Insurance Company in a fire loss.  The Federal Court granted the Insurance Company's Motion for Summary Judgment for that reason.

   In that case, it is reported that the Policyholder's Attorneys negotiated a $3Million settlement of an underlying liability case filed by a third party against the Policyholder.  The Policyholder's Attorneys then sent the Insurance Company a demand to pay indemnity under the Businessowner's Policy:

On October 29, 2008, more than three and one-half years after the fire, counsel for Kay and Ranalli notified Nationwide by letter of the fire, the lawsuit, the settlement and the assignment of rights....  Defendants [Policyholders in this case] admit that this letter was the first notice that Nationwide received of the fire, the lawsuit or the settlement.

Id. at *2.

     Under these circumstances, the Federal Court agreed with Nationwide's reasons for denying Coverage:

       Nationwide argues that under Pennsylvania law there is no coverage under the policy issued to Nova Realty for the settlement of the Kay Lawsuit because Nova Realty failed to provide timely notice of the Kay Lawsuit and the subsequent settlement agreement and Nationwide suffered prejudice as a result of the late notice. Nationwide also argues that it is not obligated to provide indemnification for claims arising from the Kay Lawsuit because Nova Realty and Lawrence Eburouh voluntarily made payments and incurred expenses without Nationwide's consent in violation of the Nationwide Policy.

Id. at *4.

   Under Pennsylvania law in short, said the Federal Court, violations of Notice and Settlement Conditions precluded Coverage on the facts of this case:

After a thorough review of the record, we are satisfied that the Defendants failed to comply with the clear terms of the Nationwide Insurance Policy by providing late notice of claims, that Nationwide was prejudiced by the untimely notice, and that therefore Plaintiff is not liable to Defendant for coverage on the claims arising from the Kay Lawsuit. We also conclude that Nationwide is not obligated to indemnify for claims in the Kay Lawsuit due to Nova Realty's breach of the voluntary payments clause of the Nationwide Policy.

 Id.

Please Read The Disclaimer.

 

 

 

Foreclosure Failures Raise Insurance Coverage Issues, To Be Determined.

   In an action filed by servicing companies or banks on behalf of securitized trusts ("foreclosers"), the highest Court in Massachusetts affirmed lower court decisions and held itself that the Plaintiffs were not entitled to a declaration of perfection.  The Plaintiffs requested a judicial declaration that their real estate titles were perfected.  Instead, the Courts unanimously held that the foreclosers failed to obey the Law which allows nonjudicial foreclosures.   Download U.S. Bank National Association v. Ibanez (Mass., Opinion Filed January 7, 2011) PUBLIC ACCESS SLIPSHEET OPINION STATED SUBJECT TO REVISION.  You can also try this link for the Public Access Official Opinion:  http://weblinks.westlaw.com/result/default.aspx?action=Search&cnt=DOS&db=MA=ORS, or do an internet search for "Massachusetts Supreme Judicial Court" and click on decisions or opinions.

   Other aspects of this decision are posted on Insurance Claims and Bad Faith Law Blog. 

   There is potential resulting from this decision for a number of Insurance Coverage Issues under Director's and Officer's Liability Insurance Coverage and under Commercial General Liability Insurance Coverages, to name two examples.

   Further, as the Concurring Justice noted in this case:

   What is more complicated, and not addressed in this opinion, because the issue was not before us, is the effect of the conduct of banks such as the plaintiffs here, on a bona fide third-party purchaser who may have relied on the foreclosure title of the bank and the confirmative assignment and affidavit of foreclosure recorded by the bank subsequent to that foreclosure but prior to the purchase by the third party, especially where the party whose property was foreclosed was in fact in violation of the mortgage covenants, had notice of the foreclosure, and took no action to contest it.

   This decision, which clearly has landmark potential, is also the subject of reporting by, for example, E. Scott Reckard, "Foreclosure Ruling Could Be Setback for Banks" (Los Angeles Times Online, Friday, January 7, 2011), and by Gretchen Morgenson, "Massachusetts Ruling on Foreclosures is a Warning to Banks" p. A1, col. 1  (New York Times Nat'l ed., Saturday, January 8, 2011).

Please Read The Disclaimer.

Washington State First-Party "Occurrence" Defined; Fact Question in Case.

   "The Court defines 'occurrence' to mean something that takes place or comes about, which is synonymous with an event or incident."   The Court defined "occurrence" three times in these identical words in Western & Clay, LLC v. Landmark American Insurance Co., Download Western & Clay, LLC v. Landmark Am. Ins. Co. (W.D. Wash. Case No. C09.1423, Order on Cross Motions for Summary Judgment, Filed Nov. 22, 2010) PUBLIC ACCESS also published as 2010 WL 4855879 *3, *4 (W.D. Wash. November 22, 2010)(authorized Westlaw password required to access Westlaw).

   This case presented "an open question" under Washington State Insurance Law:  "what the term 'occurrence' means in a first-party insurance policy where there is no definition of the term."  Western & Clay, LLC v. Landmark American Insurance Co., 2010 WL 4855879 at *2.  The answer involved high stakes in that case.

   Western & Clay and the other Plaintiffs took the position that "the weather in the 2006-2007 winter," including wind and rain storms which resulted in damage claimed by Western & Clay under Policies issued by Landmark and by Axis Surplus Insurance Company, constituted a single occurrence.  If one "occurrence" was found, then "the claimed loss would be subject to only one deductible and one 30-day waiting period."  Id. at *1.  The Insurance Companies took a single, opposite position that their policies, which the Court identified only as "first-party policies," instead applied to require multiple occurrences in that case.

   After defining "occurrence" in the First-Party Policies at issue under Washington State Law, the Federal Court declined to apply the definition to the record facts of that Case.  Rather, the Court found that there was a question of material fact as to the "number of occurrences" which would have to be resolved in that Case by a Jury.

   "Occurrence" Definitions in various contexts are given a close look in Section 3:107, "Chinese Drywall Damages:  Some Third-Party, Liability Insurance Coverage Issues" by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition, West Publishing Co. 2010 Supplement).

Please Read The Disclaimer. 

Indiana Public Adjusters Held Not Personally Liable For Various Torts.

   In the case of Meridian Security Insurance Co. v. Hoffman Adjustment Co., Download Meridian Security Insurance Co. v. Hoffman Adjustment Co. (Ind. Ct. App. Case No. 45A03.0911CV538, Opinion Filed August 18, 2010) PUBLIC ACCESS also published as 2010 WL 3250173 (Ind. Ct. App. August 18, 2010)(Westlaw subscription required to access Westlaw), the Indiana Trial and Appellate Courts held that the Plaintiff Homeowner's Insurance Company did not have available to it the independent torts it alleged against the Public Adjusters in that Case.  The Indiana Court of Appeals held:

(1)  A Public Adjusting Agency could not be personally liable as the Insured's agent, for Tortious Interference with a Preexisting Contractual Relationship because, as the Insureds' agent for presenting their Homeowner's Insurance Claim, its acts were their acts and they could not tortiously interfere with their own contractual relationship, and similarly there was no basis for imposing independent Tort Liability on the Public Adjusting Agency for other torts allegedly committed in the presentation of the Homeowner's Claim, such as actual or constructive Fraud, Breach of Contract, or Failure to Act in Good Faith (even if Indiana Insurance Law were to recognize a reciprocal duty of Good Faith from an Insured to the Homeowner's Insurer, which it does not).  Meridian Security Insurance Co. v. Hoffman Adjustment Co., 2010 WL 3250173 at *4-*5 .

(2)  A Public Adjuster's alleged destruction of evidence did not provide the basis for a Spoliation of Evidence Claim against the Public Adjuster in that case, because Indiana Law had not recognized an independent cause of action for Spoliation of Evidence in a First-Party Case, and further, since a defense based on the alleged Spoliation was available, Equity did not mandate the fashioning of a remedy in that case.  Id. at *5-*6.

Please Read The Disclaimer.

 

Per-Occurrence Self-Insured Retention: Cause vs. Effect "Occurrence" Determinations.

   In Westchester Surplus Lines Insurance Co. v. Maverick Tube Corp., Download Westchester Surplus Lines Insurance Co v. Maverick Tube Corp (S.D. Tex. Case No. H.07.540, Mem and Order Filed June 28, 2010)(FREE ACCESS), also published as 2010 WL 26335623 (S.D. Tex. June 28, 2010)(Westlaw subscription required to access Westlaw), a Federal Judge in Texas applied Missouri -- and Texas -- rules of law to determine the number of "occurrences" for purposes of a Self-Insured Retention.

  Determining this issue "would reduce [the Policyholder's] recovery because of the per-occurrence self-insured retention".  Maverick, 2010 WL 2635623 at *1.  The Federal Court noted that the parties agreed that Missouri law governs that question in this case.  "The parties also agree that Texas law is consistent with Missouri law on this issue and serves as a useful supplement to the relatively few relevant Missouri cases."  Id. at *4.

   The Federal Court discussed the cause vs. effect split of authority in determining the number of "occurrences" under a Commercial (or Comprehensive) General Liability Policy in this country.  The Federal Court concluded that Missouri State Courts appear to follow "a 'cause' approach to determine the number of occurrences.  Under this approach, 'an insured's single act is considered the accident from which all claims flow.'"  Id. at *5.  "This approach contrasts to the 'effect' analysis used in some jurisdictions.  Under the 'effect' analysis, the focus is on the number of injuries resulting from the act, not on the number of acts by the insured."  Id. 

   Using a "cause" analysis, then, the Federal Court concluded in this case that "the property damage in the present case arose out of a single manufacturing defect and the manufacturer is the insured."  Id. at *6.  Therefore there was but one "occurrence" for purposes of the Insured's per-occurrence Self-Insured Retention.  See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 3:103, "Self-Insured Retentions:  When and What Duties, if Any, of Good Faith and Fair Dealing" (Shepard's/McGraw-Hill First Edition, West Publishing Co. Second Edition and 2010 Supplement).

   The Maverick Court also addressed, separately, the equally important Insurance Coverage issue of allocation or apportionment of Covered vs. Non-covered Losses in an Insured's own settlement of claims against it, for which it seeks Coverage and payment from its CGL Carrier.  That equally important issue will also be addressed in a separate post.

Please Read The Disclaimer.

Can Waiver Make Coverage? Wrongfully Denied Defense Raises Fact Issues.

   In a case involving a Wrongful Denial of Defense under a Directors and Officers Liability Insurance Policy, a Federal Court held that there was a question of Waiver which should be resolved by a Jury as a question of Fact -- even if Insurance Coverage was constructed in the process which was expressly excluded under the Policy.  California Dairies, Inc. v. RSUI Indemnity Co., Download PUBLIC FREE ACCESS California Dairies, Inc. v. RSUI Indemnity Co. (E.D. Cal. Case No. 1.08cv00790, Opinion Filed April 16, 2010) also published as 2010 WL 1541230 (E.D. Cal. April 16, 2010)(Westlaw subscription required to access Westlaw).

   The D&O Carrier denied a duty to defend but its Disclaimer Letter apparently left out another reason for denying all Coverage under the D&O Liability Policy.  Exclusion Number 7 was the unmentioned basis for Denial under that Policy and which was at issue in that case.  California Dairies, Inc. v. RSUI indemnity Co., 2010 WL 1541230 at *4.  Under California substantive law, as in many other jurisdictions, the Courts follow a "general rule" that a Denial of Coverage on one ground does not make for a waiver of other grounds not mentioned in the Denial or Disclaimer Letter.  However, California Law adds the caveat that the general rule applies "'absent clear and convincing evidence to suggest otherwise'".  Id. at *11.

   The Federal Court held that under California law, the Insurance Company's Motion for Judgment on the Pleadings itself called for denial.  "[T]he operation of implied waiver is a question of fact that cannot be decided on the pleadings, but rather suggests factual development, even if the waiver sought would create coverage where coverage is expressly excluded by the insurance contract."  Id. at *16.  [Emphasis added.] 

  The burden of proving Implied Waiver of bases for Coverage Denials which are not mentioned in Insurance Disclaimer Letters, by clear and convincing evidence or otherwise, may be imported by other jurisdictions if this line of case law is extended even more.  Until then, this development is at rest in the California Dairies case for now.  The Pacer Online Docket reflects that a 33-page Order was entered on June 25, 2010 Granting the Defendant Insurance Company's Motion for Summary Judgment on all Claims which remained against it in that case.  Download FREE PUBLIC ACCESS California Dairies, Inc. v. RSUI Indemnity Co. (E.D. Cal. Case No. 1.08cv00790, Memorandum Decision Granting Def's MSJ).

Please Read The Disclaimer. 

When "Known Loss" IS Known From the Insurance Policy.

    In a previous post, the so-called shorthand 'doctrine' of 'known loss' was explored in case law that found little or no support for it in the Insurance Policy at hand.

    In contrast, a United States District Judge explored "known loss" by looking at the actual language in the Insurance Policy in Download Westport Insurance Corp. v. Law Offices of Gerald J. Lindor, P.A. (S.D. Fla. Opinion Filed March 18, 2009).  The case is as topical as today's news.

    In Westport, the Policyholder attorney and law firm were accused of misappropriating certain loan closing funds.  The claim against them was made by ex-clients, who alleged that the Insureds misappropriated funds from their trust account over time that were intended to pay off the clients' loan.  According to the District Court, in a separate proceeding before the Florida Supreme Court for disbarment, the Policyholder attorney "stated that he manipulated and misappropriated client funds totaling approximately three million dollars, and that such transgressions were ongoing over the course of the preceding ten years."   Download Westport Insurance Corp. v. Law Offices of Gerald J. Lindor, P.A. (S.D. Fla. Opinion Filed March 18, 2009), attached Official Slipsheet Opinion at 2.  The Insureds' malpractice carrier, Westport, filed a Declaratory Judgment Action that as a result it had no duty to defend or indemnify the Insureds in this matter.

    The District Judge granted Westport's Motion for Summary Judgment.  In part, the District Court based its ruling on a standard provision in the Policy that excluded all Coverage for:

any claim based upon, arising out of, attributable to, or directly or indirectly resulting from ... any wrongful act occurring prior to the effective date ... if the Insured at the effective date knew or could have reasonably foreseen that such wrongful act might be expected to be the basis of a claim ....

See Download Westport Insurance Corp. v. Law Offices of Gerald J. Lindor, P.A. (S.D. Fla. Opinion Filed March 18, 2009), at 5.  Although both the Insurance Company and the Federal Court referred to this provision in shorthand as a "known loss" provision, see Download Westport Insurance Corp. v. Law Offices of Gerald J. Lindor, P.A. (S.D. Fla. Opinion Filed March 18, 2009) at 2 and 5, the Insurance Company sought Summary Judgment and the District Court granted the motion in pertinent part because the quoted provision is in the Policy and not the other way around, i.e., on the basis instead of some supposed 'doctrine' of 'known loss' which is NOT in the Insurance Policy.  Download Westport Insurance Corp. v. Law Offices of Gerald J. Lindor, P.A. (S.D. Fla. Opinion Filed March 18, 2009), at 5.

Please Read The Disclaimer.

    

When "Known Loss" is Not Known From the Insurance Policy.

    Courts are often interpreting Insurance Policies without looking at the language in which the Insurance Policies are printed.  Cases are sometimes decided as a result based on a so-called "doctrine" that changes from jurisdiction to jurisdiction, and sometimes from Judge to Judge in the same jurisdiction.  Some would call this "judicial activism," and it is.  General maxims should not decide specific Insurance Coverage Questions.

    A recent decision of the Court of Appeals of Wisconsin provides an example:   Download State v. Hydrite Chemical Co. (Wis. Ct. App. 2005), cert. denied (Wis. 2005).  In State v. Hydrite, the Wisconsin Court of Appeals held that the "known loss doctrine" bars Coverage under an Excess Liability Insurance Policy "only" when the Policyholder knows that there is "a substantial probability" that the Policyholder's liability for a third party's damages will be so great as to invade the Excess Insurance Company's Coverage.  Download State v. Hydrite Chemical Co. (Wis. Ct. App. 2005), cert. denied (Wis. 2005), Official Slipsheet Opinion at 4.

    This is not to say that the case was wrongly decided or, for that matter, that it was decided correctly.  However strong the "known loss doctrine" may be in Wisconsin Insurance Law, the Court's holding was based on the supposed "doctrine" because the language is not found in the Insurance Policy before the Court.

Please Read The Disclaimer.

Notice Under Policies First-Party and Third-Party.

    Notice provisions in insurance policies require "notice" to the insurance company that there is a loss or a claim.  In basic terms, and depending especially upon the type of Policy involved, notice provisions can be liberally construed in favor of effecting coverage, or not.  Whether liberally construed or not, provisions for notice of loss are subject to conflict among the Courts.  The judicial conflict in question is whether the insurance company can prove, or must be proven to have been prejudiced where the notice is late.

    In what appears to be the majority view on this question, breach of the notice of loss provision results in a presumption of prejudice to the insurance company, but the presumption is rebuttable:

If the insured breaches the notice provision, prejudice to the insurer will be presumed, but may be rebutted by a showing that the insurer has not been prejudiced by the lack of notice.

Bankers Ins. Co. v. Macias, 475 So. 2d 1216, 1218 (Fla. 1985)(subscription required;  first-party case; claim of policyholder to personal injury protection benefits as a result of an auto accident).  Note well:  After diligent search online, this case was not to be found online in a free web site.

    This holding has been followed in a third-party case, or one involving a liability insurance policy provision and a claim against the insured rather than a claim by the insured.  Assurance Co. of America v. Lucas Waterproofing Co., 581 F. Supp. 2d 1201, 1207 (S.D. Fla. 2008)(subscription required); download the official Opinion issued by the Court on this issue in this case:  Download Assurance v. Lucas Waterproofing Co (S.D. Fla. 2008). at page 8 of the official Opinion..

    The conflicting and apparent minority judicial viewpoint on this notice issue is that the insurance company should prove prejudice resulting from an alleged breach of a provision requiring notice of a loss.

   

Please Read The Disclaimer.

New Florida Case Law on Proof of Compliance With Conditions.

In last month's Seminar at the Orange County Bar Association in Orlando, Florida, "Survey of Insurance Issues EVERYONE Should Know," one of my topics was an Overview including Recent Cases.  Two cases in particular decided in the past year re-emphasize a couple of lessons regarding proof in a Florida Court of compliance with conditions in an insurance policy:

        COOPERATION: Under Florida law, the liability insurance company has a duty to take reasonable steps to attempt to obtain the insured's cooperation. See Continental Cas. Co. v. City of  Jacksonville, 2006 WL 2048249 *5 (M.D. Fla. July 20, 2006)(Richardson, Magistrate Judge).

        NOTICE: Florida law generally raises a presumption of prejudice if there is late notice of a claim against the insured-policyholder, but as a practical matter the parties benefit by introducing evidence on the issue of prejudice, one way or the other, where there is likely to be a holding or finding of late notice.  See, e.g., Donovan Constr., Inc. v. Vacker, 938 So. 2d 597, 598-99 (Fla. 4th DCA 2006)(Late Notice issue under a CGL or Commercial General Liability insurance policy, and underlying liability claim was based on the presence of mold; summary judgment for insurance company was reversed).

Please Read The Disclaimer.

Where "regardless of cause" Means "REGARDLESS OF CAUSE" ....

        And an Undefined "Flood" in an Insurance Policy Does Not Mean
        Water Washout Allegedly Caused by Negligence  of Human
        Beings.

    A Federal Judge in Louisiana is faced with a special set of claims.  The Consolidated Case of all of these claims would be special by reason of the claims alone.  There is another reason the Consolidated Federal Case is special.  The Federal Judge just issued an 85-page Opinion ordering the Coverages of almost as many Insurance Companies.  Here is a link to this Order which is now "attached" to this post:  In re:  Katrina Canal Breaches Consolidated Litigation Pertains to Insurance (E.D. La. Case No. 05-4182 et al., Opinion Filed Mon., Nov. 27, 2006).

    Each of the Claimants in that Consolidated Insurance Coverage Case has sued her and his own Insurance Company for Insurance Coverage for Damages after Hurricane Katrina in the City of New Orleans.  However, the claims they allege are not alleged for Damages caused by the Hurricane .  The claims are for Damages allegedly caused by the alleged negligence of People, i.e., the members of the Board of Commissioners for the Orleans Levee District.   Parenthetically, the Federal Judge kept all the Insurance Coverage Claims for disposition in Federal Court, but remanded all Damages claims against the Orleans Levee District to Louisiana State Court.

    "This case began the stream of complaints that have been filed as a result of damages arising out of all levee breaches which occurred in the aftermath of Hurricane Katrina."  So begins the very recent Order on various motions by  the U.S. District Judge in In Re:  Katrina Canal Breaches Consolidated Litigation/Pertains to Insurance" (Eastern District of Louisiana).

    This is a summary of the 85-page Order of the Federal Court.  It is a summary of some of the significant Insurance Coverage Issues addressed by the Federal Judge. 

    1.  All of the Policies involved in this Consolidated Federal Case were Homeowners Policies and they all provided "all-risks" Coverage, said the Federal Court.  That means that, in the face of many Federal Rule 12(b) Motions to Dismiss in particular, said the Federal Judge, "under Louisiana law, unless there is a specific exclusion for the type of water damage that an insured has incurred, coverage is presumed under these policies.  The focus of a court's inquiry then is on the relevant exclusions to coverage."  (The Federal Judge, it should be pointed out, also confronted and resolved Motions for Judgment on the Pleadings and Motions for Summary Judgment, although most of the Motions were Rule 12(b) Motions to Dismiss.)  The quoted ruling is found on page 9.  The Homeowners Policies are quoted in pertinent part in the opinion.   "ISO Policies" are quoted by the Court on page 15; State Farm Policy language is published on page 16, and Hartford Policy language is found on pages 16-18.

    2.    The State Farm and Hartford Policies are held to Exclude Coverage for "flooding" regardless of cause, in this Federal Order under Louisiana law.   After consulting and analyzing numerous authorities, the Federal Judge ruled that a disaster caused by the alleged negligence of Human Beings regarding levee breaches and ensuing water damage is not an otherwise undefined "flood" in the first place.  Hurricane Katrina may have caused a "flood", but the Claimants in this case did not sue for alleged Katrina Damages -- they sued for Damages that resulted after Katrina was all or almost totally gone.

    The State Farm and Hartford Exclusions for damage by flooding "regardless of cause", however, are held to mean exactly what they express in the attached ruling which of course applies to all of these consolidated cases.  (Pages 50 and 73 regarding State Farm; Pages 53-54 regarding Hartford).  [Emphasis added.]

    3.    ISO Flood Exclusions, which the Federal Judge referred to as "Water Damage Exclusions," were held to be ambiguous in this particular Consolidated Coverage Case.  Under Louisiana law, an ambiguous Insurance Policy provision is strictly construed against the Insurance Company since, said the Federal Judge, the Policy provisions are prepared by the Insurance Company and in Louisiana an Insurance Policy is commonly referred to as an adhesion contract.  (Page 10.)  "ISO Policies" subject to this ruling and strict construction were issued by many Insurance Companies which are Defendants in this Consolidated Insurance Case.  (See, for example, the Federal Judge's rulings regarding all these types of Policies on pages 15, 39, 44-45, 58, 65-66, 68-69, 74, 74-75, and 77-78.)

    The Federal Judge in part analyzed case law from other Gulf Coast States in the course of reaching the ruling of ambiguity, such as case law from Alabama and from Florida, as well as from North Carolina, an Atlantic Coast State which has had some experience too with Hurricanes (page 13).  Of particular interest to Florida Attorneys, the Federal Judge's attached Opinion focuses at one point on a decision of the Supreme Court of Florida (pages 35-36).

    Further, those familiar with rulings previously issued by the Federal Court in the Southern District of Mississippi will find them analyzed in the attached Opinion, too.  The guts of those rulings were attached to "anti-concurrent cause" Exclusions, which did not yet apply in the Federal Consolidated Coverage Case in Louisiana, Order attached; the Federal Judge in the Eastern District of Louisiana distinguished those rulings because there were no allegations presented in the challenged complaints in Louisiana Federal Court that involved any more than one cause.  (Pages 49 and 71.)  The Federal Court noted in the attached Order that the actual evidence may reflect more than one cause, and the Court would in that case revisit the anti-concurrent cause Exclusions relied on by the Insurance Companies, at that time.  (See for example Pages 33, 69, and 78.)

    4.    The Federal Court in the attached Eastern District of Louisiana Consolidated Insurance Coverage case concluded its rulings by candidly holding that there is a substantial ground for differences of opinion as to the governing Insurance Law Questions, such that the Court ordered that an immediate appeal may be taken from these orders.  (Page 85.)

    A Notice of such Appeal is expected on or before Thursday, December 7, 2006.  Further known developments, if any, in this Consolidated Insurance Coverage Case will be posted here.

REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
   

Late Notice: Not good ground to support Total Denial of Coverage.

    Late notice is a coverage defense that ordinarily involves prejudice to the insurance company.  In some jurisdictions, the liability carrier must prove prejudice.  In other jurisdictions, late notice raises a rebuttable presumption of prejudice.  In cases involving a reubuttable presumption, legally there is a presumption of prejudice which the policyholder is free to rebut with evidence (and of course the insurance company is free to support with evidence).  Florida follows a presumption of prejudice following late notice, but that did not help the Commercial General Liability (CGL) carrier in Donovan Construction, Inc. v. Vacker, Essex Insurance Co., & Ocampo & Assoc's, Inc., 31 Florida Law Weekly D2440 (Fla. 4th DCA Case No. 4D05-4105 Opinion Filed September 27, 2006)(subscription required), free access available through the Fourth District Court of Appeal public web site  (click on opinions released September 27, 2006 and then follow the above case number).

    Donovan Construction and its president, Mr. Thomas Donovan, obtained a CGL policy from Essex.  Allegedly, a construction project on which Donovan was working incurred a modern problem:  Mold.

    The standard liability insurance policy generally requires two types of notice to the insurance company, although the opinion in the Donovan case does not discuss them.  First comes notice of occurrence likely to result in a claim that will involve the liability policy, in basic terms.  Without discussing whether the Essex policy required this type of notice in the Donovan case, the Fourth District wrote:  "On May 3, 2004, Thomas Donovan, directed his insurance agent, Associated Underwriters of Florida, to notify Essex of Vacker's 'possible' claims.  At no time did Essex contact Donovan regarding the potential claim nor, to DCI's [Donovan Construction, Inc.'s] knowledge, take any actions as a result thereof."

    The other type of notice required under the standard liability insurance policy involves notice of a claim in suit.  In other words, the other type of notice involves notice that an insured has been brought into a lawsuit.  On January 7, 2005 DCI was served with a complaint in a lawsuit filed as a result of the alleged mold.  Notice was again given, apparently:  "On January 25, 2005, AXA Corporate Solutions, DCI's other insurer [this is the only time AXA is mentioned in the appellate opinion], wrote to Essex advising them ....  Also on this date, Essex notified DCA of its denial of said claims.  DCI tendered the defense of this matter to Essex and requested that they be indemnified.  Essex refused to defend and indemnify" for many reasons including alleged late notice.

    The trial judge entered a summary judgment for Essex on the ground of no coverage due to late notice.  The Fourth District Court of Appeal reversed, holding that on the above and similar facts,  "there is a genuine issue of material fact concerning when DCI knew of the mold problems and whether it failed to timely notify Essex."

    Late notice is just not a particularly good ground to support Total Denial of All Coverage, as this new case reflects.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.