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On its website, the Windstorm Insurance Network (WIND) describes itself as "the only member association to bring together both defense and policyholder professionals to connect, learn, and engage on important topics in the property/windstorm insurance claims industry." I will be taking a look myself this week.
Starting tomorrow, Thursday the last day of January in 2019, and scheduled to continue on Friday, February 1, 2019, I will be attending the sessions I signed up for a couple of months ago. They include catastrophe claims handling and Hurricane damages coverages. I would like to meet up with many participants especially the defense and policyholder professionals that make up the announced membership of WIND, in other words, the people who represent the people who make and deny insurance claims every day but especially after Hurricanes and earthquakes and wildfires.
The 20th Annual Windstorm Insurance Conference is set for Jan. 30 - Feb. 2, 2019 at the Walt Disney Dolphin Resort. (I will not be staying there. I will drive back and forth from my home in the Orlando area. It's a lot less expensive.)
Home-Owners Insurance Company issued a "business owners policy" of property insurance which provides all-risks coverage, i.e., covering all risks or perils except those which are specifically excluded.
The "BOP" policy issued by HO contained a standard "earth movement exclusion":
The policy covered risks of physical loss unless the loss was “[e]xcluded in Section B., Exclusions” or “[l]imited in Paragraph A.4., Limitations.”
* * *
The claim was denied pursuant to an exclusion to coverage in Section B for “[a]ny earth movement.” Home–Owners thereafter sought a declaration that it owed no duty to cover Andriacchi’s losses because the losses were excluded under the policy.
The Michigan appellate court upheld HO's denial of coverage in this case which involved damage allegedly resulting from street repair, because, the appellate court held, the earth movement exclusion was not limited to earth movement due to natural causes. Home-Owners Ins. Co. v. Andriacchi, 320 Mich. App. 52, 903 N.W.2d 197 (Mich. Ct. App. 2017).
Dennis Wall is at work on an article about interpretation and application of all-risks insurance coverage.
The decisions in the case of In re State Farm Fire & Cas. Co., 872 F.3d 567 (8th Cir. 2017), came out of a hailstorm.
The storm struck Ms. Amanda LaBrier's home in St. Louis, Missouri, damaging the home's exterior roof, siding, and gutters. She made a claim under her homeowner's policy with State Farm. The policy provided "Coverage A - Dwelling" property insurance coverage on a "replacement cost" basis. "Until actual repair or replacement is completed," however, the policy provided that the carrier would pay "only the actual cash value at the time of the loss of the damaged part of the property," but not more than "the cost to repair or replace the damaged part." In that instance, the policy was in essence on a "replacement cost" basis for an "actual cash value."
State Farm made Ms. LaBrier an offer which she could -- and did -- refuse. State Farm was ready to pay the policy requirement of "actual cash value" which in this case included an element of depreciation to account for the age of Ms. LaBrier's roof before it was shot with hail pellets.
Ms. LaBrier apparently thought that she could do better than that, because she rejected State Farm's offer, hired a family friend to replace the roof, and sent State Farm the bill for the whole thing. The trial court ruled in her favor, effectively equating "replacement cost" with whatever-it-costs even though the policy limited the carrier's obligation to pay "actual cash value" for any replacement. The district court accordingly denied State Farm's motion to dismiss. In a separate order, the district court overruled State Farm's objections to answering voluminous interrogatories about the claims of "putative class members."
Only later did the trial court also enter an order certifying a class of similarly situated State Farm policyholders.
The appellate court reversed the trial court's with directions to dismiss Ms. LaBrier's coverage claim and thereby to deny her motion to certify a class of State Farm homeowners to whom State Farm denied allegedly similar coverage claims.
The procedural posture of this appeal is interesting. The trial court's denial of State Farm's motion to dismiss was never appealed, apparently. The appellate court tells us that State Farm appealed two things in two appellate proceedings. First, State Farm petitioned for a writ of mandamus that the district court "vacate what it alleges are overly-burdensome [sic] discovery orders." In re State Farm, 872 F.3d at 571.
State Farm's second appeal was its only other appeal in this case, and it did not request appellate review of the trial court's order denying State Farm's motion to dismiss in this second appeal, either. State Farm's second appeal in this case came when it requested and the Eighth Circuit granted "State Farm leave to appeal the class certification," which the Eighth Circuit thereafter consolidated with State Farm's other appeal, the State Farm petition for a writ of mandamus. In re State Farm, 872 F.3d at 572.
When the appellate panel reversed the class certification order it also reversed the district court's order denying State Farm's motion to dismiss. You might have thought that the appellate panel would also naturally grant State Farm's mandamus petition since the panel "vacated" the lower court's orders "upholding premature classwide discovery[.]" If you thought that, as I did, then you and I would both be wrong. After saying that it vacated the lower court's discovery orders, thereafter the panel concluded its opinion with these other words: "In light of this disposition [i.e., dismissal], State Farm's petition for a writ of mandamus is denied as moot." In re State Farm, 872 F.3d at 577.
In Pella Corp. v. Liberty Mut. Ins. Co., 246 F. Supp. 3d 1247 (S.D. Iowa 2017), a Court answered the title question. Each underlying claim for water damage allegedly caused by defective design of the policyholder's windows was a separate occurrence under its Comprehensive General Liability policies involved in that case.
A first-party property insurance policy containing both specified perils or multiperils coverages, and specified perils or multiperils exclusions, if you will, was not rendered ambiguous as a result, in Comley v. Auto-Owners Ins. Co., NO. 2016-CA-001305-MR, 2017 WL 4448528 (Ky. Ct. App. October 6, 2017; Stated Not Final And Not to be Cited As Authority in Kentucky Courts).
The facts of that case center around a water main outside the plaintiff's property. The water main broke and inundated plaintiff's-policyholder's house and personal property with damage. Kentucky's intermediate appellate court held that the water damage exclusion for a "flood" did not require natural causes in order for the exclusion to apply.
Accordingly, the policy at bar was not ambiguous and the policyholder's claimed damage was excluded "water damage," the Kentucky Court of Appeals held in that case.
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In Westfield Ins. Co. v. Davis, 232 F. Supp. 3d 918 (S.D. W. Va. 2017), it was held under West Virginia law and the unambiguous liability section of a homeowner's insurance policy, that insureds' mistaken harvesting of trees on property of another person was not an accident, and so was not a covered occurrence.
This decision is in line with the great majority of decisions under comprehensive general liability (CGL) policies that an occurrence is an accident neither expected nor intended by the insured, which many CGL policies now expressly provide. That is exactly the approach taken by the Davis court under the homeowner's insurance policy at issue in this case in West Virginia.
In Tustin Field Gas & Food, Inc. v. Mid-Century Ins. Co., 219 Cal.Rptr.3d 909, ___ P.3d ___ (Cal. 2d DCA, Div. 2, July 3, 2017), a California DCA held that an underground storage tank or "UST" did not "collapse" within the meaning of a standard property insurance policy. Its holding rested on undisputed evidence and unambiguous policy language in that case, that the policy exempted damage caused by "settling" from a covered "collapse." (The appellate court erroneously termed the exemption an "exclusion.") The court held:
Several key facts are undisputed. It is undisputed that the construction company that placed UST-1 in the ground did so negligently because it placed UST-1 on a big rock and next to several air pockets, and then buried it with debris-filled “native soil.” It is undisputed that, 16 years later, UST-1's fiberglass sheath and the big rock both split. And it is undisputed that UST-1's inner steel wall remains intact and that UST-1's fiberglass sheath retained its cylindrical shape, but that UST-1 was not usable until its fiberglass sheath was patched.
These undisputed facts show that the damage to UST-1 constitutes at most a “substantial impairment of [its] structural integrity.” However, because the Policy excludes “settling” and the like, a “substantial impairment of structural integrity” is not a “collapse” as a matter of law.
Vouchers take the place of public schooling so that people can pay for charter schooling.
Vouchers are paid by taking money from public school taxes. This seems to be the trade-off for the prospect that the children of parents holding vouchers will perform well academically if they do not have to attend public schools but can choose to attend charter schools instead.
This calls into question the availability of insurance coverage for those who enable or even mandate such choices. Many kinds of insurance policies contain the equivalent of the Commercial General Liability or CGL "occurrence" definition, which many States including Florida equate with the standard CGL Exclusion 1:
There is to put it simply no coverage for an occurrence which is not an accident neither expected nor intended from the standpoint of the insured.
In the case of school vouchers, the relatively poor academic performance of voucherized students seems to qualify as an event that should not be covered by insurance. This has ramifications on several different fronts.
Hedge Funds and other Investors in Charter Schools, and Charter School Administrators. These people certainly have, or should carry, Errors and Omissions (E&O) or Directors and Officers (D&O) coverage or the equivalent. If they push vouchers knowing of their consequences at this time, there seems to be a real insurance coverage issue over whether their choices could even potentially be covered as accidents neither expected nor intended from their standpoint.
School Boards and School Board Members. Boards and their Members carry or should carry something like School Officials Professional Liability Policies, whatever the policies might be called. Putting aside questions of immunity, if any, there is still a very real question of whether School Boards and their Members can claim insurance coverage in the face of years of such poor test results that choosing vouchers for children may not be capable of an argument that such choices, again, are accidents neither expected nor intended from the standpoint of the insured.
"Known Loss Doctrine" proponents. Some judges and many lawyers have argued that insurance coverage is or should be "excluded" whenever the policyholder knows that a loss has happened for which the policyholder is now claiming coverage. There is rarely any such exclusion written in any insurance policy, but the argument is made often, usually by people who do not practice insurance coverage law.
Insurance is not available however unless there is a risk to be covered. In this situation, there does not seem to be much risk of the outcome with vouchers. Once vouchers are chosen, the outcome seems to follow. This may present another situation for the so-called "known loss doctrine," not as a supposed "exclusion" but simply because insurance arguably does not exist to cover known losses.
A few minutes of your time could hardly be better spent than with this linked article, and I am telling you no lie. Today is George Washington's Birthday.
Products and Workmanship Exclusions were interpreted to apply to exclude coverage for a policyholder's claimed loss but for exceptions to the exclusions, in National Mfg. Co. v. Citizens Ins. Co. of Am., No. 13-314, 2016 WL 7491805 (D.N.J. December 30, 2016) (stated Not for Publication; precedential value apparently limited accordingly in District of New Jersey).
However, the District Judge found ambiguities in the exceptions to the exclusions. Therefore the Judge granted the policyholder's motion for summary judgment that there is insurance coverage for the claimed loss:
The exceptions contained in the Products and Workmanship Exclusions at best render the exclusions ambiguous and at worst incomprehensible. In light of causes of loss that are covered, the exclusions, and the exceptions to the exclusions, the policy language is circular. Under the Covered Cause of Loss section, all risks of direct physical loss are covered unless an exclusion or limitation applies. The exclusions then negate coverage under the Policy, unless the exceptions apply. The exceptions to the exclusions return the policyholder to the very place he started—the Covered Cause of Loss. The process then begins anew—covered causes of loss, exclusions, exceptions to the exclusions, and a return to covered causes of losses. Hence, the circular nature of the policy language.
National Mfg. Co. v. Citizens Ins. Co. of Am., No. 13-314, 2016 WL 7491805, at * 11 (D.N.J. December 30, 2016) (stated Not for Publication; precedential value apparently limited accordingly in District of New Jersey).
An alternative holding reached by other courts in other cases (and in other jurisdictions) is that exceptions to exclusions in an insurance policy cannot create (or provide) coverage. Under the District Court's analysis in National Manufacturing, however, exceptions effectively broaden coverage beyond the exclusions in which they are written.
There is an argument that that is the very reason that the exceptions were written, in other words, to broaden coverage and soften or limit the reach of the exclusions. Such is the approach effectively taken in National Manufacturing. It remains to be seen, of course, whether the approach taken by the Court in that case has persuasive value beyond the precedential value if any of the particular decision in that case.
In Continental Cas. Co. v. Indian Head Indus., Inc., ___ F. App'x ___, No. 15-2217, 2016 WL 7321362 (6th Cir. December 16, 2016) (emphasis added), a panel of the Sixth Circuit Court of Appeals concisely summarized the prevailing alternative rules on allocation of indemnity and defense expenses under multiple insurance policies:
E. The Allocation of Indemnity Damages and Defense Costs
There are multiple approaches a court may take in assigning the allocation of damages and costs under an insurance policy. See Arco Indus. Corp. v. Am. Motorists Ins. Co., 232 Mich. App. 146, 160–61 (1998). At issue in this case are two of these possible approaches. The “all sums” or “joint and several liability” approach considers each insurer of any policy triggered to be liable for the insured’s entire loss, including costs falling outside the policy’s period. Id. at 160. Liable insurers may then seek contribution from other insurers whose policies have been triggered. Id.The “time-on-the-risk" or “pro rata” approach assigns liability among the insurers for the triggered policies based on the portion of the underlying injuries that may be associated with each policy so as to make the insurer liable only for the prorated share of injuries. Id. at 161.
The panel then went on to apply Michigan law and pro rata allocation among the insurance policies at issue.
In Camp's Grocery, Inc. v. State Farm Fire & Cas. Co., 2 No. 4:16-cv-0204-JEO, 2016 WL 6217161 (N.D. Ala. October 25, 2016), one Camp's sued its insurance carrier for cyber insurance coverage. Camp's claimed coverage principally under its policy's Inland Marine coverage forms, including a claimed coverage for cyber insurance allegedly offered by the carrier on two forms: an Inland Marine Computer Property form and an Inland Marine (Coverage) Conditions form.
Although seemingly not identified by the District Court, the policy at issue appears to be a standard CGL policy to which the two identified forms were added. In any case, the District Court agreed with the carrier that the coverage forms from which Camp's argued for liability insurance coverage are instead first-party forms, not coverage forms for liability insurance coverage. The District Court entered a summary judgment for the insurance company of no coverage for the alleged cyber breach in this case.
Camp's operates a grocery as a franchisee of Piggly Wiggly in Alabama.
The plaintiffs against Camp's in the underlying case were Credit Unions. They sued for alleged damages resulting from an alleged cyber breach. The Credit Unions alleged that Camp's is liable for damage on the basis that a data breach was caused by Camp's failure to provide adequate computer systems and employee training and/or to maintain adequate encryption and intrusion detection and prevention systems.
The Credit Unions alleged claims against Camp's under Alabama law for negligence, wantonness, misrepresentation, and breach of contract. The Credit Unions also alleged a claim under federal law for violation of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq.
Camp's, in turn, filed the case we are concerned with here. Camp's demanded a declaratory judgment of its insurance coverage. Specifically, Camp's prayed for a declaration that State Farm must defend and indemnify Camp's in the underlying action.
It got a declaration concerning its insurance coverage, but not the one it was looking for. Even with the two Inland Marine endorsements added to this apparent standard CGL insurance policy, there still is no CGL coverage for the alleged cyber breaches at issue in the eyes of the District Court in this case. The coverage forms in question are first-party coverage forms, the District Court held. As such, they do not and never can provide for a duty to defend or to indemnify like a liability insurance coverage.
In Ventura v. Kyle, 825 F.3d 876 (8th Cir. 2016), former governor and former professional wrestler Mr. Jesse Ventura filed a suit for libel against an author, one Kyle, a Navy SEAL who wrote a book called "American Sniper."
Mr. Ventura also sued the author's publisher, HarperCollins, also for libel. By the time of trial, Mr. Kyle was dead and his widow was substituted as a party defendant in his place as executor of the author's estate.
At trial, Ventura's lawyers attempted to establish bias on the part of two witnesses who were employees of HarperCollins. The attempt went like this. Over objection and in the face of a motion for mistrial (which the District Court overruled and denied, respectively), on cross-examination Mr. Ventura's lawyer asked the witnesses whether they knew about insurance coverage carried by HarperCollins, and if they knew that the author's defense lawyers were being paid under the publisher's insurance policy for libel and defamation. "The district court permitted this cross-examination, by which Ventura's counsel ostensibly sought to show the HarperCollins witnesses were biased in favor of Kyle because HarperCollins and Kyle were covered by the same insurance policy." Both witnesses said "no," they did not know. Ventura v. Kyle, 825 F.3d 876, 882 (8th Cir. 2016).
Ventura's lawyer then mentioned HarperCollins "insurance" for libel and defamation during closing argument.
The author's estate and the publisher appealed the cross-examination and the closing. The Eighth Circuit reversed, holding that the mention of insurance during questioning and during closing argument was not supported by evidence recognized by the law in the record. There was insufficient evidence of bias to support the questioning in the first place, for one thing, the Eighth Circuit ruled:
As a matter of basic evidentiary foundation, Ventura never established by direct evidence or reasonable inference that Rosenblum and Hubbard (the witnesses in question, employees of the publisher) even knew about any insurance coverage or possible insurance payment. Rosenblum and Hubbard had no personal knowledge on the topic and were not qualified to testify on the subject. See Fed. R. Evid. 602 (parenthetical omitted).
Ventura's counsel argued in closing, “It's hard to believe that [Rosenblum and Hubbard] didn't know about the insurance policy because it's right in Kyle's publishing contract.” The one-line mention of insurance contained in the lengthy small-print contract merely acknowledges HarperCollins “may carry” insurance. (Emphasis added). The publishing contract does not establish HarperCollins actually purchased insurance, much less that Rosenblum and Hubbard knew about it.
It is difficult to envision how Rosenblum and Hubbard could have been biased or even influenced by an insurance policy of which they were unaware.
Ventura v. Kyle, 825 F.3d 876, 883-84 (8th Cir. 2016) (material in parentheses added except for emphasis by the Court; otherwise, material in brackets by the Court).
The Eighth Circuit was undoubtedly right on the narrow merits of the appeal in this particular case, that "witness bias" could not be a legally recognized foundation or predicate to inject insurance into a trial where the existence of insurance was simply not proven. In this view, bias was a pretext for injecting insurance into the trial.
But there is a larger issue embedded in this narrow ruling. Insurance coverage cannot be proven by bias even if bias is proven. Even more broadly stated, you cannot prove that someone has insurance coverage because they "may carry insurance" or a person who knows nothing about insurance testifies about it. In this view, bias cannot be used as a pretext for establishing insurance coverage.
In Owens v. Metropolitan Life Ins. Co., ___ F. Supp. 3d ___, No. 2:14-CV-00074-RWS, 2016 WL 5868103 (N.D. Ga. September 27, 2016), the Court was confronted with a motion to exclude the expert witness testimony of a respected law professor named Jeffrey W. Stempel. The Court in that case side-stepped ruling on the motion to exclude, but instead resolved the parties' competing motions for summary judgment first. This made it unnecessary to reach the motion to exclude, the District Judge said.
The Court in that case ruled on "interpretation of the unambiguous language of the Policy" without consulting Professor Stempel's expert report. Owens v. Metropolitan Life Ins. Co., ___ F. Supp. 3d ___, No. 2:14-CV-00074-RWS, 2016 WL 5868103, at *9 (N.D. Ga. September 27, 2016).
The District Judge added: "Had, however, reliance on Professor Stempel's report been necessary, the Court finds no basis for his exclusion as an expert."
Yesterday as this article is written, the current head of Wells Fargo confirmed the fraudulent opening of bogus accounts in testimony before the United States Senate.
He blamed the 5,300+ bad apples. He called them "rogue employees."
Are there any insurance policies including any bonds that provide coverage for 5,300+ bad apples and rogue employees? Wells Fargo is undoubtedly looking at this question right now. So are its insurance carriers.
Or if the damages to Wells Fargo employees are not really the results of misconduct by 5,300+ bad apples and rogue employees, but if instead they are proven to be the results of corporate requirements imposed on the apples by Wells Fargo, it seems that there may be good arguments that many if not all of the damages to Wells Fargo customers were foreseeable and even intentional. Wells Fargo admits that it has known about the fraud since at least 2013 and the "illegal sales" may have begun in 2009. Michael Corkery, "DealBook / Illegal Activity at Wells Fargo May Have Begun Earlier, Chief Says" (New York Times Online, posted Tuesday, September 20, 2016).
There is a recurring exclusion or "carve-out" from commercial general liability insurance "occurrence" coverage when the policyholder is shown to intentionally cause the damages complained of by the underlying plaintiff. This is a frequent insurance coverage issue. If that is shown to be the case here, then Wells Fargo faces some difficult issues of what it knew and when it knew it, as they say, if Wells Fargo is inclined to put on proof to contest whether the reported pattern of fraud was a covered "occurrence" or the exclusionary insurance coverage equivalent of intentional damages.
Time will tell. Stay tuned as coverage issues develop along with the liability issues embedded in this behavior.
In Liberty Ins. Underwriters, Inc. v. Davies Lemmis Raphaely Law Corp., 162 F. Supp. 3d 1068 (C.D. Cal. 2016) (page numbers not yet available from Westlaw), appeal docketed, No. 16-55711 (9th Cir. May 16, 2016), a District Judge in California held that seven lawsuits against a law firm for alleged malpractice collectively made for one claim for purposes of the firm's per-claim professional liability policy limit on the applicable policy. The seven suits in this instance did not trigger $2,000,000 aggregate limits. The reason for decision was that the alleged actions all arose from a single course of conduct:
In this case, while the Underlying Actions have been brought by different plaintiffs, they all arise from a single course of conduct, a unified policy of making alleged affirmative misrepresentations to investors in order to induce them to invest in commercial real estate acquisitions facilitated by AMC ["Asset Management Consultants, Inc."].
AMC is identified in the opinion as "a licensed California real estate broker which facilitates real estate investment partnerships, and its principal, James Hopper (collectively 'AMC')." Liberty Ins. Underwriters, Inc. v. Davies Lemmis Raphaely Law Corp., 162 F. Supp. 3d 1068 (C.D. Cal. 2016) (page numbers not yet available from Westlaw, but this quotation is from the final sentence of the fourth full paragraph in the District Court's opinion), appeal docketed, No. 16-55711 (9th Cir. May 16, 2016). The District Judge accordingly granted the insurance company's motion for summary judgment "as to whether the Underlying Actions should be considered a single claim for purposes of the per-claim limit ...."
The per-claim limit on the relevant policy is $1,250,000. In the last two paragraphs of its opinion, the District Court denied the insurance company's motion for summary judgment in this case as to the factually disputed issue of "whether the per-claim limit has been exhausted."
Ms. Maria Amplatz is a landlord of residential rental properties in Minnesota. She was issued a commercial property insurance policy that provided coverage against hail and windstorm damage. She made a claim as a result of alleged damage to her properties from a hail storm in Amplatz v. Country Mut. Ins. Co., 823 F.3d 1167 (8th Cir. 2016). Her carrier paid for exterior damage but refused to pay for interior damage under the circumstances of that case.
The Eighth Circuit affirmed the District Court's denial of Ms. Amplatz's motion for a new trial and for the entry of judgment in her favor. The Court's ruling in that appeal appears to be totally consistent with the majority views on the insurance coverage questions presented.
The Court held that jury instructions in that case fairly and adequately charged the jury with the coverage issues involved because, taken together, the instructions tracked the provisions of the insurance policy at bar:
Instruction number eleven covered policy provisions, explaining that the policy “provides coverage for damage to [the policyholder's] properties caused by windstorm or hail,” and that interior damage is covered “if that damage was caused by rain or snow AND if the building or structure first sustained wind or hail damage to its roof or walls through which the rain or snow entered.” Further, instruction thirteen covered Amplatz's duty to prevent further damage to her property. Taken as a whole, the jury instructions fairly and adequately presented the issues in the case to the jury.
Amplatz v. Country Mut. Ins. Co., 823 F.3d 1167, page numbers not yet provided by Westlaw but see text under "Headnote 11" (8th Cir. 2016) (capitalization in original).
Judge Jed Rakoff applied a policy's limiting language of "flood" without objection in National R.R. Passenger Corp. (a/k/a "Amtrak") v. Arch Specialty Ins. Co., 124 F. Supp. 3d 264, 267 n.3 (S.D.N.Y. 2016) (case involved New York substantive law), appeal docketed, No. 15-2358 (2d Cir. July 24, 2015):
Defendant Westport Insurance Co. issued a policy that defines flood as “surface water, flood waters, waves, tide or tidal waters, sea surge, tsunami, the release of water, the rising, overflowing or breaking of defenses of natural or manmade bodies of water or wind driven water, regardless of any other cause or [e]vent contributing concurrently or in any other sequence of loss.” Insurers' 3/9/2015 56.1 Statement ¶ 9. Amtrak does not dispute that this definition covers at least some of the damages it sustained during Superstorm Sandy.
Judge Rakoff did not say so, but the above-quoted "flood" definition appears to come from Westport's "flood" exclusion which plainly comes equipped with an Anti-Concurrent Case Exclusion. As Judge Rakoff pointed out in his opinion, there were two definitions of "flood" under Amtrak's many insurance policies at issue in that case.
"The Court finds that both definitions of the term 'flood' unambiguously encompass inundation of normally dry land that is caused by storm surge." National R.R. Passenger Corp. (a/k/a "Amtrak") v. Arch Specialty Ins. Co., 124 F. Supp. 3d 264, 269 (S.D.N.Y. 2016), appeal docketed, No. 15-2358 (2d Cir. July 24, 2015).
The District Court accordingly denied Amtrak's motions for summary judgment, and granted in part and denied in part the carriers' motions for summary judgment. The Second Circuit's docket shows that it has set oral argument in the appeal in this case for August 19, 2016.
SUPREME COURT OF FLORIDA, SPLIT ON AMBIGUITY, IS APPARENTLY UNITED ON NO EXTRINSIC EVIDENCE … YET, IF EVER.
In a decision that attracted at least 3 "friend of the court" briefs, and lawyers from places as far from Florida as Washington, D.C. and New York City, as well as from Fort Lauderdale, Hollywood, Miami, Plantation, Tallahassee, West Palm Beach, and Bay Harbor Islands, the Supreme Court of Florida split 4-to-3 on grounds that were much narrower than the amici wanted.
The four-Justice majority was actually even narrower than that. The Southern Third official report of this decision was just released on Westlaw. The decision provided answers to questions certified by the Eleventh Circuit Court of Appeals, which received its answers in an unofficial report a while back.
Normally, Florida Supreme Court decisions are officially published in Southern Third sooner than three years after they are rendered. The fact that this decision was finally officially published after three years may reflect that someone was waiting for a vote or two to change; if so, they were disappointed.
Three Justices concurred in the majority opinion, held that the insurance policy at bar was ambiguous, and being ambiguous should be interpreted "against the insurer and in favor of coverage without resort to consideration of extrinsic evidence." Washington Nat'l Ins. Corp. v. Ruderman, 117 So. 3d 943, 952 (Fla. 2013).
A fourth Justice voted with the majority's answers to the Eleventh Circuit's certified questions but only concurred in the result.
For their part, the 3 dissenting Justices remained unanimous that "[t]he insurance policy is not ambiguous." Washington Nat'l Ins. Corp. v. Ruderman, 117 So. 3d 943, 952 (Fla. 2013) (Polston, C.J., dissenting).
None of the Justices voted in favor of admitting extrinsic evidence to interpret an insurance policy, whether the policy is ambiguous or not.
A contractor brought suit against its builder's risk insurer after the carrier denied coverage for damage to parts of a home under construction and to certain personal property. The damage was caused by a fire, and the resulting damage from the fire was partly covered under a homeowner's insurance policy bought by the prospective home-purchasers who had not yet closed on the house.
A jury returned a verdict in favor of the builder's risk insurer and against the insured contractor. The trial court entered judgment on the verdict, which was affirmed on appeal.
The contractor and the mortgagee both appealed to the Wisconsin Supreme Court. The Supreme Court granted their petitions for review, reversed, and remanded.
The Wisconsin Supreme Court held that the existence of the homeowners' policy did not nullify all coverage under the builder's risk policy in this case, despite a condition in the builder's risk policy that effectively terminated its coverage if "permanent property coverage applied" to the interests in the damaged property. Whether and when "permanent property coverage applied" so as to trigger the condition is ambiguous, in the eyes of the Wisconsin Supreme Court, and therefore must be interpreted in favor of coverage.
Further, although the prospective purchasers in this case bought homeowner's insurance while their home was under construction, builders are entitled to a reasonable expectation that their builder's risk policies will apply to homes under construction and before closing. The homeowner's policy in this case was therefore not "permanent property coverage [that] applied" to foreclose the contractor's coverage under its builder's risk policy. Fontana Bldrs., Inc. v. Assur. Co. of Am., No. 2014AP821, ___ N.W.2d ___, 2016 WL 3526408, ¶ 69 at *16 (Wis. 2016).
In Braden v. Foremost Insurance Co., No. 4:15-cv-4114, 2016 WL 1417849 (W.D. Ark. April 8, 2016), a Federal Judge in Arkansas essentially rewrote Federal Rule of Civil Procedure 26 with the agreement of the counsel of record in that particular case, and with the agreement of the parties if the parties knew about it.
Rule 26 provides that materials in a court file may be sealed if they are "a trade secret or other confidential research, development, or commercial information." The Rule has been interpreted pretty consistently since it was written to require proof before a court can enter an order sealing materials from public view.
In the Braden v. Foremost Insurance Co. case, as in many cases in contrast, the secrecy order was simply signed by a Federal Judge based on an agreement written by the lawyers "[t]o protect the confidentiality of materials which may contain confidential, proprietary, commercially sensitive, trade secret, or personal information of Foremost's insureds …." Braden v. Foremost Insurance Co., No. 4:15-cv-4114, 2016 WL 1417849, at *1 (W.D. Ark. April 8, 2016).
Protecting personal information of insureds is something all reasonable people can agree is deserving of protection. So, let's get beyond that. In fact, the parties submitted a separate stipulation on that, and the Judge signed that one, too.
However, Rule 26 does not contemplate a blanket order entered in advance of any discovery protecting whatever a lawyer in the case prefers to keep under wraps wholesale.
The experience of Rule 26 shows clearly that secrecy was meant for individualized determinations. Lawyers' secrecy stipulations demean that experience by surrounding whole swaths of testimony and documentation in blanket secrecy, if permitted by judges. Rule 26 depends instead on a determination by a court after adversary proceedings on particular materials or groups of materials for the most part. This way of reaching secrecy determinations is consistent with most other aspects of a judicial system that has been built on the belief that adversary proceedings are the best available engine of determining facts in litigation.
Rule 26 also does not authorize the concealment of testimony and documentation simply because someone thinks it should be kept "confidential, proprietary, [or] commercially sensitive ...." Before the advent of secrecy stipulations and blanket confidentiality orders approving secrecy stipulations without the need for any evidence at all, the party seeking secrecy has always had to prove a need for secrecy.
Perhaps nothing could illustrate this better than the fact that the secrecy order filed on April 8, 2016 in Braden v. Foremost Insurance Co. does not mention Rule 26 even once. Without the Rule, what could possibly be the source of authority to make anything in that case confidential or secret or hidden from public view? There being no such authority cited, the inescapable conclusion is naturally that there is no such legitimate authority at all.
Further, the particular secrecy stipulation offered and accepted in the Arkansas case is an expanded version of what has been a fairly uniform proposed secrecy stipulation used throughout the United States, in many kinds of cases. As noted, however, this one is an expanded version, 20 paragraphs long. The Court's Order approving it occupies 5 printed pages from Westlaw.
It is incredible to accept that these stipulations are a result of intellectual horse trading, or the product of a debate over ideas. The interests of the plaintiffs and of the defendants, particularly in these large cases, are widely separated into one side of the litigation which generally thrives on disclosure in all things including discovery, and another side of the litigation which covets secrecy. Since when do secrecy orders require all those words if they are legitimate?
What was this particular case about anyway? It is telling that there is not a word about the nature of the case in any of the 20 paragraphs or 5 pages. I had to go to PACER ("Public Access to [Federal] Court Electronic Records") to find out. It is about insurance coverage, not state secrets or anything of that kind.
The Class Action Complaint contains allegations that Foremost routinely depreciated labor in calculating the value of repairs.
There are not even any allegations of first-party insurer bad faith to take this case out of the routine and ordinary class and into the sphere of silence and secrecy.
The overuse and over-approval of secrecy stipulations is stifling the founding idea of access to court in the United States. Silent as fog, baseless secrecy orders are enabling the willful elevation of short-term fees over long-term survival of a democracy. Future articles will address this unwelcome step toward rewriting Rule 26 when the lawyers and the judges, and perhaps the parties in particular cases, want to seal the evidence from public view.
Apparently the Federal Government made this term up. I have hardly heard it in all the time that I have been practicing Insurance Coverage law. Perhaps other practitioners and insurance professionals share the experience.
The following statutory definition represents one of the few times that I have found a definition of "hazard insurance" anywhere. It means what "property insurance" means throughout the United States. Note that this Section was amended in 2015, effective in 2016, but the amendment did not affect this definition:
(i)Definitions
For purposes of this section, the following definitions shall apply:
(1)Flood insurance
The term “flood insurance” means flood insurance coverage provided under the national flood insurance program pursuant to the National Flood Insurance Act of 1968.
(2)Hazard insurance
The term “hazard insurance” shall have the same meaning as provided for “hazard insurance”, “casualty insurance”, “homeowner's insurance”, or other similar term under the law of the State where the real property securing the consumer credit transaction is located.
15 U.S.C.A. § 1639d(i)(1)&(2) (emphasis added). Section 1639d is titled, "Escrow or impound accounts relating to certain consumer credit transactions." Translation: The statute applies primarily to residential mortgage loan transactions.
Starting tomorrow and running through Wednesday, my base of operations for this Blog and for Insurance Claims and Bad Faith Law Blog will be WIND 2016, the 2016 Conference of the Windstorm Insurance Network which is being held in Orlando, Florida.
Among the topics will be Interactions Between Insureds and Insurers, Florida Property Law, Insurance Bad Faith, Data Breaches and so related Cyberinsurance coverage issues, Civil Remedy Notices, and Lender Force-Placed Insurance Practices.
I am looking forward to it and I hope you are too!
Image of algae bloom in Lake Sinclair provided by NASA.
People who live in the City of Flint, Michigan used to get their drinking water from Lake Huron. They were healthy people, or at least they were not particularly poisoned by their tap water.
Then the State of Michigan took Flint over. The State installed an "emergency manager" because the elected City Council supposedly made poor financial decisions that hurt the taxpayers.
The City's emergency manager installed by the State decided to save taxpayer money by switching the source of drinking water from Lake Huron to the Flint River. After that City residents complained that they were getting sick from drinking water from the Flint River.
The State of Michigan's environmental regulation department, by whatever name, at first said that test results did not support the residents. Then the State said that, actually, they aggressively ignored test results which reflected that drinking water from the Flint River likely causes lead poisoning and is otherwise harmful to human health. They told the residents of Flint to stop drinking tap water.
The State then started spending taxpayer money on buying and distributing bottled water to the entire City of Flint.
So, as far as the Michigan Public Officials and Entities go, they were against spending taxpayer money on Flint's water supply until they were in favor of spending taxpayer money on Flint's water supply.
This raises interesting potential issues of Public Officials and Entities Liability Insurance Coverage, putting to one side sovereign immunity issues for purposes of examining insurance coverage issues. Would the State's "emergency manager" be a Public Official or Entity under the State's insurance policy, if any, or under the City's, if any? Would there be coverage under the Insuring Agreement of the applicable Public Officials and Entities policy, if any, for the decision to save money by switching water supplies? These and other insurance coverage issues are presented by this situation.
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!
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).
Cyberinsurance is an exciting subject in the world of insurance. Carriers have policies, commentators have opinions about the carriers' coverage provisions, would-be policyholders especially large corporations have wish lists for the cyber-risks they want covered.
But as I dive more deeply into the subject of cyberinsurance, I am finding only a few of the most important things of all: Cases deciding insurance coverage issues. Cyberinsurance may be the hottest new flavor of insurance. Yet how courts interpret and apply insurance policies can make all the difference for carriers, commentators, policyholders, and coverage counsel.
Until courts declare what the words of an insurance policy mean, they may not mean what you or I might think they mean. Until a court or courts recognize that a given insurance coverage claim is valid, it may not exist.
So, if you have a cyberinsurance coverage case on your hands or in your research bank, I invite you to share it with me. Send me an EMail at [email protected]. Thank you.
In the meantime, I will carry on with my research into cyberinsurance including my continuing search for coverage cases.
In a recent and as-yet officially unpublished opinion, a panel of Florida's Second District Court of Appeal apparently reached a correct result for the wrong reasons. The panel said that "[b]ecause the [policyholders] failed to establish below that their loss was covered by a peril caused by their [all-risk] insurance policy, we affirm." Peek v. American Integrity Insurance Co. of Florida, No. 2D14-780, 2015 WL 5616294, *1 (Fla. 2d DCA September 25, 2015)(stated not released for publication in permanent law reports and subject to revision or withdrawal). Actually, the record quoted by the panel establishes both that the policyholders in this case met their all-risks burden of proof and that the insurance carrier also met its burden to prove that an exclusion applied to bar coverage for claimed loss resulting from Chinese Drywall.
"At trial, the [policyholders] established through their own testimony and that of a representative of [the insurance carrier] that they suffered a loss to their property within the insurance policy period." Peek v. American Integrity Insurance Co. of Florida, 2D14-780, 2015 WL 5616294, *1 (Fla. 2d DCA September 25, 2015). A policyholder claiming coverage under an all-risks policy has the burden of proof on the initial issues of coverage that the policyholder's property suffered a loss during the policy period, as the panel recognized. Peek v. American Integrity Insurance Co. of Florida, 2D14-780, 2015 WL 5616294, *3 (Fla. 2d DCA September 25, 2015). Therefore, as the panel opinion confirms, in this case the record establishes that the policyholders met their initial burden of proving coverage. Simply put, an all-risk insurance policy basically covers all risks unless specifically excluded.
In this case the record also clearly establishes that the insurance carrier also met its own burden, which was to prove the applicability of one or more exclusions. The carrier denied coverage on the bases of "policy exclusions for latent defects, corrosion, pollutants, and faulty, inadequate, or defective construction materials and contended that the Chinese drywall fit the definitions of all of these exclusions." It introduced the testimony of an expert botanist that the Chinese Drywall used in the construction of the policyholders' home, and damages resulting from it for which the policyholders claimed coverage here, "that it was a faulty, inadequate, or defective construction material." He further testified that the Chinese Drywall emitted gases which caused the corrosion damage complained of by the policyholders here, and "that the Chinese drywall itself was a pollutant due to its emission of noxious and destructive gases." The policyholders did not put on any evidence to rebut this testimony. Peek v. American Integrity Insurance Co. of Florida, 2D14-780, 2015 WL 5616294, *1-*2 (Fla. 2d DCA September 25, 2015).
On this record, the trial court granted the carrier's motion for directed verdict and entered judgment that the carrier did not breach the all-risks insurance contract. The Second District panel affirmed. Despite some regrettably loose language, the panel clearly affirmed on the basis that the carrier had proven that the exclusions on which it relied to deny coverage, applied to the policyholders' claimed loss in this particular case as a matter of applying the all-risks contract language to the record evidence -- and regardless of any confusion about the "efficient proximate cause doctrine" here. In reaching its contract conclusion, the Florida appellate court panel joined the majority of U.S. Courts which have addressed the question.