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Posts Tagged ‘insurance’

Need a Lyft? Georgia Court of Appeals Decision Raises Coverage Questions for Ridesharing Services and Their Drivers

Posted on: February 19th, 2018

By: Connor M. Bateman

Most personal automobile insurance policies exclude coverage for damages that result from the ownership or operation of a vehicle used as a “public or livery conveyance.” Although typically undefined in the policy, this phrase has generally been understood to encompass vehicles that are “used indiscriminately in conveying the public, rather than being limited to certain persons and particular occasions or governed by special terms.”

The Georgia Court of Appeals recently weighed in on the scope of this exclusion in Haulers Insurance Co. v. Davenport.  In Davenport, the plaintiff sustained injuries in a car accident, sued the other driver, and served his uninsured motorist carrier (Haulers) with a copy of the complaint. At the time of the collision, the plaintiff was giving a ride to a female friend who would occasionally pay the plaintiff to drive her into town. There was no evidence, however, that the plaintiff ever offered paid rides to the general public. The Court of Appeals rejected Haulers’ argument that the policy’s public or livery exclusion barred coverage, reasoning that the exclusion was inapplicable absent evidence that the plaintiff “used his vehicle indiscriminately to transport members of the general public for hire, or regularly rented out his vehicle for hire.” The court recognized, however, that the exclusion would apply in cases where the driver “presents his services indiscriminately to the general public for hire.”

In light of the rising popularity of Transportation Network Companies (“TNCs”) such as Lyft and Uber, the coverage issues presented by this oft-forgotten exclusion should be carefully reexamined. TNC drivers, who use their personal vehicles to transport passengers, will often have no coverage under their personal policies due to the public or livery conveyance exclusion. This exclusion clearly applies to drivers actively transporting passengers and may even be triggered when the driver is simply using the ridesharing application to “troll” for potential customers. While some of these gaps have been addressed by commercial insurance policies provided by the TNCs, drivers may still be left without coverage in certain situations. For instance, although TNCs typically provide liability coverage for a driver who has the app turned on and is waiting to accept a ride, the TNC policies will not likely cover damages caused by someone or something else during that initial period. To account for this, the TNCs suggest that such damages may be covered by the at-fault driver’s policy or the TNC driver’s personal policy. However, the public or livery conveyance exclusion often extends to uninsured motorist, collision, and comprehensive coverage. And because courts have held that the public or livery conveyance exclusion applies when drivers “present their services” to the general public, the exclusion is arguably triggered even when the TNC driver is merely waiting for the application to connect to a customer.

Although the reach of this exclusion has yet to be fully examined in the context of ride-sharing services, these and other coverage issues will likely continue to arise. For additional information, please contact Connor Bateman at [email protected].

Beware The Egg Shell Plaintiff

Posted on: February 13th, 2018

By: Jared K. Hodges

Recently, a jury from a historically conservative venue in Georgia awarded $2.7 million to a man who claims he was injured in a 4 m.p.h. rear-end collision. This unusual verdict should serve as an expensive reminder to insurance carriers, adjusters, and their counsel that not all low-speed, minor property damage incidents are alike.

Plaintiff Art Smith was 31 years-old when he was rear-ended in his Toyota Camry by John Bishop, who was driving a Ford F-150 pickup truck. Both Smith and Bishop were stopped at a traffic light in Cobb County, Georgia, when Bishop testified he “rolled into” Smith. Smith’s vehicle incurred merely $1,400 worth of damage, and he told the responding officers he was OK, before leaving the scene of the accident on his own.

The next day, however, Smith began experiencing stiffness in his neck, and he went to the emergency room. Smith underwent physical therapy and an MRI scan that revealed herniated discs in his neck, before he ultimately received cervical fusion surgery.

While Smith’s rapid spinal deterioration and treatment seems excessive given his young age, what Bishop could not have known, was Smith had undergone prior treatments for neck injuries several years before the accident. In Georgia, as in many jurisdictions, it is a tenant in torts that “a tortfeasor takes a plaintiff in whatever condition he finds him. A negligent actor must bear the risk that his liability will be increased by reason of the actual physical condition of the other toward whom his act [is] negligent.” AT Sys. Se., Inc. v. Carnes, 272 Ga. App. 671, 674, 613 S.E.2d 150 (2005). As the Smith case shows, the egg shell plaintiff is alive and well.

So many claimants and plaintiffs contend they are “egg shell plaintiffs,” it is easy for adjusters and defense counsel to become immune to these allegations, especially when there is minimal property damage, as there was in this case. Yet, insurers, adjusters, and defense counsel should remember that a tortfeasor takes a plaintiff in the condition where he finds him. If, for example, a plaintiff has a history of neck injuries that makes his neck susceptible to injury, it is possible a jury could find the defendant responsible for all subsequent neck treatments, even from an apparently minor injury-causing incident.

If you have any questions or would like more information, please contact Jared K. Hodges at [email protected]

Look Mom, No Hands!

Posted on: January 24th, 2018

By: Seth F. Kirby

On January 22, 2018 a Tesla Model S slammed into a parked fire truck on California’s 405 near Culver City.  The driver of the Tesla stated that prior to the accident he had the car’s autopilot system engaged.  This is just the most recent in a series of accidents in which Tesla’s autopilot system has been implicated.   At present, Tesla’s autopilot system is limited to what it refers to as Traffic-Aware Cruise Control.  This feature, which is also provided by other car manufactures, allows the car to maintain a lane and speed up or slow down depending upon traffic conditions.  The system relies upon driver input to observe and avoid stationary objects, which may be the true culprit that resulted in the recent crash.  Interestingly, all Teslas are equipped to function autonomously, taking its passengers to a destination with no human interaction.  Such features are not yet enabled due to the need to obtain regulatory approval, and the features of the current systems have been changed several times to encourage drivers to be attentive when behind the wheel (i.e. requiring the driver to maintain their hands on the wheel).

The advent of various levels of autonomous driving presents challenges and opportunities for the insurance industry.  Theoretically, the implementation of autonomous vehicles over the next decade or longer will result in fewer accidents and injuries as computers will be more reliable and predictable drivers.  Of course, machines can have errors, and on the road at 60+ mph, errors can have drastic consequences.  This begs the question.  As vehicles become autonomous, who will the auto carrier be insuring?  The easy answer is that the policy is issued to the individual that owns the car, so clearly the carrier is insuring the individual for their potential liability. In many states, however, the insurance “follows the car” and covers bodily injury and property damage arising from the use of the vehicle no matter who (or what) is operating the vehicle.  If the autonomous car makes a mistake, the law presently considers the human driver to be responsible for the vehicle’s operation and the liability is placed on the driver.  That seems reasonable in our present environment in which driver interaction is required for the system to operate.  It may seem less reasonable once the systems become fully automatic.  At that point, the individual’s carrier is essentially insuring the machine and its software, effectively turning auto liability policies into product liability policies.

In the short term, the transition between human and computer controlled driving presents problems as it can lull the driver into a false sense of safety.  It appears that when the driver has less interaction with the driving process their attention wanes and they may fail to avoid obvious hazards.  This is no different than the problems caused by other forms of distracted driving (texting, eating, tuning the radio), it is just a new dynamic that is being added to the roadway.  Eventually, the human element may be removed from the equation, but whether that will result in a net improvement in vehicle safety remains to be seen.  I fully suspect that many aspects of auto liability insurance will need to evolve as technology begins to take over the wheel.

If you have any questions or would like more information, please contact Seth Kirby at [email protected].

Fire On the Mountain: Non-Replacement Valuation First Party Coverage Disputes Arising From Fire Policies

Posted on: November 16th, 2017

By: Richard E. Wirick

This blog, second in a series of three, deals with coverage issues arising from fire losses in the first party context which do not deal with dwelling replacement cost (loss settlement) disputes. The two main areas of remaining first party issues are (1) business interruption and (2) ingress/egress.

A. Loss of Use [Economic Losses]

Fire losses suffered by commercial, as opposed to residential, insureds, usually present loss of use issues. Policies purchased by businesses often contain coverages for loss of use. Unlike loss of use resulting from flood and water damage, loss of use resulting from fires have formed a fairly pro-insured trend throughout the country, and in California.

Business interruption coverage has been defined by California courts as follows. In Pacific Coast Engineering Co. v. St. Paul Fire & Marine Ins. Co., 9 Cal. App. 3d 270 (1970), the court of appeal stated that it was well settled that “[T]he purpose and nature of ‘business operation’ or ‘use and occupancy’ insurance is ‘to indemnify the insured against losses arising from his inability to continue the normal operation and functions of his business, industry, or other commercial establishment . . .’” The court went on to say that business interruption insurance (“BIC”) was to ‘indemnify the insured for any loss sustained by the insured because of his inability to continue to use specified premises  . . .[that is]  for loss caused by the interruption of a going business consequent upon the destruction of the building, plant, or parts thereof.’” One Texas court enumerated the purpose and time span of BIC when confronted with a restaurant policyholder’s windstorm loss. When the restaurant was rebuilt, it nevertheless did not return to the same volume of business for nine months. Lexington Ins. Co. v. Island Recreational Development Corp. 706 S.W. 2d 764 (Tex. App. 1986). The dispute was whether the BIC indemnified the policyholder just up until the time it reopened, or until the time it recovered its lost business volume. The Island Recreational court reasoned that since the policy did not explicitly exclude the period of recovery after the restaurant reopened, coverage continued up until the point that business was restored to its prior volume. Id. at 768.

Though no California cases have addressed this, a federal Third Circuit case examined a BIC loss for a medical imaging company. In American Medical Imaging Corp. v. St. Paul Fire & Marine Ins. Co., 949 F. 2d 690 (3d Cir. 1991), a diagnostic facility had purchased a business policy whose BIC provisions covered the “necessary or potential suspension” of operations, and required the carrier to indemnify the insured until it returned to “normal business operations.” (Emphasis supplied). The insured had reopened its CT/MRI operations at an entirely new location, but as quickly as possible. The Third Circuit held that relocation costs were recovered as part of the insured’s attempt to minimize its losses, and to deny indemnification for same would give the insured no incentive to mitigate.

B. Ingress/Egress Issues

California’s hilly terrain presents ingress and egress obstacles in the event of a fire loss. Are the costs of surmounting them covered under most BIC coverage parts? Most property policies cover losses when ingress to, or egress from, an insured premises is “prevented” because of a covered peril. Are losses from road closures covered? Again, one must look to other jurisdictions for guidance. In National Children’s Exposition Center Corp. v. Anchor Ins. Co., 279 F. 2d 428 (2d Cir. 1960), a court recognized that “prevent” could embrace the milder verb concept of “hinder.” Accordingly, if road closures hindered travel, this coverage part could provide indemnity.

Some extra-jurisdictional decisions have interpreted ingress-egress clauses even if the insured’s property (including private roads and driveways) were not destroyed by fire. In Fountain Powerboat Industries Inc. v. Reliance Ins. Co., 119 F. Supp. 2d 552 (E.D.N.C. 2000), an insured argued that a floodplain prevented ingress-egress to the insured’s boat-building business such that only heavy trucks could pass through. The insurer’s position was that since the insured’s actual facility had not been damaged, there was no coverage. The argument did not fare well with the court, which ruled “[T]he meaning of the ingress-egress clause is exceedingly clear. Loss sustained due to the inability to access the Fountain Facility and resulting from a hurricane is a covered event with no physical damage to the property required.” Id. Analogous arguments could be made for a fire loss.

If you have any questions or would like more information, please contact Richard E. Wirick at [email protected].

The NAIC’s Insurance Data Security Model Law Takes a Step Closer to Becoming Reality & Law Firms Should Pay Attention

Posted on: October 27th, 2017

By: Glenn M. Kenna

On October 24, 2017, the National Association of Insurance Commissioners (“NAIC”) adopted the Insurance Data Security Model Law (“Model Law”). The Model Law includes rules covering a broad range of data security, security breach investigation, breach notification, and risk management issues related to nonpublic information. The Model Law applies to insurers, agents, and other entities licensed under state insurance laws (“Licensees”). The passage of the Model Law by the NAIC should be a concern to every law firm as the Model Law would apply to prevent Licensees from contracting with firms that do not have adequate data security measures in place.

In part, the Model Law mandates that Licensees develop, implement, and maintain comprehensive written information security programs to, among other things, protect nonpublic information from unauthorized disclosure. Under the Model Law, Licensees must require “Third-Party Service Providers” – broadly defined as any person, not otherwise defined as a Licensee, with access to nonpublic information due to its contract with the Licensee – to implement appropriate measures to protect and secure Nonpublic information that is accessible to, or held by, the Third-Party Service Provider. Nonpublic information under the Model Law includes any information that is not publicly available and which concerns a “Consumer which because of name, number, personal mark, or other identifier can be used to identify such Consumer in combination with any one or more of… (a)Social Security Number, (b) Driver’s license number or non-driver identification card number, (c) account number, credit, or debit card number, (d) any security code, access code, or password that would permit access to a Consumer’s financial account; or (e) Biometric records.” The Model Law further requires that the Licensee’s executive management or delegates report annually on the Licensee’s compliance.

Law firms can and should develop (and follow) robust data security programs compliant with the ever-increasing data security laws or risk being passed over by companies which are increasingly sensitive to their data security obligations and increasingly responsible for breaches by third party vendors. The NAIC’s passage of its Model Law follows implementation of New York’s data security law in March, which the Model Law closely follows. Much like the Model Law, the New York law requires law firms to comply with detailed data security rules imposed on them by Licensees. It is only a matter of time until the Model Law or similar regulations of broad application are passed by each state. Law firms that ignore the rapidly-changing data security landscape do so at their own peril.

If you have any questions or would like more information, please contact Glenn Kenna at [email protected].