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FMG Law Blog Line

Posts Tagged ‘insurance’

Working Without a Net

Posted on: September 14th, 2018

By: Seth Kirby

For the legal professional, careful and appropriate selection of insurance is an essential component of practice management.  When faced with potential liability for an alleged mistake, attorneys should want the safety and security of relying upon their insurance carrier to help mitigate the potential liabilities that accompany their practice.  Unfortunately, many attorneys do not see the gaps in their insurance coverage until they are faced with a claim arising from their business activities.  A recent unpublished decision by the 4th Circuit Court of Appeals is illustrative of this dilemma.  In Hartford Casualty Insurance Co. v. Ted A. Greve & Associates PA, case number 17-2407, in the U.S. Court of Appeals for the Fourth Circuit, the Court affirmed a general liability carrier’s denial of coverage to a personal injury law firm that was sued for alleged violations of North Carolina’s Driver’s Privacy Protection Act.  Apparently the firm had been obtaining crash reports from the state’s Division of Motor Vehicles and then using the information contained in those reports to solicit business from the involved drivers.  When faced with a class action lawsuit arising from these activities, the firm’s general liability carrier denied coverage on the basis that the claims were excluded as they arose out of a violation of a state statute.  The Court approved the denial, rejecting the firm’s contention that the claim could be viewed as a common law invasion of privacy.

This decision has very little significance outside of the unique facts of the case.  Indeed, it is conceivable that the firm at issue in the case may have other types of coverage that fill this gap.  Nevertheless, it serves as an important reminder that firms should carefully review all aspects of their operations and consider whether their particular areas of exposure are covered.  Does the firm engage in novel or unique advertising to solicit business?  Does the firm use litigation financing to assist in pursuing claims?  Does the firm have potential contractual exposure because it is acting as a title agent?  These are just a few of the questions that lawyers must consider when evaluating their risk profile and in determining the nature and extent of insurance products that they should purchase.  Frankly, this task is too difficult, and the consequences are too severe, to attempt without professional assistance.  A meaningful relationship with a qualified insurance broker that specializes in professional liability placement is an invaluable resource for law firms.  The broker can often spot risks that the firm is blind to, and they are certainly more familiar with the insurance products that may provide valuable protection to the firm.

It is impossible to accurately predict what the future holds, but careful examination, and regular reexamination, of a law firm’s business model can go a long way toward identifying the dangers that lie ahead.  Absent such careful planning, lawyers are literally working without a net and potentially setting themselves up for drastic financial consequences in the event of an alleged error.

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

Federal Court Finds Exclusions in HOA GL Policies Applicable to Wrongful Death Suit

Posted on: September 7th, 2018

By: Peter Catalanotti

Colony Insurance issued a commercial general liability policy to The Courtyards at Hollywood Station Homeowners Association Inc. (“HOA”) that operates an apartment complex in Florida. Great American Alliance Insurance issued an umbrella policy to the HOA.

Two tenants were killed in their sleep by carbon monoxide poisoning at a unit in the complex.

The mother of one of the tenants filed a wrongful death suit in state court alleging that the deaths were caused by a car fumes that traveled through the HVAC of the complex.

The insurance carriers filed a declaratory relief lawsuit in federal court arguing that they are not obligated to cover the wrongful death suit because of a total pollution exclusion.

Both policies contain an exclusion that the policy does not provide for coverage for “bodily injury which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.”

The exclusion contains an exception whereby it does not apply to bodily injury caused by “smoke, fumes, vapor or soot produced by or originating from equipment that is used to heat, cool or dehumidifier the building.”

The HOA argued that the exception should apply because the carbon monoxide seeped through the AC vents.

In July 2018, the Court granted plaintiffs’ motion for summary judgment.  The Court found that the complaint “only lists the motor vehicle left running in the garage as a potential source of the carbon monoxide, and the Court cannot infer any other sources to create a duty to defend” (emphasis added).

According to the Court,

Since the source is unknown, Defendants would have the Court find that the carbon monoxide may have been produced by or originated from the building’s heating, cooling, or dehumidifying equipment, so the Exception could potentially apply. However, Plaintiffs’ duty to defend Courtyards HOA cannot arise from an inference that the carbon monoxide could have been produced by, or originated from, equipment used to heat, cool, or dehumidify the Unit.

The Court ultimately found that the facts alleged do not fall within the exception. Therefore, the carriers had no duty to defend in the underlying wrongful death action.

Colony Insurance Co. et al. v. The Courtyards at Hollywood Station Homeowners Association Inc. et al., Case #17-62467, in the U.S. District Court for the Southern District of Florida.

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

Following in the Footsteps of Lebron James? Ohio Parts Ways with the Restatement of Liability Insurance

Posted on: August 17th, 2018

By: Matthew Weiss

Last week Ohio Governor John Kasich signed into law legislation that rejected the American Law Institute’s (ALI) Restatement of the Law of Liability Insurance, claiming that it “does not constitute the public policy of Ohio.”  According to ALI, the legislation marks the first time a state has rejected a Restatement in its entirety.

The Restatement of the Law of Liability Insurance was approved by the ALI in May but has received a decidedly mixed public reaction.  Insurance attorneys have criticized numerous provisions within the Restatement.

In one example, lawyers have disagreed with the Restatement’s adoption of a “plain meaning presumption” in the interpretation of insurance contracts in the Comment to Section 3, rather than the “plain meaning rule” used in a majority of states.  This means that the Restatement advocates a “contextual approach” when interpreting provisions that requires the utilization of custom, practice, or usage.  In effect, this would lead courts to interpret insurance policies in light of the circumstances surrounding the drafting, negotiation, and performance of the policy.  By contrast, the plain meaning rule states that when a provision is “unambiguous” when applied to a claim in the context of the entire policy, courts must interpret the provision according to its plain meaning.

Another controversial provision is Section 8, which uses the word “substantiality” with respect to misrepresentation of material facts.  Experts claim that the word is unnecessarily vague and at odds with existing statutory and common law governing misrepresentation and rescission.  Similarly, Section 13 of the Restatement deviates from the majority of states by creating a duty to defend not only based on the allegations of a complaint, but also based on extrinsic evidence known to the insurer.  Finally, Section 11 provides that an insurer does not have a right to receive any information of the insured that is protected by attorney-client privilege, work-product immunity, or a lawyer’s duty of confidentiality under the rules of professional conduct if that information could be used to benefit the insurer at the expense of the insured.

The actual impact of the Restatement’s deviations from established case law in the field of liability insurance is subject to debate.  While the Restatement may have an impact in areas where limited case law exists nationally on a particular issue, where state law is silent on an issue, or where case law exists within a jurisdiction but no clear rule has been established, the Restatement will not overcome a rule in a state where clear precedent exists on a topic.

The impact of the Restatement of Liability Insurance remains to be seen, but the Ohio legislation is more likely to be the beginning, rather than the end, of a debate concerning its relevance and practicality.

For more information about the Restatement, or other insurance coverage issues, please contact Matthew Weiss of the Law Firm Freeman Mathis & Gary LLP at (678) 399-6356 or [email protected].

Is Georgia Game for Growing Bad Faith Liability?

Posted on: July 17th, 2018

By: Jessica Samford

As discussed in my last blog on bad faith, seeking bifurcation can be a proactive means to distinguish the issue of coverage from the issue of bad faith and appropriately manage the all too often unwieldy discovery process before it’s too late.  A recent case in Georgia is an interesting illustration of an insurer’s attempt to bifurcate issues after the discovery stage in a bad faith failure to settle claim in particular and is yet another cautionary example for insurers to carefully consider the increasing potential for extracontractual liability in Georgia.  Whiteside v. GEICO Indem. Co., 2018 U.S. Dist. LEXIS 87868, *3-*4 (M.D. Ga. May 25, 2018).

In that case, the trial court declined to bifurcate the issues of liability and proximate cause of damages at the trial stage as requested by Geico, which sought to have a jury determine whether or not Geico could be held liable for bad faith failure to settle before being presented with evidence of the default judgment entered against Geico’s insured of almost $3 million and causation of same.  Separation of liability and damages issues was not warranted according to the trial court because facts relating to Geico’s claim handling were relevant to both, and Geico’s concerns could be handled through proper jury instructions, special interrogatories, and the verdict form.  See also Whiteside v. GEICO Indem. Co., 2018 U.S. Dist. LEXIS 52761 (M.D. Ga. Mar. 29, 2018).  The trial court did, however, bifurcate the claim for punitive damages from the rest of the jury trial.

The result was a jury verdict of $2 million against Geico for failing to settle in response to a bicyclist’s demand for the $30,000 policy limit based on medical bills of almost $10,000 following a motor vehicle accident.  Previously, Geico had argued there was no coverage due to the insured’s failure to notify Geico of the subsequent lawsuit she was served.  Whiteside v. GEICO Indem. Co., 2017 U.S. Dist. LEXIS 203617, *6, 2017 WL 6347174 (M.D. Ga. Dec. 12, 2017).  Notwithstanding such a flagrant breach of the policy’s notice conditions, the trial court did not see coverage as being an issue since that coverage defense did not exist at the time Geico responded to the demand by offering to settle for about half the limits instead.

These unusual circumstances are certainly noteworthy, and extracontractual damages such as these are becoming less uncommon in Georgia bad faith cases.  FMG’s Insurance Coverage and Bad Faith BlogLine has already geared up to cover the Georgia Supreme Court’s upcoming rulings after granting cert on the scope of what triggers failure to settle liability in Georgia, not to mention the proposed changes to the Restatement of the Law of Liability Insurance and their impact.  Whatever is in the cards for extracontractual liability in Georgia, the risks presented by settlement demands should be evaluated in light of these current trends.

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

Pass That Dutch: California Insurers Respond to Budding Cannabis Industry

Posted on: July 2nd, 2018

By: Kristin Ingulsrud

California Insurance Commissioner Dave Jones announced on June 4, 2018 his approval of the Cannabis Business Owners Policy (CannaBOP) in California.  The new CannaBOP program was designed for cannabis dispensaries, storage facilities, processors, manufacturers, distributors, and other related businesses.  The CannaBOP program includes property and liability coverage for qualifying businesses.

Other recent offerings by insurers to the California cannabis industry include the first commercial insurance from an admitted carrier in November 2017, the first surety bond program in February 2018, and the first coverage for commercial landlords and a product liability and product recall program in May.

In April, President Donald Trump seemingly called off Attorney General Jeff Sessions’s war on marijuana and promised to support legislation that would protect states that have legalized marijuana from a federal crackdown.  The unpredictability of the current administration in regards to federal enforcement is just one of the unique issues the legalized cannabis industry faces.

Commissioner Jones hosted a webinar in May, Weeding through the Unique Insurance needs of the Cannabis Industry with the National Association of Insurance Commissioners Center for Insurance Policy and Research.   “Cannabis businesses face various insurance gaps—which means cannabis customers, workers and business owners may not have access to insurance to help them recover if there are accidents, injuries, property damage, or any of the things commercial insurance typically covers,” said Jones.

Topics included the effects of conflicting state and federal law on insurance claims, policy exclusions and gaps in coverage.  The webinar also covered the future of the cannabis industry and new trends such as on-site consumption, cryptocurrency, and blockchain.

Commissioner Jones  held the nation’s first public hearing in October 2017 to identify insurance gaps faced by the cannabis industry as part of his ongoing initiative to encourage commercial insurers to offer tailored coverage.  Since that time, insurers in California continue to expand their offerings to the cannabis industry.

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