Insurance Law Update 6/3/16

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Insurance Law Update 6/3/16 Having trouble viewing this em ail? Click here to view it online. Share this: The region's leading trial, litigation, and business-service firm. M a s s a ch u s e tts | C o n n e cticu t | L o n d o n | Ne w H a m p s h ire | Ne w J e rs e y | Ne w Yo rk | R h o d e I s la n d Insurance Law Update U.S. SUPREME Qui Tam/Rigsby Redux The U.S. Supreme Court annouced this week that it would accept certiorari of the Fifth Circuit’s finding that two former State Farm claims adjusters were entitled to recover damages from State Farm pursuant to the federal False Claims Act for allegedly defrauding the federal government in its characterization of wind v. water damage losses following Hurricane Katrina. State Farm’s cert petition in State Farm Fire & Cas. Co. v. U.S., No. asks the Court to resolve a split among federal circuits with respect to the standard of liability that a court should apply in determining whether to dismiss a FCA claim based upon the relator’s violation of the statute’s requirement that qui tam be filed under seal and not be divulged for the first sixty days. In this case, the Rigsby sisters and their lawyers hired a public relations firm and gave interviews to the New York Times, AP, ABC and CBS during the sixty day confidentiality period. The court elected not to also accept the issue of what constitutes a “knowing violation.” SECOND CIRCUIT Marine Insurance/Uberrimae Fidei (MS) The Second Circuit has ruled that a pollution policy was in the nature of a marine insurance policy. Applying Mississippi law, which recognizes the doctrine of uberrimae fidei in the context of marine insurance, the Second Circuit therefore declared in Fireman's Fund Ins.. Co. QBE 1036 v. Great American Ins. Co. of New York , No. 14‑13464 (2d Cir. May 20, 2016) that misrepresentations by the insured with respect to the condition of the insured dock foreclosed any possibility of coverage. THIRD CIRCUIT Environmental/Equitable Estoppel (PA) A homeowner's insurer that initially agreed to provide a defense to pollution liability claims pursuant to a generic reservation of rights letter only to withdraw that defense 2 years later on the basis of a pollution exclusion in its policy has been held not to be equitably estopped in light of the fact that the original letter stated that the insurer’s investigation was subject to all applicable policy terms and that its assumption of the insured's defense "shall not be deemed to be a waiver of estoppel of these and all rights under the policy and applicable law." Despite the insured’s argument that it would be prejudiced by having to provide a defense at this late date, the Third Circuit ruled in Nationwide Property & Cas. Ins. Co. v. Shearrer, No. 15- 1537 (3d Cir. May 26, 2016)(unpublished) that the insured had not been prejudiced by receiving a free defense for two years and that Pennsylvania law did not require an insurer to take steps within a specific period of time to obtain a determination that its policy did not apply or that it was otherwise entitled to withdraw. "The fact that Nationwide defended the case for some time before citing an exclusion and denying coverage does not somehow turn the defense it did provided into fraudulent inducement…Nor did it turn the insured's decision to allow Nationwide to provide them with a defense into detrimental alliance.” EIGHTH CIRCUIT First Party/Water Exclusion (AR) The Eighth Circuit has ruled that an Arkansas District Court did not err in giving effect to a homeowner’s exclusion for losses due to “water…below the surface of the ground.” In Bull v. Nationwide Mut. Ins. Co., No. 15-1397 (8th Cir. May 27, 2016), the Court of Appeals declined to find coverage for mold and foundation damage caused by the rupture of a water pipe buried beneath the insured’s home, notwithstanding the insured’s argument that the exclusion only applied to water leaking from “natural sources” and was otherwise ambiguous. ILLINOIS Duty to Defend/”Occurrence”/Criminal Acts Exclusion Despite precedents in which Illinois courts have ignored specious allegations of negligence where the facts in question clearly establish the lack of an "accident,” the Appellate Court ruled in Country Mutual Insurance Company v. Dahm, 2016 IL App. (1st) 141392 (Ill. App. May 19, 2016) that a homeowner’s insurer had a duty to defend a law suit for assault and battery as the insured’s striking of the plaintiff’s taxi with his briefcase was accidental even if the subsequent melee was not. The Appellate Court ruled, however, that Country Mutual's duty to defend ceased as of the date that the insured was criminally convicted. MONTANA Procedure/Judicial Bias The Montana Supreme Court has ruled that a judge should have recused himself from hearing an insurance coverage dispute involving a stipulated consent judgment and assignment of the insured’s rights under a professional liability policy where the judge himself had just entered into a similar agreement and was in litigation with the State’s insurance program as to its viability. In remanding the case for further proceedings before a new judge, the court ruled in Draggin’ Y Cattle Co, Inc. v. Addink , 2016 MT 98 (Mont. May 3, 2015) that Judge Huss should have disclosed this conflict at the time and that New York Marine had not waived it by raising the issue for the first time on appeal since these facts did not come to its attention until it investigated why the judge had later resigned his office. OTHER DEVELOPMENTS OF NOTE * * * Inside the Insurance Industry * * * XL Catlin subsidiaries Greenwich and Indian Harbor will be begin augmenting their pollution legal liability insurance coverage to include payment for internal costs that policyholders may incur to rectify mistakes with respect to professional services provided in an environmental contacting context. Allstate is now offering insurance coverage for Airbnb members and other insureds who share homes in Arizona, Colorado, Illinois, Michigan, Tennessee and Utah. The HostAdvantage endorsement can be added to conventional homeowners policies. * * * New Coverage Litigation of Note * * * Orion Engineering Services has filed a DJ in federal court in Houston, alleging in Orion Project Services v. ACE American Ins. Co., No. 16-01401 (S.D. Tex.) that it was entitled to coverage for law suits brought by the survivors of a 2013 terrorist attack on a BP plant in Algeria. * * * Across the Bar * * * Wisconsin Supreme Court Justice David T. Prosser will retire on July 31 after nearly 18 years on the high court. * * * Signs of the Times * * * The Ritz Carlton in Washington, D.C. has ripped the telephones out of its old phone booths and re-branded the space as “Technology Pods.” Was “Cones of Silence” already taken or just not edgy enough? * * * CLE That Will Blow Your Mind * * * DRI is presenting a two day seminar in Boulder on June 22-23 analyzing emerging legal issues presented by the legalization of marijuana in many states. Although my suggestion that the course materials be printed on rolling papers was nixed, the program is otherwise excellent (if a bit scary). * * * This Week’s Photo * * * ALI Restatement Reporters Tom Baker and Kyle Logue had ample occasion to scratch their heads about puzzling procedural and legal issues during this month’s ALI meetings in Washington, D.C. 250 Sum m er Street | Boston MA 02210-1181 Phone: 617-439-7500 | www.m orrisonm ahoney.com This em ail was sent to . To ensure that you continue receiving our em ails, please add us to your address book or safe list. manage your preferences | opt out using TrueRemove® Got this as a forward? Sign up to receive our future em ails..
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