The Eleventh Circuit has ruled that a Georgia District Court should not have entered a ruling declaring the rights and obligations of primary and excess insurers for a large explosion at the Imperial Sugar plant that killed dozens of workers. In St. Paul Fire & Marine Ins. Co. v. National Union Fire Ins. Co. of Pittsburgh, PA, No. 16-12015 (11th Cir. May 29, 2018), the Court of Appeals found that the interests of St. Paul and one of the defendant insurers (AGLIC) were identical and that AGLIC should therefore have been realigned as a party plaintiff, which would have defeated diversity jurisdiction because AGLIC and the AIG defendants are all New York corporations.
CALIFORNIA “Occurrence”/Negligent Supervision
In its most important ruling so far this year, the California Supreme Court has ruled in Liberty Surplus Ins. Co. v. Ledesma & Meyer Construction Co., S236765 (Cal. May 4, 2018) that a liability insurer was obligated to defend allegations that its insured was negligent in its hiring, training and supervision of an employee who sexually assaulted a third party. On a certified question from the Ninth Circuit, the Supreme Court held that such claims constitute an “occurrence” because the insured did not intend for the injury to occur. The court emphasized that the tort of negligent supervision relied on independent acts of negligence and did not rest on theories of vicarious liability for the employee’s intentional acts. The court concluded that “[a]bsent an applicable exclusion, employers may legitimately expect coverage for such claims under comprehensive general liability insurance policies, just as they do for other claims of negligence.” Justice Liu added a concurring opinion, questioning whether some of the cases cited by the majority were reliable authority in light of the attenuated relationship between the insured’s acts and the resulting injuries.
COLORADO Bad Faith/Statute of Limitations
On a certified question from a federal district court, the Colorado Supreme Court has ruled in Rooftop Restoration, Inc. v. American Family Mut. Ins. Co., 2018 CO 44 (Colo. May 29, 2018) that the one-year statute of limitations found in Section 13-80-103(1)(d), C.R.S. (2017), does not apply to an action brought under Section 10-3-1116(1) because section 10-3-1116(1) for the unreasonable denial or delay of insurance benefits is not an “action for any penalty or forfeiture of any penal statute” within the meaning of Section 13-80-103(1)(d).
CONNECTICUT First Party/Bad Faith (NY)
A federal court that a business owner could not recover bad faith damages against its property insurer for providing it with inadequate temporary air conditioners after construction debris clogged its original HVAC system. in granting Sentinel’s motion to dismiss the bad faith claims under New York law, Judge Merer ruled in Quinn Fable Advertising, Inc. v. Sentinel Ins. Co., No. 17-1795 (D. Conn. May 2018 ) that there an insured sues for breach of contract and breach of the implied covenant of good faith and fair dealing based on the same set of fact the implied covenent claim is redundant and should be dismissed. The court also agreed to dismiss the insured’s claim for punitive damages in the absence of any suggestion that the insurer acted with an intent to harm the general public.
ILLINOIS E&O/Intentional Acts
The Appellate Court has ruled an attorney’s willful breach of trust in distributing the assets of a client’s Estate were not covered under his professional liability policy in light of a policy exclusion for claims “arising out of any criminal, dishonest, fraudulent or intentional act or omission.” In Illinois State Bar Mut. Ins. Assoc. v. Leighton Legal Group LLC, 2018 IL App (1st) 170458 (Ill. App. Ct. May 22, 2018), the First District pointed to phrases in the underlying complaint “such as mislead, conceal, scheme, deceive, intentionally, or willfully” are the paradigm of intentional conduct and the antithesis of negligent actions” and not merely the result of professional negligence.
The Appellate Court has ruled that the principle of “horizontal exhaustion” that the Illinois Supreme Court articulated a decade ago in Kajima requires payment of all primary policies before umbrella insurance policies are triggered. In Lamorak Ins.. Co. v. Kone, Inc., 2018 IL App (1st) 163998 (Ill. App. May 15, 2018), the First District ruled that CGL policies issued by Lamorak did not become “excess” insurance merely because they featured self-insured retentions and not deductibles.
MASSACHUSETTS First Party/”Innocent Co-Insureds”
A federal district court has refused to enforce an intentional acts exclusion in a first party insurance policy to an innocent co-insured even though the exclusion in question expressly stated that it applied even if “you did not commit or conspire to commit the act causing the loss.” In Shepperson v. Metropolitan Property & Cas. Co., No. 16-12116 (D. Mass. May 22, 2018), Judge Woodlock declared that the child who torched the insured’s home was a member of her household and therefore an insured subject to the exclusion. Nevertheless, the court declared that the exclusion was unenforceable as imposing limitations to coverage beyond what is permitted by G.L. c. 175 § 99.
TEXAS Energy Insurance/”Liability”
The Texas Supreme Court announced last week that it would grant review of the Court of Appeals’ 2016 ruling in Houston Casualty Co., et al., v. Anadarko Petroleum Corp., 2016 Tex. App. LEXIS 12354 (Tex. App. 2016) that a well operator could not recover over $100 million for the cost of defending Deepwater Horizon costs because defense costs are a “liability.”
OTHER DEVELOPMENTS OF NOTE
* * * Inside the Insurance Industry * * *
CNA has a new corporate headquarters! Effective this week, the CNA Center is open for business at 151 North Franklin Street in Chicago.
P2P start up maverick Lemonade Insurance is now marketing its “Policy 2.0” that allows policyholders to revise and reword insurance terms with “plain text” through the use of open source technology (GitHub).
* * * New Coverage Litigation * * *
A Christian charity has sued its D&O insurer, alleging in MAP International v. Cincinnati Ins. Co., No. 18-66 (S.D. Ga.) that it is owed coverage for claims by the State of California that the insured misled donors concerning the scope of its aid efforts.
* * * Sins of the Fathers * * *
The Archdiocese of St. Paul, Minnesota, which filed for bankruptcy in 2015 in the face of hundreds of sexual abuse claims, has reached a settlement with the claimants as part of its reorganization plan and will reportedly pay $210 million to resolve 450 pending claims. The Archdiocese’s liability insurers are reportedly contributing most (($170 million) of the settlement. This is the second largest settlement ever entered into by an Archdiocese, eclipsed only by the Archdiocese of Los Angeles’ payment of $660 million in 2007.
* * * Across the Bar * * *
Longtime Chicago policyholder advocate Steve Gilford has moved to JAMS where he will apply his insurance expertise to mediating these disputes.
* * * Cyber News * * *
Here’s a link to the latest newsletter from MM’s cyber claims group.