CASES OF CONSEQUENCE
FOURTH CIRCUIT Business Interruption/Restoration/Bad Faith (W VA)
The Fourth Circuit ruled this week in Ramaco Resources LLC v. Federal Ins. Co., No. 22-1459 (4th Cir. July 20, 2203) that a District Court judge in West Virginia erred in calculating the “restoration period” for a business interruption loss arising out of a silo collapse and therefore reinstated the jury’s original award of $7.6 million that the judge had cut to $1.8 million. In light of this finding, the Court of Appeals also ruled that the insured had “substantially prevailed” at trial and was therefore entitled to recover Hayseeds damages for aggravation and inconvenience resulting from the insurer’s denial. However, the court ruled that the jury’s $25 million award of Hayseeds damages was punitive and should be remanded to the District Court for further findings.
FIFTH CIRCUIT Additional Insureds/Duty to Defend (LA)
The Fifth Circuit has refused to find that a contractor’s liability insurer had a duty to defend toxic tort suits involving Weyerhaueser’s fire retardant coating products under policies that did not name Weyerhaueser as an additional insured. In Weyerhaeuser Co. v. Burlington Ins. Co., No. 22-30164 (5th Cir., July 14, 2023), the court refused to consider extrinsic evidence, notwithstanding Weyerhaeuser’a argument that the underlying plaintiffs had mistakenly sued it instead of its operating subsidiary NR that was an additional insured under these policies. The court also rejected Weyerhaeuser’s argument that the District Court should have permitted it to amend its complaint to reform the policies at issue based upon a claimed “mutual mistake” with respect to Weyerhaeuser’s rights as an additional insured.
CALIFORNIA Pollution/Equitable Contribution
The Second District ruled last week in Pacific Ind. Co. v. Northrop Grumman Systems Corp., B320417 (Cal. App. July 13, 2023) that a Superior Court judge erred in granting summary judgment to two liability insurers for contamination claims brought by a property owner against the former property owner (Northrup Grumman). Whereas the trial court had ruled that the damage did not occur until after these policies expired, the Court of Appeal found that there were allegations that could be construed to support a finding of possible groundwater contamination due to discharges on the insured’s property that required a defense. The court was unpersuaded that the property owner suit was not for “historical groundwater contamination” in light of the fact that it was a separate suit by the local Water District for that contamination. Nonetheless, while reversing the lower court’s analysis as regards the duty to defend, it affirmed the court’s finding that neither insurer had an obligation to indemnify Northrup Grumman for these claims, as Northrup Grumman had “forfeited” the opportunity to seek indemnity by failing to raise this argument in its main brief In any event, the court ruled that the damages sought by the property owner such as the cost of air studies and additional consumption of electricity were unrelated to groundwater contamination.
ILLINOIS Auto/UMI/Limitations Period
The Appellate Court has ruled in Country Preferred Ins. Co. v. Westerheide, 2023 IL App. (5th) 220343 (Ill App. Ct. June 30, 2023) that a motorist was precluded from asserting an underinsured motorist claim as she had failed to make a written demand for arbitration within 2 years from the date of accident as required by her policy.
MONTANA Coverage B/Slander/Malicious Prosecution
The Montana Supreme Court has ruled in Farmers Insurance Exchange v. Minemyer, 2023 MT 138 (Mt. July 18, 2023) that a lower court did not err in dismissing an accountant’s claim that his homeowners and CGL insurers owed a defense to claims against him that included allegations of slander and malicious prosecution. As the underlying complaint did not state when the slander occurred, the Supreme Court refused to speculate that it might have occurred during the term of one of these policies. The supreme court also held that Farmers had no obligation to provide a defense to allegations of malicious prosecution since the underlying suit had begun in 2021, whereas its first policy was issued in 2014. The court aligned itself with the majority view that the offense of “malicious prosecution” occurs upon the filing of a complaint, not when it is finally adjudicated. The supreme court also ruled that there was no allegation of “bodily injury” in the underlying complaint and that this defect was not remedied by a self-serving affidavit filed by the insured in the coverage case.
NEW HAMPSHIRE Commercial Property/Water Damage/”Drain”
The New Hampshire Supreme Court has affirmed a lower court’s ruling that a property insurance exclusion for damage caused by “water that backs up or overflows or is otherwise discharged from a sewer, drain, sump pump or related equipment” was ambiguous as applied to water damage suffered by a property owner after a tenant poured cat litter down a toilet, clogging an interior pipe and causing water to overflow from a shower and toilet. In CC 145 Main LLC v. Union Mutual Ins. Co., No. 2021-3076 (N.H. July 20, 2023), the court agreed with the insured that the exclusion did not unambiguously apply to all drains and that, read in context, its apparent meaning was only to exclude drains that carry water away from a property much as occurs with “sewers” and “sump pumps.” While conceding that Union Mutual’s argument was supported by various dictionary definitions of the word “drain,” the court also found that the insured’s view reflected a “reasonable, alternative interpretation of the exclusion.” Two of the five justices dissented, arguing that drains are typically on the inside of homes and it would therefore be anomalous to interpret this exclusion as not including shower and toilet drains absent some other indication that the court should do so.
OTHER DEVELOPMENTS OF NOTE
* * * Inside the Insurance Industry * * *
Allstate reports that it has paid nearly $800 million due to cat losses in June. Hanover estimates that it cat losses in the second quarter may have been as much as $262 million. Travelers also reported a severe drop in its quarterly results due to windstorms and other cat losses. There was brighter news out of Greenwich, Connecticut as surplus lines powerhouse W.R. Berkley reported net quarterly income of $356.3 million, nearly twice what it earned for the same period in 2022. Finally, Marsh reported this week that its consolidated second quarter revenue was $5.9 billion, up 9% from the year before.
