United States: Insurance Law - Week Of September 16, 2022

PANDEMIC UPDATE

Another early policyholder victory was overturned this week as the Oklahoma Supreme Court joined the growing body of state supreme courts barring coverage for COVID BI claims. A divided court ruled in Cherokee Nation v. Lexington Ins. Co., No. 119359 (Okla. Sept. 13, 2022) that the District Court erred in finding business interruption coverage when Cherokee Nation “did not sustain immediate, tangible deprivation or destruction of property.” Three dissenting judges argued that the language in question was ambiguous and that the majority was giving “all perils” coverage the “armor” of an old named perils form.

The Maryland Court of Appeals heard oral argument last Friday on a certified question from a local federal district court in Tapestry, Inc. v. Factory Mutual Insurance Company.

In keeping with its ruling earlier this year in Estes v. Cincinnati Ins. Co., 23 F.4th 695, 699 (6th Cir. 2022), the Sixth Circuit ruled last week in Wild Eggs Holdings v. State Auto & Property Ins. Co., No. 21-5962 (6th Cir. Sept. 9, 2022) that COVID does not cause direct physical loss under Kentucky law. Further, the court refused to find any Civil Authority coverage due to the fact that any suspension of operations “due” to civil authority did not result from an alleged “exposure” to a disease. Writing in dissent, Judge Moore argued that the insured had a reasonable expectation of coverage due to conflicting meanings of “exposure.”

NEW CASES OF CONSEQUENCE

CALIFORNIA            Other Insurance Clauses

In a dispute among several liability insurers arising out of claims against a property manager for failing to prevent the murder of a community resident by her roommate, the Court of Appeal has ruled in Western World Ins. Co. v. Federal Ins. Co., B311994 (Cal. App. Sept. 8, 2022)(unpublished) that the “other insurance” language in Western World's excess policy trumped that contained in Federal's policy because Federal's clause only made its coverage excess of the underlying primary policy, whereas Western World's policy was excess to all other available insurance, whether primary or excess. As a result, the Second District ruled that Western World was entitled to be reimbursed for sums that it had contributed to settle the tort claims.

FLORIDA           First Party/Post-Loss Misrepresentations/Procedure

The Florida District Court of Appeal has ruled that newly-enacted Florida Rule of Civil Procedure 1.510, which states that summary judgment is appropriate when “the evidence is such that a reasonable jury could not return a verdict for the nonmoving party,” does not change the general principle that questions post-loss misrepresentations concerning the value of the claimed loss should be resolved by jurors, not the trial judge. In reversed a trial court's reversal of summary judgment for a property insurer, the Fifth District declared in Gracia v. Security First Ins. Co., 5D21-1456 (Fla. DCA5 Sept. 9, 2022) that “[w]hile no longer an absolute prohibition—depending on the nature of the evidence—the general rule remains intact: credibility determinations and weighing the evidence are jury functions, not those of a judge.”

ILLINOIS           First Party/Pre-Judgment Interest

The Appellate Court has ruled that a trial judge did not err in refusing to add pre-judgment interest to an award of damage for a first party loss because “the amount due was not liquidated or easily computable.” In 4220 Kildare v. Regent Ins. Co., 2022 IL App (1st) 201803 (Ill. App. Ct. Aug. 31, 2022), the court took note of the disparity between the amount claimed by Kildare and the amount determined to be due by the jury in holding that the amount due was not liquidated or easily computed as of Regent's August 2009 denial of coverage. The court also refused to find that Regent's conduct was vexatious and unreasonable, inasmuch as this claim had not been asserted at trial.

MONTANA           Kidnapping/”Occurrence”/Inter-Spousal Claims

The Montana Supreme Court ruled last week that an automobile liability insurer did not owe coverage for allegations that its insured assaulted and then kidnapped his ex-wife wife in an insured vehicle. In 21st Century North American Ins. Co. v. Frost, 2022 MT 173N (Mont. Sept. 6, 2022)(unpublished), the court ruled that, despite Frost's belief that his wife had been removed from the policy at the time of their divorce, she was still, in fact an insured. That (and the fact that her injuries were not the result of an accidental “occurrence”) precluded coverage.

NEBRASKA           Agents and Brokers/Negligent Procurement/Ripeness

The Nebraska Supreme Court has ruled that a lower court erred in preventing a corporation from proceeding with a negligence action against its insurance agent for failing to procure an E&O policy that would have covered pending claims. Whereas the trial court had ruled that the suit was not ripe since the plaintiff's liability had not been established and questions of insurance coverage therefore moot, the Supreme Court ruled in Great Plains Consulting Co., Inc. v. Midwest Ins. Exchange, 312 Neb. 367 (Neb. Sept. 2, 2022) that, while issues of indemnity might be premature, the plaintiff was already paid legal fees to fund its own defense and therefore had a ripe claim that could be pursued.

NEW YORK           Agents and Brokers/Negligent Procurement

The Second Department has ruled in Yu v. Allstate Ins. Co., 2022 NY slip op 05079 (App. Div. Aug. 31, 2022) that a judge did not err in dismissing a homeowner's negligent procurement claim against her insurance agent “because there was no rational process by which the Supreme Court could find that Better Choice negligently failed to secure adequate coverage, since the evidence demonstrated that the plaintiff did not specifically request coverage for the property other than owner-occupied coverage.”

OTHER DEVELOPMENTS OF NOTE

Inside the Insurance Industry

Lloyd's reports that its underwriting income and combined ratio improved during the first half of 2022 but that it nonetheless suffered an overall loss of $2.1 billion due to investment losses driven by increasing interest rates.

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