CASES OF CONSEQUENCE

ELEVENTH CIRCUIT Bad Faith/Excess Judgments (FL)

The U.S. Court of Appeals for the Eleventh Circuit has ruled in Cawthorne v. Auto-Owners Ins. Co. No. 18-12067(11th Cir. Oct 25 2019) that a Florida District Court was correct in ruling that a tort claimant could not recover in bad faith against the defendants' liability insurer based upon an oral assignment since he had failed to establish that the insured in the case was exposed to an excess judgment. While acknowledging that Florida courts haven't recognized limited exceptions to this general rule, as in the case of Cunningham or Coblentz agreements, the court found that in this case Cunningham did not apply since Auto-Owners was not a party to the consent judgment, nor was this a Coblentz agreement because Auto-Owners had not failed to provide a defense. The Eleventh Circuit refused to find that the settlement, whereby Auto-Owners agreed to pay its $3 million policy limit and the insured consented to an assigned $30 million judgment constituted an "excess judgment" for which the insured faced any liability. The court declined to find a separate exception for consent judgments declaring that if it did so, "insurers would not know whether an insured party and an injured party entered into a consent judgment as adversary, at arm's length and in good faith, or as friends making a strategic decision to undermine the insurance company's policy."

ALABAMA Auto/UIM/Non-Permissive Use

The Alabama Supreme Court has ruled that a policyholder was entitled to recover UIM benefits for a bizarre incident in which her husband ran her over. In Cowart v. GEICO Cas. Co., 1171126 (Ala. Oct 25, 2019), the court rejected GEICO's argument that its UIM coverage excluded losses resulting from the operation of "insured autos" including the Jeep in question, noting an exception to this exclusion for "insured autos" that are being used without the permission of the owner. As a result, the court found that summary judgment should not have been granted to GEICO since there were disputed issues of fact as to whether the victim was the sole owner of the Jeep and whether she had denied her husband permission to use it at the time of the accident.

CALIFORNIA Bad Faith/Defamation

The Second District has ruled in Khashan vs. State Farm Mutual Automobile IIns. Co., B290652 (Cal.App. October 24, 2019) that a Los Angeles trial judge did not err in granting summary judgment to an automobile liability insurer with respect to allegations by an accident victim that he had been libeled and defamed when State Farm issued a letter to his former counsel declaring that there was no liability policy in effect at the date of the accident. In an unpublished opinion, the Court of Appeal ruled that statements made by State Farm's adjuster in a letter to counsel declining to cover any non-economic damages because it had been unable to confirm that the claimant had a valid liability policy in force on the date of the accident in violation of Civil Code § 3333.4 were not libelous as they merely accurately reported what the adjuster knew to be true. Furthermore, the court found that the plaintiff had not suffered any damages since the letter was only sent to his attorney, who did not believe the allegations and continued to represent him thereafter.

FLORIDA First Party/"Matching Damages"

The Florida District Court of Appeal has ruled in Vasquez v. Citizens Property Insurance Corp., 3D18-779 (Fla. App .Oct 23, 2019) that a homeowner's policies coverage for damage to the insured's property prior to any repairs being undertaken was limited to the actual cash value" of the damaged property and therefore did not extend to the insured's claim in this case for "matching damages". The court noted that Section 627.7011, upon which the insured was relying, had recently been amended to delete formal language requiring payment of replacement costs "whether or not the insured replaces or repairs the dwelling or property." Furthermore, the court ruled that the Florida statute governing replacement costs, Section 626.9744, clearly deferred to policy language as being controlling.

ILLINOIS Auto Excllusi/"Use"

Allegations that the insured's employees were negligent in transporting a paraplegic in his wheelchair to a specially designed van have been held to fall within the scope of an auto exclusion in a general liability policy. In Country Mutual Insurance Company v. Oehler's Home Care Inc., 2019 IL App (4th) 190080 (Ill. App. Ct. Oct. 21, 2019), the Fourth District rules that a trial court had erred in finding that the van was merely the situs of the accident, ruling instead that the negligence in question clearly arose out of the insured's use of the van as the transport of a special needs patient into the van was integrally related to the allegations of negligence against the insured. As a result, the Appellate Court did not reach the issue of whether the claims in question were separately subject to a "professional services" exclusion in the policy.

NEW JERSEY Subrogation/"Made Whole" Doctrine

The New Jersey Supreme Court announced last week that it had accepted a certified question from the Third Circuit in the matter of City of Asbury Park v. Star Insurance Company on whether the "made whole" doctrine, which requires that an insured be fully compensated before the insurer can keep the proceeds of any subrogation recovery, applies to risk that has been allocated to an insured by way of a policy deductible or self-insured retention.

OTHER DEVELOPMENTS OF NOTE

Inside the Insurance Industry

Arthur J. Gallagher’s revenues grew a mere 0.3 percent to $1.2 billion during the third quarter of 2019. Meanwhile, March reports that its third quarter income rose 13% over the same period in 2018.

Even as the looming prospect of a hard Brexit has been pushed back a few weeks, Aon announced this week that it has begun the process of relocating the jurisdiction of its parent company from the United Kingdom to Ireland.

Washington State Insurance Commissioner Mike Kreidler announced this week that he has levied a $100,000 fine on the U.S. Concealed Carry Association for selling its members a policy that provided coverage for criminal prosecution involving the intentional use of a firearm, which is illegal in Washington.

Swiss Re is rolling out a new telematics program for auto insurance.

State Farm reports that you are most likely to have a highway accident with wildlife in West Virginia, Montana and Pennsylvania.

California Burning

A.M. Best issued a new commentary this week — "2019 California Wildfires – Yet Another Sign of a ‘New Normal’ — observing that current insurance modeling techniques are no longer an accurate predictor of fire risk and that the most recent outbreak of wildfires in the West may lead to a tightening of insurance and reinsurance markets.

Cyber Claims Update

Beazley reports that the incidence of ransomware attacks rose 37% in the third quarter of 2019, with a particular emphasis on attacks against IT vendors and their customers.