Welcome to the first edition of IN, a quarterly digest designed to keep insurers in the know on both the development, as well as the ongoing evolution, of legal trends relevant to first-party property coverage and bad faith law nationwide. IN canvases recent case law to identify noteworthy decisions that provide further guidance on the most current status of and analytical trends in bad faith and first-party property coverage law.
IN is industry focused and committed to reporting content of most interest to the industry-minded. As a result, and in addition to case summaries, IN summarizes various sets of relevant industry statistics; predictions; trends; and overall buzz.
IN is both for and about the insurance industry. If you are in the know about a case, topic or trend that you would like reported and followed by IN, contact us and let us know. Simply, we take requests.
Again, welcome, and we look forward to keeping you in the know.
IN sum. A summary of this edition’s intel and insight.
IN numbers. Raw numbers reported in the first quarter, or Q1, show the numerical basis for growing cyber-security risk concerns – simply, data breaches continue to increase. Q1 figures also provide a global numerical understanding of disaster events in 2015, while providing further context to the continued decrease in financial losses from natural catastrophes in 2015. Click here to read more.
IN now. In a word: cyber-security. First-party ramifications of a cyber-security incident include the potential loss of commercial operations as well as damage to both physical and intellectual property. The potential risks arising from business interruption claims and even cyber-extortion will continue to shape the industry’s first-party coverage available for a data breach.
Trend highlights also include one insurer’s recent FAA approval to use drones in its claims and underwriting processes; the increasing role of “Big Data” in the industry; and an example of how the sharing or crowdsourced economy is making its way to the insurance industry, raising the question of whether crowdsourcing apps have the potential to “Uber” the insurance industry. Click here to read more.
IN weather. The Atlantic hurricane season is approaching. Experts identify variables that combine to serve as the proverbial wild card in the 2016 hurricane season and whether the season will prove more active than those experienced in the three previous years. Click here to read more.
IN catastrophes. Recent reported data summarizes the impact of 2015 natural disasters experienced worldwide. Click here to read more.
Q1 case law presented legal analysis on both new, as well as ongoing and sometimes long debated, issues relevant to first-party property coverage and bad faith law. This edition addresses recent opinions from Alaska, Colorado, Florida, Georgia, Minnesota, New Jersey, Texas, and Washington:
COLORADO COURT FINDS LEGAL MARIJUANA INSURABLE UNDER COMMERCIAL PROPERTY POLICY. ArcView Group, which tracks the legal marijuana markets, recently estimated that legal U.S. pot sales could reach $6.7 billion in 2016. As the legal marijuana economy has grown, insurance coverage for this emerging industry has become a hot topic. The U.S. District Court for the District of Colorado, in The Green Earth Wellness Center, LLC v. Atain Specialty Insurance Company, No. 13-cv-03452-MSK-NYW, 2016 WL 632357 (D. Colorado February 17, 2016) was recently faced with determining the extent of coverage under a commercial property policy for damage sustained to marijuana plants at a growing facility and addressing whether legal marijuana was even insurable. Click to read full article.
COMMON SENSE PREVAILS: STATE OF COLLAPSE NONEXISTENT 13 YEARS BEFORE DISCOVERY OF DECAY. For years, property insurance policies that exclude rot damage have been called upon to cover rot because the policies extend coverage to collapse — an undefined term — caused by hidden decay, even if the structure remains standing and in use. A frequent argument employed by policyholders is that collapse existed years or even decades in the past, when the property insurance policy at issue was effective. In Queen Anne Park Homeowners Association v. State Farm Fire & Cas. Co., 2016 WL 424736 (9th Cir. February 3, 2016), the Ninth Circuit applies the term “collapse,” as defined for insurance purposes by the Washington Supreme Court for the first time in Queen Anne Park Homeowners Association v. State Farm Fire & Cas. Co., 183 Wn.2d 485, 352 P.3d 790 (2015). Click to read full article.
TEXAS JOIN MODERN TREND TO ALLOW LOSS OF USE DAMAGES IN TOTAL LOSS SITUATIONS. Texas very recently joined the growing trend of jurisdictions that now no longer recognize any distinction between the recoverability of loss of use damages between partial and total destruction of personal property. J & D Towing, LLC v. American Alternative Insurance Corporation, No. 14-0574, 478 S.W.3d 649 (Tex. 2016). Prior to J & D Towing, Texas was one of the few remaining jurisdictions that did not permit recovery of the loss of use damages when personal property was totally destroyed. Click to read full article.
ACCORDING TO GEORGIA SUPREME COURT, ITS SIMPLE – LEAD-BASED PAINT IS A POLLUTANT. In its March 21, 2016 decision, Georgia Farm Bureau Mut. Ins. Co. v. Smith, -- S.E.2d --, 2016 WL 1085397, Civil Action No. S15G1177 (Ga., March 21, 2016), the Georgia Supreme Court held that lead-based paint “unambiguously qualifies” as a “pollutant” to which the absolute pollution exclusion in the commercial general liability (CGL) policy at issue applied. Though this case arises in the third-party liability context, the Georgia Supreme Court’s emphasis on and enforcement of the plain and unambiguous meaning of policy text, including that used in exclusionary language, remains of critical importance to Georgia insurance coverage law, in general. Click to read full article.
MINNESOTA COURT HOLDS THAT PREJUDGMENT INTEREST STATUTE DOES NOT APPLY TO APPRAISAL AWARDS. The Minnesota Court of Appeals held in its recent decision, Poehler v. Cincinnati Ins. Co., 874 N.W.2d 806 (2016), that pre-award interest is not recoverable on an appraisal award made pursuant to the terms of an insurance policy, absent an underlying breach of contract or actionable wrongdoing. Click to read full article.
LOSS AT SEPARATE BUILDINGS REQUIRED “BUILDING SPECIFIC” COVERAGE DECISION BEFORE LOSS APPRAISAL. The recent Pernas v. Scottsdale Ins Co., 2016 WL 471949, Civil Action No. 1:15-cv-21506 (S.D. Fla., February 8, 2016), is a recent example of a court’s rejection of a policyholder’s attempt to fast track a loss to appraisal prematurely despite the existence of unresolved coverage questions. Click to read full article.
DEFENSE COSTS UNDER ALASKA LAW ARE SUNK. On March 25, 2016, the Alaska Supreme Court concluded that insurers cannot seek reimbursement for defense costs incurred defending uncovered claims. Attorneys Liability Protection Society, Inc. v. Ingaldson Fitzgerald, P.C. (Alaska S.C. No. 7095 S-15683, Mar. 25, 2016). Click to read full article.
RELIANCE ON AN EXPERT REPORT MAY NOT ELIMINATE AN INSURER’S BAD FAITH EXPOSURE. Insurers sometimes presume that having an expert report in support of a coverage declination will, at a minimum, serve as an arguable basis for a coverage denial sufficient to preclude bad faith exposure. Insurers should not lend themselves to this false sense of security, however, as demonstrated by this February 29, 2016 Eleventh Circuit Court of Appeals decision, Atlantic Specialty Ins. Co. v. Mr. Charlie Adventures, LLC, -- Fed. Appx. --, 2016 WL 767263, No. 15-12657 (11th Cir., February 29, 2016). Click to read full article.
New Jersey Supreme Court Upholds Strict Enforcement of Notice Provisions in Claims Made Policies. The New Jersey Supreme Court recently revisited its earlier decision inZuckerman v. National Union Fire Insurance Fire Insurance Co., 100 N.J. 304, 495 A.2d 395 (1985) and upheld the strict enforcement of notice and reporting requirements contained in claims made policies, holding that an insurance company does not need to show that it was prejudiced by an insured’s failure to comply with the notice provision in a Directors and Officers “claims made” policy to disclaim coverage. Templo Fuente De Vida Corp. and Fuente Properties, Inc., Inc. v. National Union Fire Insurance Company of Pittsburgh, P.A., Supreme Court of New Jersey A-18 September Term 2014, 074572 (decided February 11, 2016).
Florida High Court – UM Insured Entitled to Liability/Damages Determination Before Filing Bad Faith Action. In a February 25, 2016 decision, Fridman v. Safeco Ins. Co. of Illinois, 185 So.3d 1214 (Fla. 2016), the Florida Supreme Court held that an insured is entitled to a full determination of liability and extent of damages in the underlying liability action prior to an insured’s statutory first-party bad faith action; and that such a damages determination is generally binding as an element of damages in the subsequent first party bad faith action.