The California Insurance Department releases an insured loss estimate for the Carr and Mendocino Complex fires, a ruling in Florida on assignment of benefits policy language sets up a likely state supreme court review, and, in Massachusetts, lawsuits are filed in connection with September’s natural gas explosions.
Michigan
Court Previews Federalism Argument in Marijuana Cases
In KVG Properties Inc. v. Westfield Insurance Company, KVG sought coverage for losses sustained when commercial tenants damaged the premises it owned while illegally growing marijuana. Westfield denied the claim based in part on an exclusion for damage from any “[d]ishonest or criminal act….” The district court granted summary judgment to Westfield and the U.S. Court of Appeals for the 6th Circuit affirmed. Interestingly, the 6th Circuit’s decision notes that a compelling federalism argument in favor of coverage could be made under different circumstances, since the cultivation of marijuana is legal in some instances under the Michigan Medical Marijuana Act. The court says, “In diversity cases, we act as faithful agents of the state courts and the state legislature,” noting that the court would exercise even more care for measures passed by ballot initiative. The court notes, though, that it need not face that issue in this case, since “no reasonable jury could find that KVG’s tenants complied with Michigan law.”—From CLM Managing Editor Phil Gusman
California
Carr, Mendocino Complex Fires Insured Losses Cross $845 Million
Insured losses from the Carr and Mendocino Complex wildfires have topped $845 million and are now among the most destructive wildfires in state history, according to the California Insurance Department. The loss estimate involves over 10,000 claims and includes both residential and commercial insured losses. The department says the fires damaged or destroyed more than 8,800 homes; 329 businesses; and over 800 private autos, commercial vehicles, and other types of property. Insurance Commissioner Dave Jones says, “The Carr and Mendocino Complex fires not only caused staggering losses to thousands of Californians, they devastated entire communities and tragically cost many people their lives, and were among the most destructive fires in our state’s history…. Fire experts tell us that the worst fires for 2018 may still be ahead of us.”—From CLM Managing Editor Phil Gusman
Missouri
Court Allows Substantial Compliance for Affidavit of Merit
In medical malpractice actions, Mo. Rev. Stat. 538.225 requires the plaintiff’s attorney to file an affidavit stating that he has secured the opinion of a qualified health care provider attesting to the merit of the case. It further mandates “a separate affidavit…for each defendant,” and states that failure to comply requires dismissal. In a 2-1 decision, the Missouri Court of Appeals for the Eastern District reversed the trial court’s dismissal of an action on the grounds that the filing of a single affidavit addressing multiple defendants was “substantial compliance” with the statute. This is the first time a Missouri appellate court has found substantial compliance with the statute acceptable. The dissenting opinion held that relief from non-compliance must come from the legislature and not judicial interpretation.—From CLM Member Ryan Gavin
Kentucky
No Punitive Damages for Contract Claim
On Aug. 16, 2018, the Kentucky Supreme Court not only discussed the inability to obtain punitive damages for a claim that was fundamentally a contract claim, but also specifically adopted the economic loss rule for construction claims as well as product liability cases. In Nami Resources Company LLC. v Asher Land and Mineral LTD., the court, citing Foster Poultry Farms v Alkar-Rapidpak-MP Equipment Inc., stated that “[t]he economic loss doctrine requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond the broken contractual promise.”—From CLM Member Patricia J. Trombetta
Florida
Court Upholds AOB Policy Language
On Sept. 5, 2018, the Florida 4th District Court of Appeals upheld and validated insurance policy language that requires the signatures of all insureds and mortgagees on an assignment of benefits (AOB). The case was Restoration 1 of Port St. Lucie a/a/o John and Liza Squitieri v. Ark Royal Ins. Co. The policy language stated that “[n]o assignment of claim benefits, regardless of whether made before a loss or after a loss, shall be valid without the written consent of all ‘insureds,’ all additional insureds, and all mortgagee(s) named in this policy.” The 4th District Court of Appeals disagreed with a different outcome on the same issue by Florida’s 5th District Court of Appeals, so a Florida Supreme Court review is likely. It also is unclear whether Florida’s Office of Insurance Regulation will approve similar policy language going forward. Admitted insurers in recent years have not been successful in having similar language approved.—From CLM Member Anne E. Kevlin
Massachusetts
Lawsuits Roll In After Gas Explosions
At least four lawsuits have been filed against Columbia Gas of Massachusetts in the weeks since the September gas explosions in the towns of Lawrence, Andover, and North Andover burned dozens of homes and caused one death, multiple injuries, and forced evacuations. One class-action lawsuit filed in Essex Superior Court includes “[a]ll persons residing within Lawrence, Andover, and North Andover who did not suffer physical injuries or damage to real property, but were forced to evacuate and relocate,” following the explosions. The lawsuit, filed by Morgan & Morgan, alleges Columbia Gas knew or should have known the design, operation, and maintenance of its gas pipes was insufficient, and was negligent with respect to the design and maintenance of the pipes. It seeks an injunction ordering Columbia Gas to fix its natural gas pipes in addition to punitive damages. Authorities are still investigating the cause of the explosions and are considering the possibility that gas pressure was placed too high for the pipelines.—From CLM Managing Editor Phil Gusman