National News: November 2017

News and verdicts that affect you from across the country

November 28, 2017 Photo

Rights to accessibility extend to digital environments in Florida, New York workers comp carriers work on making sense of medical marijuana, and, in California, the 9th Circuit shifts stance on law firm liability.


Lawyers Can Represent Insurers and Insureds

On Sept. 14, 2017, the Washington Supreme Court held in Arden v. Forsberg & Umlauf that lawyers who represent insurance companies in coverage disputes may also defend their insureds, provided they adhere to the rules of professional conduct. In the underlying matter, the insurer retained defense counsel to defend its insureds in a civil matter. Defense counsel had represented the insurer in other unrelated matters but did not disclose this relationship to the insureds or otherwise obtain their informed consent. The underlying case settled, with the insurer paying the entire settlement amount. But the insureds sued defense counsel for breaches of fiduciary duty and legal malpractice. The Washington Supreme Court affirmed summary judgment in favor of defense counsel. After discussing the lawyers’ obligation to disclose actual and potential conflicts of interest under Washington’s rules of professional conduct, the Supreme Court found that there was no evidence the insureds suffered any damages.—From CLM Member Sarah E. Davenport


Negligent Conduct May Support a Punitive Damages Award In Bad-Faith Actions

In Rancosky v. Washington National Insurance Co. (as successor by merger to Conseco Health Insurance Co.), the Pennsylvania Supreme Court unanimously affirmed a holding that evidence of an insurance company’s “motive of self-interest or ill will” is not required to prevail on a bad-faith claim under Section 8371 of the Pennsylvania Statutes. Instead, such evidence is merely a factor to consider when applying the two-part test established by Terletsky v. Prudential. In Rancosky, Conseco, which had denied an insured’s premium waiver request when her ovarian cancer returned, argued that this type of evidence is required to support a bad-faith claim since the statute authorizes punitive damages. The court opined that, in enacting Section 8371, the General Assembly appeared to place punitive damages “on the same footing” as other categories of damages. Although the concept of bad faith in Pennsylvania has historically involved ill will or actual malice, this decision may lead to punitive damage awards based wholly on negligent conduct.—From Northeast Ohio Chapter Secretary Michael C. Brink


Relation-Back Doctrine Does Not Apply

On Oct. 23, 2017, the California Court of Appeal decided Curtis Engineering Corporation v. Superior Court. The issue was whether certificates required by CCP § 411.35, and filed as part of an amended complaint, relate back to the original complaint if they were filed after the expiration of the statute of limitations and more than 60 days after the filing of the original complaint. Section 411.35 requires plaintiffs in professional negligence cases involving architects, engineers, or land surveyors to serve and file a certificate on a defendant on or before the date of service of the complaint. The statute provides for a 60-day extension if the plaintiff is unable to file the certificate due to the statute of limitations. The court held that a certificate filed after expiration of the statute of limitations and more than 60 days after the filing of the original pleading does not relate back to the filing of the original pleading.—From CLM Member Stephen Henning


Providing a Defense Does Not Preclude Bad Faith

Demetre v. Indiana Insurance Co. involved an environmental claim against Liberty Mutual’s insureds. Liberty Mutual provided its insureds with a defense to the suit, under a reservation of rights. Liberty Mutual also engaged coverage counsel to file a declaratory judgment action. Ultimately, Liberty Mutual dropped most of its coverage defenses and settled the environmental claim. The insureds claimed that Liberty Mutual acted in bad faith, contending that there was no reasonable basis for Liberty Mutual to ever have contested coverage and claiming that they incurred approximately $400,000 in legal fees due to the contested coverage, as well as severe emotional distress. The jury found Liberty Mutual acted in bad faith, and the Supreme Court upheld the verdict, noting that even though Liberty Mutual provided its insureds with a defense while questioning coverage, it still owed a duty to act reasonably. It was implicit throughout the decision that the Supreme Court felt Liberty Mutual put its interests ahead of its insureds’ interests.—From CLM Extra-Contractual Committee Co-Chair Patricia J. Trombetta


Wind or Water, and What Type of Water?

After Hurricane Irma, there is sure to be litigation regarding the cause of loss—such as whether damage was caused by wind or water. Coverage disputes also arise as to the type of water that caused damage. Although all-risk policies typically contain exclusions that bar coverage for water damage, such exclusions are limited to (a) rising or surface water; (b) tidal water; and (c) waves and spray therefrom. For example, damage resulting from rain falling through an open roof is not excluded from coverage. Thus, it is important to understand each category of water damage in your policies, and to keep them in mind as you investigate and assess whether coverage exists for a particular claim.—From CLM Member Caryn Bellus

New Jersey

Two Key Holdings in How CGL Coverage Is Applied

In Air Master & Cooling Inc. v. Selective Insurance Co. of America, the Appellate Division made two significant holdings regarding the application of CGL coverage in construction defect cases. First, the Appellate Division held that a “continuous trigger” theory of insurance coverage “may be applied in this state to third-party liability claims involving progressive damage to property caused by an insured’s allegedly defective construction work.” Second, it held “that the ‘last pull’ of that trigger—for purpose of ascertaining the temporal point of a covered occurrence—happens when the essential nature and scope of the property damage first becomes known, or when one would have sufficient reason to know of it.”—From CLM Member Kevin E. Wolff


About The Authors
Phil Gusman

Phil Gusman is CLM's director of content.

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