Gov. Doug Ducey suspends Uber autonomous vehicle testing in Arizona, the New York Court of Appeals expands the phrase “issued or delivered” under the state’s Insurance Law, and a Pennsylvania court enforces broad intellectual property rights exclusions in insurance policies.
Washington
Service on Foreign Insurer Must be Through Insurance Commissioner
In Ohio Security Ins. Co. v. Axis Ins. Co., the Washington Supreme Court, on a certified question from the United States District Court for the Western District of Washington, confirms that Washington law establishes that service through the Washington State Insurance Commissioner is the exclusive means of service for authorized foreign insurers in Washington. The court reaches this conclusion based on the plain language and legislative intent of RCW 4.28.080(7)(a) and RCW 48.05.200(1). The former statute provides that service of the summons on “an authorized foreign or alien insurance company,” shall be as provided in RCW 48.05.200, which, in turn, specifies that each foreign or alien insurance company must appoint the Washington State Insurance Commissioner as its attorney to receive service of “all legal process against it.”— From CLM Member Jillian M. Hinman
Pennsylvania
Court Enforces Broad IP Rights Exclusion To Deny Coverage
In TELA Bio, Inc. v. Federal Insurance Co., a federal district court dismissed a declaratory judgment action seeking a defense in an underlying state court lawsuit. In that lawsuit, the insured’s competitor sought damages for misappropriation of trade secrets and unfair competition. The competitor alleged that TELA Bio and its co-founders had stolen the company’s employees and trade secrets to develop and sell competing hernia mesh products. In dismissing TELA Bio’s case, the district court relied upon the IP Rights Exclusion in the insured’s CGL policy, which barred coverage for the entirety of all allegations in any suit in which there is an allegation of a violation of intellectual property rights, “even if the insurance would otherwise apply to any part of the allegations in the…suit.” While noting that application of this type of exclusion is “perhaps harsh,” the district court pointed to the well-established principle that a court may not modify the plain meaning of an insurance policy’s language.— From Northeast Ohio Chapter Vice President Michael C. Brink
Arizona
Gov. Ducey Suspends Uber Autonomous Vehicle Testing
Arizona Governor Doug Ducey announced in a letter to Uber that he is directing the state’s Department of Transportation to suspend Uber’s ability to test and operate autonomous vehicles on Arizona’s roadways. The letter, released to and shared by multiple media outlets, follows a fatal March 18 accident in Tempe, Ariz. in which an Uber vehicle in autonomous mode struck and killed a pedestrian. It is the first known case of a self-driving car killing a pedestrian. the vehicle contained a safety driver, but video released by the Tempe Police Department, taken from a driver-facing camera in the vehicle, shows the safety driver looking down moments before the accident. In his letter, Ducey calls the footage “disturbing and alarming” and adds that the incident was “an unquestionable failure” to comply with his expectation that public safety be a top priority in autonomous vehicle testing. News reports indicate Uber voluntarily halted its self-driving tests following the accident, but the company would now need approval if it intends to restart tests in Arizona.—From CLM Magazine Managing Editor Phil Gusman
Florida
Insurers Should Clean Up Exclusion Language for ‘Constant and Repeated’ Water Seepage
Many homeowners insurance policies provide coverage exclusions for “constant and repeated seepage of water which has occurred for a period of 14 days or more.” Per the 5th District Court of Appeal’s ruling in the recent case, Hicks v. American Integrity Insurance Company of Florida, the exclusion does not unambiguously exclude losses caused by leakage or seepage within the first 13 days of the leak, even if the leak remained on the property for more than 13 days. Therefore, insurance companies should consider re-writing this exclusionary provision to make it clear that if a leak occurs over a period of more than 14 days, the exclusion also bars coverage for damage related to the first 13 days.— From CLM Members Charles H. Watkins and Sarah Goldberg
New York
Court of Appeals Expands the Phrase “Issued or Delivered”
In a sharply divided four-to-three decision, the New York Court of Appeals held in Carlson v. American International Group, Inc. that the phrase “issued or delivered” under Insurance Law §3420(a) “encompasses situations where both insureds and risks are located in this state.” In Carlson, plaintiff brought an action against certain insurers of DHL Worldwide Express, Inc. (DHL). One of the insurers argued that §3420 did not apply because its policy was not “issued or delivered” in New York, but rather in Washington and then Florida. The majority rejected the argument, holding that “issued or delivered” should be broadly interpreted so that it applied to policies covering both insureds and risks located in New York. As such, the statute applies in this case because DHL was “located in” New York, based on its substantial business presence and because the underlying accident happened in New York.— From CLM Member Justin N. Kinney
Connecticut
Punitive Damages Covered for Tort of False Imprisonment
The Connecticut Supreme Court ruled in Nationwide Mut. Ins. Co. v. Pasiak that an insurer was required to indemnify its insured for a punitive damages award arising out of the tort of false imprisonment. In Pasiak, the insured was sued by an employee for false imprisonment arising out of a break-in and assault. The jury found the employer liable for false imprisonment and awarded punitive damages. Nationwide argued it should not be required to pay the punitive damages award based on, among other arguments, public policy. The court disagreed, distinguishing between a case where the same court had held that indemnifying insureds for punitive damages would violate public policy, and situations such as this case where the policy provided coverage for an intentional act, namely, false imprisonment. The court noted that refusing to enforce that the policy covers all damages for intentional acts would “allow insurers to avoid an obligation for which they bargained.…”— From CLM Member Julia C. Talarick