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Preview: LexisNexis® Mealey's™ Emerging Insurance Disputes Legal News

LexisNexis® Mealey's™ Emerging Insurance Disputes Legal News



Headline Emerging Insurance Disputes Legal News from LexisNexis®



 



Majority: Material Misrepresentation On Insurance Application Warrants Rescission
PASADENA, Calif. - A majority of the Ninth Circuit U.S. Court of Appeals on Jan. 2 affirmed a lower federal court's finding that an insured's material misrepresentation on an application for directors and officers liability insurance warranted rescission of the policy (Western World Insurance Company v. Professional Collection Consultants, No. 16-55470 and 15-2342, 9th Cir., 2018 U.S. App. LEXIS 73).



Exclusion's 'Derivative Claim Exception' Does Not Apply, 9th Circuit Affirms
SAN FRANCISCO - The Ninth Circuit U.S. Court of Appeals on Dec. 27 affirmed a lower federal court's finding that the "derivative claim exception" to an insurance policy's "insured vs. insured" exclusion does not apply, finding that there is no coverage for an underlying lawsuit that an insured's CEO breached his fiduciary obligations (Sunrise Specialty Co. Inc., et al. v. Scottsdale Insurance Co., No. 16-16856, 9th Cir., 2017 U.S. App. LEXIS 26860).



Sexual Advance Complaint Against USFWS Officer Alleges Occurrence, Judge Says
MISSOULA, Mont. - A Montana federal judge on Jan. 2 held that an underlying complaint alleging that a former regional field dive officer for the U.S. Fish and Wildlife Service (USFWS) negligently proceeded with a sexual advance against a fellow employee triggers coverage under his homeowners insurance policy, denying the insurer's motion for summary judgment (American Reliable Insurance Company v. Lawrence Lockard, et al., No. 17-04, D. Mont., 2018 U.S. Dist. LEXIS 399).



Claims For Sexual, Physical Abuse, Neglect Constitute 5 Occurrences Under Policy
CHARLESTON, W.Va. - A West Virginia federal judge on Dec. 7 determined that an insurer owes at least $2 million in coverage for two underlying suits alleging claims of physical and sexual abuse against its insureds because the underlying suits allege five separate occurrences for sexual abuse, physical abuse, malnutrition and educational neglect under the policy at issue (Brotherhood Mutual Insurance Co. v. Bible Baptist Church, et al., No. 16-341, S.D. W.Va., 2017 U.S. Dist. LEXIS 201429).



Panel Affirms Insurers Have No Duty To Defend Against Discrimination Lawsuit
NEW ORLEANS - The Fifth Circuit U.S. Court of Appeals on Dec. 29 affirmed a lower federal court's finding that two insurers have no duty to defend their insureds against an underlying discrimination lawsuit that resulted in a $4 million consent judgment (Doctor Jonathan M. Isom v. Valley Forge Insurance Co., et al., No. 17-60014, 5th Cir., 2017 U.S. App. LEXIS 27035).



Exclusion Bars Coverage For Slander Counterclaim, Federal Judge Rules
LOS ANGELES - Granting an insurer's motion for summary judgment on Dec. 28, a California federal judge found that coverage for an underlying slander counterclaim against an insured is barred by a policy exclusion for personal and advertising injury arising out of a breach of contract (Penn-Star Insurance Company v. The Caden Companies, Inc., et al., No. 17-02369, C.D. Calif., 2017 U.S. Dist. LEXIS 213387).



7th Circuit Says Suit Alleging Elderly People Lured Into Policy Purchase Cannot Stand
CHICAGO - A district court properly granted a long-term care insurer's motion to dismiss an insured's suit alleging that the insurer lured elderly people into purchasing a policy by offering low premiums for the first 10 years and then instituted a 75 percent premium rate hike because the insured failed to state a claim upon which relief could be granted, the Seventh Circuit U.S. Court of Appeals said Dec. 14 (Sophie Toulon v. Continental Casualty Co., No. 16-1510, 7th Cir., 2017 U.S. App. LEXIS 25247).



11th Circuit Finds Jockey's Claim For Destruction Of Evidence Was Not Covered
ATLANTA - The 11th Circuit U.S. Court of Appeals on Dec. 14 reversed a trial court's ruling in favor of the owner of a horse racing stable and against an insurer, finding that a jockey's claims for spoliation of evidence in relation to a fall that left him paralyzed were not covered under the stable's workers' compensation and employer liability insurance policy (Selective Insurance Company of Southeast v. William White Racing Stables Inc., et al., No. 16-16248, 11th Cir., 2017 U.S. App. LEXIS 25110).



Damage-To-Property Policy Exclusion Applies To Bar Coverage, 7th Circuit Says
CHICAGO - The Seventh Circuit U.S. Court of Appeals on Dec. 18 found that because an insurance policy's damage-to-property exclusion barred excess coverage for a property damage claim arising from an April 27, 2010, grain elevator explosion, the insurer had no duty to act in good faith in responding to an offer to settle the claim (West Side Salvage, Inc. v. RSUI Indemnity Co., No. 16-3928, 7th Cir., 2017 U.S. App. LEXIS 25533).



Parties Stipulate Voluntary Dismissal Of Coverage Suit Over Loan Closing Programs
MILWAUKEE - An insured and its insurer on Dec. 19 filed a joint stipulation of voluntary dismissal of a coverage dispute arising from the insured's mortgage loan closing services after a settlement was announced (Fiserv Solutions Inc. v. Endurance American Specialty Insurance Co., et al., No. 11-0603, E.D. Wis.).



Panel: Insurer Had Authority To Settle Claims Against Doctor Under Policy
BOSTON - A Massachusetts court on Dec. 12 found that a trial court did not err when it ruled in favor of an insurer on a doctor's claims for negligence and breach of contract, finding that the insurer was entitled to enter a post-verdict settlement of claims against her without her consent pursuant to the terms of a professional liability policy (Ellen Johnson v. Proselect Insurance Co., et al., No. 17-P-109, Mass. App., 2017 Mass. App. Unpub. LEXIS 1077).



Professional Liability Insurer Has Duty To Defend Attorney, Illinois Panel Affirms
MOUNT VERNON, Ill. - An Illinois appeals panel on Dec. 6 held that underlying claims against an attorney and his law firm can be rationally said to fall within coverage of a professional liability insurance policy, rejecting the insureds' argument that coverage is barred by the policy's' business enterprise exclusion (Bruce A. Wiley, et al. v. Minnesota Lawyers Mutual Insurance Co., et al., No. 14-144, Ill. App., 5th Dist.).



Judge Dismisses Reinsurer, Related Entities From Breach Of Contract Case
SALT LAKE CITY - A Utah federal judge on Dec. 19 dismissed a reinsurer and other related entities from a breach of contract and bad faith lawsuit over denied coverage under a professional liability policy because there is no personal jurisdiction (Allegis Investment Services LLC, et al. v. Arthur Gallagher & Co., et al., No. 17-515, D. Utah, 2017 U.S. Dist. LEXIS 209257).



Insurers: Federal Court Has 'Unflagging Obligation' To Exercise Jurisdiction
SAN FRANCISCO - Primary and first-layer excess insurers argue in a recent brief to the Ninth Circuit U.S. Court of Appeals that because they raised a "facially non-frivolous" and "compelling" argument in favor of arbitration, a federal district court should have fully adjudicated their motion to compel arbitration instead of remanding the lawsuit to California court (SFA Group v. Certain Underwriters at Lloyds London, et al., No. 16-56467, 9th Cir.).



No Jurisdiction Under CAFA's 'Mass Action' Provision, Panel Says, Affirms Remand
PASADENA, Calif. - The Ninth Circuit U.S. Court of Appeals on Dec. 14 affirmed a lower federal court's remand of a lawsuit arising from claims over defective water supply lines, finding that 26 insurers, acting as subrogees of 145 insureds, are the only plaintiffs and therefore fail to satisfy the numerosity requirement under the Class Action Fairness Act (CAFA) to retain federal jurisdiction (Liberty Mutual Fire Insurance Company, et al. v. EZ-Flo International, Inc., No. 17-56523, 9th Cir., 2017 U.S. App. LEXIS 25306).



Coverage Barred For Claims Arising Out Of Contaminated Pet Food, Insurer Asserts
CHICAGO - No coverage is owed to an insured manufacturer of pet food for underlying claims alleging damages caused by pet food manufactured by the insured and contaminated with pentobarbital because the insured made material misrepresentations in its application for insurance and because the policies at issue clearly preclude coverage for the underlying claims, an insurer asserts in a Dec. 5 complaint filed in Illinois federal court (Colony Insurance Co. v. Evanger's Dog and Cat Food Co. Inc., et al., No. 17-8756, N.D. Ill.).



Judge Enters Default But Not Default Judgment In Dispute Over Fraudulent Tax Returns
BLUEFIELD, W.Va. - A West Virginia federal judge on Dec. 8 denied a businessowners liability insurer's motion to enter a default judgment against its insured in its declaratory judgment lawsuit challenging coverage for seven lawsuits alleging that the insured's employee filed fraudulent tax returns (Ohio Security Insurance Co. v. K R Enterprises, Inc., et al., No. 15-16264, S.D. W.Va.).



Judge: Any Evidence Of Insurer's Nonpayment Of Claims Is 'Irrelevant, Prejudicial'
MISSOULA, Mont. - On remand from the Ninth Circuit U.S. Court of Appeals, a Montana federal judge on Dec. 4 granted in part and denied in part a commercial general liability insurer's motions in limine in a coverage dispute over claims that a beauty school insured expelled students after they filed complaints of unprofessional conduct, sexual harassment, occupational health and safety, violations of internal policies and procedures, licensing rules and regulations and curriculum (Breanne Walden, et al. v. Maryland Casualty Co., No. 13-222, D. Mont., 2017 U.S. Dist. LEXIS 198973).



Judge: CGL Insurer Has No Duty To Defend Construction Company Against Counterclaims
ASHLAND, Ky. - A Kentucky federal judge on Nov. 28 held that a commercial general liability insurer has no duty to defend its construction company insured against counterclaims arising from a dispute over the final price of the construction of a home (Owners Insurance Co. v. Frontier Housing, Inc., et al., No. 16-40, E.D. Ky., 2017 U.S. Dist. LEXIS 195011).



Pennsylvania Judge Vacates No Coverage Ruling In Dispute Over Racetrack Death
PHILADELPHIA - A Pennsylvania judge on Nov. 30 found that a lower court erred in finding that a commercial umbrella liability insurer has no duty to indemnify its insured against $2.6 million in punitive damages that it paid to settle an underlying wrongful death and survival action, vacating and remanding for an entry of summary judgment in favor of the insured on the breach of contract claim and for reinstatement and further proceedings on the bad faith claim (Bensalem Racing Association, Inc., et al. v. Ace Property and Casualty Insurance Co., No. 530 EDA 2017, Pa. Super.).



Tennessee Panel Reverses Ruling In Employee Dishonesty Coverage Dispute
NASHVILLE, Tenn. - A Tennessee appeals panel on Nov. 22 held that a lower court erred in finding that a commercial general liability insurance policy's employee dishonesty provision was ambiguous, reversing and remanding to enter a judgment that the policy limits for an underlying employee embezzlement claim is $15,000 and not $30,000 (Tennessee Clutch and Supply, Inc. v. Auto-Owners (Mutual) Insurance Co., No. M2016-02195-COA-R3-CV, Tenn. App., 2017 Tenn. App. LEXIS 761).



Dishonesty Exclusion Bars Coverage, 5th Circuit Affirms
NEW ORLEANS - The Fifth Circuit U.S. Court of Appeals on Nov. 20 affirmed a lower court's ruling that an insurance policy's dishonesty exclusion bars coverage for a restaurant owner insured's loss, rejecting the insured's argument that the exclusion's exception for "acts of destruction" by "employees" applies to establish coverage (Maldonado Investments, L.L.C. v. State Farm Fire & Casualty Co., No. 16-31206, 5th Cir., 2017 U.S. App. LEXIS 23585).



Judge Refuses To Dismiss Coverage Suit Arising From Failed Business Relationship
MOBILE, Ala. - An Alabama federal judge on Nov. 29 held that an underlying claimant's lawsuit seeking to recover a lost investment in its relationship with an insured is sufficient, at the present stage, to plausibly state a claim that the damages fall outside the policy coverage for the "physical injury to tangible property" (Acadia Insurance Co. v. SouthernPointe Group, Inc., et al., No. 17-01368, N.D. Ala., 2017 U.S. Dist. LEXIS 195581).



Insurer Fails To Show Policy Excuses It From Defending Insured, Judge Reiterates
PHILADELPHIA - A Pennsylvania federal judge on Nov. 29 denied a homeowners insurer's motion to reconsider an April 5 ruling that denied its motion for judgment on the pleadings in a coverage dispute arising from underlying assault and battery and negligence claims (Unitrin Direct Insurance Company v. Michael Esposito, No. 16-5239, E.D. Pa., 2017 U.S. Dist. LEXIS 195739).



Insurer Asks 2nd Circuit To Find Wire Transfer Theft Is Not Covered Under Policy
NEW YORK - An insurer asked the Second Circuit U.S. Court of Appeals on Dec. 5 to reverse a lower court's finding that coverage for a firm's multimillion-dollar loss due to a fraudulent wire transfer scheme existed under the computer fraud provision of the company's executive protection insurance policy (Medidata Solutions Inc. v. Federal Insurance Co., No. 17-2492, 2nd Cir.).



Judge Stays Class Action Challenging Insurance Practices After Settlement Announced
JEFFERSON CITY, Mo. - A Missouri federal judge in a Nov. 29 text order granted a joint motion to stay a class action alleging that a homeowners insurer committed breach of contract when it unlawfully applied a policy's $1,000 deductible to an actual cash value (ACV) payment in a hailstorm coverage dispute after the parties announced that they reached a settlement (Jean Heckmann v. Liberty Mutual Fire Insurance Co., No. 14-04147, W.D. Mo.).



Insured's Suit Against Adjuster In Hurricane Ike Coverage Dispute Is Untimely
GALVESTON, Texas - A Texas federal judge on Dec. 5 found that an insured's breach of contract and negligence lawsuit against an adjuster is time-barred by a two-year statute of limitations, granting the adjuster's motion for summary judgment in Hurricane Ike coverage dispute (Gracie Reese v. Aftermath Public Adjusters, Inc., et al., No. 16-273, S.D. Texas, 2017 U.S. Dist. LEXIS 199527).



Panel: No Indemnity Obligation Owed To Target In Relation To Personal Injury Suit
CINCINNATI - The Sixth Circuit U.S. Court of Appeals on Nov. 29 held that an indemnification arrangement involving Target Corp. and hamper suppliers is not an "insured contract" pursuant to an insurance policy issued to one of the suppliers, affirming a lower court's grant of summary judgment in favor of the insurer in a coverage dispute over an alleged eye injury caused by a pop-up laundry hamper that was purchased at Target in 2010 (Northern Insurance Company of New York v. Target Corporation, et al., No. 16-2222, 6th Cir., 2017 U.S. App. LEXIS 24156).



Pennsylvania Court: Complaint Alleges Injuries Caused By Unintentional Conduct
PHILADELPHIA - A Pennsylvania Superior Court on Nov. 22 found an underlying personal injury complaint alleges injuries that were caused by unintentional conduct, reversing and remanding a lower court's ruling in favor of an insurer (Erie Insurance Exchange v. Tracy L. Moore, et al., No. 869 WDA 2016, Pa. Super., 2017 Pa. Super. LEXIS 957).



Judge: No Coverage For Claims Alleging HIV Infection From Adult Film Work
OAKLAND, Calif. - A California federal judge on Nov. 27 found that the State Insurance Compensation Fund has no duty to defend against underlying claims that adult film stars became infected with the human immunodeficiency virus (HIV) while they were performing in films that were being produced by the insured, finding that the non-intentional tort claims are preempted by the exclusive remedy provision of workers' compensation and the intentional tort claims are barred under a policy exclusion (Seneca Insurance Company Inc. v. Cybernet Entertainment LLC, et al., No. 16-06554, N.D. Calif., 2017 U.S. Dist. LEXIS 194441).



5th Circuit Affirms Ruling In Coverage Dispute Arising From Ponzi Scheme
NEW ORLEANS - The Fifth Circuit U.S. Court of Appeals on Nov. 20 rejected an insured's appeal seeking to reverse a lower court's ruling that it did not "own" its lost earnings stemming from a Ponzi scheme within the meaning of a commercial crime insurance policy (Cooper Industries Ltd., et al. v. National Union Fire Insurance Co. of Pittsburgh, Pa., No. 16-20539, 5th Cir., 2017 U.S. App. LEXIS 23349).



Judge: CGL Insurer Has No Duty To Defend Against Class Action Over Data Breach
TAMPA, Fla. - A Florida federal judge on Nov. 17 held that a commercial general liability insurer has no duty to defend against a putative class action alleging that an insured failed to adequately protect the plaintiffs' personal private information (PPI) and timely disclose a data breach to end users (Innovak International Inc. v. The Hanover Insurance Co., No. 16-2453, M.D. Fla., 2017 U.S. Dist. LEXIS 191271).



No Coverage Owed For Underlying Suits Alleging Statutory Violations
CHARLOTTE, N.C. - An insurer has no duty to defend its insured in two underlying class actions alleging violations of the federal Driver's Privacy Protection Act (DPPA) because the business liability policy's statutory violation exclusion clearly bars coverage, a North Carolina federal judge said Nov. 17 in granting the insurer's motion for judgment on the pleadings (Hartford Casualty Insurance Co. v. Ted A. Greve & Associates, P.A., et al., No. 17-183, W.D. N.C., 2017 U.S. Dist. LEXIS 190603).



1st Circuit: Insured Not Entitled To Separate Counsel To Defend Against Suit
BOSTON - The First Circuit U.S. Court of Appeals on Nov. 15 found that the presence of an embezzlement counterclaim in a dispute between an employer insured and its former employee fails to generate a conflict of interest that entitles the insured to separate counsel to defend against an underlying wrongful termination lawsuit at its employment practices liability insurer's expense (Mount Vernon Fire Insurance Co. v. VisionAid Inc., 15-1351, 1st Cir., 2017 U.S. App. LEXIS 22906).



Specific Matter Exclusion Bars Coverage For Alleged Scheme, Federal Judge Rules
LOS ANGELES - A California federal judge on Nov. 16 held that an insurer has no duty to defend or indemnify against underlying lawsuits alleging that an insured's directors and officers participated in a scheme to transfer encumbered properties to their relatives while avoiding banks' interests in the properties (Ocean Towers Housing Corporation v. Evanston Insurance Co., No. 15-6461, C.D. Calif., 2017 U.S. Dist. LEXIS 190738).



North Dakota Supreme Court: Fact Issues Exist As To Whether Exclusions Bar Coverage
BISMARCK, N.D. - The North Dakota Supreme Court on Nov. 16 held that there are material fact issues as to whether a commercial general liability insurance policy's "assault and battery" and "liquor liability" exclusions bar coverage of a negligence claim against an insured bar, reversing a lower court in part (Carol Forsman v. Blues, Brews and Bar-B-Ques, Inc., et al., No. 20170088, N.D. Sup., 2017 N.D. LEXIS 273).



Panel: Assault And Battery Exclusion Bars Coverage For Claims Arising From Shooting
DENVER - The 10th Circuit U.S. Court of Appeals on Nov. 20 affirmed a lower court's finding that an insurance policy's assault and battery exclusion barred coverage for an underlying shooting at a concert by a security officer hired by the insured (Event Security, LLC, et al. v. Essex Insurance Co., No. 17-6073, 10th Cir., 2017 U.S. App. LEXIS 23292).



Court Affirms No Coverage For Student's Sexual Assault Lawsuit Against Teacher
HARRISBURG, Pa. - The Pennsylvania Superior Court on Nov. 14 affirmed a lower court's ruling that an insurer has no duty to defend or indemnify a music teacher against a student's lawsuit alleging sexual assault (Old Republic Insurance Company v. Matthew Stevens, et al., No. 1903 MDA 2016, Pa. Super., 2017 Pa. Super. Unpub. LEXIS 4188).



Insurer's Duty To Defend Church, Elders Is Ongoing, Federal Judge Rules
WICHITA, Kan. - A Kansas federal judge on Nov. 13 held that an insurer has not paid its limit as a result of a judgment or settlement of an underlying litigation arising from sexual abuse claims against the pastor of a church and, therefore, the insurer is still obligated to provide a defense to the church and its elders against two underlying lawsuits (Brotherhood Mutual Insurance Company v. M.M., a minor by and through his natural mother, et al., No. 16-1362, D. Kan., 2017 U.S. Dist. LEXIS 187525).



Insurer, Plastics Company Dispute Scope Of Coverage For Packing Products Case
CHICAGO - A plastics company and insurer recently submitted their arguments to the Seventh Circuit U.S. Court of Appeals, disputing whether a trial court erred when it found that the insurer was not liable to provide coverage in relation to an underlying lawsuit stemming from faulty laminate made by the company (Berry Plastics Corp., n/k/a Berry Global Inc. v. Illinois National Insurance Co., No. 17-1815, 7th Cir.).