Home Medical Malpractice Insurance Law – Week Of September 3, 2022 – Insurance Laws and Products

Insurance Law – Week Of September 3, 2022 – Insurance Laws and Products

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PANDEMIC UPDATE

And then there were five. Despite policyholder hopes that the
Washington Supreme Court’s track record of finding coverage in
difficult cases might help them turn the tide of recent insurer
victories in federal appellate (and now state supreme court) COVID
rulings), the court issued a unanimous decision last week in Hill and Stout v. Mutual of Enumclaw Ins. Co.,
No. 100211-4 (Wash. Aug. 25, 2022) declaring that the corona virus
does not cause “direct physical loss or damage” to
property and that coverage would, in any event, be negated by the
policy’s virus exclusion because the efficient proximate causes
of these losses was the COVID 19 virus.

NEW CASES OF CONSEQUENCE

THIRD CIRCUIT Forum Selection Clauses/Maritime (PA)

The Third Circuit has ruled that a Pennsylvania District Court
acted prematurely in giving effect to a forum selection clause in a
marine insurance policy requiring that New York law govern the
policy. In light of the U.S. Supreme Court’s ruling in The
Bremen that under federal admiralty law a forum-selection provision
is enforceable unless “enforcement would contravene a strong
public policy of the forum in which suit is brought,” the
Third Circuit ruled in Great Lakes Insurance SE v. Raiders Retreat Realty
Company LLC, No. 21-1562 (3d Cir. Aug. 30, 2022) that the trial
court had erred in granting judgment to the insurer on the basis of
New York law without first considering whether voiding the policy
due to the insured’s failure to properly recertify the insured
yacht’s fire-extinguishing equipment implicated a strong public
policy of the Commonwealth of Pennsylvania.

EIGHTH CIRCUIT Pollution/Issue Preclusion (MO)

The Eighth Circuit has affirmed a Missouri district court’s
declaration that earlier rulings giving effect to a pollution
exclusion in St. Paul’s policies precluded a renewed effort to
avoid the exclusion on the basis of supposedly newly discovered
facts concerning new claims involving the insured’s
metallurgical plant in Peru. In Doe Run Resources Corp. v. St. Paul Fire &
Marine Ins. Co., No. 21-3046 (8th Cir. Sept. 1, 2022), the
court ruled that the Missouri Supreme Court’s 2017 decision
giving effect to the St. Paul pollution exclusion barred any right
to relitigate the applicability of the exclusion to nine new
lawsuits that have been filed against Doe Run in the interim. The
court observed that Doe Run had had ample opportunity to make these
arguments earlier and that “new evidence does not create a
new, distinct issue when all events giving rise to the claims
occurred before the filing of the first lawsuit.”

CALIFORNIA Duty to Defend/”Catch All”
Exclusions

Despite the general rule that insurers must provide a full
defense in cases that present both covered and non-covered claims,
the state Court of Appeal has excused an insurer from defending a
“mixed case” where an exclusion contains a “catch
all” clause that extended the scope of the
“habitability” exclusion to any “any claim or suit
that also alleges any violation” of habitability. As a result,
the First District declared in 24th & Hoffman Investors LLC v. Northfield
Ins. Co., A163670 (Cal. App. Aug. 30, 2022), that Northfield
had no duty to defend these claims, even though some theories of
liability were not premised on habitability violations.

IDAHO Policy Expiration/Late Payment of
Premium/Estoppel

The Idaho Supreme Court has ruled that a homeowner’s insurer
properly denied coverage for a fire loss that occurred after the
deadline for paying premium expired but before it received in the
insured’s tardy payment. In United Heritage Property & Cas. Co. v.
Zech, No. 48457 (Idaho Aug. 31, 2022), the Court declared that
United Heritage was not required to give notice of cancellation
pursuant to Idaho Code § 41-2401(1)(j) in order to
affirmatively cancel this policy. The court distinguished between
the cancellation of an extant policy and the facts here, where the
renewal policy never went into effect because the insured failed to
issue payment for the premium due. Writing in dissent, Justice
Stegner argued that the insured should have been permitted to go
forward on a theory of equitable estoppel based on the
insurer’s claimed acceptance of the late payment before
subsequently denying coverage after learning of the fire loss.

MARYLAND Lead Paint/Settlement/Third Party Beneficiary
Claims

The Maryland Court of Appeals has ruled that tort claimants are
only “incidental beneficiaries” of liability insurance
and therefore may not pursue claims as third party beneficiaries
unless they have a final judgment against the insured. In CX Reinsurance Company v. Johnson, No. 47 (Md.
Aug. 29, 2022), the court held that “no Maryland statute,
regulation or public policy recognizes tort claimants who do not
hold judgments against insureds as intended beneficiaries of
general liability insurance policies.” As a result, the court
ruled that numerous apartment building tenants who claimed that
they had suffered lead poisoning could not attempt to set aside an
agreement limiting this coverage that had been entered by CX Re and
its insured to settle a rescission action brought by CX Re due to
the insured’s misrepresentations concerning the presence of
lead paint on the property. Under the circumstances, the court
ruled that only those claimants who had procured judgments or
entered into settlements with the insured before the rescission
case settled could sue for coverage.

MASSACHUSETTS Liquor Liability/Bad Faith/Failure to
Settle

The state Appeals Court has awarded double damages to a tort
claimant based upon a liquor liability insurer’s failure to
settle his claim for injuries suffered when he was assaulted by
intoxicated bar patrons following a night of beer pong. In Terry v.
Hospitality Mut. Ins. Co., No. 21-P-530 (Mass. App. Ct. Aug. 31,
2022), the court ruled that the insurer’s pre-trial
investigation was inadequate and one-sided and had focused on
trying to disprove its insured’s liability, whereas a more
objective investigation would have shown that liability was
“reasonably clear” and that the case should settle. The
court ruled that the insurer’s offer of $25,000 in a case that
resulted in a $250,000 verdict was unreasonable and that
Hospitality’s violations were “knowing and
willful.”

OTHER DEVELOPMENTS OF NOTE

Morrison Mahoney In The News

It was a busy week on the home front.

Boston partner Grace Garcia took office this week as the new
president of the Massachusetts Bar Association. MM partner Michael
Hayden is the MBA’s new Treasurer, making this the first time
that top offices have been held by lawyers in the same firm.

At the same time, the Super Lawyer folks recognized 23 of our
partners, along with a dozen youngsters who were identified as
“ones to watch.” MM partners who were recognized for
expertise in insurance law include Dennis Anti (MA) Michael Aylward
(MA), , Mike Edwards (RI),John Graceffa (MA), Ed Landers (MA, Adam
Mordecai (NH) and Bill Schneider (MA).

Lawyers, Drugs and Money

Johnson & Johnson has reportedly agreed to pay the State of
New Hampshire $40.5 million to resolve opioid litigation claims
that were scheduled to go to trial next week.

Restating the Law

The Advisers and Members Consultative Group for the Restatement
of the Law, Torts (Concluding Provisions) project are scheduled to
meet in Philadelphia later this month for a two day debate
concerning more than a dozen topics that the Reporter’s
Preliminary Draft No. 3 addresses, including estoppel, vicarious
liability, medical malpractice, spoliation, medical monitoring
damages and first party bad faith.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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