by sohalang | Dec 15, 2010 | Blog News, Uncategorized
Lenk v. Life Insurance Company of North America, EDWA Docket No. 2:10-cv-05018-LRS, Order on Motion for Partial Summary Judgment (December 13, 2010).
The Eastern District of Washington trial court ruled that Washington’s Insurance Fair Conduct Act (“IFCA”) was not retroactive, and would not apply if the initial denial occurred prior to the enactment of IFCA. Citing to Rinehart v. Life Insurance Company of North America, 2009 WL 529524, *1 (W.D. Wash. 2009), the court found that “even where an insurer affirmatively denies an insured’s appeal after IFCA’s effective date, the statute still does not apply so long as the initial denial occurred prior to the effective date of the statute.” The Court then went on to conclude that the undisputed facts indicated that plaintiff’s claim for disability benefits was initially denied by letter dated January 18, 2006, before IFCA was enacted . Thereafter, plaintiff’s final appeal was denied by letter dated December 11, 2006. The court concluded that “[c]onsequently, the “precipitating event,” along with all subsequent denials, occurred prior to the December 6, 2007 effective date of IFCA.” And thus the court dismissed the Plaintiff’s IFCA claim.
The Court also addressed when a cause of action for bad faith accrues and when the statute of limitations runs on such a claim. The Court agreed with the insurer and found that a cause of action for a bad faith denial “accrues as of the date of the denial. ” The court rejected the insured’s argument that bad faith was a continuing tort and that accrual should be the date of “final” denial. The court stressed, “Plaintiff’s cause of action against his insurer accrued at the time his claim for coverage was [initially] denied.” Since more than three years had elapsed between the denial and the filing of suit, the court found that the bad faith claim was barred because the statute of limitations had run.
by sohalang | Dec 13, 2010 | Blog News, Uncategorized
Grey v. Leach, Ct. of Appeals Dkt. No. 63221-3-I (Div. 1, Dec. 13, 2010).
The Court of Appeals was asked to determine whether under the Washington Model Toxics Control Act (“MTCA”) , either the “innocent purchaser” defense (RCW 70.105D.040(3)(b)) or the “domestic purpose” defense (RCW 70.105D.040(3)(c)) applies to former owners of a house when the residential heating system operated by them unknowingly leaked oil into the ground and contaminated it during their ownership. The court found that the former owners, “as operators of the heating system, contributed to the contamination, they are not “innocent purchasers” under MTCA and that releasing fuel oil from leaking return pipes running to an underground storage tank is not a “domestic use” under” MTCA.
by sohalang | Dec 13, 2010 | Blog News, Uncategorized
Knowledge Learning Corporation et al v. National Union Fire Insurance Company Of Pittsburgh, PA et al., Dkt No. 3:10-cv-00188-ST, Order of Summary Judgment (D. Or. November 30, 2010)
The issue before the court was whether six separate lawsuits against the insured alleging mental and physical abuse of multiple children in the same facility and the same classroom, by the same two instructors at the insured’s learning centers could be deemed one occurrence under the primary policy language at issue. Significantly, the insured was obligated to pay a $500,000 self-insured retention per occurrence and the primary policy provided $1M per occurrence limits and $5M aggregate limits. The excess insurer, who provided $50M per occurrence/ aggregate limits, argued for a finding of multiple occurrences.
Both the primary and the excess policy define “occurrence” in pertinent part as “an act or threatened act of abuse or molestation. All “bodily injury” and “personal and advertising injury” arising out of the acts of abuse or molestation by one person or two or more persons acting together toward anyone person will be deemed a single “occurrence.” A series of related acts of abuse or molestation will be treated as a single “occurrence.””
The insured argued that the definition of “occurrence” breaks down as follows: “Sentence 1: A single “act” or “threatened act” of abuse is a single “occurrence” –without limitation as to the number of victims. Sentence 2: Multiple acts of “abuse” (whether a “series” or “related acts” or not) by [a.] one person or [b.] two persons or more acting together, “toward any one person,” is a single “occurrence.” Sentence 3: Any “series of related acts of abuse” are a single “occurrence” –without limitation as to the number of victims.” While the excess insurer argued that the policy language means: “[S]eries of related acts” is not defined and there is no mention of multiple claimants anywhere in the definition. Thus, the reasonable interpretation of this provision is that it relates back to the prior sentence … and attempts to address sexual abuse claims from an alternative direction. The definition of “occurrence” first addresses “bodily injury” arising from the abuse by one or more persons. Second, the definition addresses multiple acts of abuse against that same person. In other words, the definition addresses both the act(s) and the injury. Significantly, it does not reference multiple claimants, which would have been relatively simple to include in the definition. Importing multiple claimants into the definition of “occurrence” is not reasonable and not consistent with the language of the definition.“
The trial court agreed with the insured and ruled, “the best reading of the definition of “occurrence” is that the first sentence sets forth the general rule that one “act” = one “occurrence” and the latter two sentences set forth two different exceptions to the general rule. Accordingly, although the second and third sentences may overlap (for example, two perpetrators jointly engage in a series of related acts of abuse against the same victim), there are scenarios where the second sentence would apply and the third would not (one perpetrator abuses one victim in two very different ways). Furthermore, I find it notable that the second sentence specifically limits coverage for “bodily injury” caused by actions made “toward anyone person” whereas the third sentence grants broad coverage without limitation to the number of victims affected by the abusive acts. See ORS 42.230 (the court may not insert words into a contract).“
by sohalang | Oct 19, 2010 | Blog News, Uncategorized
In a decision issued today,
Vision One, LLC et al. v. RSUI, No. 38411-6 (10/19/2010), Division II of the Washington Court of Appeals explained the efficient proximate cause rule. The case arose out of the collapse of a concrete slab during the construction of a condominium. The developer’s policy excluded loss caused by faulty workmanship, but the exclusion contained an exception for ensuing loss caused by a covered cause.
Division II explained that the efficient proximate cause of a loss is the predominant cause which sets into motion the chain of events producing the loss—not necessarily the last act in a chain of events. Further, whenever covered and excluded perils combine to cause a loss, the loss will be covered only if the predominant or efficient proximate cause was a covered peril. If multiple causes contribute to cause a loss, the tier of fact must determine which cause was the predominant or efficient proximate cause.
The Court of Appeals then explained where an ensuring loss provision is an exception to an exclusion, the provision applies when an excluded peril causes a separate and independent covered peril. Damage caused by the covered peril is covered under the resulting loss provision, but damage resulting from the excluded peril remains excluded:
For example, following the destruction caused by the 1906 San Francisco earthquake, gasfed fires broke out and caused even more damage across the city. Most property insurance policies excluded earthquake damage but covered fire damage. Because an excluded peril (earthquake) caused an independent covered peril (fire), the resulting fire damage was covered as a “resulting loss.” But earthquake damage remained uncovered.
Accordingly, “assuming faulty workmanship caused the shoring and concrete slab to collapse, faulty workmanship was the initial excluded peril and the collapse was the loss.” Therefore, no independent covered peril (such as fire) caused a covered resulting loss. “The collapse resulted directly from the initial excluded peril of faulty workmanship, and loss resulting directly from the initial excluded peril remains uncovered.”
The court also held that:
1. The efficient proximate cause rule is a rule of policy construction. Failure to cite efficient proximate cause in a denial letter does not prevent the application of efficient proximate cause analysis to determine coverage.
2. Determining the cause of collapse is a question of fact for the jury unless the facts are undisputed.
3. When an insurer denies a tender, it is estopped from claiming that it was released from liability based upon the insured’s subsequent settlement in violation of an impairment of subrogation provision.
by sohalang | Oct 1, 2010 | Blog News, Uncategorized
In Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 2010 WL 3768022 (Or App Sep. 29, 2010), the court held that an insurance company could consider materials extrinsic to the complaint and the insurance policy to determine the duty to defend based on the facts presented.
Gemini Insurance Company (the “insurer”) issued insurance to TransMineral, a distributor of a stucco product. The policy had a so-called “vendors endorsement” that provided coverage to “all vendors of [TransMineral]” but “only with respect to ‘bodily injury’ or ‘property damage’ arising out of ‘your products’ … which are distributed or sold in the regular course of the vendor’s business,” subject to certain exclusions.
Fred Shearer & Sons (“Shearer”) was a subcontractor on a home repair and installed the stucco product on the exterior of the residence. The product allegedly failed, and the owners of the residence sued their general contractor who, in turn, sued Shearer and TransMineral.
Shearer tendered the defense of the lawsuit to the insurer on the theory that it was an insured as a vendor of TransMineral products. It based the tender on an “Exclusive Applicator Agreement” that it had entered into with TransMineral. That agreement granted Shearer the exclusive right to distribute TransMineral’s products. The insurer rejected the tender.
Shearer brought a (new, separate) lawsuit against the insurer seeking a declaration that it was an insured under the vendors endorsement. Before the trial court, shearer moved for partial summary judgment on this question, and the trial court granted the motion. Additional issues regarding the amount of the defense obligation were tried to the court, and the court again ruled in Shearer’s favor. The rulings were reduced to a limited judgment, which the insurer appealed.
The Court of Appeals affirmed the trial court. Before the Court of Appeals, the insurer argued that it was “impossible to tell from the pleadings in the underlying action or the policy language that Shearer sold or distributed the stucco product in the ordinary course of business,” that “the four corners of those documents – that is, the pleadings and the insurance policy – exclusively govern whether [it] owes any duty to defend” and that “nothing in [the underlying] allegations expressly or impliedly connotes that Shearer distributed or sold the TransMineral products.” 2010 WL 3768022 at 3 (internal quotations and some alterations omitted). The Court of Appeals rejected this argument as follows:
“When the question is whether the insured is being held liable for conduct that falls within the scope of a policy, it makes sense to look exclusively to the underlying complaint. …
“The same cannot be said with respect to whether a party seeking coverage is an ‘insured.’ The facts relevant to an insured’s relationship with its insurer may or may not be relevant to the merits of the plaintiff’s case in the underlying litigation. The plaintiff in the underlying case is required to plead facts that establish the defendant’s liability; the plaintiff often is not required to establish the nature of the defendant’s relationship to some other party or to
an insurance company in order to prove a claim….”
Id. at 5. The Court of Appeals also rejected the insurer’s other arguments as to the application of certain exclusions and the calculation and allocation of defense costs.
by sohalang | Sep 9, 2010 | Blog News, Uncategorized
The Washington Supreme Court held today in
Holden v. Farmers Ins. Co. that an insured was entitled to recover sales tax under an actual cash value (“ACV”) loss settlement provision in her renter’s insurance policy because of ambiguity regarding whether ACV includes sales tax.
The claim arose out of a fire to Laura Holden’s apartment, which damaged her personal property. Ms. Holden’s policy provided for settlement at ACV, but included an endorsement that would have allowed her to recover at replacement cost if she replaced the property within 180 days of the loss. Ms. Holden elected not to replace the damaged property. The carrier paid Ms. Holden $1,174, based upon the fair market value (“FMV”) of her loss. (This was apparently a rather small fire.) The loss payment, however, did not include sales tax. Ms. Holden argued that the ACV payment should have included an adjustment based upon sales tax even though she did not replace the damaged property.
In its 6 to 3 decision, the Washington Supreme Court held that the following provision was ambiguous regarding whether Ms Holden was entitled to recover sales tax:
Covered loss to property will be settled at actual cash value. Payments will not exceed the amount necessary to repair or replace the damaged property, or the limit of insurance applying to the property, whichever is less.
The policy defined ACV as FMV but did not define FMV. The Supreme Court acknowledged that in another (non-insurance) context FMV “is the amount of money which a well informed buyer, willing but not obliged to buy the property, would pay, and which a well informed seller, willing but not obligated to sell it, would accept.” However, the court held this definition of FMV did not resolve the sales tax issue and that there is nothing intrinsic in the notion of FMV that necessarily includes or excludes sales tax.
In construing the loss settlement provision, the court considered evidence regarding the insurer’s claims handling practices in unrelated claims including that the insurer sometimes determined ACV by applying depreciation to replacement cost value, and sometimes included sales tax in its determination of replacement cost.
The court noted that the policy’s loss settlement provision does not clearly exclude or include sales tax and does not define FMV. The fact that the loss settlement provision references replacement cost, combined with the carrier’s claims handling practices, and the lack of a definition of FMV, according to the majority, created an ambiguity, which must be resolved in favor of the insured.
