Source: https://www.insurancelawhawaii.com/insurance_law_hawaii/2009/06/?asset_id=6a00e551d65ac78833011570c04f97970b
Timestamp: 2019-04-22 10:35:19+00:00

Document:
The insured held a commercial auto policy issued on June 5, 2006 by Infinity General Insurance Company. See Infinity Gen. Ins. Co. v. Reynolds, No. 08-14785 (11th Cir. June 8, 2009) [here]. The premium was overdue as of July 5, 2006, and a cancellation notice was sent July 10, 2006. The notice indicated that coverage would cease at 11:59 p.m. on the cancellation date, July 25, 2006, unless the premium payment was received before the cancellation date.
Thereafter, the insured's son was involved in an auto accident on August 2, 2006, fatally injuring his two passengers. The insurer maintained there was no coverage because the policy had been canceled.
The insurer filed for declaratory relief. The district court granted summary judgment to the insurer, concluding there were no genuine issues of material fact because the premium had never been received and the policy was canceled.
On appeal, the Eleventh Circuit considered whether under Georgia law the insurer effectively canceled the policy. A state statute seemed to favor the insurer, providing an effective cancellation notice must be mailed at least ten days prior to the effective date of cancellation. Georgia case law provided, however, that a notice of cancellation stating a policy will be canceled on a specific date unless premiums due are paid prior to that date was not a notice of cancellation, but a demand for payment. Accordingly, the insured argued the notice, which demanded payment, did not cancel the policy on July 25, 2006.
The insurer argued the case law was not relevant because the notices of cancellation there had been given before the premium was due, unlike the situation here. The purpose of the statute was to provide the insured with an opportunity to make the premium payment before cancellation and keep the policy in force.
Is a notice of cancellation, properly given after the premium is past due, ineffective because it provides an opportunity for the insured to keep the policy in force by paying the past-due premium within the statutory ten-day period?
In the term's insurance-related case, the United States Supreme Court held that additional suits were barred against an insurer that participated in a 1986 settlement of asbestos claims and contributed to a trust fund. See Travelers Indemn. Co. v. Bailey, No. 08-295 (U.S. June 18, 2009) [here]. We previously reviewed the Travelers case here.
Before the reorganization, Travelers faced suits by third parties, such as Manville factory workers, seeking compensation under Manville's policies. In 1986, the Bankruptcy Court approved an agreement which enjoined the lawsuits against Johns-Manville Corporation's insurers, including Travelers. The reorganization plan created the Manville Personal Injury Settlement Trust to pay asbestos claims against Manville. Travelers paid $80 million into the Trust.
Over decade later, plaintiffs started filing asbestos actions against Travelers in various state courts under state consumer-protection statutes and for violation of common law duties by failing to warn about the dangers of asbestos. In 2002, Travelers invoked the terms of the 1986 Bankruptcy Orders, seeking to enjoin 26 direct actions pending in state courts. The Bankruptcy Court issued a temporary restraining order. After mediation, a settlement was reached in some of the suits, with Travelers paying $400 million, contingent upon entry of a Clarifying Order by the Bankruptcy Court stating that the direct action suits were prohibited by the 1986 Orders.
Some individual claimants and Chubb Indemnity Insurance Company appealed. The District Court affirmed, but the Second Circuit reversed, ruling that the Bankruptcy Court had no authority to block the direct actions because they involved insurers and not Manville.
The Supreme Court, in a decision by Justice Souter, reversed the Second Circuit. The direct action suits against Travelers fell within the scope of the 1986 Orders, which became final over two decades ago. Further, the Bankruptcy Court retained jurisdiction to enforce its prior injunctions and issue the Clarifying Order. It was error for the Second Circuit to reevaluate the Bankruptcy Court's exercise of jurisdiction in 1986. The time to assert a challenge was on direct appeal of the 1986 Orders.
The insureds' home was damaged by a flood in Ross, California, on December 31, 2005. See Cook v. USAA General Indemn. Co., No. C-07-4042, 2009 U.S. Dist. LEXIS 45490 (N.D. Cal. June 1, 2009). The home was insured under a National Flood Insurance Program policy issued by USAA.
The home was located in a flood zone forty feet from Ross Creek, and valued at $350,000. After the flood, the kitchen floor began to bulge over the central beam and floor tiles in the kitchen cracked. Cracks also began to appear in the plaster of certain areas of the house. Windows and doors became difficult to open and close.
USAA's claims adjustor initially concluded the total damage was $13,075.47. After subtracting the $5,000 deductible, USAA issued a check for $8,057.47. After a second USAA inspector visited the property, USAA issued another check for $4,180.32 for cleanup costs. A third check in the amount of $12,126.11 was issued for supplemental repair costs for electrical, furnace and water mitigation expenses. In total, USA issued $24,381.00 for damages to the house and cleanup, and the $5,000 deductible was exhausted.
The insureds sought not only to repair the home, but to significantly redesign it, including raising it in order to protect against future flooding. The insured wrote to USAA on July 24, 2006, notifying the insurer that they planned to begin repairs and renovations around August 4, 2006. USAA conducted another inspection on August 4, 2006, while renovations were underway. USAA's structural engineer reported it was highly unlikely that the flood caused any structural damage to the house.
On December 22, 2006, the insureds completed a proof of loss form, requesting a total of $220,039.73 for flood damage. USAA denied the proof of loss. Although additional information was requested, the insureds were unable to respond to many of the requests and they were often slow in their responses.
The insureds sued for breach of the policy. The court agreed with insureds' expert that the flood caused the cracking and bulging, and damage to the doors and windows.
The court rejected USAA's argument that the insureds failed to cooperate. The testimony demonstrated the insureds kept frequent contact with USAA and gave sufficient notice of their intent to work on the house. Moreover, the December 22, 2006 proof of loss sufficiently described which portions of the house were damaged by flood. Because USAA had not issued any money to cover the floor, windows, doors and walls of the house, USAA was in breach of the flood policy.
Meticulously combing through the record and considering competing estimates submitted by the parties, the court determined USAA was obligated to issue an additional payment of $52,690.24 for damage to the house caused directly by flood.
Uninsured-motorist coverage after the insured died in an auto accident was the issue in Estate of Anderson v. Safeco Ins. Co. of Illinois, No. 08-3452 (8th Cir. May 29, 2009) [here].
Anderson was riding in a car driven by his ex-wife when flood water swept the car off a driveway. Anderson died after being thrown from the vehicle. The vehicle was insured by Sagamore Insurance Company. Sagamore denied the Estate's claim because the cause of the accident was not the fault of Ms. Anderson, but the contractor's poor repairs to the driveway.
2. Caused by an accident.
a. denies coverage. . . .
Relying on Part C.1 of its policy, Safeco denied coverage. Although the Sagamore letter indicated the vehicle was insured under its policy, the Estate failed to present sufficient documentation that the death was the result of an auto accident caused by an uninsured motor vehicle. The Estate argued Safeco should provide coverage under Party C.4(a) because Sagamore denied coverage. The district court granted summary judgment to Safeco.
The Eighth Circuit affirmed. Sagamore did not dispute that Ms. Anderson was covered by its policy; it denied payment because it contested her liability for the accident. It would be unreasonable in the context of uninsured motorist insurance to define "coverage" to include a denial by the liability insurer of the insured's fault in the accident. "Coverage" related to whether the policy was intended to apply to a particular claim, whereas "liability" addressed the viability of the claim on the facts. Because Sagamore denied payment on the basis that the insured, Ms. Anderson, was not at fault but did not dispute that the accident was generally covered by the policy, there was no denial of "coverage" within the meaning of Safeco's definition of "uninsured motor vehicle."
The court also rejected the Estate's argument that Safeco was estopped from arguing that Ms. Anderson did not meet the definition of an "uninsured motor vehicle" under Part C.4(a) of the policy because Safeco failed to reference this provision in its declination letter. Safeco was not required to anticipate the Estate's erroneous argument that it was asserting liability under Part C.4 because the definition of "coverage" encompassed a tortfeasor with liability insurance but whose underwriter denied liability in that particular instance.
The ABA's Section of Litigation, Insurance Coverage Litigation Committee's website has been building a collection of insurance related articles, labeled "Hot Topics." Many informative and timely articles appear at the site. See my article, "Breadth of the Flood Exclusion: A Flood is a Flood, Including Storm Surge," posted on the site [Article] which discusses the Fifth Circuit's recent decision in Arctic Slope Regional Corp. v. Affiliated FM Ins. Co., No. 08-30050, 2009 U.S. App. LEXIS 6900 (5th Cir. April 2, 2009), involving the flood exclusion and the anti-concurrent causation clause.
Here is a report in today's Insurance Journal regarding oral argument conducted last Tuesday before the Mississippi Supreme Court in Corban v. United Services Automobile Assoc., No. 2008-M-645 (Miss.) At issue is the application of the anti-concurrent causation clause where the insured's home was allegedly damaged by both wind and flood. We have previously discussed the Corban case here and here.
In our last post [here] we discussed a decision from the Oklahoma Supreme Court recognizing a bad faith claim against a workers' compensation insurer. My Damon Key colleague and fellow blogger, Mark Murakami (hawaiioceanlaw.com), informed me of a similar case winding its way through the trial court on Kauai. See Ordonez v. Hawaii Employers Mutual Ins. Co., Civil No. 060138 (Circuit Court for the Fifth Circuit, State of Hawaii). The Pacific Business News reported on the case here in January. The case was also recently reported by the Advocates Research Company.
In Ordonez, the decedent was killed on January 4, 2005, when her all-terrain vehicle, used by her employer to check hiking trails, overturned. Decedent was survived by her indigent mother, a resident of Venezuela. A workers' compensation claim for full dependency benefits was filed on Plaintiff's behalf with Hawaii Employers Mutual Insurance Company (HEMIC).
HEMIC contested the claim and refused payment. After a hearing in January 2006, the Department of Labor and Industrial Relations ordered that full dependency benefits be paid. The Department found HEMIC had delayed making payments for more than a year without reasonable basis for doing so. After payment was made, Plaintiff sued HEMIC for bad faith in its delay in making payments.
After a trial, Findings of Fact and Conclusions of Law were issued on April 9, 2009. The court ruled HEMIC had sufficient information in January 2005 to determine the decedent's death was compensable. The delay in acknowledging the claim was unreasonable and violated established industry standards for good faith and fair dealing. The court further found HEMIC's motivation in denying Plaintiff's claim was to delay payment so the statute of limitations would expire and HEMIC could escape ever making payment. Plaintiff was awarded $75,000 in general damages and $250,000 in punitive damages.
Based on the on-line docket sheet, it appears that judgment has not yet been entered. HEMIC informed the Pacific Business News that it was considering an appeal.
In Summers v. Zurich Am. Ins. Co., No. 105617 (Okla. May 26, 2009) [here], the Oklahoma Supreme Court addressed confusion under state law in a establishing a bad faith claim against a workers' compensation carrier.
Ms. Summers was injured in March 2004 while employed at Walmart. She was an insured under a workers' compensation policy issued by Zurich. Several orders from the Workers' Compensation Court directed that medical and wage benefits be provided to Ms. Summers. On October 16, 2007, the Workers' Compensation Court entered an Order Authorizing Medical Treatment which repeated prior authorizations in 2004, 2005, and 2006. Zurich did not appeal from this final order or any order of the Workers' Compensation Court.
Zurich, however, refused on several occasions to authorize the treatment ordered by the Workers' Compensation Court. She sued Zurich, asserting its refusal to comply with the Court's order and provide benefits in a timely manner constituted bad faith. Zurich moved for summary judgment, arguing Ms. Summers had failed to secure proper certification of her workers' compensation claim as a necessary statutory precondition to an allegation of bad faith. The trial court granted Zurich's motion and the Court of Appeals affirmed.
The Supreme Court reversed. Indeed, a claimant seeking to enforce a monetary workers' compensation award had to use the statutory mechanism and have the award certified by the Workers' Compensation Court for enforcement. But a claimant who obtained an order certifying that non-monetary benefits had not been provided could pursue a tort claim for bad faith in the trial court without pursuing execution of a certified judgment.
Here, Ms. Summers alleged Zurich refused to authorize the medical treatment ordered by the Workers' Compensation Court. The record contained an order certifying that previously awarded medical benefits had not been provided as ordered, and demonstrated no good cause for Zurich's failure to do so. Ms. Summers could therefore choose to pursue a tort claim in the trial court for Zurich's continuing failure to pay the overdue court-ordered medical treatment. Consequently, the trial court erred in granting summary judgment.
Hawai`i law similarly considers a tort claim against the workers' compensation carrier to be outside and separate from the workers' compensation statutes. See, e.g., Hough v. Pacific Ins. Co., Ltd., 83 Hawai`i 457, 927 P.2d 858 (1996); Catron v. Tokio Marine Management, Inc., 90 Hawai`i 407, 978 P.2d 845 (1999). In our next post, we will update a bad faith claim against a workers' compensation carrier percolating its way through the trial court on the island of Kauai.

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