Monthly Archives: January 2006

Man Seeks To Prove Coverage To Fight Criminal Fraud Charges

I love stories about alleged insurance fraud like this one: what else can you expect from a former newspaper crime reporter? Also, it’s always fascinating to consider the psychology of one who games the system to attempt to pass off the cost of a bad gamble to someone else, and who, in trying to avoid risk, creates a huge new risk of civil or criminal prosecution.

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Court Overturns Jury Malpractice Verdict Against Insurance Coverage Lawyers

There are a number of ways to look at Baker Donelson Bearman & Caldwell, P.C. v. Muirhead, 2006 WL 177593 (Miss. January 26, 2006). First, it shows why forum shopping is alive and well, because this case would not have happened in a state with different bad faith laws, like Oregon. Second, it can be looked upon as a rags to riches story about a guy who beat someone up in a parking lot and wound up several years later with a judgment in his favor for $1.6 million. Third, it shows why insurance coverage is considered a specialty field best left to the experts. It is full of minefields, traps for the wary and unwary alike, abandoned wells and deadfalls.
The bizarre events of the case began with a hotel drinking party attended by numerous employees of a company, followed by a fight in the parking lot between one of the employees, Jack Muirhead, and a stranger. The stranger’s leg was broken, and he sued Muirhead. Muirhead hired his own attorney, and for some reason did not tender the defense to his company’s insurer. The insurer, however, became aware of the lawsuit after the plaintiff amended the complaint and added Muirhead’s employer and the hotel as defendants.

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Possible Changes Coming To “Black Box” Technology In Autos

Until just a few days ago, I fell into the 90 percent of people who are not aware they may have an electronic “black box” in their cars, until I read this story. The devices can record the last five or 10 seconds of the vehicle’s operation before a crash, aiding accident investigators. The federal government will soon be going through the rule-making process to standardize this technology. While I’m all for reducing insurance fraud, I found the comment in the story about everyone having a “policeman under the hood” a little chilling.

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Six Indicted In Portland For Alleged Hurricane Katrina Fraud

A Portland grand jury has indicted six people for allegedly making false statements to receive hurricane relief money.

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Insured’s Volitional Acts Fell Short Of Uncovered Intentional Conduct

Damages caused by an insured who messed up a shipment of cleaning solution by adding the wrong chemical mix were covered as an “occurrence” in the insured’s Commercial General Liability (CGL) policy, the Michigan Court of Appeals has held. An occurrence is defined in a CGL as an event that produces, within the coverage period, property damage or bodily injury that is unexpected and unintended from the standpoint of an insured.
In J. Collins, Inc. v. Cleaning Solutions, Inc. v. Citzens Ins. Co., Inc., WL 170428 (January 24, 2006), the appellate court affirmed the trial court and explained that intentional acts that cause intentional damage are different from intentional acts that cause unintentional damage. The analysis, the court said, is of subjective intent from the point of view of the insured. The court cited precedent in which pulling the trigger on a gun the insured thought was unloaded produced unintended damage, while starting a fire to cause smoke damage to inventory that led to a runaway fire produced excluded, intended damage.

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Sale Of Fake Native American Crafts Does Not Constitute “Advertising Injury”

The U.S. Seventh Circuit has held that falsely claiming to sell authentic Indian arts and crafts did not implicate the “advertising injury” section of a Commercial General Liability (CGL) policy. In Native American Arts, Inc. v. Hartford Casualty Ins. Co., 2006 WL 172194 (January 25, 2006),the court ruled that a business’ primary and excess insurers had no duty to defend it in a lawsuit brought under the Indian Arts and Crafts Act, 25 USC Section 305.
Advertising injury in a CGL is defined as oral or written publication in an advertisement that disparages a person’s goods, products or services, violates a person’s right of privacy, copies another’s advertising idea or infringes a copyright or title of a work in an advertisement. The court found that falsely claiming goods are authentic products of a certain cultural heritage is not the same as copying the advertising idea of companies selling authentic products. In addition, the court said, coverage was expressly excluded in the policy for trademark and other claims concerning the “designation or origin or authenticity” of products.

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Truck Crash With Multiple Cars Was One “Occurrence”

A lot of people who should know better hopelessly botch an analysis of choice of law. On the other hand, there is Zurich American Ins. Co. v. Goodwin, 2006 WL 177608 (Miss. January 26, 2006), where the court went methodically and thoroughly through a choice of law analysis. The court reversed a lower court that had applied Mississippi law to a coverage dispute because Mississippi is where a multiple-vehicle crash occurred. The lower court incorrectly applied a type of “minimum contacts” analysis appropriate for personal jurisdiction but not appropriate for choice of law.
The case arose out of an accident where an eighteen-wheeler collided with eight other vehicles, killing two people and causing numerous injuries and property damage. The trucking company was insured under a Zurich policy that provided liability insurance of $1 million per accident. Under Mississippi insurance law, each vehicle constituted a separate accident, meaning $8 million was available to compensate victims. Under the law of Iowa, where the trucking company was headquartered, all eight vehicles constituted one accident subject to the $1 million limit. The court held that, under Section 188 of the Restatement (Second) of Conflicts of Laws, Iowa was the state of real interest: the insurance contract was entered into and performed there.

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Record Catastrophe Loss Claims In 2005

This story says a record $56.8 billion will be paid out due to 24 catastrophes in 2005. (Bonus points to anyone who can name all 24 without peeking). As I pointed out in an earlier post, however, the insurance industry still is in excellent health.

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Exclusion Precludes Coverage If Related Claim Has Genesis In Excluded Conduct

It may sound obvious that where conduct is excluded from coverage, it is still excluded when you rename the conduct with a different legal label. However, this isn’t always so obvious when one reads the allegations of a complaint containing multiple counts. Often, the plaintiff’s attorney throws in some sort of negligence claim in an attempt to create coverage. Sometimes the negligence claim is actually different from other excluded claims, but a lot of the time it is merely excluded conduct trying to get into an invitation-only ball by wearing a disguise.
In Rayborn v. State Farm Fire & Casualty Co., 2006 WL 162646 (W.D. Wash. January 20, 2006), U.S. District Court Judge Ronald Leighton decided, under Washington law, that the insurer had no duty to defend or indemnify in a professional malpractice lawsuit that also contained a claim of negligent hiring because the insured would not have been subject to a negligence claim save for the existence of malpractice, which was excluded from coverage.

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Archdiocese Sues Insurer Over Alleged Theft Of $1.2 Million By Priest

Considering a grand jury indicted a New York priest for allegedly living the high life on church funds, and for using undue influence to get an elderly parishioner to sign over $490,000 in cash and stock to him, I found the most interesting part of this story to be the defense of the priest by his lawyer: he “may not have been a good bookkeeper, but he was a beloved, effective and honest pastor.”

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