Monthly Archives: March 2006

Court Rules Class Actions Claiming Mobile Phone Health Risks Allege Bodily Injury

Class actions over the supposed health risk of mobile phones created a duty to defend under Commercial General Liability policies, the U.S. District Court for the Northern District of Texas ruled. The case is Ericsson, Inc. v. St. Paul Fire and Marine Insurance Co., 2006 WL 770424 (March 27, 2006). St. Paul failed to defend the class actions, claiming they alleged only increased future risks, and that this did not constitute covered “bodily injury” under the CGL policies. The complaints spoke of “adverse health effects,” “biological injury,” “health risk” and “biological effects” due to “cellular dysfunction.”
St. Paul also argued there were no allegations of damages. The court, applying Texas law, disagreed. Texas is one of the states that employs the “eight-corner rule,” meaning the court, when evaluating the duty to defend, should look only to the allegations of the complaint and the language of the policy. The court, after considering cell phone cases in other jurisdictions, including Illinois, Maine and the Ninth Circuit, said that allegations of effects on human cells are sufficient to constitute “bodily injury” under a CGL, barring any definition to the contrary. The court also said there were no requirements in the policy that the alleged injuries be diagnosed or have manifested themselves.
Finally, the court considered St. Paul’s argument regarding the term “damages” in the policies. This was a tricky question, because not only were the health problems apparently undiagnosed, the relief sought was that the class would be furnished with free mobile phone headsets, so they wouldn’t have to hold the phones so close. However, the court said, the relief sought by the complaints “includes but is not limited” to the headsets. The court found the word “damages” in the policy ambiguous, and not clearly excluding the awarding of headsets as covered damages, and so construed the term against the insurer.

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10th Circuit: Insurer Owed Duty To Defend In Blast Fax Class Action

The U.S. Tenth Circuit Court of Appeals found that sending a “blast fax” constituted both “advertising injury” and “property damage” under a Commercial General Liability policy. The insurer therefore had a duty to defend against a consumer lawsuit, the court said. The case is Park University v. American Casualty Co. of Reading, Pa., 2006 WL 766750 (March 27, 2006). A blast fax is a mass, repeat faxing of materials, usually some sort of advertising. A number of courts have decided blast fax cases recently because the federal Telephone Consumer Protection Act creates an incentive for people to sue, often in class actions, over the receipt of unsolicited faxes. Some claims are brought under similar state laws.
As Park University points out, two circuits, the Fourth and Seventh, have found blast fax liabilities are not covered as advertising injuries. The Fifth, Eighth and Eleventh circuits have decided they are covered. The main dispute has been whether blast faxes are “oral or written publication of material that violates a person’s right of privacy” and therefore constitute advertising injuries. These terms, however, are usually not defined by a CGL, forcing courts to decide if “right of privacy” refers only to a right to have your secrets kept, or whether it also includes a right to be left in seclusion. The Tenth Circuit agreed with other courts that found the term comprises both meanings.
The Tenth Circuit also found that the sending of the fax that triggered the lawsuit constituted “property damage” under the policy, because the fax used the printer’s ink. Nevertheless, the insurer said, because the fax was sent intentionally, it could not constitute an accident and therefore was not an “occurrence.” However, in this instance, the fax apparently was requested by an employee of the firm that owned the fax, and the faxer sent it believing the fax would be welcome. The court reasoned that the alleged injury was unintentional from the standpoint of the insured, and therefore the alleged harm could be seen as accidental. Here’s more on the case from Marc Mayerson.
An interesting part of the Tenth Circuit’s decision is the court’s observation that “right of privacy,” lacking further definition in the policy, should be construed in the ordinary sense, or in other words, from the perspective of the average insured who doesn’t spend much time analyzing insurance policies. Insurers, of course, can react to this by limiting the scope of advertising injury through a narrow definition that says a right of privacy refers only to secrets, and not to seclusion. I suspect a number of insurers are already considering such a change.

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Court Finds Statutory Requirement For 12-Point Type Not Binding

Seldom in insurance coverage cases do courts look beyond the language of a statute or insurance contract. When they do find ambiguity, they usually try to resolve it with resort to the least amount of extrinsic evidence possible. So Kinsey v. Pacific Employers Ins. Co., 277 Conn. 398, 891 A.2d 959 (March 7, 2006) deviates from the common rule.
In the case, an employer signed a consent form to lower its Underinsured/Uninsured Motorist (UIM) Coverage. The form contained a warning, in 8-point type, that the insured’s “family” would pay a lower premium, but also receive less of an important protection. An employee was injured driving a company vehicle, and claimed the attempt to lower the limits was ineffective, because Connecticut has a statute requiring the notice to be in 12-point type. The court noted that the warning was worded as the statute dictated, and said the reference to “family” rendered the statute ambiguous regarding a sophisticated entity like a large corporation. The court therefore looked at the legislative history, and found lawmakers were concerned with protecting individuals, not companies with resort to high-level legal and insurance advice. The court ruled the use of the 8-point type did not affect the validity of the company’s reduction of its UIM coverage, and granted the employer’s request to vacate an arbitration award against it.

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From The Nostalgia File

Yesterday morning, I was thinking about the most popular post I’ve done, which I think was put up on the second day Insurance Coverage Law Blog was on the web, back in January. Lots of regular readers weren’t here yet, and they may not have combed the archives to find this item. I speak, of course, of this video of an enraged bus rider attacking a bicycle rider who had a dispute with a city bus here in Portland.
I was undecided whether to do a new post, when last night as I was riding home on my bus a bicyclist got mad at the driver and for several blocks drove in the traffic lane instead of the bike lane, having the effect of holding up the bus, as well as about 40 people on the bus who likely had no particular wish to become embroiled in this battle of wills. Mind you, even though I come from North Dakota, where self-help is something of a cultural artifact, I am taking no sides in any of this. Nor do I cast judgment on the propriety of any actions or pretend to know anyone’s motives –I merely comment on the appearances. As a former journalist, however, I do note that the TV report provided in the link above was far out of sync with the thoughts of Portland residents about this incident and smacked of Big Brotherism to some people I spoke to. Judging from comments on local blogs and letters to the editor of the local newspaper, the majority of people, including regular bicyclists, seemed not only to understand the bus rider’s reaction, but to find it admirable as a kind of decisive, Jack Bauer-esque conduct. One lawyer friend of mine, a reasonable, mild type of guy, said he hoped they didn’t find “the righteous bus rider.” Some people observed that, since the incident took place on one of Portland’s many bridges and the bike did not wind up in the Willamette, there was no real harm, in their view. I do not endorse such sentiments, but I do note their existence.
Some time after this report, the authorities apparently still hadn’t found the bus rider, and the only calls to Trimet, the local transit authority, were not to report the man’s identity but to praise him. I checked with Trimet yesterday about what if any developments have happened, but no one knew anything. I’ll let you know more when I know more.
UPDATE: Check out this post for more information. Unfortunately, the link above goes only to a summary with text and a few pictures. KATU News tells me their video links are only good for about 60 days due to space limitations, so you won’t be able to watch the video.

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Insurance For Losing Your Driver’s License

There is insurance for just about everything, as this story from Scotland shows. My guess is that the premium is pretty high with a healthy deductible. I don’t get the outrage expressed in the story over the supposed moral hazard: the insurance only provides what a suspended driver could get anyway — taxi, bus and limo rides.

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Business Not Covered For Interruption Of Commerce Because Of Wild Fire

A Deadwood, South Dakota business was not covered under a business interruption policy for a reduction in commerce related to an evacuation order triggered by a range fire, the U.S. District Court for the District of South Dakota ruled. The case is By Development, Inc. v. United Fire & Casualty Co., 2006 WL 694991 (March 14, 2006). The governor of South Dakota ordered an evacuation of the town because of the fire. About 50 hours later, the order was lifted. The business, a hotel/casino, was able to re-open, but because some roads in the area were still blocked, it suffered a loss of customers.
One term of the policy granted coverage if civil authorities were to “prohibit access” to the business location, and the coverage would begin after 72 hours. The court held that, because only some roads were closed for as long as 72 hours, access was not totally denied, and granted summary judgment for the insurer.

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Equitable Relief That Seeks Costs And Attorney Fees Is A Claim For “Damages”

So ruled the U.S. Ninth Circuit Court of Appeals in National Casualty Co. v. Coastal Development Services Foundation, 2006 WL 700943 (March 20, 2006). The court was considering a Directors and Officers insurance policy, and the definition of damages was “a monetary judgment, award or settlement arising from a covered claim.” The court, sitting in diversity jurisdiction and deciding under California law, said attorney fees constitute a monetary award.

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Class Actions

Here’s an interesting take from a Maine newspaper.
UPDATE: Here’s another story about the $10.8 million class action-related jury verdict in Maine against a Seattle plaintiff’s firm.

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Business Interruption Insurance Did Not Cover Airline’s Losses From September 11 Attacks

United Air Lines, Inc. v. Insurance Company of the State of Pennsylvania, 439 F.3d 128 (2nd Cir. Febuary 22, 2006) has been out for a month, but the first time I had a chance to read the opinion was over the weekend. It was published in the Federal Reporter last week. In the case, United argued its $25 million “Property Terrorism & Sabotage” policy with the defendant should cover certain losses United suffered in the September 11, 2001 terrorist attacks.
The policy covered business interruption losses only if the interruption resulted from damage to United’s business locations or to adjacent property. United sought recovery for all losses United suffered because of the government-ordered grounding of airline flights for a time following the attacks. The court said it did not need to decide whether the Pentagon and the World Trade Center were adjacent to United’s property, because United could not show its operations were shut down because of damage to these buildings, as opposed to fear of future attacks. The court granted summary judgment to the insurer.

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Claim First Made When EEOC Complaint, Not Lawsuit, Is Filed

A claims-made employment practices liability insurance policy did not cover an employment lawsuit when the employer’s first notice of a claim was an administrative charge filed before the policy period, a Pennsylvania court ruled. The case is LA Weight Loss Centers, Inc. v. Lexington Insurance Co., 2006 WL 689109 (Pa.Comm.Pl. March 1, 2006). A “claims made” policy is unlike an “occurrence” policy in that the former covers claims only if they are first made within the policy period, while the latter covers damages that happen during the policy period, no matter when a claim is made.
The court said a charge filed with the federal Equal Employment Opportunity Commission constitutes the first notice of a Title VII lawsuit, because the later lawsuit filed within the policy period was defined by and covered the same allegations as the administrative claim.

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