Insurance Law Update Week of February 11, 2022


The Michigan Court of Appeals ruled in Gavrildes Management Co., Inc. v. Michigan Ins. Co., No. 354418 (Mich. App. Feb. 1, 2022) that a trial court did not err in finding that the insured’s restaurants suffered no “direct physical loss”. The court disagreed that “loss or damage may include contamination of the environment inside a building, such as the air, even in the absence of any detectable alteration of the structure or other property”, but said it was not necessary to decide this legal issue insofar as the plaintiff’s complaint does not allege actual contamination of the property. The court also ruled that the policy’s virus exclusion applied, rejecting arguments that it was unduly vague or contrary to public order. In a footnote, the court declined to entertain the insured’s claim for regulatory estoppel, noting a lack of factual evidence for such claims, but suggested that the insured submit such claim to the insurance commissioner. of Michigan if he thinks they were meritorious.

The Eighth Circuit denied a florist’s claim that he should be reimbursed for excessive premiums charged by his property insurer during the pandemic. Despite the insured’s argument that the rate plan established by State Farm in 2019-2022 did not comply with the conditions during the pandemic, the court ruled in Alissa’s Flowers c. State Farm Fire & Case. Co.No. 20-3340 (8and Cir. February 3, 2022) that the insured had not filed an administrative challenge to this rate plan with the Missouri Department of Insurance as provided in § 379.348 and that, having not exhausted its administrative remedies, it could not now bring a civil action challenging State Farm’s rates, pricing plan, pricing system and underwriting rules.

The New Jersey Appeals Division heard its first COVID appeal last week as the attorney supported him in Capri Holdings LLC v. Zurich American Ins. Co. that a trial court erred in refusing to cover the parent company of fashion icons like Jimmy Choo and Michael Kors.

Florida also had its first COVID appeals argument as the Third District Court of Appeals heard the argument in Commodore, Inc. against certain underwriters at Lloyds.

In a rare setback for insurers in the California COVID litigation, Judge Kronstadt denied a motion for judgment on the pleadings in Live Nation vs. Factory Mutual Ins. Co.No. 21-862 (CD Cal. 3 Feb. 2022), finding that there were at least questions of fact as to whether the presence of virus particles represented “a physical intrusion that affects the integrity of a property and that, in this case, the “complaint sufficiently alleges that the infectious respiratory droplets, which transmit COVID-19, are physical objects that can alter the property on which they land and remain”.

In Miami, a federal judge has denied a hospital chain’s request for business interruption coverage, ruling in Carlion Clinic v. American Guarantee & Liability Ins. Co., no. 21-168 (SD Fla. February 4, 2022) that the insured had not pleaded a claim for direct physical loss or damage. In a lengthy opinion applying Virginia law, Judge Urbanski denied the insured’s request not to “follow the herd” of opinions across the country who also refused to grant BI coverage for pandemic losses . In particular, the court found that the circumstances giving rise to the COVID claims are quite different from pre-COVID cases involving asbestos and other harmful substances. The court also held that these losses were subject to a “contamination” exclusion and rejected the insured’s argument that a Louisiana amendment endorsement, which truncated this exclusion, applied to losses occurring at the outside of Louisiana. On the other hand, the court said that the insured had pleaded a viable claim under a separate endorsement insuring “Interruption by Communicable Disease”.


FIFTH CIRCUIT First Part Cover/Named Storm (TX)

Overturning a Texas district court’s finding that damage caused by Hurricane Harvey was covered, the Fifth Circuit ruled in American landmark ns. Co. v, SCD Memorial Place IINo. 20-20389 (5and Cir. February 3, 2022) that the coverage of a so-called excess surrender policy for the “Covered perils: Windstorm or hail associated with a named storm” applied on a named risk basis and therefore did not cover damage caused by floods that were not associated with the wind. Despite the insured’s argument that it was an “all risk” policy, the court agreed with Landmark that the listing of “Windstorm” and “Hail” demonstrated that it covered specific risks associated to named storms, but not others. Since this was “named peril” coverage, the court rejected the insured’s argument that it had to expressly exclude flood losses in order not to cover them.

SEVENTH CIRCUIT Coverage B/Commercial Dress Offense (IN)

The Seventh Circuit ruled that a competitor’s allegation that ATC manufactured and sold an infringing trailer using the competitor’s design did not seek relief for trade dress violation and therefore did not triggered coverage B. Applying Indiana law, the court held in Aluminum Trailer Co. c. Westchester Fire Ins. Co.No. 21-1538 (7and Cir. Jan. 31, 2022) that for Coverage B to apply, the Insured’s liability must result from a covered breach and cannot simply arise from a breach.

EIGHTH CIRCUIT EPL/Discrimination (MO)

The Eighth Circuit rejected arguments that a liability policy was ambiguous or inconsistent because its coverage of “personal and publicity damages” includes “discrimination” committed “in the course of . . . company” but is subject to an exclusion – for “[e]employment practices, policies, acts or omissions, such as . . . discrimination.” In a brief unpublished opinion, the court said in Amco Ins. Co. c. Columbia Maintenance Co.No. 21-1823 (8and Cir. February 1, 2022) that there was nothing inconsistent or irreconcilable in an insurance policy which contains broad coverage but then limits it with policy exclusions and that in this case the clear intention of the policy was to cover discrimination in general but not where it arises from employment-related practices.

CALIFORNIA Part One/”Replacement Cost”

The California Court of Appeals ruled in Westmoreland v. Fire Insurance Exchange, A160387 (Cal. App. Dec. 28, 2021) that California Insurance Code Section 20515 does not require a property insurer to compensate a homeowner for replacement costs beyond the actual cash value paid when the insured did not actually incur these costs. The First District agreed with the Superior Court that the policyholders had already received the full measure of compensation to which they were entitled because they had received the cash value of the insured dwelling and built replacement housing at a different location without incur additional replacement costs at and above this amount.

IDAHO Policy Interpretation/”Illusive Coverage”

In one case, the Idaho Supreme Court ruled that a trial court erred in finding that Viking’s auto policy compensation provisions excluded UIM coverage. On the contrary, the court ruled in Pena vs. Viking Ins. Co of WisconsinNo. 48379 (Idaho, February 1, 2022) that these provisions were contrary to public order and thus nullified the applicable coverage to the point of rendering it illusory.

MASSACHUSETTS Complaints made and reported policies

The Court of Appeal has ruled that an employer is not entitled to coverage for wage and hour disputes if he has not notified the claims against him during the period of insurance. In an unpublished provision, the court ruled in Meadows Construction Company LLC v. Westchester Fire Insurance Company, 20-P-1272 (Miss. App. Ct. Jan. 18, 2022) that the insured could not circumvent the policy’s “claims report” requirement by focusing on a separate provision that allows an insured to block coverage for future claims by reporting circumstances that may give rise to litigation since, in this case, no notice was ever given. Having concluded that there was no coverage, the court also rejected the bad faith claims of the insured.

SOUTH DAKOTA Deductible/Auto/UM

The South Dakota Supreme Court ruled that an umbrella liability insurer was not obligated to provide UIM coverage to Florida residents for a motorcycle accident that occurred in South Dakota. In Payne v. State Farm Fire and Cas. Co. , 2022 SD3 (SD Jan 19, 2022), the court said Fla. Stat. § 627.727 only applies to policies providing primary liability insurance for liabilities arising out of the maintenance or use of insured motor vehicles and therefore had no applicability to this umbrella policy. Further, the Court noted that while the law nevertheless requires insurers to make UM coverage available to their policyholders, they are only required to do so if the policyholder makes a specific request for UM coverage. Having found that Florida law did not require coverage, the Supreme Court chose not to consider State Farm’s alternative argument that Virginia law, where the original policy was issued, applied. , not the law of Florida where the insured subsequently moved.


* * * In the insurance industry * * *

Americans are back on the road and crashing into each other, a rekindled trend that sent Allstate’s net income for the fourth quarter of 2021 down 50% from the same period in 2020. Meanwhile, Hartford reported last week that its fourth quarter earnings in 2021 rose 36% from a year earlier. Aon PLC also announced an increase in its profits for 2021 despite the fees and costs associated with its unsuccessful effort to acquire Willis Towers Watson.

* * * The Next Big Thing: Privacy * * *

The Illinois Supreme Court ruled last week that Illinois workers’ compensation law does not bar claims for damages under the Biometric Information Privacy Act (BIPA). In McDonald v. Bronzeville Symphony Park, the court focused on the fact that the plaintiffs’ claims did not seek compensation for bodily injury or mental anguish amenable to workers’ compensation. Further, the court concluded that “the plain language of the Privacy Act leads to the conclusion that Parliament did not intend to make the Privacy Act prevail over the Privacy Act. ‘compensation’.

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