The Wall Street Journal’s story on this topic is subscriber-only, but thanks to Daniel Gross, here is a significant part of the article. (Scroll down to the discussion headlined "Cram Down Nation"). The market response to increasing costs for health care insurance, where premiums have outstripped decelerating increases in actual health care costs, has been to go bare and purchase no insurance at all, endangering the profits and future viability of health care insurers. For those employers and individuals who can’t afford insurance at current prices, few tears would be shed at this news. It’s obvious that double-digit premium increases can go on only so long when companies and workers aren’t increasing their profits or wages by double-digits every year.
Monthly Archives: July 2006
Here is a story about an insurance agent who allegedly committed fraud by writing wads of policies for people who never talked to the agent and never asked for the policies. To keep the unwitting policyholders from getting the paperwork and raising questions, she wrote down bogus addresses. Among the return addresses of the policyholders: the agent’s own address. I also like the recurrent theme of failing to sell any policies during office hours but then coming in the next morning with 20 new policies. No way anyone could figure out a scheme like that.
Connecticut Supreme Court: Loss Of Consortium By Patient’s Wife Is Covered Under Physician’s Liability Policy
A physician’s liability policy that insured against damages "because of bodily injury" covered a claim for loss of consortium by a patient’s wife due to an injury to the patient allegedly caused by the doctor’s faulty care, the Connecticut Supreme Court ruled. The case is Connecticut Insurance Guaranty Assoc. v. Fontaine, 278 Conn. 779, 900 A.2d 18 (July 4, 2006).
The Guaranty Association, which as you probably know is a state-created fund that steps into the liabilities of insolvent insurance companies, brought a declaratory action seeking a judgment of no coverage. The court probably took more pages to analyze this than it needed, finding that the policy contained no clause restricting the damages to the person who suffered bodily injury. The court could have said the policy language plainly covered the damages claimed by the patient’s wife, but instead it found the language ambiguous, or susceptible to more than one reasonable interpretation. Under that circumstance, the policy must be construed against the insurer and in favor of coverage, producing the same result.
The Guaranty Association also argued that the rule of deciding against the drafter did not apply to it because it didn’t draft the policy, but merely inherited its liabilities. This is a pretty weak argument. How many insurance policies are out there in which the original underwriting company has since merged or been purchased? Considering the Insurance Services Office or other trade organizations actually draft much insurance policy language, how far could this argument go? The court didn’t buy it either. The court affirmed the trial court’s judgment for Mrs. Fontaine, the patient’s wife, on her cross-motion for summary judgment.
I wonder what the basis is for denying these claims where a car supposedly caught on fire, started itself and drove into two other cars? Non-permissive driver? Seriously, my guess is the insurer finds this story about as plausible as the story my niece, Lisa, told when she ate five Reese’s peanut butter cups, hid the wrappers in an easily seen pile under the couch and then blamed it on the dog.
An Illinois construction company that was denied coverage for construction-related damage came up with another way to seek coverage: claiming the insurer was responsible for the negligence of its agent and employee to provide the right coverage. The case is Country Mutual Insurance Co. v. Carr, 2006 WL 1999220 (Ill. App. 4 Dist., July 14, 2006).
The insured, Carr Construction, was sued for allegedly putting improper backfill around the foundation of a home it constructed and operating heavy machinery near the foundation that then damaged the basement walls. Carr’s insurer, Country Mutual, filed a declaratory action seeking a judgment that it had no duty to defend under Carr’s commercial general liability policy. Carr then filed a counterclaim alleging Country Mutual was responsible for the negligence of its agent, Vogelzang, in failing to procure a policy that covered such damage. This is a pretty good counterclaim, because it uses the insurer’s denial of coverage against it. However, the trial court dismissed the negligence counts of the counterclaim, saying the agent, Vogelzang, owed no duty of care to Carr and that the economic-loss doctrine barred recovery in tort.
The Court of Appeals reversed and allowed the negligence counts to proceed (a count of breach of contract in Carr’s counterclaim had remained untouched by the trial court). The appellate court found that an insurance agent falls under an Illinois statute creating a duty of ordinary care for insurance producers, and that the economic-loss doctrine is meant to bar tort claims only when claims sound only in contract and no extra-contractual duty applies. In this instance, the court said, a duty arose outside of contract by statute, and even if the agent’s performance was a breach of contract, tort claims are viable. Hard to argue with the court’s reasoning in this case, and I appreciated the clarity of the court’s writing.
I’m in Billings for a deposition today. As you may know from my incessant talking about it, I’m originally from North Dakota and Billings is about six hours from where I grew up. It’s a real treat to be back in this area. While Portland, Oregon is the perfect place for me and my family and the best place I’ve ever lived, this part of the country is never far from my thoughts, and I feel as much a part of it as if I had never left.
Colony Insurance Co. v. Barnes, 2006 WL 1995720 (11th Cir. July 18, 2006) is a case that could serve as a model of how a plaintiff can plead to avoid a policy’s assault and battery exclusion. In May 2004, one Faheem Brown, a patron of the Dreamland Inn in Greenwood, Florida, was killed when other patrons began firing guns in the parking lot. It is not clear from the case exactly why they did this, whether out of malice or stupidity, but it appears Brown was struck by a stray bullet and was not an intended target.
His estate brought a wrongful death suit against the club, alleging that it failed to suppress patrons from recklessly shooting firearms, that it failed to provide an environment free from gun play, and that firearm use at the club was so frequent as to constitute an ultra-hazardous activity for which the club was strictly liable. The club’s insurer, Colony, filed a declaratory action, seeking to establish that the policy’s assault and battery exclusion precluded a duty to defend. However, the U.S. district court, and on appeal the 11th Circuit, found that assault and battery, which were not defined in the policy, require an intent to injure or to create a well-founded fear of imminent peril. The complaint, the 11th Circuit said, contained no allegation of intent by the shooter, and therefore Colony owed a duty to defend the club.
It may occur to many of you, as it did to me, that bringing a dec action in circumstances like this, where the underlying tort action against the insured is ongoing, is tricky and hazardous. An insurer can’t force an insured to defend itself in a dec action with a position that will expose it to liability to the underlying plaintiff. In this case, it would appear that the insured could defend the dec action merely by saying that the complaint alleged no criminal intent by the club or the shooter, without admitting any of the negligence or ultra-hazardous conduct in the complaint. Still, the nightclub would have to assume for purposes of argument that the gun was fired on its premises, a fact that exposes it to potential liability. Maybe there was no dispute about this and the club admitted as much in its answer to the wrongful death suit, I don’t know.
This brings to mind something that separates the practice of insurance coverage law from some other kinds of legal practice. I mention this because last night I was reading a blog written by a so-called trial lawyer that frankly made my jaw drop, because it purported to analyze case law but was so lacking in objectivity and fairness as to be disgusting. (I’m not going to mention who this is because it was so evidently written in a bid for any kind of attention, negative or positive, that recognizing these efforts by name would merely reinforce the delusions at their root). Coverage lawyers can have their own views on the world, but when they start wading chest deep in serious analysis of cases and insurance policy language, in my view they have to strive for maximum objectivity and suppress emotion and bias in favor of an intellectual sorting process similar to playing chess. If they don’t remain objective and allow bias to influence their thinking, it is too easy to make a mistake and then gain a new bias: defending your own previous substandard analysis.
Turns out dead men do tell tales. As long as they have a lawyer for a mouthpiece, that is. Check out this story about a class action against an insurance company where the named plaintiff died a couple years ago, but the class counsel maintained the fiction he was still alive. The insurer wants to find out how long class counsel knew about the lead plaintiff’s death, but counsel is referring all questions to his client. As Dave Barry would say, I am not making this up.
Insurance coverage law is not boring. Frequently misunderstood, yes, but not boring. Because if it was boring, it would not be a post on this cool blog about UFOs. I’m not sure why the post features a case that is eight years old, except that it involves the duty to defend James Randi, the paranormal debunker also known as "the Amazing Randi." However, I’m going to take this as an omen that insurance coverage may be the new "it" topic, much like UFOs were during the 1970s.
The case is reprinted in its entirety on the blog and I read it pretty closely. I’m not sure I agree with the court. I’m not entirely sure I disagree either, but I didn’t really like the court’s writing and analysis, so I kind of want to disagree, but I can’t. It seems Randi was sued by Uri Geller, a man who claimed to do various paranormal stuff and did not appreciate Randi’s attempted debunking. The issue in the case was whether the insurance company owed a defense to Randi, who was sued along with a group, of which he was a director. The policy said directors were insureds under the policy as long as they were acting within the course and scope of their duties as directors.
Geller sued Randi after he made anti-Geller statements in the International Herald Tribune, and alleged in the complaint that Randi was acting on behalf of the organization when he spoke out. In a deposition, however, Randi denied this. As it turns out, Missouri, whose law applied, is not an "eight-corners" state, and an insurer can consider extrinsic evidence in analyzing the duty to defend. Nevertheless, the policy itself said an insured would be defended even if the lawsuit were false, groundless or fraudulent. I think there is a very strong argument that, state law notwithstanding, the contract itself would not allow the insurer to consider extrinsic evidence. The real issue, I think, is whether the inquiry into whether Randi’s actions were within the course and scope is an "extrinsic evidence" issue at all, or merely an inquiry into the identity of the insured. On one question the court appears right: someone can’t create a duty for my neighbor’s homeowners insurer to defend me by alleging I’m covered under the policy. So Geller can’t make Randi an insured by his allegations. I’d be tempted to call this a question that is outside the extrinsic evidence framework, and say the insurer is allowed to inquire into the course and scope to determine if Randi is an insured at all.
That is, unless Randi hired me. Then I could come up with some great arguments for the other side of the issue.
First off, let me begin this post by acknowledging that some have made it known to me that there is such a thing as too much Katrina, too much hurricanes, too much Katrina coverage law, too much rising homeowners insurance rates. I live by one principle: give the people what they want. So to you folks, I dedicate this day on the blog. This day will be known as Freedom from Katrina Day. If I can make it through tomorrow without talking about Katrina, that day will be known as Freedom from Katrina Day: Reloaded. After that, we’ll see. For those who are saddened and blindsided by these developments and need More Katrina, allow me to refer you to the other zillion posts I’ve done on the subject. But before we move on, let me say one last thing: Katrina. There. I’m over it.
So let us return today to the roots of this blog, which is insurance coverage case law. As you may know from reading my bio, I read or at least look at a fair number of new insurance coverage cases most every day. Some of my reasons are as follows: so I know what is going on, to broaden my horizons, and because I like coverage law. Some stuff repels me, of course. Anything badly written or where it is apparent the writer has no clue gets the skunk eye from me. In addition, any case that is primarily about ERISA, I run from it like someone is trying to hand me a basket full of snakes. (No offense intended to Steve Rosenberg). But I find maybe half the cases hold some interest for me, with a small number of those standing out as truly fine work that sheds some needed light on some aspect of coverage law.
In this elite category, I place Dubrow v. Mike Check Builders, Inc., 2006 WL 1966966 (E.D. Wisc. July 11, 2006). Almost all the time cases that discuss the so-called "business risk" exclusions in a Commercial General Liability policy, or that discuss construction defect coverage in general, wind up in a total mess. Hats off to U.S. District Court Judge William Griesbach, who wrote an opinion that succinctly and precisely discusses these exclusions, what they mean, and when they apply. Based on one reading, albeit a careful one, I find no fault in this case. I particularly liked how the judge dispensed with the argument over the application of the economic loss doctrine, pointing out that is a remedies principle and not part of an insurance policy analysis. I am going to keep this case handy for reference when I work on coverage matters with Eric Kekel, who has an amazing construction defect practice. Since his office is two doors down and he knows where to find me, I need to have answers at my fingertips.