Archive for the ‘Casualty Coverage’ Category

It’s All in the Delivery – Proper Renewal Saves Millions

Friday, February 14th, 2014

By Carol Gerner, Sedgwick Chicago

In Windmill Nursing Pavilion Ltd. v. Cincinnati Ins. Co., (No. 1-12-2431), the Illinois Court of Appeals concluded that under Ohio law, Cincinnati Insurance Company (“Cincinnati”) provided sufficient notice to its insured, Unitherm, Inc. (“Unitherm”), of renewal terms that added an exclusion for alleged violations of the Telephone Consumer Protection Act of 1991 (“TCPA”). Accordingly, the court affirmed the trial court’s decision granting partial summary judgment in favor of Cincinnati on the validity of the TCPA exclusion. As a result, Cincinnati did not have to pay $4 million out of a $7 million consent judgment.

Windmill Nursing Pavilion, Ltd. (“Windmill”) filed a class action complaint alleging that Unitherm violated the TCPA by sending unsolicited fax advertisements to it in November 2005 and in late April 2006. At the time Unitherm sent the faxes, it carried commercial general liability and umbrella liability coverage through Cincinnati. The original policy expired before the April 2006 faxes were sent. The renewal policy contained a modification that excluded coverage for “bodily injury,” “property damage,” or “personal and advertising injury” arising out of “any act or omission” that violated the TCPA.

Windmill, Unitherm, and Cincinnati entered into a settlement agreement resolving the class action. The parties agreed to a $7 million consent judgment against Unitherm, which was collectible from Cincinnati under the insurance policies. Cincinnati agreed to provide an initial settlement fund of $3 million, which represented the combined general aggregate and umbrella limits under the original policy. The settlement agreement also provided that Cincinnati’s obligation to pay any further portion of the judgment balance would depend on the outcome of two “carved-out” issues. One of those issues was whether Cincinnati’s notice of reduction in coverage to Unitherm regarding the TCPA exclusion (added to the renewal policy) was sufficient.

The appellate court agreed with the trial court’s ruling that Ohio law applied in the case, and Cincinnati’s notice of a coverage exclusion complied with that state’s insurance law, defeating Windmill’s request to have Cincinnati pay the remaining $4 million of the settlement.

The decision is instructive on several levels. First, when issues of coverage are involved at the time of settlement of the underlying litigation, a settlement may be negotiated which reserves the right to address certain “carved-out” issues as was done in this case. In Windmill, the court found that the release did not preclude the parties from litigating the “carved-out” issues. Second, insurers should be mindful of any differences in statutory requirements for “renewal” as compared to “nonrenewal” situations. In this case, the court held that the notice provided with the renewal policy complied with Ohio law: it was on a separate page, attached to the policy, and was clearly worded regarding the change in coverage. In addition, because the underlying and umbrella policies were “bound together and share[d] the same policy number, the notice was sufficient for both.”

Windmill serves as a reminder that, when limiting coverage on renewal, an insurer should confirm which state’s law will apply to policy interpretation and ensure that it is complying with those specific statutory renewal requirements. As the decision demonstrates, doing the right thing can result in significant savings.

Washington Insurance Law: 2013 Year in Review

Tuesday, January 21st, 2014

2013 was a particularly eventful year in Washington insurance law. This paper, authored by Sedgwick Seattle’s Robert Meyers, summarizes the holdings of several notable Washington insurance decisions that were filed in 2013.  Download a copy of the paper here. 

In June 2013, Bob gave a webinar on The State of Bad Faith in Washington.   The WA program, and the others in our bad faith series, are are available for on demand viewing.  Please click here to request a link.

Webinar Series: The State of Bad Faith

Wednesday, December 4th, 2013

Sedgwick’s 2013 webinar series explored the current state of insurance bad faith law and practical issues impacting the defense of bad faith cases in Washington, California, Florida, New York, New Jersey, Texas and Illinois.  The programs are available for on demand viewing.

The Washington program was presented by Sedgwick Seattle’s Robert A. Meyers and Eliot M. Harris on  June 12, 2013.

The California program was presented by Alex Potente (Sedgwick San Francisco) and Valerie Rojas (Sedgwick Los Angeles) on July 10, 2013.

The New York/New Jersey program was presented by Sedgwick New York’s Greg Lahr and Laura Markovich on August 21, 2013.

The Florida program was presented by Ramón Abadin (Sedgwick Miami) and Al Warrington (Sedgwick Fort Lauderdale) on September 25, 2013.

The Texas program was presented by Sedgwick Dallas’ Lisa Henderson and Sondra Rosebrock on October 30, 2013.

The Illinois program was presented by Sedgwick Chicago’s David Dolendi and Michael McNaughton on November 13, 2013.

 To request a video copy of any of the webinars listed above, please click here.

 

California Supreme Court Holds that Insurers May Be Held Liable for Violations of California’s Unfair Competition Law

Thursday, August 1st, 2013

By Valerie D. Rojas, Sedgwick Los Angeles

In Zhang v. Superior Court, __ Cal.3d __ (2013), the California Supreme Court held that Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287 does not preclude insureds from maintaining a claim for violations of California’s Unfair Competition Law (UCL) against insurers. In Moradi-Shalal, the court held that, when the Legislature enacted California Insurance Code 790.03(h) (UIPA), it did not intend to create a private cause of action for commission of the various unfair insurance practices set forth in the UIPA. Thereafter, a split of authority developed in the California Courts of Appeal concerning whether an insurer could be subject to liability for UCL violations based upon conduct that was also a violation of the UIPA. The court has resolved the disagreement finding that an insurer may be held liable for violations of the UCL even when the insurer’s conduct also violates the UIPA.  The court issued its decision today.

In Zhang, the plaintiff alleged causes of action for false advertising under the UCL and insurance bad faith based upon the insurer’s alleged misleading advertising, which included false promises that the insurer would timely pay proper coverage in the event the insured suffered a loss. The insurer demurred based upon the grounds that plaintiff’s false advertising claim was barred by Moradi-Shalal, and the trial court sustained the demurrer. The Court of Appeal disagreed with the trial court, and the California Supreme Court affirmed the Court of Appeal’s decision.

As a result of the decision, insurers may now be subjected to claims for violations of the UCL.  Insureds may recover under the UCL if they can show that they were likely to be deceived, and that they suffered economic injury as a result of that deception. The court also held that insurers may be liable under the UCL for conduct which also supports a bad faith claim, such as unreasonable claims handling practices, withholding of policy benefits, etc.

If an insured prevails on its UCL claim, it may be entitled to restitution (i.e., return of premiums) and injunctive relief. Damages are not available under the UCL. Although there is no provision for attorney’s fees under the UCL, the court noted that a prevailing plaintiff may seek attorneys’ fees as a private attorney general under Code of Civil Procedure section 1021.5. Additionally, insurers may now be subjected to class actions for violations of the UCL. Insurers should also expect insureds to use the decision to attempt to expand the scope of discovery.

Click here to review the decision issued today.

California Court of Appeal Holds No “Advertising Injury” Coverage for Product That Is Neither Mentioned Nor Disparaged in Advertisement

Friday, November 9th, 2012

By Jamison R. Narbaitz

In Hartford Casualty Ins. Co. v. Swift Distribution, Inc., __ Cal.Rptr.3rd __, 2012 WL 5306248 (Cal. Ct. App. Oct. 29, 2012), the California Court of Appeal held that the “advertising injury” coverage in a CGL policy does not apply when the insured’s advertisement neither mentions nor disparages the claimant’s product.  The claimant, Dahl, manufactured and sold a product known as the “Multi-Cart.”  Dahl sued Ultimate for patent infringement, unfair competition, dilution of a famous mark, and misleading advertising arising from Ultimate’s sale of a similar product, the “Ulti-Cart.”  Ultimate’s advertisement did not expressly refer to Dahl’s Multi-Cart, nor did it disparage Dahl’s product or business.

Hartford Casualty Insurance Company insured Ultimate under a CGL policy that covered advertising injury, defined to include “injury … arising out of … [o]ral, written or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services… .”  Hartford denied coverage for the underlying action and sought a declaratory judgment that it had no obligation to defend or indemnify Ultimate.  On cross-motions for summary judgment, the Los Angeles Superior Court granted Hartford’s motion and denied Ultimate’s motion, finding that the Dahl action was not potentially covered under the policy.

The Court of Appeal affirmed.  The court observed that the underlying action alleged that Ultimate engaged in advertising with the intent to mislead the public:  (1) as to the origin and ownership of Dahl’s mark; and (2) into believing that Ultimate’s products were the same as Dahl’s or were authorized by or related to Dahl.  The court held that disparagement, or injurious falsehood, must specifically refer to the derogated product either expressly or by reasonable implication.  The court found that even though the advertisement could have caused the public to confuse Ultimate’s Ulti-Cart with Dahl’s Multi-Cart, the advertisement did not refer to or disparage the Multi-Cart.  The court criticized the recent decision in Travelers Property Casualty Co. of America v. Charlotte Russe Holding, Inc., 207 Cal.App.4th 969 (2012), for improperly expanding the scope of potential coverage for disparagement to include disparagement by implication and held that Dahl’s allegations could not show a potential for coverage under such a theory of disparagement.

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