Archive for the ‘Personal Injury’ Category

New York Court of Appeals Clarifies Scope of Additional Insured Coverage, Resolves Appellate Division Split?

Thursday, June 8th, 2017

By: Cara Vecchione

In New York, differing views have been offered by the Appellate Divisions in the First and Second Departments regarding the scope of additional insured coverage when the named insured did not cause the accident. This split appears to be resolved by the New York Court of Appeals in its new decision in Burlington Ins. Co. v. NYC Transit Auth., No. 57, 2017 N.Y. LEXIS 1404 (N.Y. 2017), where the court held that additional insured coverage is only available if the named insured’s conduct is the proximate cause of the underlying injuries. In its decision, the Court of Appeals made clear that “there is no coverage because, by its terms, the policy endorsement is limited to those injuries proximately caused by [the named insured].” Given the Court of Appeals’ focus on policy language, this decision has the potential to impact a wide range of additional insured coverage disputes.

In brief, Breaking Solutions, Inc. purchased commercial general liability insurance from Burlington, which included an endorsement listing the NYC Transit Authority, MTA and the City as additional insureds. The additional insured endorsement at issue provides, in relevant part, that the NYC Transit Authority, MTA and the City are additional insureds:

only with respect to liability for ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ caused, in whole or in part, by:

  1. Your acts or omissions; or
  2. The acts or omissions of those acting on your behalf.

The plaintiff in the underlying litigation, a NYC Transit Authority employee, allegedly sustained injuries in a fall at a construction site while he was trying to avoid an explosion that occurred after a Breaking Solutions machine touched a live, underground electrical cable. Discovery in the underlying litigation revealed that the NYC Transit Authority was at fault. As a result, Burlington denied coverage to the NYC Transit Authority and MTA on the ground that neither entity qualified as an additional insured within the meaning of the policy, because the NYC Transit Authority was solely responsible for the accident that caused the underlying injuries.

In the subsequent coverage litigation, Burlington argued that the policy did not afford coverage in such circumstances (i.e., where the additional insured was the sole proximate cause of the underlying injuries). Reversing the Appellate Division, the Court of Appeals determined that “where an insurance policy is restricted to liability for any bodily injury ‘caused, in whole or in part’ by the ‘acts or omissions’ of the named insured, the coverage applies to injury proximately caused by the named insured.”

This decision should provide some relief and clarification for insurers that include additional insured endorsements on their liability policies, as the Court of Appeals now has established the extent of a named insured’s role in the accident for additional insured coverage to be triggered. However, insurers should be mindful of the analysis offered by the dissent, which explained that a stricter application of the policy wording should have been used to resolve the coverage question.

A Shock to the System: Significant Changes to the Discount Rate Applicable to Personal Injury Damages Awards in England and Wales

Wednesday, March 8th, 2017

By: Alex Potts and Caitlin Conyers, Bermuda

In the United Kingdom, when victims of life-changing personal injuries accept lump sum compensation payments, the actual amount they are awarded by English Courts is adjusted according to the interest that they can expect to earn by investing the award. In finalising the compensation amount, English Courts apply a calculation called the Discount Rate – with the rate percentage linked legally to returns on the lowest risk investments, typically Index Linked Gilts.

On 27 February 2017, the Lord Chancellor and Minister of Justice announced significant changes to the Discount Rate applicable under the “Ogden Tables” to the calculation of the compensation payments and lump sum damages awards in England and Wales. The announcement was not welcomed by the UK insurance industry, as many UK insurers will face the prospect of significantly increased personal injury damages liabilities.  However, legal representatives for injured claimants have long been advocating for Discount Rate reform in England and Wales, against the background of a number of consultation exercises.

The decision by the Lord Chancellor to lower the Discount Rate from 2.5% to minus 0.75% was made in accordance with the UK’s Damages Act 1996, which makes clear that claimants must be treated as risk averse investors, reflecting the fact that they are financially dependent on this lump sum, often for long periods or for the duration of their life.  Compensation awards using the discount rate should, so far as possible, put the claimant in the same financial position that they would have been in had they not been injured, including loss of future earnings and future care costs.  The new Discount Rate of minus 0.75% comes into effect in England and Wales on 20 March 2017, following amendments to the current legislation.

The Discount Rate previously had been set in 2001, and remained unchanged for 16 years.  The Lord Chancellor’s recent change to the Discount Rate will see compensation payments rise in England and Wales, and, as such, it is likely to have a significant impact on the insurance industry, and a knock-on effect on public services with large personal injury liabilities (particularly the National Health Service).

In the Lord Chancellor’s announcement to the London Stock Exchange on 27 February 2017, the UK Government made four key pledges:

  • the UK Government has committed to ensuring that the NHS Litigation Authority has appropriate funding to cover changes to hospitals’ clinical negligence costs;
  • the Department of Health will work closely with general practitioners (GPs) and Medical Defence Organisations to ensure that appropriate funding is available to meet additional costs to GPs, recognising the crucial role they play in the delivery of NHS;
  • the UK Government will launch a consultation in the coming weeks to consider whether there is a better or fairer framework for claimants and defendants, with the government bringing forward any necessary legislation at an early stage. The consultation will consider options for reform – including whether the rate should in future be set by an independent body; whether more frequent reviews would improve predictability and certainty for all parties; and whether the methodology is appropriate for the future;
  • the UK Government’s Chancellor of the Exchequer, Philip Hammond, will meet representatives of the insurance industry to assess the impact of the rate adjustment.

It should be noted that in certain other common law jurisdictions such as Bermuda, the Courts already had moved in recent years towards a Discount Rate consistent with the minus 0.75% now applicable in England and Wales, on a case by case basis (see, e.g., Simon v Helmot [2012] UKPC 5; Argus Insurance v Talbot [2014] Bda LR 114; Warren v Harvey [2015] Bda LR 59; and Colonial Insurance v Thomson [2017] Bda LR 41).

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