Around the Nation: June 2014

MISSOURI

Required Stacking of Auto Liability Minimum Limits

The Missouri Court of Appeals, Western District, recently held in Dutton v. American Family that the Missouri Vehicle Financial Responsibility Law requires stacking of liability coverage. The insured had two American Family policies covering two different vehicles, one of which she was driving when the accident occurred. The court held that the liability coverage for the vehicle not involved in the accident applied up to the $25,000 minimum statutory requirement and that neither an anti-stacking provision nor an exclusion for injuries arising out of the use of an owned vehicle not insured under the policy was enforceable.—From CLM Member Jeffrey J. Brinker 

OREGON

EUO Required for Insured to File Suit

In Smith v. Mutual of Enumclaw Ins. Co., the plaintiffs’ home was burglarized, resulting in the theft of personal property. They had a homeowners’ policy and made a claim for the stolen property. Property insurance policies typically set forth an insurer’s right to demand an examination under oath (EUO), along with all records and documents to support the claim. An EUO enables an insurer to obtain information and documentation regarding the facts and its obligations and to detect and protect against potentially false claims. After six months, the EUO process had dragged on, and the plaintiffs filed suit against the insurer for policy benefits and attorney’s fees. The court dismissed the notion, stating that if an insurer in good faith requests an EUO and the insured refuses or fails to attend, then the insured may be prevented from filing a lawsuit against the insurer.—From CLM Member Jack Levy

NEVADA

Household Exclusions and State Law

In Progressive Gulf Ins. Co. v. Faehnrich, et al., the plaintiff was involved in an accident while driving a vehicle co-owned with her husband. The couple’s two boys, who were Nevada residents when the accident occurred, suffered serious injuries. The husband presented a claim for his sons’ injuries, but Progressive denied coverage, citing a household exclusion included in the policy that eliminated coverage for the boys’ claims against his wife. The district court held that the exclusion violated Nevada public policy and, in accordance with Nevada choice-of-law rules, Mississippi law validating such exclusions did not apply.

The 9th Circuit Court of Appeals inquired as to whether Nevada’s public policy precluded giving effect to a choice-of-law provision in an insurance contract negotiated, executed, and delivered while the parties resided in Mississippi when the effect would deny any recovery under N.R.S. 485.3091 to Nevada residents who were injured in Nevada. The Supreme Court answered the certified question in the negative and concluded that giving effect to the choice-of-law provision in the parties’ automobile insurance policy does not violate Nevada’s public policy.—From CLM Member Gina Mushmeche

CONNECTICUT

Obligation to Defend Underlying Claims

In R.T. Vanderbilt Co. Inc. v. Hartford Accident & Indemnity Co. et al., the plaintiff brought an action against Hartford and others seeking a determination of insurance coverage obligations relative to the defense and indemnity for asbestos-related bodily injury actions brought against the plaintiff. A Connecticut trial court held that an insurance company has no duty to defend in underlying litigation pursuant to an umbrella policy provision entitled Coverage B – Excess Liability Indemnity Over Retained Limit. The Superior Court disagreed, saying that an “occurrence not covered in whole or in part by underlying insurance or to which there is no other insurance in any way applicable” included the exhaustion of the primary policy in the underlying actions. The court agreed with the insurance company that the question of whether underlying insurance “covers” an occurrence that might trigger a duty to defend under Coverage B of the umbrella policy focuses on the nature of the occurrence, not the amount of the primary policy limit. In other words, it refers to the fact of coverage, not the extent of coverage, such as exhaustion of the primary policy.—From Connecticut State Chapter Member Lanell Hession Allen

MASSACHUSETTS

Treble Damage Award for Failure to Settle When Liability Was Clear

In Odin Anderson v. American International Group Inc. & Others, the plaintiff was seriously injured when he was hit by a bus while crossing the street. Liability was reasonably clear, but the insurers pursued aggressive case handling, including withholding statements, creating implausible fact scenarios, and manipulating witnesses. The insurers paid the judgment five years after it was entered, and the plaintiff brought c.93A and c.176D claims alleging unfair claims settlement practices. The Superior Court held that the insurers engaged in egregious conduct in failing to “effectuate prompt, fair, and equitable settlement,” and awarded treble damages. It reasoned that the defendants deliberately concealed the truth, skewed the legal system, and deprived the plaintiff of fair compensation.—From CLM Member Michelle Byers

KENTUCKY

New Data Breach Notification Law

In April, Kentucky became the 47th state to pass data breach notification legislation. The legislation (H.B. 232) is similar to that of most other states and covers unauthorized access to “personally identifiable information” in computerized form that is unencrypted and unredacted. Notification requirements do not apply to persons and entities in the regulated sectors of finance and healthcare or to most state and local government entities. Interestingly, the legislation also contains provisions related to the handling of student data that is maintained in the cloud.—From CLM Member Matthew Bakota

TENNESSEE

$100 Million Settlement for Fungal Meningitis Outbreak

A proposed national settlement has been announced for the fungal meningitis outbreak that occurred in 2012 in which 156 Tennesseans were sickened and 16 died as a result of contaminated steroid shots used primarily for patients with back pain. The victims will share in the proposed $100 million settlement with other victims across the country (a national total of approximately 750 sickened and 64 deaths). The settlement fund is to be comprised of $50 million from the New England Compounding Center Inc. (NECC) and its owners; $25 million from NECC’s insurers; and the remainder from the sale of a company. Shortly after the outbreak, NECC—the company responsible for the tainted steroid shots—sought bankruptcy protection. The proposed settlement will require bankruptcy court approval. Lawyers are pursuing other sources of funds for the victims. In Tennessee, lawyers are pursuing a Nashville hospital that provided a location for the pain clinic where a number of the injections occurred.—From CLM Member James C. Wright