CLM National: May 2019

The U.S. Supreme Court considers the “bare-metal defense”; the Arizona Court of Appeals holds insureds can validly assign post-loss claims and rights under a homeowners policy to a contractor; and a new workers compensation law for firefighters is signed in Montana.

Washington

Defense Cost Reimbursement Provision Upheld

In the matter of Massachusetts Bay Ins. Co. v. Walflor Industries Inc., the Washington federal district court upheld a defense-cost reimbursement provision, rejecting the argument that such provisions are void as a matter of public policy. The provision provides, in part: “If we initially defend an insured or pay for an insured’s defense but later determine that none of the claims, for which we provided a defense or defense costs, are covered under this insurance, we have the right to reimbursement for the defense costs we have incurred.” The court found support for the reimbursement provision in Nat’l Sur. Corp. v. Immunex Corp., noting that the Immunex court stated that to “allow recoupment to be claimed in a reservation of rights letter would allow the insurer to impose a condition on its defense that was not bargained for.” The court found no basis for invalidating the endorsement on public policy grounds and held that Massachusetts Bay is entitled to recoup the defense costs it paid in the underlying lawsuit pursuant to the endorsement.—From CLM Member Jennifer P. Dinning

Montana

New Workers Comp Law for Firefighters

Gov. Steve Bullock signed into law SB 160, which provides presumptive coverage under workers compensation for certain diseases associated with firefighting. The new law, which takes effect July 1, 2019, outlines specific “presumptive occupational diseases” that must be covered provided the firefighter has served for a certain number of years. The years served range from four to 15 depending on the disease. Diseases covered include bladder cancer, brain cancer, lung cancer, breast cancer, kidney cancer, and others. When disputing a presumptive occupational-disease claim, the burden of proof shifts to the insurer to establish, by a preponderance of the evidence, that the firefighter is not suffering from a compensable presumptive occupational disease. News reports indicate this bill ends a 20-year fight to get firefighters’ claims to be presumed valid if they have served for a given number of years.—From Managing Editor Phil Gusman

Arizona

Insureds May Assign Post-Loss Breach-of-Contract Claim

In Farmers Ins. Exchange v. The Honorable David Udall, the Arizona Court of Appeals held that insureds can assign post-loss claims and rights under a homeowners policy to a water damage mitigation and remediation contractor. The court reasoned that, although Arizona generally enforces anti-assignment provisions, and most insurance policies include such provisions because an insurer has the right to choose its insureds (and risks), this rationale does not apply after a loss occurs, so post-loss assignments are valid and enforceable. The contractor/assignee steps into the insured’s/assignor’s shoes and assumes no greater rights than the insured/assignor, and the policies obligate the insurers to pay the contractor the reasonable costs of remediation, according to the court. The court also carefully limited its decision by noting that it did not address whether an insured could assign a post-loss, bad-faith claim to a contractor.—From Arizona Chapter Board Member Nate Meyer

Florida

AOB Reform Will Be Signed Into Law

The state legislature passed an assignment of benefits (AOB) reform bill, and Gov. Ron DeSantis says he plans to sign it into law. In a statement, DeSantis points to the “exponential growth in AOB abuse,” and states, “In recent years, there have been calls for reform, and today [April 24] the legislature took action. I thank them for their efforts in getting this done, and I look forward to signing this meaningful legislation into law.” Among other changes, HB 7065 states that insurers “may make available a policy that restricts in whole or in part an insured’s right to execute an assignment agreement” if certain conditions are met, including clearly stating the restriction to the insured. The bill also limits attorney’s fees in these types of lawsuits and implements a formula to determine those fees.—From Managing Editor Phil Gusman

Washington, D.C.

Supreme Court Limits Bare-Metal Defense in Maritime Cases

In March 2019, the U.S. Supreme Court, in Air and Liquid Systems Corp. v. DeVries, struck down the bare-metal defense in maritime cases in certain circumstances. In DeVries, the families of Navy veterans sued various manufacturers of asbestos-containing products to which the sailors were exposed in the Navy. At issue in this case are products manufactured and installed without asbestos, but then asbestos was later applied by an unaffiliated third party. The Supreme Court held that the original manufacturers are liable for injuries if their products required incorporation of a dangerous part and had reason to know the incorporated product would be dangerous for its intended uses. The Supreme Court’s decision rejected the bare-metal defense as inconsistent to the principles of torts. The court’s decision marks a significant shift in product liability in maritime cases in the United States.—From CLM Young Professionals Advisory Board Member Nicholas Sulpizio

New Jersey

Injured Motorists Cannot Recover Beyond PIP Limits

In the consolidated lawsuits of Haines v. Taft and Little v. Nishimura, the New Jersey Supreme Court considered whether the state legislature, when it amended the Automobile Insurance Cost Reduction Act, intended to depart from the first-party PIP system. In settling a split among various appellate divisions, the New Jersey Supreme Court affirmatively held that drivers who elect to purchase reduced PIP limits cannot seek to recover expenses between the $15,000 PIP limit in the policy and the statutory default PIP limit of $250,000. In a three-to-two decision, the court held that to hold otherwise would mark the return to a fault-based system consisting solely of economic damages claims for medical expenses in excess of an elected, lesser level of PIP coverage.—From Northeast Ohio Chapter Secretary Michael C. Brink