CLM National: October 2019

A court in Oregon allows a federal RICO suit concerning a cannabis grower to proceed, Arizona now has a statewide texting-while-driving ban, and, in Texas, flood damage from Imelda brings back memories of 2017’s Hurricane Harvey.

Washington

Court Applies Inverse Proximate Cause Language

In the matter of Belmain Place Condominium Owners Association v. American Insurance Company, the Washington federal district court denied an insured/plaintiff’s motion for summary judgment on coverage related to water damage to a condominium. Based on the “inverse proximate cause” language found in the “Washington Changes—Excluded Causes of Loss” form, the court rejected the insured’s argument that if water intrusion damage is not specifically excluded, then it is always covered under an ensuing loss provision. The court explained that the Washington Supreme Court expressly allowed for “inverse proximate cause” language in Vision One LLC v. Phila. Indemn. Ins. Co. and distinguished this matter from another Western federal district court decision that addressed different policy language. Notably, the decision also states that “plaintiff’s position has the potential to swallow the exclusions in an all-risk policy whole.”—From CLM Member Jennifer Dinning

Oregon

Court Considers State vs. Federal Law on Cannabis

In Momtazi Family LLC v. Wagner, the District Court of Oregon denied a legal cannabis grower’s motion to dismiss a vineyard’s lawsuit filed under the federal Racketeer Influenced and Corrupt Organization (RICO) Act, alleging the grow operation was running a “criminal enterprise,” because marijuana is illegal under federal law. The court held that the vineyard had plausibly alleged that it had suffered a “concrete financial loss,” because a customer canceled an order over fears, “whether valid or invalid,” that the grapes were contaminated with the smell of marijuana. Because marijuana remains illegal under federal law, the vineyard may proceed with a racketeering lawsuit. This case highlights the emerging liabilities associated with cannabis markets legalized under state laws and the challenges to insurers from legal cannabis businesses.—From CLM Member Kevin Clonts

Arizona

Ducey Signs Statewide Texting-While-Driving Law

Gov. Doug Ducey has signed H.B. 2318, which institutes a statewide ban on texting and driving. The law has already taken effect, and penalties will begin Jan. 1, 2021. The law replaces a patchwork of local ordinances throughout the state. The legislation prohibits holding or supporting a wireless device while driving; writing or reading text-based communications while driving; and watching, recording, or broadcasting video while driving. Texting while driving is considered a primary offense, which means officers are allowed to pull drivers over for this violation. Civil penalties include a fine of up to $150 for the first offense and up to $250 for second and subsequent offenses. Criminal penalties include up to six months in jail and a $2,500 fine for causing a crash resulting in serious injury or death.—From CLM Member Penny McCloud and Managing Editor Phil Gusman

Texas

Imelda Causes Over 10,000 Vehicle Flood Claims

Insureds have filed over 10,000 vehicle flood claims in Southeast Texas so far as a result of Tropical Storm Imelda, according to the Insurance Council of Texas (ICT). The storm, which struck Texas in mid-September, brought more than 30 inches of rains to the area, which caused rising flood waters. The intensity of the floods in some areas has drawn comparisons in media reports to 2017’s Hurricane Harvey. “Homeowners are still assessing damages caused by flooding, but damage estimates will likely reach well into the billions of dollars,” ICT said in a statement. News reports indicate that five people were killed as a result of Imelda.—From CLM Managing Editor Phil Gusman

Alabama

Statute of Limitations Rules Updated

The Alabama Department of Insurance has made a change to Regulation 482-1-125-.07(4), which is set to take effect on Jan. 1, 2020. The regulation has been expanded to include language requiring insurers to give notice to any claimant who is unrepresented regarding the expiration date of the statute of limitations. Prior versions of the regulation have not put any notice on insurers to notify claimants of the expiration date. Under the revised regulation, insurers must give notice to the unrepresented claimant not less than 45 days before the date on which the statute of limitations will expire.—From Alabama Chapter Secretary Jeremy Richter

New Jersey

New Bills Impact PIP, Auto BI

As a result of the New Jersey Supreme Court decision in the Haines v. Taft case in March 2019—and the justices encouraging the legislature to change the law—Gov. Murphy signed two new bills that impact PIP and auto BI settlements going forward. The first, S-2432, allows injured victims of motor vehicle accidents to seek payment for medical expenses due to the negligent or reckless actions of another driver when those expenses exceed their insurance policies under PIP coverage. The new law will permit a party injured in an automobile accident to recover all medical expenses that exceed, or are unpaid or uncovered by any injured party’s auto insurance medical PIP coverage. The second bill, S-3963, revises the law concerning recovery of unreimbursed medical expenses as economic loss in civil actions for damages arising from an automobile accident. It permits the injured person to recover all unreimbursed medical expenses not covered by the insured’s own PIP limits.—From CLM Member Denise Koval