Nevada becomes the first state to eliminate policies with eroding limits, a Montana ruling that the government must do more to protect citizens from climate change may set a precedent for decisions in other states, and legislative action in California designed to help stabilize the property insurance market fails.
Montana
Ruling May Preface Nationwide Environmental Mandate Increase
A state court judge recently ruled that Montana’s government must do more to protect the state and its residents from climate change. The judge ruled in favor of a group of youth plaintiffs and invalidated a pair of laws prohibiting state agencies from considering the effects of greenhouse gas emissions. The case is among a wave of similar suits arguing that future generations will bear the consequences of a warming planet. A provision in Montana’s constitution explicitly guarantees the right to “a clean and healthful environment.” The plaintiffs argued the state’s reliance on fossil fuels and their production defied that guarantee. State officials must now consider climate impacts in policy decisions, including on energy and mining projects. Montana opposed the suit largely on procedural grounds and plans to appeal. The case may be a bellwether rather than an outlier as similar cases move forward in other states.—From CLM Member Todd Thacker, Goldberg Segalla
California
Effort to Stabilize Property Insurance Market Fails
An initiative to broaden the availability of property insurance in wildfire-prone areas in California has failed. Homeowners and business owners are increasingly struggling to secure property insurance coverage due to the heightened risk of wildfires as several insurers have stopped writing business in the state. The initiative would mean insurers could raise rates in exchange for covering a certain percentage of properties in high-risk areas. California property insurers are prohibited from using climate risk modeling to price coverage, and are not allowed to factor in the rising costs of reinsurance. As a result, insurers cannot charge actuarily sound rates to cover wildfire risks. With fewer options available, more Californians are resorting to the FAIR Plan, a last-resort option offering less coverage for a higher premium. The rising threat of wildfires requires a sustainable approach to ensure Californians can protect their properties. —From Mark Friedlander, Insurance Information Institute
Nevada
No More ‘Burning Limits’
Taking effect on Oct. 1, Nevada becomes the first state to prohibit insurers from issuing or renewing liability insurance policies with “eroding limits” provisions. Eroding limits policies are those in which amounts paid by an insurer to defend a claim against the insured are considered part of the loss. These policies are known as “self-eroding” or “burning limits” policies. They are common in policies for professional liability, directors and officers, and errors and omissions liability. The future implications remain uncertain. Gov. Joe Lombardo signed an emergency regulation for clarification. The law has the potential to eliminate or greatly reduce the availability of certain policies of liability insurance while significantly increasing costs, affecting all types of Nevada businesses. —From CLM Member Ty M. Maynarich, Tyson & Mendes
Michigan
Impact of Bad Faith Legislation Explored
The American Property Casualty Insurance Association (APCIA) released a study on the economic impact of proposed insurance reforms in Michigan showing how “bad faith” legislation could impose big costs on consumers if signed into law. The changes in House Bill 4681 and Senate Bill 329 would create 35 new avenues for legal action against insurers, creating a potential cost to Michigan consumers ranging between $2.4 billion and $4.7 billion on average. The potential for disruption of the insurance market could lead to higher auto, home, and other insurance costs for all Michiganders. While the bills are being touted as a consumer protection measure, they may be more about increasing profits for the trial bar than protecting consumers. And it’s not just consumers that will be impacted, small businesses will also feel the financial burden of these attempted reforms.—From Jeffrey Brewer, American Property Casualty Insurance Association
Georgia
Proprietor Liable Due to Foreseeable Dangers
The Supreme Court of Georgia recently delivered its highly anticipated decision in Ga. CVS Pharmacy v. Carmichael, shedding light on the liability of proprietors and security contractors for injuries resulting from third-party criminal activity. James Carmichael was shot several times in a CVS parking lot and suffered severe injuries. He filed a premises liability suit asserting inadequate security. The jury found in favor of Carmichael, awarding just under $42.8 million. The Supreme Court of Georgia granted certiorari of the case to clarify how reasonable foreseeability in a premise liability claim involving third-party criminal acts should be determined. It reinforced the parties should examine the “totality of the circumstances” in determining whether the third-party criminal act was reasonably foreseeable. Specifically, the court concluded the pertinent question in determining foreseeability is whether the totality of the circumstances gave sufficient reason to anticipate the criminal act. —From CLM Member Jenna Melton Fowler, Wood Smith Henning & Berman
Ohio
Largest Nuclear Verdict Recorded
An Ohio family was recently awarded $787 million by a federal jury following the death of their two-year-old son. The child became trapped in the ladder of his bunk bed while playing and passed away. The family sued the distributors and the Vietnam-based manufacturer of the bed. The family previously settled their claims against the distributors, but the manufacturer never responded and did not appear in court. The court therefore entered a default judgment. A jury in the Southern District of Ohio awarded the family $522 million in punitive damages and $265 million in compensatory damages. The $522 million punitive damages award correlated directly with the date of the toddler’s death—May 22. This award is believed to be the largest jury award ever in Ohio. The manufacturer’s failure to appear arguably played a role in the large award. However, it also speaks to the need for a vigorous defense and “anchoring.”—From CLM Members Doug Holthus and Ashley Hetzel, Freeman Mathis & Gary LLP