Missouri extra-contractual reforms take effect, California’s Supreme Court reviews a controversial decision involving skilled nursing facilities, Arizona agents and brokers get some relief from liability lawsuits, and more.
Oregon
Court Clarifies Safe Harbor for Attorney’s Fees in UM/UIM Claims
Oregon statute ORS 742.061 provides for an award of attorney’s fees when an insured brings an action against his insurer and recovers more than the amount tendered by the insurer. A “safe harbor” for the insurer in uninsured motorist cases states that an insured is not entitled to attorney’s fees if, within six months of a proof of loss filing, the insurer states in writing that it has accepted coverage, that it agrees to binding arbitration, and that the only remaining issues are the liability of the uninsured motorist and the “damages due the insured.” In Spearman v. Progressive Classic Ins. Co., the Oregon Supreme Court addressed whether an insurer may come within the safe harbor when the insurer’s challenge to the extent of the insured’s injuries could result in the insured recovering nothing in the action. The court stated that the insurer need not admit the insured is due damages above a zero-dollar figure because the insurer is entitled to challenge liability and the treatment, which may result in no damages due the insured.—From CLM Members Alex Hill and Geoffrey Bedell
California
Supreme Court to Review Skilled Nursing Decision
The California Supreme Court will review a court of appeal’s decision that contradicts earlier precedent and, if upheld, will afford patients a new avenue for seeking punitive damages against skilled nursing facilities. California Health & Safety Code 1430 (b) provides recourse for violation of patient rights, while limiting remedies to a penalty of up to $500, attorney’s fees and costs, and injunctive relief. The statute has previously been interpreted as providing up to $500 per action with no punitive damages allowed. In Jarman v. HCR ManorCare Inc., the 4th District Court of Appeal upheld recovery for $500 per violation and found that punitive damages were warranted, despite the trial court’s determination of insufficient evidence of malice, oppression, or fraud. In Jarman, the jury found 382 violations at issue. The appellate court said the number of violations constituted conscious disregard for patient safety. Further, the director of nursing was deemed a “managing agent” pursuant to the Elder Abuse and Dependent Adult Protection Act’s requirements for punitive damages.—From CLM Member Constance A. Endelicato
Arizona
Court of Appeals Narrows Broker/Agent Liability
Historically, Arizona has required insurance agents to conform to an amorphous standard of care dependent upon expert testimony. Expert testimony has been routinely used in attempts to impose a duty on agents and brokers to advise customers on the types and limits of insurance products available, even in instances where such advice was not expressly sought. On July 11, 2017, the Arizona Court of Appeals clarified in BNCCORP Inc. v. Hub International Limited that treatises interpreting the standard of care misconstrued and/or incorrectly interpreted prior case law. Citing Couch on Insurance § 46:38 (3rd Ed. 2014), the court held that the applicable standard of care does not require a broker/agent to identify its clients’ needs and advise whether they may be underinsured because it is the client’s responsibility—not the insurance agent’s—to determine the amount of coverage needed. This clarification is expected to provide agents and brokers respite from suits seeking to impose liability simply because exposure exceeds coverage limits.—From CLM Member Jason Mullis
Missouri
Extra-Contractual Reforms Should Benefit Insurers
Legislation aimed at reforming insurance extra-contractual litigation by limiting legal but abusive practices becomes effective Aug. 28, 2017. The new law modifies R.S.Mo. § 537.065 regarding “rollover agreements” and enacts R.S.Mo. § 537.058, which deals with settlement of tort claims. Insurers are granted the opportunity to provide a defense without a reservation of rights before an insured enters into a rollover agreement under the amended R.S.Mo. § 537.065. Written notice of a § 537.065 contract must also be provided to an insurer, and the insurer has 30 days to intervene as a matter of right in any pending lawsuit involving the claim for damages. R.S.Mo. § 537.058 will require that time-limited demands be open for at least 90 days, among numerous other requirements. A demand failing to adhere to all requirements will not provide “a reasonable opportunity to settle” and “shall not be admissible in any lawsuit alleging extra-contractual damages.”—From CLM Member Stephen Murphy
Ohio
Subagent’s Apparent Authority May Excuse Insured’s Failure To Comply With Policy
In Kaplan Trucking Co. v. Grizzly Falls Inc., an Ohio appeals court reversed summary judgment in favor of Westchester Fire Insurance Company in a coverage dispute with its insured. Grizzly secured the subject cargo policy through an insurance broker who, in turn, procured the policy from a Westchester producer, Westrope & Associates. The policy required Grizzly to notify Westchester within 30 days of a vehicle change. Grizzly notified the broker when it purchased a new truck but failed to notify either Westrope or Westchester. A few months later, the truck was involved in an accident in which $105,000 worth of cargo was deemed a total loss. Westchester denied the claim on the basis that Westrope and Westchester were not notified about the vehicle change. The trial court granted summary judgment to Westchester, but the appeals court reversed on the basis that a fact question existed regarding the broker’s apparent authority, as a subagent of Westrope, to bind Westchester.—From Northeast Ohio Chapter Secretary Michael C. Brink
North Carolina
Court Grants JNOV on Negligence Claim
In Beaufort Builders Inc. v. White Plains Church Ministries Inc., a landowner filed a breach of contract counterclaim against the plaintiff construction company, and a third-party negligence claim against the construction company’s president who did some work on the property. A jury found that there was no breach of contract by the company, but found against the president on the negligence claim. The trial court granted the president’s judgment notwithstanding the verdict (JNOV), and the North Carolina Court of Appeals affirmed. The court found that the contract between the parties was controlling and the negligence claim against the construction company’s president was barred by the economic loss doctrine. The court said to hold otherwise “would create an impermissible ‘end run’ around the economic loss rule that is inconsistent with the logic underlying that rule.”—From CLM Member Amie Sivon