National News: August 2018

Ford agrees to a nearly $300 million settlement over Takata airbag recalls, oil companies’ motion to dismiss is granted in a climate change suit, and, in South Carolina, passage of the NAIC’s Insurance Data Security Model Law could start a nationwide trend.

Washington

Joint and Several Liability Preserved When Defendant Vicariously Liable

In a 5-4 split decision, the Washington Supreme Court held in Afoa v. Port of Seattle that RCW 4.22.070(1)(a) preserves joint and several liability when a defendant is vicariously liable for another’s fault, but whether vicarious liability exists is a factual question. Plaintiff commenced this action against the Port of Seattle for injuries sustained during his employment with an independent contractor operating at Sea-Tac International Airport. At trial, the Port asserted an empty chair defense against four non-party airlines. The $40 million verdict was apportioned as follows: 0.2 percent to plaintiff, 25 percent to the Port, and 74.8 percent to the four airlines. Plaintiff appealed, alleging the Port was vicariously liable for the airlines’ portion of the damages because it had a non-delegable duty to provide a safe workplace. The court answered in the negative, holding that “an entity’s non-delegable duty cannot substitute for a factual determination of vicarious liability when RCW 4.22.070(1) clearly requires apportionment to ‘every entity which caused the claimant’s damages.’”—From CLM Member Rachel A. Rubin

California

Oil Companies Dismissed from Climate Change Lawsuits

On June 25, Judge William Alsup of the U.S. District Court for the Northern District of California granted defendants’ motion to dismiss in City of Oakland v. BP. Oakland and San Francisco brought identical public nuisance actions against BP, Chevron, ConocoPhillips, ExxonMobil, and Royal Dutch Shell, seeking money damages to offset the cost of mitigating the anticipated effects of sea level rise. The judge found that climate change “deserves a solution on a more vast scale than can be supplied by a district judge or jury…,” adding that the legislative and executive branches of the federal government are the proper forums for addressing climate change. For nine similar pending lawsuits targeting the fossil fuel industry—six in California and one each in Colorado, New York, and Washington—this ruling signals that plaintiffs’ uphill battle just got steeper.—From CLM Member Andy Miller

Ohio

Insurer May Not Void Policy Ab Initio Without Returning Premium

In Nationwide Mutual Fire Ins. Co. v. Pusser, the carrier sought a declaratory judgment that it did not owe liability coverage for a fatal traffic accident caused by the insured’s sister, a household member. Because the insured did not identify her sister as a household member of driving age when she completed her policy application, Nationwide argued that it was permitted to void the policy ab initio due to a breach of the warranties made in the application. The trial court sided with Nationwide and entered judgment while simultaneously denying a competing summary judgment motion filed by the deceased pedestrian’s estate. The appellate court reversed on the basis that the policy and application language does not constitute a plain warning that a misstatement as to the warranty will render the policy void from inception. Notably, the appellate court determined that Nationwide could not even attempt to void the policy because it had altogether failed to return the insured’s premium.—From Northeast Ohio Chapter Vice President Michael C. Brink

South Carolina

Cybersecurity Legislation Could Have National Impact

When the state legislature made South Carolina the first state to ratify the National Association of Insurance Commissioners’ (NAIC) Insurance Data Security Model Law on May 1, 2018, it set the stage for adoption of similar legislation nationwide. South Carolina is the first state to adopt cybersecurity legislation specifically for insurance corporations with requirements to protect customer information. This puts South Carolina in the same conversation as New York—which developed a set of regulations within its Department of Financial Services (DFS) (23 NYCRR 500)—as a leader in providing protection from cyberthreats for its citizens. New York’s regulations had a nationwide impact and essentially initiated the cybersecurity-focused regulatory process for all of the U.S. financial sector, and we expect that the South Carolina legislation will have the same impact on the insurance industry. The NAIC model law may not go far enough in demanding hefty enough cybersecurity defenses and foundational controls to protect a patient’s privacy, but it is a healthy start.—From CLM Fellows John F. deCraen and John C. Thompson

Florida

Ford Reaches Takata Settlement

Ford Motor Company has agreed to a $299.1 million settlement to resolve claims over the massive Takata airbag recalls. The settlement—which was filed in the U.S. District Court, Southern District of Florida, and received preliminary approval on July 16—covers economic-loss claims but not claims for personal injury or property damage other than to the subject vehicles. The litigation began more than three years ago and is connected to the largest recall in U.S. history. Tens of millions of airbags manufactured by Takata and installed in many vehicles from major automakers have been recalled because they can malfunction and cause serious injury or death. The recalls led Takata to file for bankruptcy in 2017. The plaintiffs’ motion for preliminary approval of the settlement notes similar settlements for economic loss have been reached with Toyota, Honda, BMW, Nissan, Mazda, and Subaru.—From Managing Editor Phil Gusman

New Jersey

Allocation to Insured Not Appropriate When Insurance Not Available

The New Jersey Supreme Court recently issued its decision in an asbestos coverage case, Continental Insurance Company v. Honeywell International Inc. This case involved numerous nationwide product liability claims spanning many years of product exposure. The court held that the choice of law analysis should focus on Restatement (Second) Conflicts of Law §188 contacts in relation to the Restatement §6 factors. The court minimized the importance of the place of contracting (Michigan) and focused on the insured’s principal place of business and domicile at the time the underlying claims were made (New Jersey). As to allocation, the court stated that the assumption of risk language in Owens-Illinois addressed only assumption of an insurance risk for the existing claim periods when insurance was reasonably available but the insured elected not to purchase it. The court declined to recognize an equitable exception to the unavailability rule.—From CLM Member Kathleen J. Devlin