In 1984, Len Elmore retired from the New York Knicks following a 10-year career as a professional basketball player.  From there, he went to Harvard Law School and then a diverse career as a lawyer. Throughout it, he also served as a college basketball announcer -- including over 20 years behind the microphone, for CBS Sports, for the NCAA Tournament.

Len was at the announcer’s table for what is widely-considered the greatest college basketball game of all time.  

I interviewed Len, for the ABA Journal, on his remarkable and varied career.  And about that famous college basketball game, he broke the contest down -- in a way that only a lawyer could.

I hope you can check it out:

https://www.abajournal.com/columns/article/from-the-basketball-court-to-the-courtroom-and-back-again-an-interview-with-len-elmore

 

I go through phases with webinars.  I can do five a month for insurer claims departments, and then I burn out and don’t want to think about a webinar for a while.  It’s like fishing.  Once I year I get the bug and can’t wait to go.  And when I’m done, I have no desire to go again until a year later.   

I haven’t done any webinars for a while and decided that it would be nice to get back to them.  I always meet new people and try to make them entertaining.  So, if any insurer claims departments are interested in having me put on any of the following one-hour webinars -- with various CE credits offered (I have to get the specifics on that) -- drop me a note and let’s see if we can put it together.  There is the webinar menu:

• 50 Item Reservation of Rights Checklist
• Top 10 Duty to Defend Issues
• Road Trip Through the CGL Policy
• ALI Insurance Restatement: Its Impact After the First Four Years
  
  Also, I’ll send a complimentary copy of the 5th edition of Insurance Key Issues to the person who coordinates the program.  There is always someone who sorts out the date and deals with the tech stuff and various miscellaneous issues.  This seems like a thankless job and I want to show my appreciation for whomever takes on this task.

I know.  I know.  I am really tardy getting to this.  But I wanted to include the announcement in a real issue of CO and not an email update.

The winner of the Coverage Opinions NCAA Tournament “Final Four” contest is Dorothy Arimond, Assistant Vice President of Brandywine Group of Insurance and Reinsurance Companies in Philadelphia.  Dottie correctly picked Kansas over North Carolina to cut down the net and with an impressive total points of 134.  The actual total was 141 (Kansas 72, UNC 69).  Dottie’s detailed analysis, of how she arrived at these picks, would rival anything from Dickie V!  

Congratulations to Dottie, a long time CO reader and contest enterer, for which I am deeply grateful.  Dottie will get a copy of the fifth edition of Insurance Key Issues.

I was in IKEA not long ago and came across this cute little stuffed elephant.  The mini pachyderm is 4 inches in length.  The collective length of its four tags is 16 inches.  Come on, man!  Is this really necessary?  Hey, IKEA folks -- it’s a tiny stuffed elephant.  It’s not a motorsåg.  [That’s chainsaw in Swedish.]

In case you’re wondering, 3 of the tags inform me, in English and French, that the little guy is made out of polyester.  He or she (it’s not clear which) is a Sot (2 dots over the o) Barnslig, which is soft toy in Swedish.  Two of the tags advise that he or she was made in Vietnam.  I am also provided with 15 symbols (yes, 15) concerning the washing instructions – machine wash, maximum 40 degrees Celsius, do not bleach, and tumble dry.  Wait, here’s the best – do not iron or, get ready, do not dry clean.   At $0.99, which is all it cost, it seems that it would be wiser to just buy a new one if it needs dry cleaning. The Sot Barnslig is suitable for kids 0 and up.  As you’d expect, there are also a few unexplained product numbers.  Lastly, IKEA’s address in Almhult (2 dots over the A), Sweden is provided – P. O. Box 702.  I guess that’s in case the tags do not provide enough information and you want to send them a letter.

On the upside, at least I didn’t have to assemble my sot barnslig.

This is from the July 18, 2018 issue of Coverage Opinions.  I’d completely forgotten about it.  When I saw it the other day I chuckled.  So I thought I’d re-run it here;

https://www.coverageopinions.info/Vol7Issue6/WorkofArt.html

OMGosh.  It has been non-stop chatter about last week’s Missouri Court of Appeals decision holding that GEICO could owe $5.2 million to a woman who contracted human papillomavirus from having unprotected sex in its insured’s 2014 Hyundai Genesis.  The case has been covered by such major media as CNN, NBC, CBS, The Washington Post, and on and on and on.  [In fact, six CO readers sent me the opinion and suggested that I include it in the newsletter.   I’m not sure if I should be flattered or concerned that people think of me when crazy cases come up.]

Of course, $5.2 million and sex in a car is an easy headline.  But those media big boys don’t address the real issue at hand.  For that, you need to go to tiny little, low budget, one man band, Coverage Opinions.

First, in the decision getting all the hoopla, the Missouri Court of Appeals, in M.O. v. GEICO General Ins. Co, No. WD84722 (Mo. Ct. App. June 7, 2022), rejected GEICO’s argument that it did not have a meaningful opportunity to defend its interests, when it intervened in an action where M.O., the victim, was seeking to confirm an arbitrator’s award, of $5.2 million, for the damages that she sustained on account of contracting the STD.  Without getting into the details about GEICO’s initial involvement in the claim, and how it ended up in arbitration, the case is essentially procedural, addressing the rights of an intervenor under Missouri law and the ability to challenge an arbitration award.

But here’s the real story -- and the one not being addressed in those media pieces: how is having unprotected sex in a Hyundai, that leads to the contraction of an STD, covered under an automobile policy in the first place?  [I bet that Volvo, given its long-time touting of its safety record, has a warning sign on the dashboard about this.  Can any Volvo owners let me know.]  

According to GEICO, having unprotected sex in a Hyundai, that leads to the contraction of an STD, is not covered under an automobile policy.  And the insurer has an action pending, in the Western District of Missouri, seeking to establish just that.  I obtained a copy of the complaint and here’s the crux of GEICO’s no coverage argument: 

29. The Auto Policy only covers bodily injuries and property damage that arise “out of the ownership, maintenance or use of the owned or non-owned auto.”

30. The above-described facts and damages alleged by M.O. do not arise out of the ownership, maintenance, or use of the listed 2014 Hyundai Genesis. Therefore, the damages demanded by M.O. are not covered by the Auto Policy.

31. Even assuming M.O. contracted HPV from M.B. in the listed 2014 Hyundai Genesis (meaning the motor vehicle was the situs of a claimed injury), there is no causal connection between a covered use of the insured vehicle and the alleged injury.

32. Any injury to M.O. did not arise out of a covered use of the listed 2014 Hyundai Genesis.

33. Any injury to M.O. instead arose from an intervening cause not identifiable with normal ownership, maintenance, and use of an insured vehicle—namely unprotected sexual activities, a failure to adhere to protections against the transmission of sexually transmitted disease, and/or the failure to warn of such a possible transmission.

What do you mean that having sex in a car is not “normal ownership, maintenance, and use of an insured vehicle!”  Then why does Autoblog.com provide prospective buyers with the front and rear leg room of a 2014 Hyundai Genesis.

As you’d expect, this is a classic “use of an auto” case.  And, as I wrote here 7 years ago: “Come On. Who Doesn’t Love A Good ‘Use Of An Auto” Case.’” 

Like many of you, reservation of rights letters have a prominent place in my work.  I draft a lot of them.  And I read a lot drafted by others. 

There is one issue that I frequently see overlooked in these letters.  The insurer agrees to defend its insured under a reservation of rights and pay the insured’s counsel’s defense costs.  However, in agreeing to defend, the letters often fail to state that the payment of defense costs is limited to those incurred subsequent to the insured’s notice of claim.  In other words, the letters do not disclaim coverage for pre-tender defense costs.

Consider the case of a relatively short delay in placing the insurer on notice, say three months.  That may not be tardy enough to disclaim a defense based on late notice, as prejudice – required in most states -- cannot be satisfied.  However, in the great majority of states that have addressed the issue, an insurer need not prove that it was prejudiced, by late notice, to disclaim coverage for pre-tender defense costs.  The general rationale adopted by courts is that an insurer is not obligated to defend a case that it is unaware of.

Based on my count, of the 30 states that have addressed the issue [in some way], an insurer need not prove that it was prejudiced, to disclaim coverage for pre-tender defense costs in, 22 states.  Eight states require prejudice.

This can be no small issue.  Even in the case of a relatively short delay in placing the insurer on notice, the defense costs may be significant.  After all, defense costs are incurred in peaks and valleys.  And the start of the case -- where the defense counsel is figuring it all out and filing a response (possibly a motion to dismiss) -- is one of those times when the defense meter is ticking at a good clip. 

While the issue may not be applicable in every late notice--duty to defend case, it has plenty of relevance.  Pre-tender defense costs is number 9 on my “50 Item Reservation of Rights” checklist!    

At issue in Nucor Steel v. HDI Global Ins. Co., No. 21-1904 (E.D. La. June 1, 2022) was an insurer’s desire to disclaim coverage for pre-tender defense costs, and the insured’s argument that the insurer, having not reserved the right to do so, waived it.

While the court sided with the insurer – and found no waiver, despite the omission in the reservation of rights letter -- the case makes the point that addressing pre-tender defense costs is an issue well-worth being addressed by an insurer when agreeing to defend an insured following a delayed tender.      

A few weeks back I addressed a pet topic of mine – plaintiffs that allege that obviously intentional conduct is negligent, in an effort to trigger an insurer's duty to defend a defendant. The objective is to hopefully open the door to insurance as a source of funding for a settlement or judgment.

One of my favorite examples: State Farm v. Simone, No. 20-908 (W.D. Pa. Jan. 28, 2021), where the complaint alleged that Charles Simone breached the duty to act reasonably and avoid injuring Michael Wain by, among other things, (1) "[n]egligently striking [Michael Wain] and causing him to suffer personal injuries"; (2) "[f]ailing to observe [Michael Wain] and avoid striking him"; and (3) "[f]ailing to stop his arm before striking Michael Wain." By the way, Simone allegedly punched Wain with enough force to break seven bones in his face.

I invited people to submit good examples of pleading into coverage – and, if I used it, I would send them a copy of Insurance Key Issues.

Robert Chemers, of Chicago's Pretzel & Stouffer, took me up on it. His submission wasn't just good. He hit it out of Wrigley -- and even over the rooftops on West Waveland.

Robert sent me an amended complaint in Gibbons v. Cusick, No. 12L77, (Cir. Ct. of LaSalle Cty., Ill.(Oct. 22, 2012). It is a tragic case involving a horrific crime. As often happens in such cases, the search for criminal justice proceeds to the pursuit of civil redress. And then, given the underlying criminal conduct, coverage issues can arise.

Here are the allegations taken verbatim from the complaint:

COUNT I – WRONGFUL DEATH – WILLFUL AND WANTON CONDUCT

1. Tracy Cusick, deceased, was married to Kenneth Cusick, Defendant, on February 5, 1998 and remained married to Defendant until Decedent's death.***

6. On January 17, 2006, the Defendants, without legal justification, murdered Decedent which was directly caused by the following intentional acts or omissions:

Knowingly and intentionally forced Tracy's head into a toilet bowl, submerging her head under toilet water, until she died from downing and asphyxiation;

Knowingly and intentionally provided medical personnel and law enforcement authorities with false and misleading information regarding Tracy's death.

OK. That's pretty intentional. Probably not the stuff of an "occurrence" and an easy disclaimer. But the coverage effort did not end there.

Count III: Wrongful Death - Negligence

6. It was the duty of care of the Defendant to exercise reasonable care under the circumstances to protect the Decedent; yet, notwithstanding that duty, the Defendant breached his duty of care by committing one or more of the following acts and/or omissions;

Failed to administer first aid care or attempt any type of resuscitation on behalf of Tracy Cusick, despite Defendant's professional training as a firefighter and despite Defendant's special relationship to Tracy as her husband;

Failed to report Tracy's need for medial attention to the appropriate emergency medical personnel in a timely fashion;

Failed to provide medical professionals with accurate information regarding Decedent's injuries.

While Gibbons v. Cusick is an extreme example of pleading into coverage, there is nothing unusual about the effort.

Incidentally, I interviewed Robert for the March 8, 2021 issue of CO, where I called him an "insurance coverage record-holder." At the time of the interview, a Lexis search revealed that he had served as counsel in a staggering 650 or so opinions (not all coverage, but certainly most). I don't believe that there is any coverage lawyer credited with so many opinions.

You can see the interview here:

https://www.coverageopinions.info/Vol10Issue2/Declarations2.html

There are some coverage decisions that policyholder counsel believe are so wrongly decided that their heads explode while reading them.  It is hereby ordered that the insurer’s motion to dismiss is granted.  Kaboom! 

The California Court of Appeal’s decision in Ghukasian v. Aegis Security Ins. Co., No. B311310 (Cal. Ct. App. April 14, 2022) is one of these.

The facts are simple.  Maryam Ghukasian hired contractors to clear trees and level land that she believed to be part of her property in Glendale, California.  But it turned out that the land was owned by her neighbors, Vrej and George Aintablian.

The Aintablians sued Ghukasian for trespass and negligence, alleging that Ghukasian and her contractor “entered upon [the neighbors’] [p]roperty without [the neighbors’] consent,” “made deep cuts . . . into a natural hill on [the neighbors’ property],” “caused a natural swale located on [neighbors’ property] to be filled with dirt[,]” which :prevented the flow of water in and through the swale,” and “removed, cut down and carried off timber, trees, and underwood from [the neighbors’ property].”

Ghukasian sought coverage for the suit from her homeowner’s policy with Aegis. 

The trial court agreed with Aegis, that no coverage was owed, because the underlying action did not allege an “occurrence.”  As the trial court put it, Ghukasian’s “mistaken belief as to the boundaries of the property does not transform her intentional act [of hiring contractors to clear and level land] into an accident for the purposes of being covered as an ‘occurrence’ under the Policy.” 

The California Court of Appeal, looking at other mistaken boundary line coverage cases, agreed: “[I]t is undisputed Ghukasian specifically instructed her contractor to level certain land and cut trees, which is exactly what was done. Ghukaskian’s mistaken belief about the boundaries of her property is irrelevant to determining whether the conduct itself—leveling land and cutting trees—was intentional.”

As policyholder counsel will no doubt see it, Ghukasian is wrongfully decided because an intentional act should be an accident, so long as the insured did not intend to cause injury.

“Intent to act” versus “intent to cause injury” has long been a fundamental issue at the heart of “what is an accident” cases. 

One policyholder counsel, in a very animated and incredulous fashion, once explained the issue to me this way: If intent to act makes conduct non-accidental, even if there was no intent to cause injury, then it must not be an accident when a driver backs out of a parking spot and hits another car or causes a crash while changing lanes.  In both cases, the driver thought that he or she could perform these functions safely.  That this was a mistaken belief did not make their conduct accidental?            

To the guy who once explained “intent to act” versus “intent to cause injury” this way, I hope for his head’s sake that he doesn’t read this case

I missed this decision from late last year.  Although, since it’s not a coverage case -- which is what I follow -- I had no real chance of learning about it when it came down. 

But even though it’s not a coverage case in the traditional sense, it has as much to do with insurance coverage as even the most important cases discussed in Coverage Opinions.  So I was delighted when CO reader Dan Borinsky, of Esquire Settlement in Alexandria, Virginia, brought this gem to my attention.  I am grateful to Dan for alerting me to this important case that I can report on here.

It is a generally accepted rule of evidence that a plaintiff cannot tell the jury that the defendant has liability insurance.   That’s that.  But the Supreme Court of Nevada, in Capriati Construction Corp. v. Yahyavi, No. 80107 (Nev. Nov. 10, 2021), held just the opposite: the trial court did not get it wrong when it charged the jury that a tort defendant had liability insurance to satisfy a verdict.

The case arose out of a simple motor vehicle accident.  An employee of Capriati Construction drove a forklift into a street travel lane and collided with a vehicle driven by Bahram Yahyavi.  Yahyavi brought an action against Capriati Construction, which denied liability.  Capriati filed for bankruptcy.  Following conclusion of the bankruptcy, the tort action went to trial. During the plaintiff’s case, the forklift operator admitted fault.

During Capriati’s case, testimony was elicited that its business had filed for reorganization.  Yahyavi objected on the grounds that his recovery would be prejudiced by this intentional introduction of inadmissible evidence suggesting to the jury that Capriati would be unable to pay a judgment.  The court agreed and, among other things, instructed the jury that Capriati had liability insurance to satisfy any verdict.

One of the issues on appeal to the Nevada Supreme Court was whether the trial court erred when it instructed the jury that it could consider Capriati’s liability insurance.

The high court upheld the jury charge.  The analysis, not lengthy, it centered around NRS 48.135(2) which provides as follows:

1. Evidence that a person was or was not insured against liability is not admissible upon the issue whether the person acted negligently or otherwise wrongfully.

2. This section does not require the exclusion of evidence of insurance against liability when it is relevant for another purpose, such as proof of agency, ownership or control, or bias or prejudice of a witness.

The crux of the court’s decision is that, under paragraph 2, the introduction of Capriati’s liability insurance was relevant for another purposes, other than whether a person acted negligently or otherwise wrongfully.

Citing decisions from the high courts of Arkansas and West Virginia, the Capriati Construction explained its decision as follows:

Persuasive authorities lead us to conclude that evidence of a defendant’s liability insurance is admissible under NRS 48.135(2) if the defendant first introduces evidence suggesting its inability to pay a judgment. (citations omitted)

Capriati first introduced evidence of its bankruptcy, thereby suggesting that it was unable to pay a judgment in favor of Yahyavi. Thus, to cure the resulting prejudice, the district court appropriately instructed the jury that Capriati had liability insurance to satisfy any judgment. This instruction accurately states Nevada law, and the district court therefore acted within its discretion.

As I said, while the decision is not a coverage case in the traditional sense, it has as much to do with insurance coverage as even the most important cases discussed in CO.   

I’m not sure what to make of this case, other than to say that it is wrongly decided.

Homeowners in a residential development secured a $4 million judgment against the developer for construction defects.  The developer was insured under a Steadfast policy subject to a self-insured retention of $1,000,000 per occurrence.  The homeowners, as judgment creditors and assignees of the developer, filed an action against Steadfast seeking coverage for the judgment.       

Steadfast maintained that it never had a duty to defend or indemnify the developer because it never paid the self-insured retention, being a condition precedent to coverage.  The trial court agreed.  But the appeals court, in Stryker v. Steadfast Ins. Co., No. C089374 (Cal. Ct. App. Mar. 7, 2022) reversed.

The applicable self-insured retention language provided as follows:

1. Our obligations under SECTION I — COVERAGES to pay damages . . . applies only to the amounts of damage . . . in excess of any “self insured retention” amounts . . . . 2. If you do not pay the applicable “self insured retention” amount . . . the insurance provided by this policy will not replace the “self insured retention."

Self-insured retention was defined as “a. All amounts which you become legally obligated to pay as damages . . . as defined in this policy; and b. The legal expenses, expert and other witness expenses, court costs, bond premiums and such other usual and incidental expenses attendant to claim and litigation costs.”

On one hand, the court noted that “case law indicates that, as a general matter in insurance, satisfaction of a self-insured retention is a condition precedent to a duty to defend or indemnify.”  However, “here, the language of the policy does not expressly and clearly say that.”  Further, “[t]he label ‘self-insured retention’ does not control our interpretation of the policy; the actual language in the self-insured retention does.”

As the court saw it, the flaw in the policy language was as follows:

“The policy language defining the self-insured retention as being comprised of ‘usual and incidental’ litigation expenses did not expressly and clearly indicate to Cambridge [the insured-developer] that satisfaction of the self-insured retention was a condition precedent to Steadfast’s obligations under the policy. . . . Further, the policy’s definition of a self-insured retention as ‘the amount you or any insured must pay for . . .’ has no temporal language. Had the definition said a self-insured retention was ‘the amount you or any insured must first pay for . . .’ such a definition would be somewhat closer to the general understanding of typical self-insured retentions that Steadfast invokes. But even if such temporal language were in the definition, there might still be an ambiguity if the definition did not also expressly preclude any duty to defend or indemnify until satisfaction of the self-insured retention.”  (emphasis in original)

Indeed, the court went so far as to conclude that the self-insured retention language did not preclude Steadfast from an obligation to reimburse the insured for damages or defense costs less than the self-insured retention amount.

Late May marked the fourth anniversary of the American Law Institute’s vote to approve the organization’s Restatement of the Law, Liability Insurance.

In general, throughout its long and contentious drafting process, there were numerous concerns raised by insurers, and their counsel, that the ALI was seeking to adopt positions in the RLLI that would lead to all manner of detrimental outcomes for insurers in coverage disputes.  A review of the several dozen decisions, that have had something to say about the RLLI, reveals that that has not come to pass.  

[I have a one-hour webinar that undertakes an examination of the first four years of the RLLI and the impact that it has had on the coverage landscape.  I’ve done it for lots of insurers.  If you are interested, drop me a note.  See above article re: webinars.]

Late last month, the Arizona District Court cited to the ALI’s Insurance Restatement in finding against the insurer in Clarendon America Ins. Co. v. R.E.P. Custom Builders, Inc., No. 20-8078 (D. Ariz. May 24, 2022).  While Clarendon goes in the category of an insurer ALI loss, the opinion makes clear that the outcome was going to be the same, even without the court’s added cite to the ALI Restatement.  But the decision is worth a look, as the Restatement provision at issue is one of the more unusual ones.

REP grows out of a construction defect coverage suit.  In 2006, the Whiles hired REP as their general contractor for the construction of a house in Cornville, Arizona.  REP contracted with McBride Excavating to grade the land and construct the building pad.  The Whiles began noticing issues with their house in 2009.  In 2016, the Whiles filed suit against REP, alleging that “movement, cracking, separation and/or rotation of the flooring and/or concrete and/or retaining wall elements” resulted in “substantial vertical offsets (i.e., trip hazards)” and rendered the house “unsafe to its occupants and/or visitors.”

REP’s insurer, Praetorian, undertook REP’s defense, under a reservation of rights, hiring the firm of Springel & Fink to serve as counsel.  REP’s expert placed all of the blame for the problems on settlement of the fill used to construct the building pad.  So Springel & Fink filed a third-party complaint against McBride Excavating for its faulty work.  However, the complaint was dismissed as untimely under Arizona’s statute of repose. 

In May 2020, REP and the Whiles agreed to a stipulated judgment in the amount of $406,000 and change.  REP assigned to the Whiles insurance-related claims against REP’s insurers, for not paying the stipulated judgment.

Praetorian and Clarendon, another REP insurer, filed an action seeking a declaration that their policies do not provide coverage. They generally asserted subsidence of land exclusions and the court held that no coverage was owed.

Despite the court concluding that no coverage was owed, there was also the issue of a bad faith claim against Praetorian.  It was argued that Praeterian, by delaying its authorization of litigation against McBride, the at-fault subcontractor, until after Arizona’s statue of repose had expired, REP was unable to secure indemnity or contribution.  

The details of this alleged delayed authorization are not spelled out.  In any event, Praetorian argued that it could not be liable for defense counsel Springel & Fink’s alleged legal malpractice. 

Looking at Lloyd v. State Farm, a 1992 Arizona appeals court decision for guidance, the REP court discerned the following rule: “when an insurer assumes a duty to defend an insured, the insurer may breach that duty if it inhibits the timely filing of pleadings in the insured’s defense.”

As for whether Praetorian did, in fact, delay authorizing a third-party complaint against McBride, a genuine dispute existed, leaving this aspect of the bad faith claim to the jury.

Of note, the court pointed out that the rule from Lloyd v. State Farm – an insurer may breach the duty to defend if it inhibits the timely filing of pleadings in the insured’s defense – comports with the ALI Insurance Restatement, § 12(2), which provides for liability of the insurer “when the insurer directs the conduct of the counsel with respect to the negligent act or omission in a manner that overrides the duty to counsel to exercise independent professional judgment.” 

[Section 12(1) provides that if the insurer “fails to take reasonable care” in selecting defense counsel, “the insurer is subject to liability for the harm caused by any subsequent negligent act or omission of the selected counsel that is within the scope of the risk that made the selection of counsel unreasonable.”]

What’s interesting about the decision citing to the ALI Restatement’s § 12 is that the scenarios provided in that section, for assigning liability to an insurer, for alleged legal malpractice of its retained defense counsel, are quite narrow.  Yet, here, the case allegedly managed to fall within the standard.

In any event, it is clear that the court, in Clarendon America Ins. Co. v. R.E.P. Custom Builders, given its decision to follow Lloyd, was going to reach the same decision even without citing the ALI Restatement’s take on the issue.  But the decision demonstrates what has been a common use of the Restatement – providing additional, even if unneeded, support for a court’s decision.      

I have been in cities umpteen times where the show Blue Man Group was playing and I’ve never felt the urge to go see it.  Like not even one iota of an inkling.  Maybe I’m missing something and this has been a huge loss on my part.  After all, the show has been around for decades and played all over the world.  So, there must be a reason for this.  But I’d still choose watching Love Boat reruns over Blue Man Group.  It has always felt like it would be as bad as CATS.  And that’s saying a lot.  [If you’ve seen Blue Man Group, I’d love to hear what you think of it.]

Blue Man Group has a part in Allstate Property & Casualty v. Tortora, No. 20-78 (D. Nev. Mar. 10, 2022).  Ironically, it is a very interesting and entertaining decision.

Jeff Tortora was performing at a club in a rock band called Tinnitus.  [I love that name.]  Daniel Facchian was in the crowd and gestured for Tortora to jump off the stage and crowd surf.  Tortora did so and landed on Facchian.  Facchian sued Tortora for personal injuries.  [If the case stopped right here it would be great!  And we haven’t even gotten to the Blue Man Group part.]

Allstate undertook Tortora’s defense and filed an action seeking a determination that it had no duty to defend or indemnify Tortora.

Principally at issue was whether the Allstate homeowner’s policy’s “business pursuits” exclusion precluded coverage.  The exclusion exempts from coverage bodily injury “arising out of the past or present business activities of an insured person.”  Then, business is defined as “any full-or part-time activity of any kind engaged in for economic gain.”

The court held that the “business pursuits” exclusion applied.  Tortora’s regular occupation was as a percussionist for Blue Man Group.  But he was also paid to play in Tinnitus.  For gigs at Count’s – the club at issue – the band was paid $600 per performance, and over time that was raised to $1,200, which was split equally among the six members.  Tinnitus existed since 2008 and would not perform without getting paid.  [Although it performed for free, in other countries, while Blue Man Group was on international tours.]

Seeking to avoid the “business pursuits” exclusion, Tortora testified that, although the band required payment to perform, he played in the band for fun and it was a hobby and “not a financial enterprise” for him, and that performing with Tinnitus “just . . . feeds the soul.”

Based on these facts, the court held that the “business pursuits” exclusion applied:

“Tortora’s performances with Tinnitus constitute part-time activity engaged in for economic gain as defined in the policy. Under Dwello [v. American Reliance, 990 P.2d 190 (Nev. 1999)]  the activity involved customary or continuous engagements and involved a profit motive. Although Tinnitus performed only a few times each year, it has existed since 2008 and played both internationally and domestically. The band would not play in the United States without being paid, its compensation at Count's doubled over time, each band member received $200 for a 90-minute performance, and if offered other gigs, the band would have taken them. The mere fact that the band members had other main sources of income or that they also played for the joy of entertaining does not negate economic gain or a profit motive.”

The decision aligns with many involving the “business pursuits” exclusion under a homeowner’s policy.  The “it’s just a hobby” argument is routinely rejected by courts.  It is easy to see why people with “businesses,” that are really just hobbies, and where the money received is minimal -- and perhaps only covering expenses – do not have commercial general liability policies.