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Coverage Opinions
Effective Date: April 17, 2023
Vol. 12 - Issue 3
 
   
 
 
 
 

Declarations: The Coverage Opinions Interview With Barbara Rae-Venter
For over four decades, law enforcement spent 200,000 personnel hours and $10 million in an effort to catch the "Golden State Killer."  Then Barbara Rae-Venter got involved in the effort.  The retired patent lawyer cracked the case in 63 days, spent $217, did it between tennis and gardening and never left her house.  It is a remarkable story and one that she shared with me in a recent interview for The ABA Journal website.  

Randy Spencer's Open Mic
Taking Work-From-Home Too Seriously Leads To Coverage Battle

Encore: Randy Spencer's Open Mic
The Drone Coverage Case That Flew Out Of Nowhere

Insurance Key Issues On Sale For Half-Price
 
Randy Spencer – And Coverage Opinions -- Goes To Paris
 
Some CGL Issues I've Never Confronted As A Coverage Lawyer
 
To Be Or Not To Be In the Reservation Of Rights Letter
 
Fascinating Use Of Insurer's Concluding Non-Waiver Statement In ROR
 
A Covid-19 Coverage Case Like None Other
 
You Don't Bring A Hairdryer To A Gun Fight
 
The Chutzpah Argument For Coverage
 
Bodily Injury: Some Insurers Making Their Lives Unnecessarily Complex

Tapas: Small Dishes Of Insurance Coverage
• Louisiana Court Disallows Arbitration Clause In Surplus Lines Policy

 

Back Issues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Volume 5 - Issue 12 -December 7, 2016
 
  Volume 6 - Issue 2 -February 13, 2017
 
 
 
 
 
 
 
 
  Volume 8 - Issue 1 - January 3, 2019
 
 
 
 
 
 
 
 
 
  Volume 9 - Issue 1 -January 8, 2020
  Volume 9 - Issue 2 -February 26, 2020
  Volume 9 - Issue 3 -March 24, 2020
  Volume 9 - Issue 4 -May 31, 2020
  Volume 9 - Issue 5 -July 16, 2020
  Volume 9 - Issue 6 -September 23, 2020
  Volume 9 - Issue 7 -October 30, 2020
  Volume 9 - Issue 8 -December 7, 2020
  Volume 10 - Issue 1 -January 11, 2021
  Volume 10 - Issue 2 -March 8, 2021
  Volume 10 - Issue 3 -April 28, 2021
  Volume 10 - Issue 4 -June 17, 2021
  Volume 11 - Issue 1 -January 3,2022
  Volume 11 - Issue 2 -February 28,2022
  Volume 11 - Issue 3 -June 15,2022
  Volume 11 - Issue 4 -August 15,2022
  Volume 11 - Issue 5 -October 15,2022
  Volume 11 - Issue 6 -Decmber 16,2022
  Volume 12 - Issue 1 -January 12,2023
  Volume 12 - Issue 2 -March 14,2023
   
 

 


Vol. 12 - Issue 3
April 17, 2023

 

Taking Work-From-Home Too Seriously Leads To Coverage Battle

 

 

 

 

 

So many people embraced work from home during the pandemic and afterwards.  But surely few did so as such as Brooks Martin, a systems analysis for a company that provides back-end services to internet travel sites.  Martin was completely enamored with work from home and jumped at the chance to do it full-time, post-Covid, when the offer was made.  His dream had always been for his cat, Rochester, to walk across his keyboard as he worked.

Martin lived alone in a two-bedroom townhouse in Albuquerque, New Mexico and converted the extra bedroom to a home office.  He organized it exactly as his prior office at his employer’s headquarters.  But he didn’t stop there.  To make his work from home experience even more realistic, he installed a hand dryer in his bathroom as well as motion-censored faucets.  But even that wasn’t enough.  Martin installed a lock on his home office door that used a key card entry system.  He wore the key card in a lanyard around his neck.

About three months after installing the key card system, it failed to operate.  Martin was locked out of his home office.  But, more concerning to Martin, Rochester was locked in.  Rochester had no food, litter box nor balls of yarn.  Martin panicked.  He called Be Free of Keys, LLC, the company that made the entry system.  However, it was a Sunday and its offices were closed.  And there was no emergency phone number listed on its website.

Seeing no other option, Martin borrowed a circular saw from his neighbor and cut out an opening in the bottom of the door for Rochester to exit.  While Rochester was now free, Martin was convinced that his beloved feline had been traumatized by the noise of the circular saw.  Sure enough, from that day forward, Rochester refused to come into the home office.  And if Martin brought him in, the cat immediately fled out.  Martin’s joy, of having Rochester walk across his keyboard as he worked, had been clawed away from him.

Over the next month, Martin slipped into a depression.  It led to various physical symptoms such as chest pains and headaches.  He demanded damages from Be Free of Keys, LLC, but it ignored his letters.  He sought out a lawyer to sue the company, but none were willing to take the case. 

Martin filed a pro se complaint in New Mexico state court, alleging in Brooks Martin v. Be Free of Keys, LLC that Be Free’s negligent manufacture of its keyless entry system caused Martin to sustain various physical ailments as well as the loss of having Rochester walk across his keyboard as he worked in his home office.

Be Free tendered the complaint to its products liability insurer, Keyless Entry Systems Risk Retention Group, LLC, which undertook its defense under a reservation of rights.  The insurer acknowledged that coverage was owed for the bodily injury claims – physical manifestation of emotional injury was bodily injury – but maintained that no coverage was owed for any damages sustained by Martin for the loss of having Rochester walk across his keyboard as he worked.  Keyless Entry Systems RRG explained that these were not damages because or “bodily injury,” “property damage” or “personal and advertising injury.”   
 
At an early status conference, the judge noted that she was a cat lover and signaled that Martin’s claim, for the loss of not having Rochester walk across his keyboard, while certainly unusual, may have been meritorious.

Be Free, concerned by the judge’s signaling, filed a coverage action in New Hampshire state court against its insurer.  The insurer filed a motion to dismiss.  The court denied the motion, explain its rationale in Be Free of Keys, LLC v. Keyless Entry Systems RRG, LLC, No. 2022-3675 (N.H. Super Ct., Hillsborough Cty., March 23, 2023):

“While Rochester is Mr. Martin’s beloved cat, the feline is also, in the eyes of the law, his tangible property.  Further, Rochester serves many uses for his owner, one of which is to provide joy and amusement at the kitty’s sometimes oblivion to his surroundings.  In this case, that means walking along a keyboard at the same time that Mr. Martin is using it for important business.  Examining the allegations in the complaint, this court cannot say that Mr. Martin has not sustained “property damage,” based on the policy’s definition that includes “loss of use of tangible property that has not been physically injured.”  Despite its curiosity, that is not enough to kill Be Free’s claim for coverage under the Keyless Entry Systems RRG policy.”          

         

 
That’s my time. I’m Randy Spencer.

 
 

 

 

Vol. 12 - Issue3
April 17, 2023

 

Encore: Randy Spencer’s Open Mic

The Drone Coverage Case That Flew Out Of Nowhere

 

This “Open Mic” column appeared in the September 13, 2017 issue of Coverage Opinions.

 

https://www.coverageopinions.info/Vol6Issue7/RandySpencer.html

 

 



 
 

 

Vol. 12 - Issue 3

April 17, 2023

 

 

I am thrilled that Insurance Key Issues is having one of its few times a year half-price sales.  For the rest of April, Key Issues will be marked down 49% on Amazon.  The price listed on Amazon is the reduced price. 

It’s a great opportunity to see what Key Issues is all about or pick up the new edition if you are using an older one.  As each new edition adds about 900 new cases, older ones are much less effective. 
 
As I say, if you want an esoteric discussion of coverage, do not buy Key Issues.  It would be a huge waste of money.  Buy a treatise instead.  But, if you just want answers to frequently arising liability coverage questions -- in all 50 states – without extraneous history, theory or other unneeded mumbo-jumbo, you won’t be disappointed by Key Issues.

“This is the single best reference for any claims person who handles complex liability claims in multiple jurisdictions around the country, hopefully there will be a Third Edition.”
Amazon Review of the 2nd Edition of Key Issues

“The holy grail for coverage attorneys.”
Amazon Review of the 3rd Edition of Key Issues

“Our office staff refers to this as the ‘Coverage Bible.’ - an awesome starting point for insurance coverage research across all states!”
Amazon Review of the 4th Edition of Key Issues

“For anyone who does anything involving general liability insurance, this is a must have.”
Amazon Review of the 5th Edition of Key Issues

 

For more information on Insurance Key Issues and links to Amazon to order, click here:

https://www.insurancekeyissues.com/


 

 

 

 

Vol. 12 - Issue 3

April 17, 2023

 

Randy Spencer – And Coverage Opinions -- Goes To Paris

 

I was in Paris a couple of weeks ago -- and possibly set the record for most baguettes eaten by a foreigner in a week.  The French really know what they are doing when it comes to bread.

As you can see -- and was there any doubt, really -- I found a way to work Coverage Opinions into the trip.    

[Incidentally, I worked on this issue a little from the City of Lights, making it the first time that CO was put together in a foreign country.  Subscription fees can now be paid in Euros.]   

 
 

 

 

 

 

 

 

 

 

 

 

Vol. 12 - Issue 3

April 17, 2023

 

Some CGL Issues I’ve Never Confronted As A Coverage Lawyer

 

I’ve been doing this for a long time.  And so have many of you.  But even after all these years, there are some issues that I’ve just never confronted under a commercial general liability policy.  Here are some:

  • An insurer makes payment, under a CGL policy’s Supplemental Payments provision, for up to $250 for the cost of a bail bond because of an accident or traffic law violation arising out of the use of a vehicle.
  • The coverage determination is tied to the fact that the policy period is 12:01 standard time and not daylight savings time.  [I know that a couple of cases have actually addressed this issue; I’m waiting for my turn.]    
  • A tape measure is needed to determine if a watercraft, not owned by the named insured, is less than 26 feet long to satisfy the exception to the watercraft exclusion.
  • It must be determined whether the “coverage territory” requirement has been satisfied for purposes of airspace.
  • The “insured contract” exception to the contractual liability exclusion is satisfied by an elevator maintenance agreement.
  • What would otherwise be “your product” is not so because it is a vending machine.
  • An insurer is found to have not waived a right because it made sure to reserve all of its rights -- not just at law, but in equity too.

  

 

 

 

 

Vol. 12 - Issue 3

April 17, 2023

 

 

Included on my “50 Item Reservation of Rights Checklist” are the following two items:  the insurer’s right to withdraw its defense if it is later determined that no defense is owed and the insurer’s right to file a coverage action to resolve the extent of any obligations.  Then I say to webinar attendees: is it mandatory to include these rights?  Will the insurer, I ask, not be able to assert these rights if it does not include these provisions in the ROR letter? 

My response is always the same – I don’t know.  I have never seen any case law addressing the issue.  However, I then go on to state that these provisions should be included because, as I explain, the test of an effective ROR letter is not what it includes, but, rather, what it does not include.  In other words, policyholders challenge ROR letters based on what they allegedly lack – and that can be absolutely anything that a policyholder maintains should have been in the letter and was not.  Then the court must decide if the absent provision was required.  If so, so the policyholder argument goes, the ROR letter is ineffective, and, hence, the insurer has waived the right not reserved.

Well, I can no longer say that I have never seen any case law addressing this issue. 

U.S. Underwriters Ins. Co. v. Kenfa Madison, LLC, No. 20-2761 (E.D.N.Y. Mar. 30, 2023) involved an insurer that undertook its insured’s defense for a construction site bodily injury claim.  While the insurer defended, it also sent a letter to the insured stating that no coverage was owed for any loss.  The basis was an exclusion that amended/expanded the employer’s liability exclusion to include an employee of any contractor or subcontractor.  [If you do CGL work you’ve seen these endorsements that have appeared in some commercial general liability policies over the past decade or so.]

After undertaking its insured’s defense, U.S. Underwriters filed an action seeking a determination that it had no duty to defend its insured and had the right to withdraw its defense.

The insured said whoa, not so fast.  It argued that U.S. Underwriters could not proceed this way.  But the court was not convinced, stating: “Kenfa [the insured] argues ‘[n]owhere in the letter did [U.S. Underwriters] state that it could withdraw this defense coverage,’ and that ‘no reasonable fact trader (sic) would conclude that U.S. Underwriters’ disclaimer was a reservation of rights with regard to its defense.’  But the September 20 disclaimer plainly stated, ‘the policy does not cover this matter,’ ‘[w]e reserve the right to file a declaratory judgment action to have a court determination made to confirm our coverage position,’ and, importantly, that it ‘reserve[d] all of our rights under the policy.’  This language put Kenfa on notice that U.S. Underwriters did reserve the right to withdraw its coverage. Kenfa has also not pointed to language in either disclaimer representing that U.S. Underwriters would provide a defense through the conclusion of the Underlying Action.”

As I read the court’s rationale, for the insurer being able to proceed as it did, it leaves little doubt as to the importance of including, in a reservation of rights letter, the insurer’s right to withdraw the defense if it is later determined that no defense is owed and the insurer’s right to file a coverage action to have its obligations determined.  Both of these were relevant to the insurer’s ability to file the coverage action and seek to withdraw its defense.   

Further, while the court concluded that the letter’s catch-all reservation of rights language – reserving “all of our rights under the policy” -- was sufficient to preserve the insurer’s right to seek to withdraw its defense, my suggestion is to specifically assert a reservation of rights to withdraw the defense.  A catch-all reservation of rights may be effective, but it is certainly better to be specific and not need to argue the scope of the catch-all.

As an aside, the insurer’s motion for summary judgment on the applicability of the employer’s liability exclusion was denied; but thanks to its reservation of rights, at least it was in the game.

  

 

 

 

 

Vol. 12 - Issue 3

April 17, 2023

 

Fascinating Use Of Insurer’s Concluding Non-Waiver Statement In ROR

 

Insurers sometimes face this situation.  They defend an insured in a suit.  Then a subsequent, similar claim is made against the insured.  This time, the decision is made that no defense is owed.  But, if the insurer disclaims, won’t the insured challenge the disclaimer on the basis that a defense was provided for the prior, similar claim.  In other words, so the argument will likely go, whatever the coverage defense is for the current claim, the insurer waived it by not asserting it for the prior claim.

This is what happened in Hemphill v. Landmark Am. Ins. Co., No. 20-2544 (3d Cir. April 5, 2023).  The court concluded that the insurer was not precluded from denying a defense for the current claim based on having defended a prior similar claim.  The court’s reasoning was interesting and clever.

At issue was the availability of a defense for Carl Hemphill under a professional liability policy that provided coverage for negligent acts, errors or omissions in the rendering or failure to render employment placement services.  Hemphill was sued by a former client, Jose Castillo, who alleged that, when he arrived in the U.S. to work, he was the victim of human trafficking at the hands of Hemphill.  The insurer, Landmark, denied a defense for various reasons, including that Hemphill’s actions were intentional.  Coverage litigation ensued and the federal district court found in favor of the insurer.  

Putting aside substantive coverage issues, Hemphill argue at the Third Circuit that Landmark could not deny a defense for the Castillo action because the insurer defended him in an earlier, similar class action – Urrutia suit.  As Hemphill saw it, on account of Landmark’s handling of the prior action, he had a reasonable expectation of coverage for the Castillo action.

On one hand, Pennsylvania law, generally speaking, can recognize that reasonable expectations can play a part in determining an insurer’s coverage obligations.  However, it has very narrow applicability, as noted by the court: “to protect non-commercial insureds from policy terms not readily apparent and from insurer deception.” 

But the court noted that this was not the basis for Hemphill’s reasonable expectations argument:

“Instead, he claims that the mere fact that Landmark defended the Urrutia Lawsuit created a reasonable expectation that it would defend the Castillo Lawsuit.”  However, the court explained that “[n]o authority supports finding a duty to defend when the insured’s expectation of coverage arises solely from the insurer’s conduct in another, unrelated transaction.  Indeed, Pennsylvania law instructs us to ‘examine the totality of the insurance transaction involved’—not the totality of all other transactions between the parties.”

But the court had another reason for refusing to use Hemphill’s reasonable expectations, based on the handling of the Urrutia suit, to conclude that coverage was not owed for the Castillo suit:

“Even if Hemphill could take advantage of the reasonable expectations doctrine, Landmark’s earlier conduct could not have given him a reasonable expectation of coverage in the Castillo Lawsuit. Landmark subjected its defense of the Urrutia Lawsuit to a complete reservation of rights. In its letter agreeing to defend the lawsuit, Landmark stated that nothing in the letter, ‘nor any further actions taken by Landmark, should be construed as a waiver of any rights or defenses . . . that may be available now or at any point in time.’  Hemphill could not reasonably expect that such a limited acceptance of coverage would extend to a separate, unrelated lawsuit.”

I thought this was an interesting and clever rationale for the court’s decision.  Just about every reservation of rights letter contains concluding non-waiver language similar to what was in Landmark’s letter for the Urrutia action.  But such language is likely intended to mean that the actions taken by the insurer, and rights asserted and not asserted, are not a waiver of rights for purposes of the current claim.  In other words, as the current claim goes forward, nothing in the reservation of rights letter precludes the insurer from talking some action, with respect to the claim, at a later point in time.

But here, the court applied the concluding non-waiver language more broadly – no action taken with respect to the prior, Urrutia action served as a waiver of any rights or defenses with respect to the later filed Castillo action.

This is the most substantive decision I’ve ever seen concerning concluding – and seemingly pro forma -- non-waiver language in a reservation of rights letter.

  

 

 

 

 

Vol. 12 - Issue 3

April 17, 2023

 

A Covid-19 Coverage Case Like None Other

 

This has to be the most unique case involving coverage in connection with Covid-19. 

Theodore Cooperstein was a U.S. Attorney.  On four occasions, between June 22, 2021 and October 6, 2021, he appeared before Judge Carlton Reeves in the Southern District of Mississippi.  Each time, at the beginning of the proceedings, Judge Reeves asked the parties and counsel on the record whether they were vaccinated against COVID-19.  Cooperstein gave conflicting responses each time and ultimately acknowledged that he was not vaccinated. 

Following an order to show cause, Judge Reeves sanction Cooperstein $6,000.  Cooperstein also incurred costs as part of an investigation by the U.S. DOJ’s Office of Professional Responsibility.

Cooperstein sought coverage, under a federal employee professional liability policy, for his costs of defending against the proceedings before Judge Reeves and the OPR investigation.

The insurer disclaimed coverage on the basis that Cooperstein’s alleged misrepresentation did not qualify under the policy as “misconduct arising from an act, error or omission in professional services rendered.”  As the insurer saw it, Cooperstein “was not engaged in furthering the affairs or services of his employer when he allegedly misrepresented his personal medical status to the court.”

Cooperstein filed a coverage action.  The insurer argued that, because Coopestein’s “misrepresentations were not themselves made in furtherance of the affairs or services of the United States, the Policy does not cover the Plaintiff’s defense costs.”

However, the court in Cooperstein v. Scottsdale Ins. Co., No. 21-780 (S.D. Miss. March 7, 2023) didn’t break a sweat in concluding otherwise.  In finding that coverage was owed, the court explained:  

“The Court finds, however, that the misrepresentations were clearly made while the Plaintiff was furthering the affairs or services of the United States because he was in court appearing for the United States, the cases the Plaintiff was prosecuting had been called by the court, and he was responding on the record to questions posed by the presiding Judge in each instance.  This lines up with the relevant Policy language, which states that the Defendant insurer will pay the costs of defense arising out of any disciplinary proceeding or investigation into the Plaintiff's alleged misconduct regarding services rendered within the course and scope of employment and performed while engaged in and furthering the affairs or services of the United States.”

 

 

 

 

Vol. 12 - Issue 3

April 17, 2023

 

You Don’t Bring A Hairdryer To A Gun Fight

 

This case had the potential to be a really good one in the world of “pleading into coverage.”  And maybe it was.  But, if so, the court didn’t provide enough of the underlying complaint’s allegations to tell us.  And since the underlying complaint was filed in state court, I couldn’t get it easily like a federal court complaint.  And since you don’t pay for this fine publication, you can’t say that you didn’t get your money’s worth by my lack of effort.  So, I’ll discuss State Farm v. Thomas, No. 22-1465 (W.D. Pa. March 23, 2023) based solely on what’s in the court’s decision.  [I suspect that if there were really good “pleading into coverage” allegations in the complaint, the court would have concluded them in its analysis.]

Antoine Thomas is the sole proprietor of Hair on Bedford Square.  An employee, Gino Graffia, pointed a hairdryer at Thomas in a playful manner pretending it to be a gun.  Thomas did what most people would: he reached into the drawer behind his barber chair, pulled out a handgun and shot Graffia in the ankle.  [How does that happen?]

Litigation ensured, followed by coverage litigation with the issues that you would expect to see.  The court concluded that Graffia’s injuries were not caused by an “occurrence.”  While the court noted that the underlying complaint included causes of action styled negligence and negligent infliction of emotional distress, the allegations belied the conduct as accidental.  That was the end of the court’s discission on the issue. 

Needless to say, a creative plaintiff’s lawyer – and there are many when it comes to doing so -- could have done a lot here to attempt to plead a negligence claim into coverage: Thomas confused the handgun for the hairdryer that he kept in his drawer; Thomas thought that Graffia was holding a real gun that was in the shape of a hairdryer; Thomas believed that hot air from the hairdryer could be lethal and was justified in using a gun in self-defense.  

 

 

 

 

Vol. 12 - Issue 3

April 17, 2023

 

The Chutzpah Argument For Coverage

 

The classic definition of chutzpah is widely known – the kid who kills his parents and then seeks mercy from the court because he is an orphan.  That’s what went through my mind when I read one particular argument for coverage in Niles v. Travelers Home, No. 21-265 (D. Me. March 15, 2023).

At issue was coverage for Jessica Niles, an assignee of Eric Motsenbocker, under a homeowner’s policy, for injuries alleged sustained on account of horrific conduct by Mr. Motsenbocker.  Mostenboker was Niles’s landlord.  He allegedly recorded secret videos of Niles while she was in her bathroom.  He did this by having a “weather station device” mounted to the wall in the bathroom opposite the toilet and shower.  The device contained a video camera that filmed when it detected motion in the bathroom.  He also insisted that Niles have a clear shower curtain, saying that it would allow him to detect the presence of mold.  [FYI, the “weather station device” provided the temperature and humidity in the bathroom.  Is a “device” really needed for that?]

You can see where this is going.  The video camera was discovered, litigation ensued and then coverage litigation was on the table.  The various coverage issues were all of those that you would expect to see in the context of such intentionality. 

But here’s the one issue that got me.  Niles [remember, despite being the victim, she is the one seeking coverage as an assignee] argued that Motsenbocker had no intent to inflict injury because he had intended that his surreptitious recording not be discovered.  Not surprisingly, the court did not buy it:

“[T]his argument misses the point. It is always true in torts of this sort that the victim has discovered the wrong. Here the Court does not need to resolve the philosophical question of whether an undiscovered harm is a harm because to claim insurance coverage, the tort must have been discovered. Thus, when Mr. Motsenbocker secretly recorded Ms. Niles in her intimate moments, he either actually intended or should have reasonably expected that when she discovered the recording, she would have been harmed. The hope not to be caught is different than the certainty that if caught, he would cause harm.”

  

 

 

 

 

Vol. 12 - Issue 3

April 17, 2023

 

Bodily Injury: Some Insurers Making Their Lives Unnecessarily Complex

 

I’ve seen a few cases like this recently.  An insurer desires to exclude coverage for bodily injury.  But, instead of simply saying “no coverage is owed for damages because of bodily injury,” they take a different approach: excluding bodily injury arising out of “physical abuse” or use some other language that incorporates “abuse” into an exclusion for bodily injury. 

Why this is done, I’m not sure.  Maybe it sounds more lawyer-like to do it this way.  If a lawyer drafted it, he or she needs to show that it was worth hiring a lawyer to do so, since you don’t need a lawyer to simply write “no coverage is owed for damages because of bodily injury.”

In any event, insurers going down this road have had challenges using an abuse-based exclusion to preclude coverage for what is run-of-the-mill bodily injury.

This is what happened to the insurer in Dorchester Mutual Ins. Co. v. Miville, No. SJC-13308 (Mass. March 16, 2023).  At issue was coverage for William Brengel, for a claim under a homeowner’s policy, for damages that he allegedly caused to Leonard Miville, on account of an unprovoked attack in which Brengel punched Miville in the head and repeatedly kicked him after he had fallen. 

The insurer argued that no coverage was owed on account of an exclusion for “bodily injury . . . arising out of sexual molestation, corporal punishment or physical or mental abuse.”

[As an aside, it seems pretty curious that the liability section of a homeowner’s policy would exclude coverage for “bodily injury.”  That’s as if a commercial general liability policy contained a bodily injury exclusion.]  

Putting aside how the case reached the Massachusetts high court, the court concluded that the exclusion did not serve to preclude coverage.  The court’s decision was tied to its recent decision in a similar case, Dorchester Mut. Inc. v. Krusell (2020), where it held that “‘physical abuse’ applies ‘to a limited subset of physically harmful treatment, where the treatment is characterized by an ‘abusive’ quality such as a misuse of power or, perhaps, conduct so extreme as to indicate an abuser’s disposition towards inflicting pain and suffering.’  Because the conduct in that case — a single push by the insured — contained no such ‘abusive’ quality, we held that the abuse and molestation exclusion did not preclude coverage.”

Turning to the situation before it, with Krusell as guidance the Massachusetts court had no trouble concluding that no coverage was owed for the injury sustained by Mr. Miville because the attack “was not achieved by capitalizing on or exploiting an imbalance of power.”

An unsuccessful effort was made by the insurer, to find an abusive quality, on the basis that, because Brengle was 31 years older than Miville, there was a physical power imbalance that rendered the attack “physical abuse.”

Of note, in reaching its decision, the court also looked to the ISO drafting history of the “physical abuse” exclusion – sexual abuse claims in the 1980s on account of the actions of clergy members.  Based on this history, the exclusion was clearly intended for something other than a one-off physical attack: “In 1987, the Insurance Services Office, Inc., promulgated the abuse and molestation exclusion as a form endorsement for insurers to include in their general liability policies as a means to preclude coverage for all claims arising out of abuse or molestation. (citation omitted) The exclusion was to be ‘used with ‘[o]rganizations that have care or custody of others — schools, hospitals, nursing homes, day care centers, etc.’

“In adopting this exclusion, insurers’ ‘rationale was to shield themselves from liability for abuse or molestation claims where they unexpectedly could not rely upon the intentional acts exclusion to preclude coverage’ due to theories by which these claims were brought as a result of the institutional nature in which they arose.”

If you want to exclude coverage for bodily injury, keep it simple. 

  

 

 

 

 
Vol.12 - Issue 3

April 17, 2023
 
 

Louisiana Court Disallows Arbitration Clause In Surplus Lines Policy


This is a really narrow issue, but if you are dealing with the enforceability of an arbitration provision in a surplus lines policy, check out Fairway Village Condos. v. Independent Specialty Ins. Co., No. 22-2022 (E.D. La. April 10, 2023).  In general, there is law nationally on the enforceability of arbitration provisions in insurance policies – do they violate public policy?  In Fairway Village Condos., the court examined the issue in the context of surplus lines policies and held: “[T]he Court cannot enforce the arbitration provision because Louisiana law regards arbitration provisions in insurance contracts as a ‘condition, stipulation, or agreement’ that deprives Louisiana courts of jurisdiction over the action.  Defendant’s status as a surplus lines insurer does not bear on the analysis.”