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Vol. 8 - Issue 5
May 31, 2019
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“You are absolutely right about that,” Doug Jones told me, letting out a guffaw. “That’s the secret that I try to keep buried. Most people don’t follow up with enough questions to get down that far.”
The trial lawyer-turned recently elected United States Senator from Alabama confirmed that I’d figured out his favorite thing about being a member of the so-called world’s most exclusive club – no time sheets.
While my phone conversation with Jones, 65, was filled with light-hearted moments, the topic on the table was anything but. Jones called me from the nation’s capital to discuss the 1963 bombing of the 16th Street Baptist Church in Birmingham that killed four African-American girls ages eleven to fourteen. Jones, as a United States Attorney, successfully prosecuted two of the Klansman-bombers in 2001 and 2002. The bombing, and the hows and whys it took nearly four decades to get the convictions, is the subject of Jones’s recently published book – “Bending Toward Justice” (All Points Books, co-authored with Greg Truman).
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Changed The Course Of Civil Rights
The cover of “Bending Toward Justice” states that the Birmingham church bombing “changed the course of civil rights.” I asked Jones why this tragedy has such prominence in the fight for equality.
Jones ticked off several pivotal events in the civil rights movement that preceded the bombing, including Brown v. Board of Education, the Montgomery bus boycott, the murder of Emmett Till and the children’s marches in Birmingham. The momentum was building, he pointed out. “But when all of a sudden, four innocent children were killed in a house of God on a Sunday morning,” he said, “that pulled them all together.” Now “this is not just about equality, it’s about life and death.” Jones explained that the church bombing “galvanized all of those into one force that really helped wake up people to the sins of Jim Crow in the South and other places.” Two months later President Kennedy was killed and then “everything just seemed to get accelerated at that point. The Civil Rights Act was passed in ’64 and the Voting Rights Act passed in ‘65.”
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The Birmingham church bombing was part of Jones’s fabric long before he sent two of the bombers to prison. The first trial of a bomber took place in 1977. Bill Baxley, Alabama’s Attorney General, won a murder conviction of Robert Chambliss. In an eerie foreshadowing, Jones watched the trial while a law student at the Cumberland School of Law at Samford University and was in the courtroom when the verdict was read. He left knowing that his future “career as a lawyer would always be grounded in some way by that case.”
Jones owed his presence at the Chambliss trial to United States Supreme Court Justice William O. Douglas. Jones, while a student at the University of Alabama, had the chance to meet Douglas. The aspiring trial lawyer asked the legendary jurist for career advice. Watch good lawyers ply their trade, Douglas told him. Jones did, often, he told me.
Jones left Cumberland and, in another foreshadowing, went to work for Alabama Senator Howell Heflin, whose seat Jones would later occupy. From there he embarked on a career as an Assistant U.S. Attorney and then private practice.
Jones’s opportunity to finish the job that Baxley started came in 1997 when he was nominated by President Bill Clinton to serve as United States Attorney for the Northern District of Alabama. At the time, the bombing had been the subject of the office’s investigation. Jones was now in the right place, at the right time, to handle the case that he said had “influenced [his] whole life.”
“Bending Toward Justice” is the story of both Baxley’s and Jones’s prosecutions. But these were not whodunnits. The prime suspects – members of a Ku Klux Klan fringe group that advocated even more violence than the national organization -- were identified not long after the bombing, thanks to polygraph tests, witness statements and the suspects’ shaky alibis. The real stories Jones tells are why the suspects were not charged at the time and the challenges of finally prosecuting them so many years later.
Here, Jones, by examining the bombing in the context of the era, paints a picture of his segregated home state that made prosecutions not possible. In the mid-Sixties, Jones said, even with concrete evidence and multiple eyewitness accounts, “conviction of white men in the South by all-white, all-male juries was the exception rather than the rule.”
When the times were finally right to bring the cases – especially for Jones, nearly four decades later – the long delays presented huge evidentiary and other prosecution challenges. Even witnesses who had not died were, in some cases, too infirm to testify or needed medical escorts to do so. Jones lays out these prosecution difficulties in a way that both lay readers and lawyers will appreciate.
While Jones was only nine years old at the time of the church bombing, “Bending Toward Justice” is a riveting insider’s account. He tells the story as a lawyer -- focusing on such things as rules, evidence and burden of proof – as well as historian and Alabamian who is unafraid to confront the state’s ugly past.
Alabama’s junior Senator says on the last of his 350 pages that “on several occasions over the years, I wanted intensely to put the church bombing case behind me. It dominated my life and, especially in quiet moments, its ugliness was sometimes overwhelming.” Given a possible down-side of taking a legally important, but life-consuming, case, what advice would he give to a lawyer confronted with the opportunity.
“Take it. Take it,” Jones said without a moment’s hesitation. “I tell lawyers and judges all the time that I really do wish that every lawyer, every judge, but particularly lawyers, who are advocates, could have and work on a case that means so much to so many people.” It is a great opportunity, Jones explained, to have a case “that really helped society, but at the same time meant so much . . . deep down within the pit of [your] stomach or the chambers of [your] heart. [It] helps change you as a person. You look at the world differently. You look at people differently.”
Baxley paid a high price for prosecuting one of the church bombers. It has been credited for his election loss as governor of Alabama. Was Jones concerned that his own association with the case could lead to the same election result?
To the contrary, he told me that it was a strength in his campaign. “I wanted people to understand what formed me so much in who I am.” The case was, he said, consistent with his platform of “we’ve got to come together, we’ve got to treat each other with more dignity, with more respect.” In addition, “taking that case on, and knowing the challenges that we faced from a case that was decades old, the incredible challenge that we faced to try to bring that sense of justice, I think it helped me deliver a message that I’ve got both the drive and the determination to make this job what it should be and that is one of public service.” |
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From Trial Lawyer To U.S. Senator
Jones, a Democrat, won his Senate seat in late 2017, in a special election to fill the vacancy when Jeff Sessions was tapped by President Donald Trump to serve as his Attorney General. Jones defeated Republican Roy Moore, the state’s former Chief Justice, who had been expelled from the bench for defying a court order to remove a large statue of The Ten Commandments from the courthouse. Prior to the election Moore was accused of sexual misconduct. He denied the allegations.
Jones had been a partner in Birmingham’s Jones & Hawley, P.C., where he focused on white collar criminal defense. The biggest challenge, Jones told me, of being a lawyer one day, and United States Senator the next, has been getting used to the travel and demands of the schedule. |
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As for early observations and surprises in his new job, “there is a lot more bipartisanship that goes on in the U.S. Senate than what people see,” Jones said. “We’re used to seeing dueling press conferences and Senate floor speeches. . . . We’re not that great deliberative body, on the floor of the Senate, that I think the founders intended. There’s a lot more political speeches.”
But there is more to the story. “People think we just don’t like each other up here -- that we’re just at each other’s throat -- that’s just not the case,” Jones assured me. “There’s a lot that goes on at the committee level and on a personal level where people are trying to work together. I think probably 85-90% of the bills that I’m on are bipartisan bills where we’ve got one Republican for each Democrat and vice versa.”
Jones used to like to begin speeches with a lawyer joke or two. I told him I wrote one that he can now sue as a Senator. He’s intrigued. I can see the curious look on his face through the phone. I lay it on him. “This is how bad the partisanship has gotten in Washington. I was in the Senate cafeteria the other day and the peas and carrots are refusing to be served together.” Jones let out a few laughs. “It’s not a side splitter,” he said. But “it makes a point and I like that.” |
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[Elizabeth Vandenberg, a student at the University of Iowa College of Law, assisted with this article.] |
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Vol. 8 - Issue 5
May 31, 2019
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I met Yosef Kuperman on Twitter. Although I didn’t know who he was at the time. I just knew him as an insurance coverage lawyer whose Twitter handle was @bmoretheaterfan. Basically, he was someone who saw plays in Baltimore and tweeted about the experience, gave reviews, etc.
Then, in late April, Yosef posted that it was his one-year anniversary on Twitter. He went back, and did the math, and calculated that he saw 119 plays in one year. In Baltimore (with a few in D.C. and some other places). Huh? I was amazed. How could anyone do this? And, in Baltimore? Nothing against Baltimore. But are there that many theater opportunities there? Someone sees 119 plays in one year and I’m fascinated. A coverage lawyer sees 119 plays in one year and I see a Coverage Opinions interview.
So I reached out to Yosef to get a look behind the curtain of this usual feat. He was happy to oblige. [He informed me that we once corresponded about a Coverage Opinions Haiku Contest.] I appreciate Yosef taking the time to speak to CO readers about the hows and whys of seeing such a huge number of plays in one year. [Follow him on Twitter @bmoretheaterfan.]
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About Yosef Kuperman.
Yosef grew up in Baltimore City and graduated from UMBC (B.A. in History) in 2011 and University of Baltimore School of Law in 2014. Yosef works for the Law Offices of Robert L. Siems, P.A. in Baltimore, where he represents insurers, policyholders, and insurance professionals in civil litigation and administrative proceedings, mostly involving property and casualty insurance and insurance profession licensing. Before he changed hobbies, Yosef published on Maryland legal history. See Kuperman, Yosef (2016) “Whose Bright Idea Was This Anyway? The Origins of Judicial Elections in Maryland,” University of Baltimore Law Forum: Vol. 46: No. 2, Article 3. Available at: https://scholarworks.law.ubalt.edu/lf/vol46/iss2/3. [He swears it’s not boring. I’ll take his word for it.] |
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Obviously, you love plays. Where did this interest develop?
I wish I had a good story for this. I don’t. I started seeing plays because my uncle took me to a few Shakespeare plays every year in D.C. starting around 2002. And that’s just it -- until…
Fast forward to 2015! I’m bored. I’m a baby lawyer, just learning the secrets of the “occurrence” in the CGL. It’s my first real job and for once I’m finally not broke and have some money to do things I’d like. And I have free time. (Yeah… I won the lawyer lottery and I’m not just saying it because my boss reads Coverage Opinions too.) And yet I’m bored. So…
I decided to beat boredom by seeing a play! Baltimore’s got to have at least one theater, right?
Fast forward again! It’s 2019. I’m a little bit older, a little bit less deep in debt, and seeing three shows a week (sometimes more). Turns out some slippery slopes are real.
How is it possible to see so many plays in one year – in Baltimore?
There’s enough shows to do it, although I doubt anyone else sees as many as I do. I’ve wondered about why for a while. I see four necessary causes for my play habit: (1) a willingness to see non-Broadway plays, (2) a solitary nature, (3) tons of spare time and (4) fiscal irresponsibility.
I see shows most people pass up. Most people fear they won’t like a show unless it’s a Broadway tour with seats they can’t afford, and thus talk themselves out of seeing shows. Here’s a secret for you: Broadway tours have terrible price to quality ratios. Lesser Secret: As journalist and satirist H.L. Mencken famously said: “No one ever went broke underestimating the intelligence of the American public.” I, however, try everything. It turns out Baltimore has a Broadway Tour theater, two regional theaters, at least nineteen non-fully-professional theater organizations, an annual Fringe Festival, and at least two indie theater spaces. All I did was try them.
I see most shows alone. I see almost nobody else doing that. But if I waited for friends to go with me, I doubt I’d see even 40 shows a year. My friends lack appetite for non-professional theaters.
I spend 2.5 days/week seeing shows on average. It fills my evenings and weekends. My friends won’t go. They want to “be with their families” or “watch Netflix” or something…
I pay over $3,000/year for theater tickets, not counting incidental expenses like parking, drinks, etc. [It sounds like a lot, but look at how many hours of entertainment I get from it. It’s much less expensive, on an hourly basis, than many other hobbies.] Paying off my student loans instead would be “wise” and “fiscally prudent” (or so I hear). I prioritize short-term gratification instead. YOLO, right? [Editor’s note: You only live once.]
What are some of your conclusions about theater after seeing so many plays in such a compressed period of time?
Hot takes!
Ticket price and theater size only loosely correlate with quality. Take “Eulogy,” performed and created by Michael Burgos. It’s one of the best shows I’ve ever seen. But Michael Burgos isn’t famous or anything. I paid $10 at a Fringe Festival on Charles Street in Baltimore.
People are too pessimistic about the quality of theater. In my experience, (1) less than ten percent of shows are bad (1-2 stars) and (2) most shows are good (4-5 stars.) Therefore, I take chances on shows, especially on cheap tickets. Odds are I’ll enjoy myself.
Seating matters. Aim for front and center seats, especially if there’s no markup for them.
Jukebox musicals (showcases for an artist’s hits (e.g. “Smokey Joe’s Café”)) are the worst.
Dark comedies with insane bureaucratic systems are the best. (That’s my inner lawyer talking.)
Unpopular Opinion: “Classic” or “Important” plays are often “bad” or “incomprehensible” plays.
Unpopular Opinion number 2: Shakespeare is overrated (even though I love him.) Hamlet is double overrated. If most people can’t understand the words, the problem’s the play, not the audience.
Tell me a few of your favorites?
Counting plays that aren’t obscure indie theater, in no particular order:
Tom Stoppard’s Hapgood
Lauren Gunderson’s Revolutionists
Stephen Sondheim’s Company
Martin McDonagh’s The Pillowman
Lin-Manuel Miranda’s In The Heights
Irene Sankoff & David Hein’s Come From Away
Lin-Manuel Miranda’s Hamilton
You recently saw Hamilton in London. What’s your take on it? Is all the hype justified?
London was hard to leave. Hamilton tickets —Orchestra Row C, less than ten feet back in the center, were only 100 pounds, and that’s expensive for London tickets. A-list stars like Tom Hiddleston act in plays. Oh, and Brexit is killing the pound, so everything’s de facto ~30% off.
Oh? The play? All the good stuff people say about it —it’s an understatement. The soundtrack didn’t do it justice. London gave it a standing ovation, and those are rare over there.
What’s your theater plan for the next year?
I have to cut back. I need to make time for my other hobby: writing sci-fi / fantasy short fiction. (I haven’t been published. I’m not good at it. I just do it. There’s a difference.)
For context though, I saw 20 plays in May 2019. That included a play-binge in London, but that won’t be my only play binge. So I say this like I say I’ll cut back on froyo. I say I’ll do it and I sometimes mean it and yet somehow I still eat froyo. |
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Vol. 8 - Issue 5
May 31, 2019
Classic Movie Quotes – Insurance Coverage Style
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Classic movie quotes are, of course, a staple of pop culture. You know the biggies: "Mr. DeMille, I'm ready for my close-up." (Sunset Boulevard); "Go ahead. Make my day." (Sudden Impact); "You talking to me?" (Taxi Driver); "Here's looking at you, kid." (Casablana); and dozens and dozens more.
What if classic movie quotes also played a part in insurance coverage. Consider the following ways in which that could work out:
• Mediator to an extraterrestrial insurance adjuster: "E.T. phone home office and get more authority." (E.T., 1982)
• "If you build it, he will come and file a construction defect claim." (Field of Dreams, 1989)
• "I see dead people. Ugh. I need to do a large loss report." (The Sixth Sense, 1999)
• Plaintiff's attorney to insurer: "You're gonna need a bigger boatload of money to settle this case." (Jaws, 1975)
• "I'm gonna make him an offer he can't refuse. If he does, he'll be liable for an excess verdict." (The Godfather, 1972)
• After coverage case remanded to Kansas state court: "Toto, I've a feeling we're not in Kansas federal court anymore." (The Wizard of Oz, 1939)
• Supplementary payments: "We do not have to furnish these bonds. James Bond." (Dr. No, 1962)
• "May be force be with you, defined as the named insured and not an additional insured." (Star Wars, 1977)
• "Show me the money! It's been a month since my client signed the settlement agreement." (Jerry McGuire, 1996)
• "There's no place like Home Insurance anymore." (The Wizard of Oz, 1939)
• "Plastics can involve pollutants, that cause damage, that may be excluded by the pollution exclusion." (The Graduate, 1967)
• Policyholder preparing to sue for bad faith: "I'm as mad as hell, and I'm not going to take this anymore." (Network, 1976)
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That’s my time. I’m Randy Spencer. Contact Randy Spencer at
Randy.Spencer@coverageopinions.info |
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Vol. 8 - Issue 5
May 31, 2019
Encore: Randy Spencer’s Open Mic
Selfie Stick Injury: Insurer Writes Policy Covering Cell Phone Mishaps
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Sometimes it seems as if there’s insurance for everything. Policies exist for a golfer making a hole-in-one, a wedding catastrophe and, so they say, Liberace’s hands were insured. When new bad things happen, or threaten, the insurance industry always seems to be right there with products designed to spread the risk. A few cases of Ebola not long ago -- boom, welcome Ebola insurance. Planes might fall out of the sky at midnight on January 1, 2000? Fear not. Here’s your Y2K policy. And as new technologies are developed, insurers respond with policies designed to protect against mishaps. Not long after drones began showing up under Christmas trees, drone insurance rained down. Pot is legal in some places. Many are doobie-ous that that can be done safely. The insurance industry rolled out marijuana policies.
So, on one hand, it comes as no surprise that an insurer is offering a policy designed to cover the risks of using a cell phone. But wait, cell phones have been around for a very long time you say. Nothing bad happens from using them. Who needs insurance? What’s the biggest risk of using a cell phone? Losing it? Dropping it?
Maybe that used to be the case – back in the day when cell phones had just one purpose. But as cell phones do more and more things, they are out of our possession for less and less time. Did you see that new app that makes really good guacamole? The more we use cell phones, the greater the risk of unintended consequences. Seeing an opportunity, enter CellRisk with its “Cellular Technology Legal Liability and First Party Policy.”
I got my hands on CellRisk’s policy form. It offers coverage for many types of risks associated with using a cell phone – a few of which I never even thought of. No doubt some of the coverages are likely available on existing policies, such as homeowners and health. But even if that’s the case, CellRisk touts in its promotional materials that its policy may offer higher limits than these others. Not to mention that, according to CellRisk, an insurer that issued a more traditional policy may balk at paying a claim with which it is unfamiliar.
Consider these coverages available from CellRisk under its Cellular Technology Legal Liability and First Party Policy:
Bodily Injury To Others Caused By a Selfie Stick. The insurer will defend and pay up to $250,000 for bodily injury to others caused by an insured’s use of a selfie stick. I guess those things can be dangerous. Think of it as “Put that thing down before you poke someone’s eye out” insurance.
Bodily Injury to the Insured While Taking a Selfie. It seems crazy, but the news is full of stories about people injured, even killed, while taking a selfie. The policy pays medical expenses up to $500,000, and a death benefit of $1,000,000 (less any medical expenses paid), if an insured is injured or killed while taking a picture of themselves (being injured or killed).
Humiliation. The insurer will pay $100,000 to an insured who, on account of inattention while staring at their cell phone, falls into a fountain or walks into a wall, and a video of it appears on the internet and goes viral. The policy contains a complex explanation of what it means to “go viral.” Rife for dispute I might add.
Bodily Injury to Others While Using a Cell Phone. The insurer will defend and pay up to $250,000 for bodily injury to others caused by an insured’s inattention while staring at their cell phone. No more worries about knocking over an elderly and infirm person while texting.
Quiet Car Injury. The insurer will pay up to $250,000 for injuries sustained by an insured, in an altercation, on account of the insured’s use of a cell phone on a train’s Quiet Car. |
That’s my time. I’m Randy Spencer. Contact Randy Spencer at
Randy.Spencer@coverageopinions.info |
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Tapas In The Spotlight (Again) |
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I called the Tapas column, in the last issue of Coverage Opinions, “Tapas In The Spotlight.”
“Tapas” has always been called “Small Dishes Of Insurance Coverage.” It provided just a brief summary of a few cases. These were cases where there was a point to be made – but not enough about the decision to justify an article with analysis.
For the last issue of CO, there were many really good cases worthy of articles. But not enough time for me to do more than just a handful of full-blown write-ups. So I solved this by expanding the Tapas column. Instead of having three or fours cases in Tapas, I had many. I hit just the high points of the decisions and kept the analysis and commentary brief (or just skipped it). I figured that anyone interested in leaning more about the case could simply read it.
Once again there are a lot of cases worthy of inclusion in this issue of CO. And, once again, there is not enough time for me to do more than just a few lengthy write-ups. So, once again, Tapas will be “in the spotlight.” I even moved it higher up in the issue, taking it out of its basement position where it has lived for the past six-plus years.
Appeals Court: Amazon.com Not a “Seller” For Purposes of Product Liability Law
This case has nothing to do with insurance coverage. However, it is interesting, lots of general liability coverage is tied to products liability and Amazon.com has become pretty ubiquitous in many of our lives. So I tossed it into this Tapas column.
In Erie Insurance Company v. Amazon.com, No. 18-1198 (4th Cir. May 22, 2019), the federal appeals court addressed whether Amazon.com could be liable under the following circumstances: “Trung Cao of Montgomery County, Maryland, purchased a headlamp on Amazon’s website and then gave it to friends as a gift. The headlamp’s batteries apparently malfunctioned, igniting the friends’ house and causing over $300,000 in damages. Erie Insurance Company, which insured the house, paid the loss and now, as subrogee, is pursuing this action to obtain reimbursement from Amazon for negligence, breach of warranty, and strict liability in tort, arguing that Amazon has liability under Maryland law because it was the ‘seller’ of the headlamp.”
The court held that, based on the nature of the relationship between Amazon and the “seller,” and the issue of who had title to the headlamp – not Amazon -- Amazon was not the seller for purposes of Maryland’s products liability law: “At bottom, we conclude that Amazon was not, in this particular transaction, a seller — one who transfers ownership of property for a price — and therefore does not have the liability under Maryland law that sellers of goods have. To be sure, when Amazon sells its own goods on its website, it has the responsibility of a ‘seller,’ just as any other retailer, such as Home Depot, would have. But when it provides a website for use by other sellers of products and facilitates those sales under its fulfillment program, it is not a seller, and it does not have the liability of a seller.”
To me, Amazon sure seems like a seller, as that term is generally understood. When someone asks where I bought something, if Amazon, I say Amazon, and not the name of the seller on whose behalf Amazon fulfilled the transaction. Next time I’ll say Amazon, but not for purposes of Maryland products liability law.
People who read this article also read an article about MacPherson v. Buick Motor Co.
Court Holds That Asbestos Is A “Pollutant” Under The Pollution Exclusion
At issue in Zurich American Insurance Co. v. Insurance Company of North America, No. 14-1112 (E.D. Mo. May 21, 2019) was a dispute between two insurers over contribution for a settlement of an asbestos claim, against their mutual insured, Anheuser-Busch. One insurer, INA, argued that it had no obligation to share in the settlement or defense costs because its pollution exclusion precluded coverage “because it involved an ‘irritant, contaminant, and/or pollutant’ which ‘discharge[d], dispers[ed], release[d], or escape[d]’ into ‘the atmosphere,’ thereby injuring the underlying decedent. According to the underlying suit, the decedent was exposed to asbestos through the air as she came into contact with her husband and his work clothes. INA argues that this type of contamination is covered by the plain language of the pollution exclusion, which precludes coverage for bodily injury ‘arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon the land, the atmosphere or any water course or body of water . . . .”
The court, following a lengthy analysis, agreed that the pollution exclusion precluded coverage: “In the factual context of this case, asbestos unambiguously falls within the exclusion’s definition of ‘contaminants,’ ‘irritants,’ and ‘pollutants,’ and the policy is not rendered ambiguous as a matter of law merely because asbestos is not explicitly listed in the exclusion. In [the underlying action], the plaintiff alleged that asbestos inhaled in the air caused the decedent’s bodily injury and death from pleural mesothelioma. Plaintiff claimed that the asbestos, asbestos fibers, and asbestos dust to which decedent was exposed were ‘ultrahazardous to health’ and were ‘released into the air [thereby] creat[ing] dangerous and unreasonable risk of injury to the lungs [and] respiratory systems’ of those ‘breathing that air and coming into contact with that dust,’ including the decedent. Plaintiffs further alleged that A-B ignored the dangers of exposure to asbestos to its employees and their families, including decedent, and failed to institute proper hygiene procedures to ensure that ‘toxic chemicals and substances such as asbestos containing dust were not carried home on the employees’ person and their work clothing.’ These claims unambiguously allege that asbestos is an irritant or contaminant under the ordinary meanings of those words.”
Court Says That The Word “Coverage” Does Not Include Defense
I’ve been saying this for years in my “50 Item ROR Checklist” seminar. The word “coverage,” while we all know what it means, may not mean what we think it does, when it is used as a stand-alone term. In other using, using “coverage,” without specifying coverage for defense or coverage for any damages, may lead to an unintended result.
That was the point made by the court in Allied World Assurance Co. v. Lee Memorial Health Systems, No. 18-158 (M.D. Fla. May 1, 2019). Allied World filed a complaint seeking a declaratory judgment that its “Policy does not afford coverage for [Lee Health] in connection with the Underlying Action.” The underlying action involved medical malpractice and Allied World asserted two exclusions.
As the court saw it, the DJ complaint did not speak to the insurer’s duty to defend, as it addressed “coverage.” The court stated: “Preliminarily, the pleadings do not discuss Allied World’s duty to defend, focusing mainly on coverage in general. This suggests indemnification is at issue rather than any duty to defend. See EmbroidMe.com, Inc. v. Travelers Prop. Cas. Co. of Am., 845 F.3d 1099, 1113 (11th Cir. 2017) (‘The term ‘coverage’ typically connotes coverage of a claim, such that the insurer will indemnify the insured for any damages, up to policy limits, that the insured is found liable to pay.’).”
In the end, it does not seem to have mattered, as duty to defend, even if at issue, was not ripe for a judicial decision. But the case makes a good point about the use of “coverage,” as a stand-alone term, if the intent is for it to mean coverage for both defense and any damages.
Court Rules Insurer Has No Duty To Defend – Even Before Complaint Is Filed (Really)
In general, there are not an abundance of situations where an insurer can use extrinsic evidence to defeat a duty to defend. And some states don’t allow any. The court in Esurance Inc. v. Hamm, No. 18-1715 (D. Ore. Apr. 30, 2019) listed a few: “extrinsic evidence provides the date an insurer was notified of a claim; when the court needs to determine whether an organization or an individual was an insured under a policy; and when a previous judicial decision precludes coverage, based on the doctrine of issue preclusion.”
Then the court in Hamm went further, holding that extrinsic evidence can even be used to defeat a duty to defend a complaint -- that has not even been filed. Really. I’ll keep it simple and brief…
Seth Hamm shot Emilio Pina. Hamm pleaded guilty to Assault in the Third Degree with a firearm and was sentenced to thirty-six months in prison. Pina sued Seth Hamm for his injuries. Seth and Michelle Hamm sought for Esurance to defend and indemnify Seth Hamm. Esurance undertook the defense (hiring Dennis Quaid) under a reservation of rights. Pina subsequently dismissed his lawsuit with the intent to refile.
Importantly, the court noted: “As of yet, Pina has not refiled his suit against Seth Hamm.” But that did not stop the court from concluding that the insurer would have no duty to defend the as-yet filed, sight-unseen, complaint. How could that be?
The Esurance policy contains a criminal act exclusion, which the court concluded would apply to preclude coverage – even if such fact is known through extrinsic evidence and, get this, even though Pima suggested that “he might, through artful pleading, allege that he was injured by Seth Hamm without explicit reference to the fact that Seth Hamm was subsequently convicted of a criminal act.” But such artful pleading would not matter, the court concluded, as there would be extrinsic evidence of Hamm’s guilty plea to Assault in the Third Degree.
The court wasn’t finished with its crystal ball. It also held that, even though “Pima has not articulated any theory of liability as to Michelle Hamm,” there would be no duty to defend her. The policy contained a “joint obligations” clause. Thus, the court held that the criminal act exclusion applies to negligence claims against other insureds.
The next time someone tells you that the duty to defend is broad….
No ROR Except For Punitive Damages: Independent Counsel Required
At issue in Xtreme Protection Services LLC v. Steadfast Ins. Co., No. 1-18-1501 (Ill. Ct. App. May 3, 2019) was an insured’s claim that it was entitled to independent counsel for a suit filed against it. The insurer said no, since its defense, it maintained, did not create a conflict, as it did not reserve its rights on any compensatory damages. The ins and outs of the underlying claim can be spelled out here in the context of the discussion of the issues.
The independent counsel issue arose as follows: “Here, the underlying complaint alleges that Israel suffered damages when Xtreme's employee placed listening devices in Israel’s office, attached GPS devices to his vehicles, and sent threatening or harassing text messages. Steadfast’s policy with Xtreme excludes coverage for ‘intentional, criminal, fraudulent, malicious or dishonest’ acts. Steadfast argues, however, that no conflict exists because it explicitly waived its right to deny coverage for compensatory damages based on these acts. While Steadfast’s waiver may have resolved one type of conflict, Steadfast’s continuing reservation of its right to deny coverage for punitive damages presents another area of potential conflict.”
The court concluded that, despite the insurer’s waiver of coverage defenses for compensatory damages, a conflict still existed to support the insured’s right to independent counsel. Its conclusion was based on which party bears the risk of loss in the suit: “The third amended complaint seeks no less than $120,000 in compensatory damages and no less than $2.1 million in punitive damages. Here, as was the case in Nandorf and Mobil Oil, the underlying complaint seeks a substantially greater amount of punitive damages than compensatory damages, but the insurance policy explicitly denies coverage for punitive damages, and Steadfast has not waived its reservation of rights regarding punitive damages. Such an award is not inconceivable given the allegations in the underlying complaint. Where punitive damages form a substantial portion of the potential liability in the underlying action and Steadfast disclaims liability for punitive damages, Xtreme is left with the greater interest and risk in the litigation. Therefore, a conflict of interest exists, entitling Xtreme to obtain independent counsel paid for by Steadfast.”
The court also observed that “[s]ince Steadfast has denied coverage for punitive damages, it has little interest in defending against Israel’s claims for punitive damages.”
I’m not sure I get this. After all, the court stated that “the claims for compensatory and punitive damages arise from the same wrongful conduct.” In that case, since the insurer is obligated for any compensatory damages for this wrongful conduct, wouldn’t it still want a strong defense effort, which would also go toward defeating liability for punitive damages?
Appeals Court Says That Money and Checks Are Not Tangible Property
Somehow the insured threw this hail Mary twice…
In Estate of Keppel v. Angela’s Angels Home Healthcare, No. A-3868-17T1 (N.J. Super. Ct. App. Div. May 9, 2019), the court addressed general liability coverage for Angela’s Angels Home Healthcare, for a claim that its employee, a home health aide, misappropriated 192 checks, from a patient, over a two-year period, leading to a loss of nearly $225,000.
The insurer disclaimed coverage on the basis of a lack of “property damage,” arguing that money is not tangible property. Litigation ensued. The trial court concluded that checks and money are not tangible property. Further, loss of the money, attempted to be recovered, was not loss of use of the checks.
For some reason the insured decided to try again. The appeals court, looking to New Jersey law, cases nationally and dictionaries, concluded as follows:
“The loss of stolen money does not constitute ‘property damage’ because money, or the checks representing money, is not ‘tangible property.’ While checks can be touched, the checks themselves have no intrinsic monetary value and suffered no injury upon being cashed by Thomas. Checks represent money in a bank that exists in digital form in a computer database in the name of the account holder. Checks are a representation of money held by a bank and are simply a medium of exchange. A medium of exchange, such as coins or dollar bills, is not tangible property. Thus, the checks misappropriated by Thomas and then cashed without permission are not property damage as defined in the Nautilus policies. Because we reject plaintiffs’ claim that the checks constitute tangible property, the money obtained as a result of Thomas cashing the checks does not constitute consequential damages. The loss of use of a check does not equate with the loss of money. Here, there is no injury to the checks, and the loss of use relates to the money misappropriated. Therefore, there is no property damage claim under the Nautilus policies.”
Attorney’s Fees Are Covered “Damages” Says Court Following Multi-Faceted Analysis
Even though, under our so-called American Rule, a prevailing party is not entitled to recover its attorney’s fees (subject to certain exceptions), there is still a fair amount of litigation over whether attorney’s fees are covered as “damages” under a liability policy.
A California federal court held that they are. What makes United States Liability Ins. Co. v. A&B Market Plus, Inc., No. 19-172 (S.D. Calif. May 14, 2019) worthy of note is the extent of analysis that the court undertook to reach its decision. The court approached the question six ways from Sunday, looking at dictionary definitions of the term “damages,” the context and structure of the policy, the fact that other courts have found “damages” to include “attorney’s fees” and construing the term according to the reasonable expectations of the insured.
The court left little doubt as to the moral of the story – the term “damages” was not defined in the policy.
If you have this issue, A&B Market, while it’s an unpublished federal court decision, provides an excellent tutorial on the issue and competing arguments.
Louisiana Supreme Court Upholds Policy’s New York Forum Selection Clause For Claim Unrelated To N.Y.
If you are dealing with the enforceability of a forum selection clause, in an insurance policy, then you’ll want to take a look at Creekstone/Juban I, LLC v. XL Ins. Am. Co., No. 2018-CC-0748 (La. May 8, 2019). The Louisiana high court held that a New York forum selection clause was enforceable for a claim for flood damages in Louisiana, under a policy issued in Texas, to 20 insureds, covering over 100 properties in over 20 states.
The best way to summarize the decision is to look at the dissent’s introduction: “It is ridiculous that a Louisiana business with Louisiana customers and employees that suffers millions of dollars in damages requiring millions of dollars of repairs by Louisiana carpenters, plumbers, and painters in Louisiana insured by an insurance policy delivered in Louisiana[*] should be required to litigate against the insurer in New York when it has been the public policy of Louisiana since 1948 that such matters should be litigated in Louisiana and that ‘any condition’ to the contrary contained in an insurance policy is prohibited. The disdain for Louisiana business and the Louisiana Legislature is remarkable. In reversing the trial court and the court of appeal, the majority opinion is wrong for three separate reasons: failure to recognize public policy, false dichotomy between ‘big sophisticated’ business and ‘single’ Louisiana residents, and an unsupportable reformation of the contract to enable the desired result.”
As Francis Albert said, a New York forum selection clause can make it anywhere.
[*] The majority opinion states: “The Policy was issued to named insured MRMG Commercial and delivered to MRMG Commercial in Lufkin, Texas.” |
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Vol. 8 - Issue 5
May 31, 2019
Encore: Randy Spencer’s Open Mic
Selfie Stick Injury: Insurer Writes Policy Covering Cell Phone Mishaps
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Sometimes it seems as if there’s insurance for everything. Policies exist for a golfer making a hole-in-one, a wedding catastrophe and, so they say, Liberace’s hands were insured. When new bad things happen, or threaten, the insurance industry always seems to be right there with products designed to spread the risk. A few cases of Ebola not long ago -- boom, welcome Ebola insurance. Planes might fall out of the sky at midnight on January 1, 2000? Fear not. Here’s your Y2K policy. And as new technologies are developed, insurers respond with policies designed to protect against mishaps. Not long after drones began showing up under Christmas trees, drone insurance rained down. Pot is legal in some places. Many are doobie-ous that that can be done safely. The insurance industry rolled out marijuana policies.
So, on one hand, it comes as no surprise that an insurer is offering a policy designed to cover the risks of using a cell phone. But wait, cell phones have been around for a very long time you say. Nothing bad happens from using them. Who needs insurance? What’s the biggest risk of using a cell phone? Losing it? Dropping it?
Maybe that used to be the case – back in the day when cell phones had just one purpose. But as cell phones do more and more things, they are out of our possession for less and less time. Did you see that new app that makes really good guacamole? The more we use cell phones, the greater the risk of unintended consequences. Seeing an opportunity, enter CellRisk with its “Cellular Technology Legal Liability and First Party Policy.”
I got my hands on CellRisk’s policy form. It offers coverage for many types of risks associated with using a cell phone – a few of which I never even thought of. No doubt some of the coverages are likely available on existing policies, such as homeowners and health. But even if that’s the case, CellRisk touts in its promotional materials that its policy may offer higher limits than these others. Not to mention that, according to CellRisk, an insurer that issued a more traditional policy may balk at paying a claim with which it is unfamiliar.
Consider these coverages available from CellRisk under its Cellular Technology Legal Liability and First Party Policy:
Bodily Injury To Others Caused By a Selfie Stick. The insurer will defend and pay up to $250,000 for bodily injury to others caused by an insured’s use of a selfie stick. I guess those things can be dangerous. Think of it as “Put that thing down before you poke someone’s eye out” insurance.
Bodily Injury to the Insured While Taking a Selfie. It seems crazy, but the news is full of stories about people injured, even killed, while taking a selfie. The policy pays medical expenses up to $500,000, and a death benefit of $1,000,000 (less any medical expenses paid), if an insured is injured or killed while taking a picture of themselves (being injured or killed).
Humiliation. The insurer will pay $100,000 to an insured who, on account of inattention while staring at their cell phone, falls into a fountain or walks into a wall, and a video of it appears on the internet and goes viral. The policy contains a complex explanation of what it means to “go viral.” Rife for dispute I might add.
Bodily Injury to Others While Using a Cell Phone. The insurer will defend and pay up to $250,000 for bodily injury to others caused by an insured’s inattention while staring at their cell phone. No more worries about knocking over an elderly and infirm person while texting.
Quiet Car Injury. The insurer will pay up to $250,000 for injuries sustained by an insured, in an altercation, on account of the insured’s use of a cell phone on a train’s Quiet Car. |
That’s my time. I’m Randy Spencer. Contact Randy Spencer at
Randy.Spencer@coverageopinions.info |
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Vol. 8 - Issue 5
May 31, 2019
One Of The Most Interesting Insurance Cases I Have Ever Seen
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The headline of this article describes Kenyon v. Elephant Ins. Co., No. 04-18-00131 (Tex. Ct. App. Apr. 24, 2019) as one of the most interesting insurance cases that I have ever seen. It does not say that it is one of the most interesting coverage cases that I have ever seen. That’s intentional. Kenyon v. Elephant Ins. is not a coverage case. However, it is so intimately tied to an insurance policy that I believe CO readers will find it interesting.
[In the past I have had a laugh at the name Elephant Insurance Company. They sell their policies for peanuts, I once concluded. As much as I’d love to do that again, I refrain, as the facts at issue in the case are tragic.]
Kenyon v. Elephant Ins. is a torts case. It reads like something right out of first law school law.
The tragic facts are these: On March 10, 2016, Lorraine Kenyon was involved in a single-vehicle accident in San Antonio. While inside her vehicle, on the side of the road, she called her husband, Theodore, and then Elephant, her insurer. Elephant’s first notice of loss representative, Kaitlyn Moritz, answered Kenyon’s call from Elephant’s call center in Virginia. “Kenyon described the accident and asked Moritz: ‘Do you want us to take pictures?’ Moritz answered: ‘Yes, ma’am. Go ahead and take pictures. And—And we always recommend that you get the police involved but it’s up to you whether you call them or not.’ Moritz testified she was trained to get information about the accident, who was at fault, and whether there were any injuries, as well as to encourage the insured to take photographs of the accident scene. Moritz was not trained to inquire about the insured’s safety or to ask whether the insured is in a safe location. While Kenyon was on the phone with Moritz, Theodore arrived at the scene. Kenyon told Theodore ‘they need pictures,’ and he began taking photographs of Kenyon’s damaged vehicle. As Theodore was taking photographs, another motorist, Kimberly Pizana, lost control of her vehicle and collided with Theodore. Theodore later died of his injuries.”
Lorraine Kenyon, as executrix of Theodore’s estate, sued Pizana for negligence, as well as Elephant, asserting various types of negligence claims.
The legal issue, with respect to any liability for Elephant, is easy to see: “The question before the trial court and this court is whether Texas law recognizes a duty on the part of an insurer who accepts a call from its insured and provides ‘post-accident guidance.’”
The court concluded that the foremost and dominant consideration, whether a duty exists, is foreseeability.
The court, for various reasons, concluded that, based on a lack of foreseeability, no duty existed.
There is a lot to the decision, including a lengthy dissenting opinion, but the highlights are as follows:
Kenyon argued that it was “‘readily foreseeable that in sending an insured out into the accident scene to take photographs, the insured might be struck by another vehicle and injured.’ In support, Kenyon cites Elephant’s FNOL representative Moritz’s testimony that she understands ‘there may be dangerous situations or circumstances’ surrounding an insured who calls to report a single-vehicle accident. Kenyon also cites the testimony of the responding police officer, who stated it is generally not advisable for motorists to photograph crash scenes because doing so ‘put[s] [one]self in danger.’”
However, the court saw it differently, noting that there was “no evidence in the record, however, that Elephant was aware of any prior, similar incidents in which an insured was injured (much less struck by another vehicle) while photographing an accident scene. There also is no evidence Elephant was aware of the potential risk of injury to Theodore.”
The court found additional reasons for concluding that Elephant owed no duty:
“While Elephant and its employees may have more knowledge regarding motor vehicle accidents generally, Kenyon was in a better position than a person located in Virginia to assess the risk of Theodore’s and her particular circumstances at the time of the accident.”
“While the burden to inquire whether an insured is in a safe location when she calls to report a claim is not onerous, the burden to actually assess whether an insured is safe and secure enough to report a claim or take photographs of vehicle damage is likely too onerous for an insurer that is not present at the accident scene. Further, as Elephant argues, even if an insurer is required merely to ask whether its insured is in a safe location, doing so would not have changed the outcome in this case. Kenyon testified she felt she was in a safe place at the time she called Elephant, and she did not believe Theodore was in danger while photographing her vehicle.”
Any good torts case has a dissenting opinion. And Kenyon does. The dissenting judge concluded that “Elephant owed Kenyon a duty due to the nature of their relationship. The ‘special relationship’ between an insurer and an insured was implicated when Elephant began intaking Kenyon’s insurance claim. Alternatively, the risk—utility factors weigh in favor of recognizing a duty.”
The dissent summarized its lengthy opinion this way: “When a driver, who had just been in a car accident, is on or near the side of the road taking photographs of the scene, the general risks from other cars on the road is foreseeable as a matter of law. The magnitude of harm is severe bodily injury and death, and given the degree to which an insured is contractually controlled by and situationally reliant on an insurer, insureds are likely to get out of their cars and take photos and, in cases like this one, get hit by another car. This risk is unjustifiable because Elephant hires adjusters to take photographs and document vehicle damage, rendering photographs taken by insureds duplicative, especially in a one-car accident where questions of fault are less important. The risk here is even more unjustifiable considering the danger Elephant’s practice poses to police officers and other first responders. Considering all the facts and evidence presented in this case, I would hold Elephant owed Kenyon a duty.”
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Vol. 8 - Issue 5
May 31, 2019
Don’t Shake Your Head In Disbelief:
World’s Biggest Bobble Head Is An Insurance Company Mascot
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Thank you to Andy Lundberg, long-time Coverage Opinions reader, retired Latham & Watkins partner and current managing director of litigation financier Burford Capital, for alerting me to the embarrassment of riches that he came upon at RIMS in Boston earlier this month. Like all trade shows, the vendors had all manner of gimmicks to get attendees to stop at their booths. But surely worker’s compensation insurer Applied Underwriters (Berkshire Hathaway) gets best in show with a 15’ 4.75” bobble head of its St. Bernard mascot. As the nearby picture shows, even the 6’4” Lundberg looks Lilliputian next to this big fella. Andy is lucky that he didn’t drown in slobber.
But “Big Dog,” as he is called [that’s clever], isn’t just a big bobble head. He is the world’s largest, according to Guinness. The record-keeping folks’ website says that Big Dog was introduced in 2016 at Berkshire’s shareholders show in Omaha. Guinness says that it took 400 hours of design and physical labor to create the steel and polystyrene best friend. And yes, he bobbles, thanks to a two-ton spring inside his head.
Andy, Latham’s one-time global co-chair of the firm’s Insurance Coverage Litigation Practice, told me that holding the pup’s leash was reminiscent of his 35 years spent as a policyholder lawyer -- bringing a carrier to heel. |
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Andy Lundberg (left) and "Big Dog" |
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[I referred to “Big Dog” here as a he. But who knows. You’d have to look underneath, which could then mean another Guinness record.]
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Vol. 8 - Issue 5
May 31, 2019
#DateYourselfIn5Words - Leading Coverage Lawyers Version
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I’m not much of a Twitter-guy. But I saw something on the social media site a couple of weeks back that was kinda neat. It was called #DateYourselfIn5Words. It was just like it sounded. People posted five words that gave a clue as to their age.
Here are a few of my favorites:
• The smell of a mimeograph
• Please be kind and rewind
• TV test pattern after midnight
So I thought about it myself. And, as I am wont to do, did so insurance coverage style. I came up with this: New trigger decision faxed around
Then I wondered how others would respond to it - also insurance coverage style. So I reached out to some prominent coverage lawyers, who have been around long enough, that I knew they’d have clever responses. And, not surprisingly, this gang did not disappoint. Here’s what they came up with.
Florida: defects not occurrence (yet)
Stephen Berry
General Counsel
Builders Insurance Group
Atlanta
New Jersey warehouse of boxes
Mary Borja
Wiley Rein, LLP
Washington, D.C.
Send it by air mail
Robert Marc Chemers
Pretzel & Stouffer, Chartered
Chicago
Wellington -- beef not an agreement
Mike Marick
Skarzynski Marick & Black LLP
Chicago
We are a manifestation carrier
Brad Mortensen
Kennedys CMK
Philadelphia
Keene establishes the triple trigger
Jerry Oshinsky
Kasowitz Benson Torres LLP
Los Angeles
Trigger meant Roy Rogers’ horse
Neil Selman
Selman Breitman LLP
Los Angeles
Regulatory Estoppel voids pollution exclusion
Chuck Spevacek
Meagher & Geer, PLLP
Minneapolis
Thank you to everyone who participated.
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Vol. 8 - Issue 5
May 31, 2019
Holy Cow (2 Of Them):
Noah’s Ark Attraction Sues Insurers For Damage Caused By Rain
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You may have seen this story floating around the internet not long ago.
Since 2016, a popular attraction in Williamstown, Kentucky has been a replica of Noah’s Ark. It is full-size -- 510 feet long, 85 feet wide and 51 feet high, per the dimensions given in the Bible.
On May 22, its owner, Ark Encounter, LLC, filed suit against several of its insurers, for damage caused by heavy rains. Some media stories suggested that the suit was for damage to the ark caused by flooding. But it is not. I guess that was just too attractive of a headline to pass up. In fact, the suit seeks to recover for damages to an ark access road that was caused when heavy rains led to a landslide.
Since Coverage Opinions readers wants their insurance news from the source, and not the internet, I splurged and spent $1.30 to get the complaint from PACER.
Plaintiffs, Ark Encounter, LLC and Crosswater Canyon, Inc. (sole member and manager of Ark Encounter) -- represented by Keating, Muething & Klekamp of Cincinnati -- filed suit in the Eastern District of Kentucky against two Allied World Assurance Company entities, Certain Underwriters at Lloyd’s, HDI Global Specialty, Blackboard Specialty Insurance Company and General Security Indemnity Company of Arizona. No counsel had yet been listed for any of the insurer-defendants.
Plaintiffs were insured under a commercial property policy, issued by the defendant-insurers, that covered plaintiffs’ property at 1 Ark Encounter Drive in Williamstown, Kentucky. At this location, Ark Encounters operates a “creationist theme park” known as Ark Encounter and the “centerpiece” is a representation of Noah’s Ark.
The complaint alleges that “[b]eginning in or about May 2017, and continuing into 2018, the slope abutting and supporting the access road [to Ark Encounters] began to fail. Subsequent to heavy rains, a significant landslide occurred along portions of the slope, which eliminated the structural support for the roadway, caused significant damage to the road surface itself and the incorporated improvements, and rendered portions of the road unsafe and unfit for use. The complaint alleges that the work to remediate the damaged and destroyed roadway, and the substructure surrounding and underlying the roadway, was completed by plaintiffs at a cost of approximately $1,000,000.”
As far as I can tell from the complaint, the claim involved a covered peril – on the basis of it being an exception to an excluded peril. Specifically, the policy states that it “does not insure against the cost of correcting defective design or specifications, faulty material, or faulty workmanship; however, this exclusion shall not apply to direct physical loss, damage or destruction resulting from such defective design or specifications, faulty material, or faulty workmanship.”
The dispute may be over an exception to excluded property. While the policy does not insure “land and land values,” there is an exception for the cost of “reclaiming, restoring or repairing Land Improvements.” The Policy defines “Land Improvements” as “any alteration to the natural condition of the land whether natural or manmade by grading, landscaping, earthen dikes or dams, and additions to land such as drainage systems, pavements, roadways or similar works.”
But the plaintiffs also stated another issue that they allege to be causing problems. Plaintiffs allege that the insurers “agreed to issue payments for part of Plaintiffs’ claim of loss. With respect to the remainder of Plaintiffs’ claim, the Defendants requested that Plaintiffs submit
additional information. Despite Defendants’ appropriate concessions and the additional information Plaintiffs provided, the Defendants continue to contend that Plaintiffs’ loss is not covered because the physical damage was caused by faulty design or workmanship, even though the Defendants have already conceded that the Policy language provides coverage for damage resulting from faulty design or workmanship.”
The Plaintiffs assert causes of action for breach of contract, declaratory judgment, common law bad faith and violation of the Kentucky Unfair Claims Settlement Practices Act.
What’s the remedy for committing bad faith in a claim involving Noah’s Ark? Obviously, the insurer must pay every dollar twice.
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Vol. 8 - Issue 5
May 31, 2019
Winners Of The Coverage Opinions Caption Contest
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The winners of the Coverage Opinions Caption Contest are in.
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Lance Meyer
O’Meara Leer Wagner & Kohl, P.A.
Minneapolis |
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Congratulations! |
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Vol. 8 - Issue 5
May 31, 2019
West Coast Casualty Construction Defect Seminar:
Thanks For Stopping By The Book Signing
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The 26th Annual West Coast Casualty Construction Defect Seminar was held from May 9-10, 2019 at the Disneyland Hotel in Anaheim. Compliments of West Coast Casualty, attendees of this year’s seminar received a copy of the 4th edition of General Liability Insurance Coverage – Key Issues In Every State!!
I was asked to do a book signing. To be sure, I felt strange signing books – that’s for real authors, of real books. But I had such a great time speaking to so many folks.Thank you to the Coverage Opinions subscribers and others who stopped by to say hello. Great seminar!
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Vol. 8 - Issue 5
May 31, 2019
9th Circuit Rules In That Crazy Cosgrove Case
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For the past two years I have had a fascination with the Arizona federal district court’s decision in Cosgrove v. National Fire & Marine Insurance Company. I have written about it a lot. The 9th Circuit recently weighed in on it. It is an important decision for the case and, more importantly, perhaps has wider implications.
In April 2017, at the outset, an Arizona federal court held that insurer-appointed defense counsel, in a reservation of rights-defended case, used the attorney-client relationship to learn information about his client’s use of subcontractors on a project. When defense counsel did so, he knew, or had reason to know, that his client’s policy contained a Subcontractors Exclusion and that the insurer may attempt to deny coverage based on the exclusion. Thus, the court held that the insurer was estopped from asserting the Subcontractor Exclusion as a coverage defense.
Needless to say, this was a very troubling decision for insurers (and appointed defense counsel). After all, the court reached this decision despite the existence, or not, of subcontractors being a pretty routine, and obvious, and not secret, fact in a construction dispute.
Very shortly after the court’s decision the parties settled. As part of the settlement, the court agreed that it would vacate and seal the summary judgment decision. Sure enough, you can’t get the decision on Pacer and the insurer arranged for the decision to be 86ed from Lexis and Westlaw. I have a copy of the decision if anyone is interested. It is also on the internet.
In November 2017 – many months after the case was over -- United Policyholders, a policyholder advocacy group, filed a Motion to Intervene to unseal and reinstate the decision. UP said in its brief that what the insurer did is an “impermissible tactic” – one “commonly employed by insurers in an attempt to reshape case law in their favor after an adverse ruling.” UP said that the insurer, faced with an adverse decision, is “seek[ing] to hide the court’s opinion.”
On January 18, 2018, the court denied UP’s motion to intervene, citing such reasons as lack of jurisdiction, it is not a party to litigation that shares questions of law or fact to the case, untimeliness and prejudice to the parties.
UP filed a notice of appeal to the Ninth Circuit. Oral argument was held on April 16, 2019. I wrote about the oral argument in the current issue of CO.
On May 6th the speedy Ninth Circuit issued it decision. It has two parts – one was a win for the insurer and one was a win (for now) for UP.
On the subject of reinstating the vacated partial summary judgment order, the Ninth Circuit held that the district court did not abuse its discretion in denying UP’s motion to intervene: “United [UP] has no independent basis for jurisdiction, nor does it possess a common question of law and fact with the claims or defenses involved in the main action. The district court determined that granting permissive intervention would prejudice the parties because the case had been dismissed pursuant to a settlement of the parties. The district court did not abuse its discretion in denying United permissive intervention for the purpose of attempting to reinstate a vacated order, given that such an action would have ‘prejudice[d] the adjudication of the original parties’ rights.’”
But then comes part 2: Can UP get the order unsealed? The court’s answer – maybe. The court stated: “A third party seeking permissive intervention purely to unseal a court record does not need to demonstrate independent jurisdiction or a common question of law or fact.”
The court also noted that “there is a ‘strong presumption’ in favor of the public’s right of access to judicial records.” This requires a balancing test: “A court must evaluate whether the countervailing interests opposing public disclosure can overcome the presumption in favor of it.” But since the district court did not undertake this exercise, the Ninth Circuit remanded to the district court to do so.
So the crazy Cosgrove case marches back to Arizona.
UP (presumably they’ll keep at it) will now be seeking to have a vacated order unsealed. In other words, if successful, you would think that the opinion would return to Pacer and Westlaw and Lexis.
The upshot as I see it:
Based on this Ninth Circuit decision, strangers to a case have a very steep climb to intervene to have a vacated order reinstated. Even my mother-in-law doesn’t intervene in my life that much.
However, if “there is a ‘strong presumption’ in favor of the public’s right of access to judicial records,” a stranger may have success in getting a sealed order unsealed. Of course, what is the value of a vacated opinion (although not vacated on the merits)? That is a question for litigants and judges.
Given how anomalistic the Cosgrove decision is, I’m not sure it has a lot of value going forward. But I could certainly be wrong. See My mother-in-law. Id. Even if I’m not, the Ninth Circuit decision has provided a voice, generally, on the use of sealing and vacating decisions as part of a settlement. |
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Vol. 8 - Issue 5
May 31, 2019
Court Distinguishes Between Rates For Policyholder Counsel And Insurer Counsel
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The rates to be paid by insurers to the policyholder's selected counsel – for defense or recovery of DJ fees – has long been a contentious issue. Insurers often seek to pay such counsel the same rates that they pay their own defense or coverage counsel. Policyholders often balk, saying that a distinction should be made, because the rates that insurers pay, to so-called panel counsel, are not a reflection of market rates. You know this drill.
The court in C.M.S. v. American European Insurance Co., No. A-2056-17T3 (N.J. Super. Ct. App. Div. May 28, 2019) upheld such a distinction in the context of determining the hourly rate to be paid to the insured's counsel, under New Jersey law, as a prevailing party in a coverage action. The court had this to say about it:
"Rule4:42-9(a)(6) specifically permits a fee award in an action upon a liability or indemnity policy of insurance in favor of a successful claimant. A 'trial judge has broad discretion as to when, where, and under what circumstances counsel fees may be proper and the amount to be awarded. In setting the lodestar, a trial court must first determine the reasonableness of the rates proposed by prevailing counsel in support of the fee application. Generally, a reasonablehourly rate is to be calculated according to the prevailing market rates in the relevant community[] . . . for similar services by lawyers of reasonably comparable skill, experience, and reputation. Next, the 'court must determine whether the time expended in pursuit of the 'interests to be vindicated' . . . is equivalent to the time 'competent counsel reasonably would have expended to achieve a comparable result[.]'" (numerous citations omitted).
Turning to the appropriate hourly rate to use, the court drew a distinction between who hires the lawyer: "The trial judge did not abuse his discretion in arriving at a lodestar rate of $350. AEIC based its proposed figure of $190 on a certification of its claims examiner who attested to the market rate for coverage litigation and insurance defense in northern New Jersey. However, as the trial court pointed out, this figure only represents the market for counsel representing insurance companies, not claimants seeking coverage. Insurance companies have significantly more bargaining power than claimants in fee negotiations, and, in exchange, provide the lawyer with the security their bills will be paid. Comparatively, counsel for a claimant takes on more risk than counsel for the insurer in the form of volume of work and non-payment. The trial judge concluded counsel for CMS [the insured] should not be paid a similar fee as counsel for AEIC because their respective cost/benefit analyses were different. Moreover, AEIC could have, but failed to, provided CMS with counsel at a negotiated rate under a reservation of rights."
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Vol. 8 - Issue 5
May 31, 2019
Just In: Insurer's Unique Approach To E-Mail Spoofing Under Computer Fraud Coverage
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Just as this issue of Coverage Opinions was going to print, a Washington federal court decided Tidewater Holdings v. Westchester Fire Ins. Co., No. C18-6006 (W.D. Wash. May 31, 2019). There's no time to analyze it in any detail. But it was worth getting it into this issue – even if as a brief mention.
The Tidewater court addressed coverage, for an e-mail spoofing claim, under a policy that included Computer Fraud coverage. This has been a widely discussed topic of late, as losses from spoofing schemes have become prevalent. The issue got a lot of attention in coverage circles last year when two federal courts of appeal, just days apart, handed policyholders wins in their pursuits of coverage: Medidata Solutions, Inc. v. Federal Ins. Co. (2d Cir.) and American Tooling Ctr., Inc. v. Travelers Cas. & Sur. Co. of Am. (6th Cir.).
The facts in Tidewater are these: "On November 16, 2017, a Tidewater accounts payable clerk received a computer generated external email from an impostor instructing the clerk to alter the payment details Tidewater held on file for JH Kelly, a general contractor for Tidewater. In response to the email, Tidewater's clerk changed the payment details for JH Kelly in Tidewater's computer system. This resulted in four subsequent payments to the imposter's bank account instead of JH Kelly's account totaling $568,448.92. . . . Tidewater was able to recover $288,388.91 of the fraudulently diverted funds."
For various reasons, the insurer argued that no coverage was owed under "Computer Fraud coverage," which provided as follows: "The Insurer will pay for loss of or damage to Money, Securities and Other Property resulting directly from the use of any computer to fraudulently cause a transfer of that property from inside the Premises or Banking Premises: a) To a person (other than a Messenger) outside those Premises; or b) To a place outside those Premises."
The court rejected some of the insurer's arguments. However, it ultimately held that no coverage was owed, under the Computer Fraud section, for a simple reason. The policy contained an exclusion as follows: "With respect to all Insuring Clauses other than the Supplemental Funds Transfer Insuring Clause, the Insurer shall not be liable for any loss resulting from any Fraudulent Transfer Request." The policy defined "Fraudulent Transfer Request" as "the intentional misleading of an Employee, through a misrepresentation of a material fact which is relied upon by an Employee, sent via an email, text, instant message, social media related communication, or any other electronic telegraphic, cable, teletype, telefacsimile, telephone or written instruction, regardless of whether such misrepresentation is part of a phishing, spearphishing, social engineering, pretexting, diversion, or other confidence scheme." [The policy provided some coverage for a Fraudulent Transfer Request. That's a different story.]
Policyholders are fond of saying that, if an insurer did not want to cover something, it could have written an exclusion into the policy.
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