CM Report of Recent Decisions
2003 Volume 1
A summary of significant recent developments in the law focusing on substantive issues of litigation and featuring analysis and commentary on special points of interest.
Download this publication as a PDF
Articles in this report
Clausen Miller Obtains Summary Judgment in Multi-Million Dollar Environmental Insurance Coverage Case
In Dow Chemical Co. v. Fireman’s Fund Ins., et al., Case No. 2:99-CV-76398, the United States District Court for the Eastern District of Michigan granted summary judgment to six CM clients: AIU Insurance Company, American Home Assurance Company, Birmingham Fire Insurance Company, Granite State Insurance Company, Insurance Company of the State of Pennsylvania, and National Union Fire Insurance Company of Pittsburgh PA (“Certain Defendants”), finding that Certain Defendants had no duty to indemnify Dow Chemical for environmental losses at five manufacturing companies throughout the United States. Dow Chemical had claimed damages of approximately $395,000,000 at the five manufacturing sites.
Deposing the Expert
Deposing the expert is often the most important event during the course of civil litigation discovery proceedings. This is true primarily because the expert presumably has the technical background, training and experience necessary to identify and explain issues, (i.e. origin and cause) which are beyond the scope of knowledge and experience of the average, reasonable person. Indeed many, if not most, cases require a “battle of the experts” in order to ascertain the most plausible explanation of the technical issues involved in the case.
Eighth Circuit Reverses Summary Judgment for Insurer, Finds Application of Mold Exclusion Requires Further Factual Analysis
Focusing on the lead-in language in a policy exclusion for “loss caused by . . . mold”, the Eighth Circuit reverses summary judgment for the insurer and holds that coverage for the insureds’ mold damage may indeed be provided by the homeowner’s policy at issue where the mold was caused by a covered peril (rupture of frozen pipes). Shelter Mutual Ins. Co. v. Maples, 2002 U.S. App. LEXIS 23143 (8th Cir.).
Illinois Appellate Courts Address Appraisal Issues
In Travis v. American Manufacturers Mut. Ins. Co., 782 N.E.2d 322 (Ill. App. 5th Dist.), the Illinois Appellate Court, Fifth District, found that an auto insurance policy’s appraisal clause was not applicable to the particular dispute. The insured’s complaint alleged that the insurer was engaged in a fraudulent scheme to undervalue its insured’s vehicles that were declared a total loss in order to increase its own profits. In response to the plaintiff’s class action lawsuit, the insurer filed a motion to compel an appraisal and to dismiss the lawsuit or stay the lawsuit pending the appraisal.
The Illinois Supreme Court holds that (1) an insurer who mails notice to its insured of a material change in an insurance policy, as required under Section 143.17a(b) of the Illinois Insurance Code, must maintain proof of mailing on a recognized U.S. Post Office form or a form acceptable to the U.S. Postal Service or other commercial delivery service; and (2) an insured who enters a settlement agreement consisting of an agreed payment amount, covenant not to sue and an assignment of the insured’s rights is still “legally obligated to pay” the injured party for purposes of establishing the insured’s right to indemnity under standard liability policy language. Guillen v. Potomac Ins., 785 N.E.2d (Ill. 2003).
Implications to Liability Carriers Where the Insured Files for Bankruptcy
Self-insured retention is basically the amount of risk the insured has retained or kept to cover its own liability. It will pay for claims or losses that fall within that specified level. One or more insurance companies will provide specific layers of coverage above the SIR level. The insured can reduce the cost of premiums and control the handling of claims within the SIR. The amount of the SIR can vary greatly. Large corporations may maintain SIRs of up to several million dollars while smaller entities, depending on their business, will have far lower retentions.
Indiana Appellate Court Rules Case Management Order Controls
Consistent with an emerging trend, the Indiana Appellate Court recently held that the terms of a Case Management Order (“CMO”), created in collective agreement by the parties, is to be given the same weight as a settlement agreement or contract between the parties. Such agreement between the parties may trump the application of procedural rules which may have dictated a different result had the CMO not been in effect. In Cinergy Corp. v. St. Paul Surplus Lines Ins. Co., the Indiana Court of Appeals affirmed the dismissal of Cinergy’s declaratory judgment action filed in Marion County, as another declaratory action had already been filed by St. Paul in Hendricks County, Indiana.
New York's Disclaimer-of-Coverage Statute and Bodily Injury Claims from Mold Exposure: is Mold Exposure an "Accident?"
The consequences to an insurer for failing to comply with §3420(d) are dire. “Where...the policy would provide coverage but for a policy exclusion, the insurer must disclaim coverage [pursuant to §3420(d)], and the failure to do so in a reasonably timely manner estops the insurer from disclaiming coverage based on the exclusion.” Hamilton v. City of New York, 681 N.Y.S.2d 563, 564 (N.Y. App. Div. 1998). We accordingly advise New York insurers presented with bodily injury claims caused by mold exposure to follow the strictures of §3420(d) until the New York courts determine that such compliance is unnecessary because mold exposure is not “accidental.” We will continue to monitor this important area of mold law and provide our readers with updates as they occur.
Policyholder Must Pay Full SIR "Deductibles" Across All Triggered Policies
A New Jersey appellate court requires the exhaustion of every self-insured retention in each triggered policy prior to coverage arising under any of the policies. Benjamin Moore & Co. v. Aetna Cas. & Sur. Co., et al, No. A-4423-01T2F (N. J. App. Div. Jan. 14, 2003) (unpublished).
A claim filed by a moving and storage company for property damage to stored property caused by a series of warehouse floods was not covered under the storage company’s comprehensive transportation and storage liability policy. The Ninth Circuit determined that the policy was not in effect during the damage-causing flood, and that the policy’s exclusion for “gradual deterioration” precluded coverage for the rust, mold and mildew that developed on the property after the initial flood damage. Insurance Co. of North America v. G.F. Snyder Moving & Storage Inc., 52 Fed. Appx. 899 (9th Cir. 2002).
Punitive and "Mental Anguish" Damage Awards in "Ballard" Reversed
In late December, 2002, a Texas appeals court reversed the $32 million in punitive damages awarded to Mary Melinda Ballard and her husband, Ronald Allison, holding that Fire Insurance Exchange did not “knowingly” breach its duty of good faith and fair dealing toward Ballard and Allison during the claims handling process. Allison v. Fire Ins. Exchange, 98 S.W.3d 227 (Tex. App.).
The Challenge to a Tortfeasor's Good Faith In Settling With an Injury Claimant
There is commonly a statutory or quasi-contractual right of contribution among joint tortfeasors where one has paid more than his fair share of the common liability. In Illinois the right is statutory and the contribution liability is extinguished when the tortfeasor from whom contribution is sought has settled in “good faith” with the injured party. 740 ILCS 100/2(d). The statute neither defines “good faith” nor the manner in which it is to be established or challenged. Johnson v. United Airlines (Ill. Sup. Ct. No. 91894) answers those questions.
Two State Supreme Court Reject Independent Tort of Spoliation of Evidence
In two recent cases of first impression, the Supreme Courts of Nebraska and Mississippi each rejected the invitation to recognize a cause of action in tort for spoliation of evidence.
Victoria's Secret v. Victor's Little Secret: The U.S. Supreme Court Rules Actual Dilution is Required Under the Federal Trademark Dilution Act
On March 4, 2003, the United States Supreme Court unanimously ruled that the Federal Trademark Dilution Act (“FTDA”) requires an owner of a famous trademark to show “actual dilution” and not the mere “likelihood of dilution” to obtain relief under the statute. Moseley v. V Secret Catalogue, Inc., 123 S. Ct. 1115 (2003).
