CM Report of Recent Decisions (2002v4)
2002 Volume 4
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.
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Articles in this report
8th Circuit Holds Insurer That Breached
The Eight Circuit itself gives the insured its practice pointer by observing that had the settlement documents in the state court case included a vacatur of the summary judgment order on the trespass issue, it may have preserved its right to litigate the coverage issue. We suggest the settling parties should also have tried to make a fair allocation, if possible, of damages attributable to trespass if they wished to preserve the right to argue for indemnification. In this case, however, the facts suggest that the order granting summary judgment on the trespass issue entered by the state court reflected the true fact of the matter and that no portion of the claim was attributable to any actionable trespass and therefore indemnification in any amount would have been inappropriate.
Asbestos Abatement Of Buildings In Continuous Use Does Not Constitute Physical Loss Or Damage Under A First-Party Property Policy
Citing the principle that for purposes of a claim made against a property policy, physical loss or damage due to asbestos occurs only when the quantity and condition of the asbestos make the property unusable, the Third Circuit affirms a decision in favor of a large group of insurers in Port Authority of New York and New Jersey v. Affiliated FM Ins. Co., 311 F.3d 226 (3d Cir. 2002).
Fears Of "Iguana Litigation" Assuaged: A Remnant Of Illinois Tort Reform Survives
In 1997 the Illinois Supreme Court held unconstitutional the vast majority of the tort reform legislation passed by the then Republican-lead Illinois legislature. Best v. Taylor Machine Works, 689 N.E.2d 1057 (Ill. 1997). Section 2-1117 of the Code of Civil Procedure (735 ILCS 5/2-1117), which modified the common law rule of joint and several liability, had not been considered in Best. That statute has now been upheld and given real teeth in Unzicker v. Kraft Food Ingredients Corp., 2002 Ill. LEXIS 957 (Ill. Nov. 21, 2002).
Insured vs. Insured Exclusion Bars Claim By Director Who Was Not Qualified For Office
In a case of first impression, a district court in Florida has ruled that the insured versus insured exclusion in a director and officer liability (“D&O”) insurance policy applies to a claim brought by a former director of the insured corporation who had obtained his board position fraudulently. In Sphinx Int’l Inc. v. National Union Fire Ins. Co., 226 F. Supp. 2d 1326 (W.D. Fla.), the district court held that the person who brought the claim was a “duly elected” director, and therefore an insured for purposes of the exclusion, even though his placement on the board had been induced through fraudulent misrepresentations and he was never qualified to hold the position.
Learning Lessons From The Trenches: Wallace v. Valentino
In the last issue of the CM Report, we discussed the United States Supreme Court decision in Morgan v. National Railroad, where the court said that the continuous violation theory did not apply to claims of discreet acts of discrimination but did apply to claims of harassment. Lessons also can be learned down in the “trenches” where employers and employees battle it out in the district courts.
Ninth Circuit Reverses Multi-Million Dollar Punitive Damages Award In Mold Case
The Ninth Circuit, applying California law, reversed a significant punitive damages award entered against an insurer in a mold case holding that “Allstate’s conduct does not reach the level required for an award of punitive damages. There is no substantial evidence that Allstate acted with malice, oppression, or fraud in handling Anderson’s [the insured’s] claim.” Anderson v. Allstate Ins. Co., No. CV-00-00907-PAN, 2002 WL 2021617 at *5 (9th Cir.).
No Coverage For Continuing Water Intrusion Damage That Manifested Prior To Policy Inception
In Factory Mutual Ins. Co. v. Estate of Campbell, 2002 District LEXIS 8053 (C.D. Cal.), the court granted Factory Mutual’s motion for summary judgment declaring no coverage under its property insurance policy for water-intrusion damage at the defendant’s shopping center in Mission Viejo, California.
Pennsylvania Appellate Court Holds Waiver Of Subrogation Cause
The Superior Court of Pennsylvania holds that a contractual waiver of subrogation clause did not violate public policy and thus was enforceable even where the misconduct alleged violated public safety ordinances and regulations. Penn Avenue Place Assocs. L.P. v. Century Steel Erectors, Inc., 798 A.2d 256 (Pa. Super. 2002)
Pennsylvania Jury Finds In Favor Of Insurance Adjusters In Mold Injury Case
Alehigh County, Pennsylvania jury found that an insurance adjuster and his employer failed to properly handle a mold claim, but determined that their actions were not the cause of plaintiff’s alleged personal injuries in Traub v. Great American Ins., No. 1995-C-153 (Pa. Ct. Common Pleas, Lehigh Cty.)
Recent Developments In Illinois Insurance Law
NICOR sued its liability insurers to recover costs it incurred investigating and remediating environmental contamination at six manufactured gas plant (MGP) sites. The MGPs were in operation as early as the mid 1800s. One of the by-products of the gas manufacturing process was tar, which was either sold or stored underground at the MGPs. In the 1900s, the introduction of natural gas made manufactured gas production obsolete. By the early 1950s, the facilities were no longer operational. Although the owners made efforts to extract some of the tar from the underground containers, some tar remained when the MGPs were closed. Eventually, coal tar and coal tar water was released from the containers contaminating the groundwater, soil and the surrounding environment.
Reinsurance Arbitration Decision Upheld
The Seventh Circuit has upheld an arbitration award in Sphere Drake Ins. Ltd. v. All American Life Ins. Co., 2002 WL 31255618 (7th Cir.), reversing a trial court decision which the Seventh Circuit identified as the only case in the last 77 years where a federal court had set aside an award because a party-appointed arbitrator on a tripartite panel, as opposed to a neutral, displayed “evident partiality” under the Federal Arbitration Act (“FAA”).
Second Circuit Holds As A Matter of First Impression That Electronic Funds Transfers May Be Subjected to Maritime Attachment
In Winter Storm Shipping, Ltd. v. TPI, 2002 WL 31478850 (2d Cir. 2002), the Second Circuit decided as a matter of first impression that funds transferred by means of an electronic funds transfer (EFT) may be subjected to maritime attachment in the hands of an intermediary bank without violating constitutional due process.
Seventh Circuit Suggests New Standard For Awarding Attorney Fees In Copyright Cases
In Gonzales v. Transfer Technologies, Inc., 301 F.3d 608 (7th Cir. 2002), the Seventh Circuit attempts to make it more affordable for copyright owners to police and enforce their rights. Because of the relatively small monetary awards in copyright infringement cases, it is generally cost prohibitive for owners to pursue alleged infringers. The Court addresses this reality by suggesting a new standard, whereby a prevailing party in a copyright case involving minor monetary damages should have a presumptive entitlement to an award of attorneys’ fees.
Spoliation of Evidence: How Should A Court Address Such Conduct?
Massachusetts highest court declines to recognize an independent cause of action for spoliation of evidence in Fletcher v. Dorchester Mut. Ins. Co., 773 N.E.2d 420 (2002).
US Supreme Court Rules That Federal Boat Safety Act Does Not Protect Marine Manufactureres From Being Sued In State Court
In Sprietsma v. Mercury Marine, 123 S.Ct. 518 (2002), the United States Supreme Court held that the Federal Boat Safety Act (“FBSA”) does not preempt state common law negligence claims. No longer does federal maritime law protect marine manufacturers from varying state safety requirements.
