Tuesday, March 28, 2017

United States District Court holds insurer has duty to defend allegation of defective product

Michael Ladas alleged in a suit against IMS that it had manufactured non-compliant and defective components of a product made for the United States army, in violation of the federal False Claims Act.  (What that product was, as well as other facts, has been redacted from the publicly available version of the court's opinion.)  The underlying suit eventually settled, after IMS had spent more than $400,000 in legal fees. 

IMS had sought coverage from its insurer, All America.  All America denied a duty to defend or indemnify.  In Innovative Mold Solutions, Inc. v. All America Ins. Co., Inc., 2016 WL 3814774 (D. Mass. 2016), the United States District Court held that All America had violated its duty to defend.

Because of the redactions it is somewhat difficult to follow the court's analysis.  The first question before it was whether the damage alleged was covered property damage.  The issue was whether the damage was to property that belonged to someone other than IMS, since faulty workmanship to an insured's own product is not covered.  The court held that there was a duty to defend because the underlying complaint alleged that faulty epoxy potentially caused damage to components that were supplied by other entities.

The next issue was whether the underlying complaint alleged an occurrence within the meaning of the policy.  All America argued that IMS changed the composition and application of epoxy, which was an intentional act and not an occurrence.  IMS asserted that the injury was an occurrence because it had not intended the injury.  The court agreed with IMS.

Finally, the court held that the faulty workmanship exclusions did not apply.  Exclusion j(6) does not apply to property damage included in the products-completed operations hazards, which means that it does not apply to property damage that occurs away from premises owned or rented by the insured.  The other faulty workmanship exclusions do not apply to damage to property owned by someone other than IMS. 

Wednesday, March 15, 2017

Massachusetts Appeals Court holds that auto insurer does not have to pay sales tax for replacement vehicle if no such taxes have been incurred

The standard Massachusetts auto policy includes a provision that damages for a vehicle totalled by the insured "include any applicable sales tax."

In Ramirez v. Commerce Ins. Co., 91 Mass. App. Ct. 144 (2017), the Massachusetts Appeals Court held that that provision applies only if the claimant has actually purchased a replacement vehicle on which sales tax was assessed.  

Wrbasy Ramirez was involved in a collision with a car driven by Edith McGuinness, who was insured by Commerce. Ramirez's vehicle was declared a total loss.  Ramirez chose to retain ownership of it, so Commerce was liable to him for the actual cash value less the salvage value.

Ramirez accepted Commerce's calculation as far as it went, but objected to the omission of Massachusetts sales tax in the amount of his loss.  Commerce informed him that he would be reimbursed for sales tax upon proof that he purchased a replacement vehicle and incurred the tax.

The Massachusetts Appeals Court agreed that Commerce did not have to pay the sales tax.  It reasoned that such tax does not constitute an element of damages if Ramirez did not actually incur the tax by purchasing another vehicle.  

Thursday, March 9, 2017

Massachusetts Appeals Court distinguishes slander of title from slander

Wayne and Cynthia Robbins were sued for slander of title.  The underlying plaintiff alleged that they published false claims with respect to the ownership of land that was owned by him.

The Robbinses sought insurance coverage from their homeowner's insurer, Hingham Mutual Fire Insurance Company.  Hingham declined to defend or indemnify, asserting that the policy did not provide coverage for slander of title.

In Robbins v. Hingham Mutual Fire Ins. Co., 91 Mass. App. Ct. 1108, 2017 WL 729749 (unpublished), the Massachusetts Appeals Court agreed with Hingham.  It held that although the policy provides coverage for slander, slander of title is a different tort.  Slander encompasses "a publication of a false and defamatory statement by spoken words of and concerning the plaintiff."  Slander of title involves "disparagement of a person's title to real or personal property."

There's no good reason why slander of title shouldn't be a covered loss, as long as the standard exclusions apply.  Seems like its time to amend the personal injury coverage in homeowner's policies. 

Tuesday, February 28, 2017

I will be speaking at a panel discusion, "Your Lawyers Professional Liability Insurance and What Happens if You Get Sued"

I am excited to announce that John Torvi of Landy Insurance and I will be speaking at the Social Law Library in Boston on the topic, "Your Professional Liability Insurance and What Happens if You Get Sued."  The program is on Wednesday, March 22, 2017, from noon to 1:00 PM.

This will be an informative one hour discussion on developing and understanding a legal malpractice insurance plan. Learn about how your professional liability insurance will (and will not) protect your practice, and insurance defense and coverage issues that may arise if you find yourself the subject of a claim or lawsuit.

(Scroll down for more information.)

I am thrilled to co-present this discussion with John. With over 20 years experience in the insurance industry, John is an expert on what attorneys and other professionals need and don't need in their professional liability policies.  He's also a great guy.

The program costs $10 and is limited to 25 attendees.  Lunch will be provided.   You do not need to be a member of the Social Law Library to attend.

You can register here

Tuesday, January 24, 2017

Massachusetts Appeals Court rules on how insurers may valuate damaged vehicles

One of my favorite insurance blogs, Agency Checklists, offers a summary of Morgan v. Mass. Homeland Ins. Co., __ Mass. App. Ct. __, 2017 WL 264507,  a recent Massachusetts Appeals Court case that discusses how auto insurers should determine the value of totaled vehicles. 

Sunday, January 22, 2017

US District Court holds anti-SLAPP statute does not apply to insurers' claim that law office participated in fraudulent scheme

Two insurers, Metropolitan and Commerce, brought suit against chiropractic companies and a law firm, alleging a scheme to defraud the insurers.  According to the insurers, the chiropractors billed them for chiropractic treatment that was unreasonable and unnecessary, was wrongfully and grossly exaggerated, was not rendered at all in some cases, was rendered by unlicensed personnel, was rendered to non-injured body areas, and was rendered for fabricated symptoms and injuries. 
The insurers alleged that the law firm unlawfully recruited and solicited patients insured by the insurers, referred those patients to the chiropractors for treatment, and submitted and prosecuted false and inflated claims for insurance benefits using false chiropractic records. 
The insurers alleged that they incurred millions of dollars in damages as a result of the false claims. 
The law firm moved to dismiss under the anti-SLAPP statute, Mass. Gen. Laws ch. 231 §59H. That statute makes it unlawful to sue someone for petitioning the government, which, under the Massachusetts version of the statute, includes use of the court system.  A defendant who prevails on  a special motion to dismiss under the anti-SLAPP statute is entitled to attorney's fees. 
The law firm asserted in its motion to dismiss that all of the claims against it must be dismissed because they are based on petitioning activities -- namely, use of the courts to bring claims against the insurers. 
In Metropolitan Property Casualty Ins. Co. v. Savin Hill Family Chiropractic, 2016 WL 7469711 (D. Mass.), the United States District Court for the District of Massachusetts held that the anti-SLAPP statute did not apply because the firm failed to meet the burden of proving that the claims against it were based on petitioning activities alone and that there was no substantial basis for the claims aside from the petitioning activities. 

Wednesday, November 30, 2016

Massachusetts Appeals Court holds insurer acted in bad faith by conditioning contribution to settlement on waiver of insured's claims against it

I have been posting about Rass v. The Travelers Cos. Inc., __ N.E.3d __, 2016 WL 6636281 (Mass. App. Ct.).  The underlying plaintiff manufactured an Indian sauce that she had worked with the insured, Rass, to create.  Rass distributed the sauce to Trader Joe's.  When Rass decided to use a different manufacturer, it sent an email to Trader Joe's stating that the plaintiff might contact them directly for the sale of the sauce.  The insured wrote that such an action would be illegal.
The claimant sued for trade disparagement arising out of the contents of the email, and for misappropriation of trade secrets.  Rass hired counsel, Mishky, and later notified its insurer, Travelers, of the claim.  As I wrote here, the Appeals Court held that Travelers was not responsible for pre-notice defense costs.  Travelers also complained that Mishky's hourly fee was unreasonable. 
Settlement negotiations occurred on the eve of trial.  Travelers agreed to contribute to settlement if Rass would waive its right to dispute Mishky's hourly fee, or, later, if Rass would waive its right to seek indemnification for the rest of the settlement under the policy.  Rass refused, and settled the case for $175,000 with no contribution from Travelers.  Rass then sued Travelers.   
As I wrote in my previous post, Travelers asserted that there was no coverage for the trade disparagement claim.  The court disagreed.
There was, however, no coverage for the claim for misappropriation of trade secrets.  Travelers was obligated to pay only the portion of the settlement that could be attributed to the covered loss.  The Appeals Court affirmed the trial judge's allocation of eighty percent of the loss to the covered claim. 
The Appeals Court also affirmed the trial judge's finding that Travelers had breached Mass. Gen. Laws ch. 93A by engaging in unfair settlement tactics.  Travelers had acknowledged that it would be required to indemnify Rass for the claims arising from the email.  It should have been aware of the strength of that claim, but offered a settlement fair below Rass's likely exposure.
Travelers also attempted to condition its settlement on a waiver of Rass's right to seek attorney's fees or indemnification.  That was a violation of its duty to effectuate a fair and equitable settlement of claims in which liability had become reasonably clear. 
The court held that Travelers also violated the law by refusing to pay Mishky's reasonable hourly rates.   
Finally, the court affirmed the finding of the trial court that Travelers' actions were not willful or knowing, so that multiple damages would not be awarded.