Around the CLM - National March 2017
This month, we look at the Oroville Dam crisis in California, triggering events in Ohio, and emotional distress damages in Oregon.
California: Dam Crisis Highlights Danger and Need for Flood Insurance
The Oroville Dam crisis is leading to an increase in the number of people requesting flood insurance coverage, according to a recent San Francisco Chronicle article. Built in the 1960s, the dam is an earth-fill embankment, the tallest in the U.S., and it creates the second largest man-made lake in California. The recent evacuation of some 200,000 people has highlighted the need for flood insurance. People living near a dam are not required to carry flood insurance unless they live in a flood zone (only 12 percent). It has been estimated that, if the dam were to collapse, then 50,000 homes could be damaged, costing over $13 billion. A Scientific American report stated that most of the country’s 84,000 dams were built between 1950 and 1980 and were not designed for the populations that now surround them.—From CLM Member James C. Wright
Delaware: Medical Expenses and Challenges to the Collateral Source Rule
In Stayton v. Delaware Health Corp., the Delaware Supreme Court decided that the collateral source rule does not apply when Medicare pays the medical bills. The plaintiff is limited to recovering the amount actually paid by Medicare. In Smith v. Mahoney, the Supreme Court extended the holding in Stayton and determined that the collateral source rule does not apply in Medicaid payments. The plaintiff’s recovery is limited to amounts actually paid for medical expenses. Delaware still applies the collateral source rule in the private insurance context and for gratuitous write-offs by physicians allowing plaintiffs to recover the total amount of the medical charges. Examples include Mitchell v. Haldar, which found that total expenses charged can be recovered despite private contract reduced charges, and Onusko v. Kerr, which found that total medical expenses charged can be recovered despite physicians’ write-offs.—From CLM Member Paul A. Bradley
Maryland: An Un-Fare Ruling?
Personal injury protection (PIP) shields accident victims regardless of the vehicles they occupy. But a Baltimore cab driver learned otherwise in Maryland Insurance Admin. v. State Farm Mut. Auto. Ins. Co., which excluded coverage for vehicles “owned but not insured” under the plaintiff’s personal automobile liability carrier. After State Farm denied his PIP claim for injuries sustained in his own taxi, Maryland’s insurance commissioner found in his favor by citing the strong legislative purpose to cover the medical expenses of accident victims. The state’s highest court upheld the exclusion by a narrow 4-3 vote and denied PIP coverage. Though PIP coverage usually “follows the person and not the vehicle,” taxicabs are statutorily exempt from such no-fault coverage. Since the insured bought PIP coverage for his personal car but declined to do so for his taxi, the majority would not permit him to apply it to the “owned but not insured” vehicle.—From CLM Member Irwin R. Kramer
Ohio: Court Reaffirms Use of “Triggering Event” Approach in Dispute over Asbestos-Related Claims
In The William Powell Co. v. OneBeacon Ins. Co., the appellate court upheld a summary judgment finding that a claimant’s exposure to a product containing asbestos was a triggering event to coverage under an occurrence-based policy. William Powell Co. began receiving personal-injury claims in 2001 for exposures that occurred between the 1940s and 1980s. OneBeacon and its insured handled these claims under the assumption that each constituted an “exposure” under the respective policy. When claims snowballed, OneBeacon reversed, taking the position that the “occurrence” was William Powell Co.’s decision to manufacture and sell valves without adequate warnings. This was significant because, if OneBeacon’s policy interpretation was correct, the aggregate limits for any single policy would never be implicated. Relying on precedent and policy language, the appeals court upheld the trial court’s interpretation that each claimant’s exposure constituted an occurrence.—From Northeast Ohio Chapter Secretary Michael C. Brink
Oregon: Physical Injury Not Required for Emotional Distress Damages
Oregon’s Supreme Court significantly changed state law in Philibert v. Kluser, holding that Oregon will now follow the “bystander rule,” aka “restatement rule,” in cases where plaintiffs seek to recover damages for severe emotional harm caused by contemporaneously witnessing serious bodily injury to a close family member. In doing so, the court rejected the former “impact rule,” which required those seeking compensation for emotional distress to have also suffered a physical injury. Philibert involved two young boys who witnessed their younger brother being hit and killed in a crosswalk by a pickup truck. As in other states, the bystander rule can become an exercise in determining who can and cannot seek recovery. The Philibert decision acknowledges that some aspects of the bystander rule may seem arbitrary and could prompt false or inflated claims, but it held that, ultimately, juries are tasked with discerning truth from self-serving fiction in claims for emotional injuries.—From CLM Member Skip Winters
Washington: The Insurance Fair Conduct Act and Underinsured Motorists
In Isidoro Perez-Crisantos v. State Farm Fire and Casualty Co., the Washington Supreme Court addressed Washington’s Insurance Fair Conduct Act (IFCA) in the underinsured motorist context. IFCA permits any first-party claimant who is unreasonably denied a claim for coverage or payment of benefits to bring a claim against an insurer for actual damages. IFCA also allows a court to treble actual damages and directs the award of attorney’s fees if an insurer makes an unreasonable denial of coverage or benefits or violates certain insurance regulations that broadly address unfair insurance practices, not just unreasonable denials. After finding IFCA ambiguous, the court evaluated legislative history and concluded that IFCA did not create a cause of action for regulatory violations in the absence of any unreasonable denial of coverage or benefits.—From CLM Member Jacquelyn A. Beatty