Around the Nation: July 2016
State news and updates from CLM chapters, reps, and committees.
WASHINGTON: No Coverage for Damage to Vacant Building
In Lui v. Essex Insurance Company, less than 60 days after a tenant vacated an insured’s building, a pipe burst causing water damage to the building. The insurer asserted that coverage did not exist because, under the terms of the policy, coverage was immediately suspended at the inception of any vacancy for all but specifically named perils and water damage was not one of the insured perils. The insured argued that the endorsement did not apply until the property had been vacant for more than 60 days. Siding with the insurer (which is rare in Washington), the court held that under the language of the policy, when a building becomes vacant, coverage is limited to losses resulting from the specified perils and after a 60-day vacancy, the policy provides no coverage. Accordingly, the court held that the policy barred coverage for the water damage in this case.—From Seattle Chapter President Paul Rosner
OREGON: Obligation to Provide Defense for Additional Insureds
Oregon’s anti-indemnity statute for construction contracts obligates insurers to provide a defense for additional insureds only when the additional insureds’ involvement in the case arises out of the named insured’s negligence. In Homeland Insurance Co. of New York v. AAM Inc., a coverage case involving a construction site injury, the U.S. District Court for the District of Oregon held that an insurer’s duty to defend its additional insureds can be triggered even where the complaint does not allege the named insured’s negligence. The court reasoned that when the complaint merely “implies the negligence” of the named insured, the insurer has a duty to defend its additional insureds. Allegations of a complaint in construction site cases should be reviewed broadly and with the understanding that the complaint need only imply the negligence of the named insured for the duty to defend to arise.—From CLM Member Jack Levy
COLORADO: Inbounds Avalanche Part of Inherent Risk in Skier’s Death
In January 2012, a skier was killed in an avalanche while skiing on the Trestle Trees run within the bounds of Winter Park Resort. His surviving spouse asserted claims of negligence and wrongful death against the ski resort. The resort allegedly knew that the risk of avalanches was high prior to the accident and that the snow on the Trestle Trees run was unstable, but it did not close the run or post signs to warn skiers of the risk. In Fleury v. IntraWest Winter Park Operations Corp., the Colorado Supreme Court held that an inbounds avalanche at a ski resort was included in the Ski Safety Act’s definition of “inherent dangers and risks of skiing,” specifically “snow conditions as they exist or may change.” The court’s holding is a victory for ski operators because it clarifies that an inherent risk of skiing includes an avalanche, even when skiing within the bounds of a resort.—From CLM Member Joan Allgaier
OHIO: Use of Doctrine of Inferred Intent Narrows in Cases Involving Intentional Acts Exclusions
In State Farm Mutual Automobile Insurance Co. v. Schalk, an appellate court reversed a grant of summary judgment in favor of State Farm, which had sought a declaration that bodily injury coverage was excluded under the intentional acts exclusion of its insured’s automobile policy. Schalk, the insured, spent an evening drinking “a little bit of everything,” and arguing with his estranged wife at a bar. Upset that his wife and others remained inside the bar after closing time, Schalk returned and intentionally drove his truck through the bar’s front window, causing property damage and bodily injury to three patrons. State Farm argued and the trial court agreed that coverage was excluded because Schalk’s act was intentional and, thus, not an “accident,” an undefined policy term. In reversing and remanding the summary judgment, the Schalk court held that “[f]oreseeability or substantial certainty of injury does not ‘intrinsically tie’ an injury to an intentional act,” even in cases where the conduct is reckless or wanton.—From Northeast Ohio Chapter Secretary Michael C. Brink
CONNECTICUT: Expanded Scope of Liability in Medical Malpractice Cases
In Cefaratti v. Aranow, a divided Connecticut Supreme Court (4-3) expanded the scope of potential liability and theories of recovery against Connecticut hospitals and other institutional defendants in medical malpractice actions. In an issue that has received inconsistent treatment at the trial court level for years and was previously settled in favor of hospitals by the appellate court, the Supreme Court held that hospitals may be held liable for the negligent acts or omissions of nonemployee physicians on a theory of apparent agency.
The court adopted two alternative standards for establishing apparent agency in tort cases. First, the plaintiff may establish apparent agency proving that (1) the principal (hospital) held itself out as providing certain services, (2) the plaintiff selected the principal on the basis of its representations, and (3) the plaintiff relied on the principal to select the specific person who performed the services that resulted in the harm claimed by the plaintiff.
Second, a plaintiff may establish apparent agency by proving that (1) the principal held the apparent agent or employee out to the public as possessing the authority to engage in the conduct at issue or knowingly permitted the apparent agent or employee to act as having such authority; (2) the plaintiff knew of these acts by the principal and actually and reasonably believed that the agent possessed the necessary authority; and (3) the plaintiff detrimentally relied upon the principal’s acts, i.e., the plaintiff would not have dealt with the agent-tortfeasor if it had been known that the tortfeasor was not the principal’s agent or employee. The Supreme Court recognized that the second standard is narrow, and it will be rare for a plaintiff to be able to prove “detrimental reliance.”—From Connecticut Chapter President Michele S. Newman
TENNESSEE: Driver Negligence Not Presumed When Pedestrian Is Hit
A plaintiff was walking on the sidewalk, and the next thing she remembers is waking up in the hospital. The defendant driver admitted to hitting her but denies ever leaving the roadway. In Omni Insurance Company v. Nickoloff, a nonjury case, the trial judge weighed the evidence and found for the plaintiff. Simple, right? Not so fast, says the Tennessee Court of Appeals. There was no transcript, so the driver submitted a two-paragraph statement of the evidence. Tennessee courts have stated repeatedly that negligence is not presumed from the mere fact of an accident or injury. Since the trial court did not find the driver acted negligently or make sufficient findings of facts as required under the Tennessee rules, the case was reversed in favor of the driver.—From CLM Member James C. Wright