Around the Nation: May 2014

State news and updates from CLM chapters, reps, and committees.

By Bevrlee J. Lips


Unintended Product Liability Coverage

Mid-Continent provided CGL coverage to Scentry Biologicals, the manufacturer of pest control product NoMate. Scentry and the distributor, Wilbur-Ellis (W-E), were sued for property damages in Michigan. Mid-Continent defended Scentry but not W-E, which assumed its own defense and settled for $62,500. A judgment was entered against Scentry for $544,325. However, before judgment was entered in Michigan, Scentry, W-E, and the plaintiff in the property damage case filed a declaratory judgment action against the insurer in Montana. In Scentry v. Mid-Continent Cas. Co., the district court and the Montana Supreme Court held that Scentry was insured for both CGL coverage and products-completed operations hazard, and that W-E was an additional insured because of a charged premium and issuance of a certificate of insurance. A discrepancy on the declaration pages left the insurer vulnerable to an unintended outcome. The court held that the insurer was liable for the judgments/settlements and W-E’s attorney’s fees.—From CLM Member James Cumming


No Special Relationship, No Recovery

In Hettle v. Constr. Contractors Bd., a letter written by a contractor to the homeowner indicating that there was no significant water damage at the window he inspected did not create a special relationship between the contractor and purchaser. As a result, the purchaser could not recover purely economic damages due to the contractor’s alleged negligent inspection. The contractor was never informed by the seller that the purpose of his inspection was to address the potential for persistent water intrusion and, therefore, was not aware that anyone would rely on the letter as an analysis of the presence or likelihood of persistent water intrusion and resulting damage.—From CLM Member Jack Levy 


Service of Process and Duct Tape

In Alimi et al. v. Lorenzo et al., plaintiffs were having a difficult time locating and serving the defendants. They felt that service by publication was “to a large degree a fiction,” too expensive, and time consuming. Plaintiffs moved for alternative service of process pursuant to Ak.R.Civ.P. 4(e)(3), which states, “In its discretion, the court may allow service of process to be made upon an absent party in any other manner that is reasonably calculated to give the party actual notice of the proceedings and an opportunity to be heard, if an order permitting such service is entered before service of process is made.” The court ordered that “plaintiffs may duct tape the summons and complaint on each of the defendant’s last residence as set forth in the police report.” Or alternatively, “plaintiffs may serve the insurance company known to have insurance on the defendant vehicle involved in each accident.”—From CLM Member Rebecca J. Hozubin


State and Federal Courts at Odds on Medical Expenses

In determining reasonable medical expenses for personal injury cases in Indiana, defendants present evidence of the amount of medical bills actually paid by the insurer, and plaintiffs present the amounts billed by the medical provider. The jury then chooses which amount (billed vs. paid) better reflects the plaintiff’s reasonable medical expenses. This applies in all Indiana state courts (see Stanley v. Walker). But does this apply in federal court? In a recent case, U.S. District Judge Rudy Lozano, Northern District of Indiana, prohibited defendants from presenting such evidence. The judge ruled that the federal collateral source rule applied, not the state rule.—From CLM Member J. Kirk LeBlanc


Settlement Doesn’t Constitute Successful Claimant

In Johnson v. Plasser Am. Corp., T. Glennon Inc. (TGI) appealed the trial court’s order granting summary judgment and dismissing its declaratory judgment coverage action against its excess insurance carrier, The Hartford Casualty Insurance Company (Hartford). Hartford contributed $4 million (the policy limit) to settle an employee’s workplace injury suit against TGI. Notwithstanding this payment, Harford previously denied that it owed TGI a duty to defend or indemnify, and it resisted TGI’s separate declaratory judgment action to establish coverage. The Appellate Division held that Hartford’s contribution to the settlement of the underlying tort action, standing alone, did not render TGI a “successful claimant” under R. 4:42-9(a)(6), which permits the court to award fees to a successful claimant in an action on an indemnity policy. When examining the terms of Hartford’s CGL and umbrella policies, the Appellate Division concluded that the carrier had no duty to defend or indemnify. Therefore, the trial court correctly dismissed TGI’s declaratory judgment action and its claims for attorney’s fees.—From Northern New Jersey Chapter President Karen Painter Randall


Requirements of UM/UIM Coverage Offers

In Newman v. Cornerstone, an insured sought payment of UIM benefits, asserting that the insurer’s UM/UIM offer was deficient because it lacked a premium price. The court held that an offer need not include a premium, reasoning that the UM/UIM statute is specific regarding the contents of an offer and reflects the legislature’s intent to require carriers to “make available” by “written offer” UM/UIM coverage in an amount not less than the liability limits. Previously, the courts employed similar reasoning holding that an offer need not be written in an insured’s native language and need not be rejected expressly by the insured. Also, the court has held that the successful party in UM/UIM actions is entitled to attorney’s fees since the claim arises out of contract.—From Arizona Chapter Member John Elardo


Opportunity to Control Safe Environment

The Tennessee Court of Appeals reversed a grant of summary judgment in favor of Big Brothers Big Sisters of America in a claim alleging sexual and emotional abuse of a minor child by a Big Brothers Big Sisters of Middle Tennessee volunteer. The national organization claimed its agreement with the local chapter provided that the national organization had no control over the day-to-day activities of the local chapter; therefore, it had no duty. The trial court agreed and granted summary judgment. In Ms. B., Individually and on Behalf of Minor Child, John Doe, “N” v. Boys and Girls Club of Middle Tennessee, et al., the Court of Appeals noted that, although the agreement provided for no control, the organization still had the opportunity to control and reversed the grant of summary judgment.—From CLM Member Jim Wright

Bevrlee J. Lips was managing editor of Claims Management magazine (now CLM Magazine) from January 2012 until March 2017.

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