Articles Posted in Insurance

In most states the duty to defend an insured in litigation is broader than the duty to indemnify that insured. 

Here is a 50-state survey prepared by the highly regarded Chicago-based firm of Hinshaw & Culbertson on the duty to defend.  Here is how they describe the 105-page publication:

Duty To Defend contains a survey of the law of the 50 United States and the District of Columbia on an insurer’s duty to defend a lawsuit against its insured and related topics. Each state entry includes a discussion of the scope of the duty to defend in that state and of the test employed by the state to determine whether the insurer owes such a duty. The state entries also include discussions of whether the insurer may defend pursuant to a reservation of rights and the implications of doing the same, including conflicts of interest which may be created; whether a declaratory judgment action may be brought to determine the insurer’s rights and obligations under the policy; and the consequences of the insurer’s failure to defend where it has an obligation to do so.

The United States Court of Appeals for the Fourth Circuit has ruled that a drunk driver’s death was not "accidental" and therefore his surviving spouse could not collect accidental death benefits under an insurance policy.

The decedent’s blood alcohol level was fifty percent higher than the legal limit when he ran into the rear of a tractor trailer parked eight feet off a West Virginia road.  It was, of course, 3:49 a.m.

His wife sought "accidental death benefits" from an insurance policy provided by the decedent’s employer.  The policy provided coverage "if the insured dies ‘due to an accident.’  The Plan defined ‘accident’ as ‘an unexpected and sudden event which the insured does not  foresee.’ The Plan also provided that "ReliaStar Life has final discretionary  authority to determine all questions of eligibility and status and to interpret and construe the terms of this policy(ies) of insurance."  ERISA governed this case.

The Tennessee Supreme Court has issued an extremely important decision in the field of bad faith law.

In Johnson v. Tennessee Farmers Mutual Insurance Company, No. E2004-00250-SC-R11-CV  (August 28, 2006), Justice Holder, writing for an unanimous court, reversed the Court of Appeals and upheld a bad faith verdict against Tennessee Farmers.

Johnson sued his own insurer after he got hit for an excess judgment in an auto case.  A 2-1 decision of the Court of Appeals took away a plaintiff’s verdict of $279,430.92 against Tennessee Farmers, saying that the trial judge had not charged the jury correctly on the law of bad faith.  Judge Lee dissented, saying the trial judge had gotten it right. 

The Illinois Appellate Court has ruled that Illinois courts have jurisdiction over a Japanese parent corporation in a case alleging negligent design.

Plaintiff alleged that her daughter died as a result of a fire started with a Aim ‘n Flame II lighting rod. The lighting rod was designed by Tokai Corporatin in Japan and distributed by its wholly-owned subsidiary, Scripto-Tokai. The subsidiary admitted that Illinois courts had personal jurisdiction over it but the parent contested jurisdiction.

The Court put the issue and holding this way: “This case presents the question of whether a foreign corporation that designs a product can immunize itself from liability for negligent design by marketing the product through a subsidiary. We hold that it cannot. We find that the use of a subsidiary to introduce the product it designed to Illinois markets suffices for the exercise of personal jurisdiction over the foreign corporation for an action for negligent design.”

This doctor got hit for an excess verdict in a medical malpractice case. He assigned the patient his bad faith claim against his insurer, alleging that it refused to settle the case within the policy limits and assigned him a lawyer with a conflict. The patient won compensatory and punitive damages. The case is Jurinko v. The Medical Protective Company, No. 03-CV-4053 (E.D. Pa. March 29, 2006).

The trial judge affirmed entry of judgment and issued the opinion including the following remarks:

“[Defendant] Medical Protective employee James Alff admitted that he knew that [the original defendant] Dr. Marcincin’s exposure was in excess of $50,000, and yet he never offered more than $50,000.9 The jury also heard testimony that the [excess] CAT/MCARE fund had informed Medical Protective that their failure to tender was in bad faith and was undermining the settlement of the case. Alff admitted that Dr. Marcincin could not negotiate with funds from his $1 million secondary line of coverage (the CAT/MCARE fund) without tender of the full policy limits. Alff also admitted to unfair gamesmanship in his negotiating tactics, and attempting to get the CAT/MCARE fund to cover Dr. Marcincin’s liability from Dr. Edelman’s line of coverage in order to save Medical Protective money. The evidence demonstrated that both Alff and Jacqueline Busterna, who was negotiating for the CAT/MCARE fund, believed the case would settle for around $1 million. From the evidence presented, it was also possible for the jury to conclude that the Jurinkos would have been offered approximately $1 million had Medical Protective tendered its policy, even if the CAT/MCARE fund had not offered any money from Dr. Marcincin’s $1 million line of secondary insurance. Overall, the Court finds sufficient evidence for the jury to find bad faith.

The Tennessee Supreme Court has granted a Rule 11 application in Johnson v. Tennessee Farmers Mutual Ins. Co. With this case, the Tennessee Supreme Court will decide whether the tort of “bad faith” exists is Tennessee.

Judge Inman’s decision in this case renders the tort virtually meaningless. It requires almost intentional conduct to give rise to liability.

Judge Lee’s dissent says that the law of Tennessee is (and should be) that bad faith may be found if the jury determines from a consideration of all relevant factors that good faith was absent. She would not require proof of fraud or dishonesty.

I came upon a new blog – Insurance Scrawl – written by Marc Mayerson in D.C.

Here is how Marc describes the purpose of the blog:

“Insurance Scrawl focuses on the law of insurance, the insurance of business, and the business of insurance. It is the first insurance blog (or insurance blawg) that approaches these issues from the perspective of policyholders. The principal focus is on commercial property-casualty matters (and not life/health/disability/auto or the insurance needs of individuals). The goals of this weblog are to provide current updates, with links to source materials, on matters about which well-informed professionals should be aware and to share my perspective and knowledge about insurance-coverage issues. In-house lawyers, risk managers, brokers, outside counsel, insurance-company and reinsurance professionals, adjusters, professors, law students, and judges are the intended audience. Although Insurance Scrawl approaches the subject from a particular vantage point, readers should find the articles to be more analytical than polemical.”

The Tennessee Supreme Court has ruled that the “family exclusion” that exists in every motor vehicle insurance policy I have ever seen is not void as against Tennessee law or public policy. The case came before the Court on a certified question from a federal district court in East Tennessee.

Have you ever got the feeling that the insurance company trying to sell you life insurance did not want you to tell the truth? Have you ever had an agent say “you don’t have to put that down?”

The questions on many applications are very difficult to understand. For instance, “Do you smoke?” I don’t consider myself a smoker in any shape, form or fashion, and no other sane person would. ( I have plenty of other vices, to be sure, but not this one.)

Nevertheless, I made the mistake of answering that question “Yes” 6 years ago because 2 or 3 times a year I used to smoke a cigar with the guys. I use the term “smoke” lightly – it would be more accurate to say that I allowed the cigar to burn between the index and middle finger of my hand while using my right hand to raise a Bombay Saffire on the rocks (two olives) to my parched lips.

The Florida Supreme Court recently held that a person bringing a first-party bad faith action against an insurance company has the right to discover all materials contained in the underlying insurance claim and related litigation file. Read the decision by clicking here.

In this type of case there is always a big fight over whether certain materials are protected by the work product privilege. Insurers attempt to invoke the doctrine. Plaintiffs seek the documents, saying that the information in such documents is directly relevant to resolution of the issue of whether bad faith was committed. In Florida, full discovery has traditionally been permitted in third-party claims but the law on first party claims was not as generous. This law opens up discovery in first party bad faith cases.

Florida has a well-developed body of bad faith law. This decision substantially changes the law of discovery in those cases and will greatly impact the law on this subject around the nation.