COVID-19 Litigation Kicks off in North Carolina

By Susan Boyles

And so it begins . . . one of the first coronavirus insurance coverage cases in N.C. was filed recently in Guilford County Superior Court. Not surprisingly, the plaintiffs are restaurants that were forced to close or curtail their services due to Gov. Cooper’s stay-at-home order that went into effect in mid-March. Most of the allegations are more legal arguments than facts (read full complaint here), but plaintiffs recognize that one of the issues is whether the government-mandated closings caused “direct physical loss,” which is alleged to be undefined in the policies at issue. There is apparently a “virus” exclusion in some of the policies, but plaintiffs argue that the actual cause of their losses was public fear, commotion, and/or government action. Plaintiffs further contend the court should find coverage for their lost business revenue because they paid premiums for that coverage.

As with most litigation, there will be no quick answers from the Court. I predict we’ll see a decision on a summary judgment motion in about 12-18 months, and then an appeal after that.  It’s one to keep an eye on.

Do I Have Business Insurance for Coronavirus Losses?

By Susan Boyles

The coronavirus has turned all of our lives upside down in the past two weeks. Who would have dreamed that we would be required to work from home, courts would be operating on a drastically reduced schedule, the NCAA Tournament and the Summer Olympics would be cancelled, and toilet paper would become more valuable than most stocks? (I don’t even want to look at my 401K plan right now!)

While we are waiting for the world to go back to “normal,” I have been pondering what all of this disruption means for insurance claims. Initially, there may be little increased claims activity as businesses focus on how to react to the ever-changing economic climate and try to keep their employees healthy. However, after the threat of the virus is diminished and business stabilizes, many companies will step back and gauge the real impact on their bottom line and ask the question: “Do I have insurance to cover this?” The answer is “maybe,” based on the type of policies purchased before the virus and the terms of each policy. However, if you’re trying to find coverage, here are some places to look:

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Fight Hunger, Help Others in the COVID-19 Pandemic – Participate in the Legal Feeding Frenzy and Support Your Local Food Bank!

Michele Livingstone

Will Quick

By Michele Livingstone and Will Quick

We are in unprecedented times with COVID-19 (Coronavirus).  It is now more important than ever that we help our neighbors and those who are not as fortunate. I am confident that each of you is doing your part.

Even in the best of times, however, over 1.5 Million North Carolinians struggle with hunger—of those, nearly half a million are children. With public schools and many religious and nonprofit organizations that traditionally serve the food insecure in our communities being closed for indefinite periods, and government leaders calling for social distancing to help limit the spread of Coronavirus, that need is never more pressing than now.

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N.C. Supreme Court Gives Green Light for Insurers to Depreciate Labor Costs

By Susan Boyles

Accardi v. Hartford Underwriters Ins. Co., ___ N.C. __ , No. 42A19 (Feb. 28, 2020)

The North Carolina Supreme Court nixed a putative class-action lawsuit against a property insurer and validated the insurer’s untested practice of depreciating labor costs under actual cash value (“ACV”) policies. A unanimous Court held that an insurance policy provision allowing a deduction for depreciation of labor costs for roof repairs applied to all repairs to the dwelling. Although the amount at issue for the individual plaintiff was only $169.30, the decision has far-reaching implications for the adjustment of first-party property damage claims.

Accardi v. Hartford Underwriting Insurance Company arose out of a hailstorm claim in which plaintiff-homeowner Thomas Accardi sustained damage to his roof, siding and garage. Accardi had a homeowner’s policy with Hartford that required Hartford to pay plaintiff the ACV of the damaged property until repairs were completed. If the property were repaired and the repairs cost more than the ACV, then Hartford was required to reimburse Plaintiff for the full amount of the repair costs, minus the deductible.

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Insurance and More (2020 Insurance Law Section Annual Meeting and CLE)

Dear Section Members!

I hope you all had a wonderful holiday season and a happy start to the New Year!

On Thursday, January 30, 2020, the NCBA Insurance Law Section will host its seventh annual CLE at the North Carolina Bar Center in Cary, North Carolina.  This year’s CLE covers a number of insurance-related topics including the Restatement of the Law of Liability Insurance, Top Insurance Law Decisions from 2019, E-Discovery in 2020, Cyber Insurance, and more.

This year’s CLE has been approved for 1.0 hour of Ethics/Professional Responsibility Credit AND also satisfies the NC State Bar Technology Training requirement.

As always, the Section will hold its annual meeting during the lunch break.

For more information and to register, click here.  On behalf of the entire NCBA Insurance Law Section, we hope to see you there!

Sincerely,

NCBA Insurance Law Section, CLE Committee

Choice of Law in Coverage Disputes

By Alan M. Ruley

Choice of law is often an important issue in insurance coverage disputes.  Both policy holders and insurers will argue for application of the law of a State that they deem most favorable to their position.  Judge Gale of the Business Court recently had an opportunity to consider that issue in American Realty Advisors, et al. v. Lexington Insurance Company, et al., No. 18CVS5171, Wake County.

The Plaintiff in American Realty Advisors owned property in Cary, North Carolina.  Four insurers, including Lexington, provided coverage for the property.

Construction of the property was completed in early 2007, and the plaintiff purchased the property shortly before construction was complete.  Upon purchase of the property in 2007, it was covered by a 2006-2007 “All Risk” commercial property insurance policy from Lexington, as well as substantially similar follow-form excess policies, combining for a total of $25 million in coverage.  The 2006-2007 policies – – which were the policies at issue in the case – – did not include a mandatory choice of law provision.  The policies for the following years did include a mandatory choice of law provision, providing for the application of California law.

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A Case to Keep Your Eye On – $29,000,000 Chapter 75 Judgment

By Dan Morton

There is a case making its way through Onslow County Superior Court that you may want to keep an eye on. In Ortez and the Estate of Estes v. Penn National Security Insurance Company (Penn National) a trial court recently awarded judgment against Penn National for treble damages of $28,949,424.80, for breach of its duty to defend and breach of its duty to settle a claim against its insured driver. A Rule 59 motion for reconsideration is pending. This case could generate caselaw on several important coverage issues.

Penn National insured Kitchen and Lighting Designs Inc. under a commercial auto policy, with liability and UM/UIM limits of $1,000,000. Kitchen and Lighting’s employee (Ortez) was driving an Isuzu box truck that was a covered auto and was involved in a two-vehicle accident in which Ortez’ passenger/co-employee (Estes) was fatally injured. The Estes Estate sued Ortez, Fissaha (the driver of the other vehicle) and Passport (Fissaha’s employer) in Craven County (The Underlying Action). Fissaha and Passport settled the claims against them for $863,000. Relying on exclusions for injury to an employee of the insured or to a co-employee of the insured, Penn National denied coverage and refused to provide a defense to Ortez. In response to the coverage denial, the Estes Estate asserted an uninsured motorist claim under the Penn National policy.

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Proposed Pattern Jury Instructions Submitted

The Insurance Law Section Council previously prepared and approved last spring four proposed Pattern Jury Instructions relating to insurance litigation.  Those proposed instructions, which may be seen on the Section website, cover the following topics:

  1. First-party bad faith;
  2. Expected or intended injury exclusion in CGL policy;
  3. Expected or intended injury exclusion in homeowners’ policy; and
  4. UM/UIM resident of household.

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Insurance Law Section Annual Meeting and CLE Wrap-Up

By Daniel Knight

In case you missed it, the Insurance Law Section of the North Carolina Bar Association held its annual meeting and CLE at the Bar Center in Cary on January 31, 2019.  The theme of this year’s CLE was “Back to the Basics” and included a great selection of speakers covering topics such as CGL Insurance and the Duty to Defend, Excess and Umbrella Insurance, Directors & Officers Insurance, and the Top 10 Insurance Decisions from 2018.  This year’s CLE finished with a segment discussing a hypothetical insurance coverage dispute.

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NC Supreme Court: Hairston v. Harward

By Dan Morton

Hairston v. Harward, N.C. Supreme Court, No. 416A17 Dec. 7, 2018

In Hairston v. Harward, 821 S.E.2d 384 (N.C. 2018), the Court held that an underinsured motorist was not entitled to a credit against a judgment for payments made by the plaintiff’s underinsured motorists carrier.  The case is interesting on many levels, including its discussion of the collateral source rule, what the reasoning in this opinion portends regarding the current Court’s proclivities in coverage disputes and what was not addressed concerning the “500-pound gorilla in the room.”

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