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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COA Penalizes Insurer for Poor Writing in Policy Exclusion

By Susan H. Boyles

Bad grammar can lead to an adverse coverage decision – that’s the lesson one insurer (and its insured) learned the hard way when the NC Court of Appeals held that an incomplete sentence and improper grammar in an insurance policy that purported to exclude coverage for claims involving sovereign immunity was ambiguous. The Court’s decision paves the way for the Plaintiff to proceed with her slip-and-fall case, even though Supreme Court had previously ruled that the Defendant was entitled to assert sovereign immunity.

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Back to the Basics: 2019 Insurance Law Section Annual Meeting and CLE

The Insurance Law Section’s 2019 CLE is premised on a “back to basics” concept to assist attorneys and insurance adjusters both new to and well-versed in insurance law.

Back to Basics: Insurance Law Section Annual Meeting and CLE
Live and Webcast
Thursday, Jan. 31, 2019
NC Bar Center, Cary
CLE Credit: 6.5 hours, includes 1.0 Hour Ethics/Professional Responsibility
6.0 Hours of General Continuing Education Credit for Insurance Professionals (Live program only). Must attend the entire program to receive this credit.
Planned by  the NCBA Insurance Law Section

Insurance law encompasses many issues and areas of practice, including whether a policy of insurance potentially provides coverage for a claim and disputes between third parties and individuals or entities listed as named insureds or identified as additional insureds under a policy.

In addition to those matters, learn from exceptional attorneys as they share, explain and provide helpful practice information in the areas of commercial general liability insurance, excess and umbrella insurance, directors and officers insurance, errors and omissions insurance (malpractice insurance), medical health insurance, disability insurance, automobile insurance, and homeowner’s insurance. The program also addresses issues concerning insurance carriers’ duty to defend and provides an excellent role play of an insurance coverage dispute.

This is a fantastic opportunity to learn more about analyzing and handling insurance law matters, and is useful to attorneys from a wide range of practice areas.

Click here to read the complete agenda or here to register for the event.

Hotel Information

TownePlace Suites by Marriott
120 Sage Commons Way | Cary
Nightly Rate: $114 studio queen with sleeper sofa (Sunday-Thursday)
Reservations: 919.678.0005
Ask for the NCBA corporate rate.

Embassy Suites
201 Harrison Oaks Boulevard | Cary
Nightly Rate: $169 single/double
Reservations: 919.677.1840 orwww.tinyurl.com/NCBA-Embassy
Corporate Account Code: 2691626

 

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Court Rules Insured Has Duty To Read Insurance Policy Sooner Rather Than Later

By Susan Boyles

In a recent case involving claims against an insurance broker, Judge Graham Mullen firmly put the burden of reviewing an insurance policy and understanding coverage exclusions on the insured.  Granting summary judgment for the broker on the insured’s negligence and breach of fiduciary duty claims, the Court declared that the insured’s claims were time-barred because it had a duty to check its coverage when it first received the policy – not years later when a claim arose.

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NC Business Court Weighs In On ‘Actual Cash Value’

By Susan Boyles

Accardi v. Hartford Underwriters Ins. Co., 2018 NCBC 109 (Oct. 22, 2018) 

A storm damage claim with only $169.30 in controversy has set the stage for a battle over actual cash value calculations. In a win for insurance carriers, Business Court Judge Gregory McGuire dismissed a putative class-action lawsuit against Hartford, holding that its practice of depreciating labor costs when determining actual cash value on a first-party property loss claim was consistent with the policy’s language and North Carolina public policy.

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4th Circuit Case Summary: Continental Casualty Co. v. Amerisure Ins. Co.

By Deb Bowers

Continental Casualty Co. v. Amerisure Ins. Co., 886 F.3d 366 (4th Cir. 2018)

The Fourth Circuit has ruled that the terms of an underlying agreement between the named insured and a third party can impose coverage beyond that necessarily provided for in the policy. This case further confirms the long standing principle that exclusions will be strictly construed against the insurer.

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