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 NC Bar Center in Cary on January 31, 2018.  This year’s CLE offered a great selection of speakers presenting on a variety of practical topics, including useful tools in litigating coverage matters, such as E-discovery, use of experts, and tips for deposing insurance adjusters, the Section’s annual insurance case law update, understanding professional liability insurance, and managing stress through the use of mindfulness.  Video Replays of the CLE will be on March 27, 2018 in Cary and April 12, 2018 in Winston-Salem.  Click here to register for one of the live replays.

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Token Offers By UIM Insurer Do Not Constitute Unfair Claims Settlement Practice

By Bill Lipscomb

In Elliott v. Am. States Ins. Co. 2018 U.S. App. LEXIS 3952 (4th Cir. 2/20/2018), the 4th Circuit held that a UIM insurer, in a claim where the tortfeasor’s liability coverage had already been paid, did not violate paragraphs (f), (g) and (h) of N.C.G.S. § 58-63-15 (11) by declining to make an offer until after its insured filed a lawsuit against the tortfeasor and then making only “token offers” before the arbitration hearing (which resulted in an arbitration award close to the UIM limit), because the UIM carrier’s liability is derivative of the tortfeasor’s liability and is not determined until the tortfeasor’s liability for damages has been determined.

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Trade Creditor Had No Right to Bring Deceptive Trade Practice Claim Against Liability Insurer of Tortfeasor/Insured

By James W. Bryan

On February 20, 2018, the North Carolina Court of Appeals upheld a ruling of the North Carolina Business Court that provides further clarification on whether a claimant with a judgment against the insured may sue the insurer for deceptive trade practices.  USA Trouser, S.A. de C.V. v. Williams, 2018 WL 943639 (N.C.App. 2018).  In this case, Navigators Insurance Co. issued a directors and officers liability insurance policy to the insured International Legwear Group, Inc. (“ILG”).  Plaintiff USA Trouser S.A. de C.V. (“USAT”), a trade creditor of the insured, sold socks on credit to the insured.  In federal court in Charlotte, USAT sued ILG and three of its directors/officers for failing to disclose ILG’s worsening financial condition while continuing to obtain products from USAT upon credit.  USAT obtained a default judgment for $2.0 mil.   USA Trouser later filed the instant action in state court against Navigators asserting claims for, among other things, bad faith claims settlement practices and unfair trade practices pursuant to N.C. Gen. Stat. § 75-1.1.  Navigators moved to dismiss.  In opposing the motion, USAT argued it became a third-party beneficiary to the insurance policy upon entry of the default judgment and obtained the right to payment on the judgment and to sue the insurer directly for its failure to pay.  Business Court Judge Gale granted the motion to dismiss and USAT appealed.

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Insurance Law Section Members Author New Insurance Litigation Guide

A newly published LexisNexis Practice Guide entitled “North Carolina Insurance Litigation (2018 edition)” is now available. This publication was authored and edited by members of the Pinto Coates Kyre & Bowers PLLC firm, most of whom are members of this Section. Some other attorneys from around the state were also contributing authors, many of whom are also members of this Section.  The Guide is a primer on the provisions and construction of the most common types of insurance policies, and includes tips for practitioners representing both insurers and policyholders. The book was written by lawyers for lawyers and insurance professionals, but may provide some insight for others interested in the topic.

Click here for more details.

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Proposed Pattern Jury Instructions, Comment Requested

The Insurance Law Section Council 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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Mere Disagreement With Claim Valuation Not Enough For Unfair And Deceptive Trade Practice Or Bad Faith Claim Against Insurer

By Daniel J. Knight 

In a recent unpublished decision, the North Carolina Court of Appeals reviewed whether an insurer’s handling of a claim constituted, inter alia, an unfair and deceptive trade practice.  Jackson v. Century Mutual Ins. Co., 2017 WL 3863901 (N.C. App. 2017).  Split 2-to-1, the Court ultimately affirmed summary judgment for the insurer.

Jackson involved a claim under a homeowners’ liability policy after the insureds’ home was severely damaged in a fire.  In submitting their claim to Century, the Jacksons sought relief under their Dwelling, Loss of Use, and Contents coverages.  Unsatisfied with the amounts they were compensated and with Century’s handling of their claim, the Jacksons filed suit against Century, alleging Unfair and Deceptive Trade Practices, Breach of Contract, Bad Faith, and Infliction of Mental or Emotional Distress.  In claiming that Century committed unfair and deceptive trade practices, the Jacksons sought relief under Chapters 58 and 75 of the General Statutes; specifically, the homeowners claimed a violation of N.C. Gen. Stat. § 58-63-15(11) also violated N.C. Gen. Stat. § 75-1.1.  Finding no genuine issue of material fact, the trial court granted summary judgment in favor of Century.

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Late Notice Under Claims-Made Policy Torpedoes Claim

By James W. Bryan

A recent ruling by the federal district court in Raleigh, NC highlights the different treatment the courts give to the late notice defense under a claims-made liability insurance policy versus an occurrence-based policy.  The insurer has a clearer opportunity under claims-made policies to defeat coverage when the insured’s notice of a claim is late. The United States District Court for the Eastern District of North Carolina in the case of John Hiester Chrysler Jeep LLC v. Greenwich Ins. Co., 2017 WL 6210897 (E.D.N.C. December 8, 2017), rejected the policyholder’s argument that prejudice must be shown by the insurer under a claims-made policy before coverage can be avoided due to late notice.

What happened in John Hiester is a lesson for all coverage lawyers. Claims-made policies are different.  They contain traps for the unwary.  One such trap is notice.  In John Hiester, the claims-made policies at issue were two similar employment practices liability (“EPLI”) policies.

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Reservation Of Rights Letter Found Insufficient By South Carolina Supreme Court

By William Lipscomb

The South Carolina Supreme Court issued a decision on July 26, 2017, which provides some good information regarding the purposes and requirements of reservation of rights (ROR) letters.  The Court held in Harleysville Group Insurance Corporation v. Heritage Communities, Inc., 803 S.E.2d 288 (S.C. 2017), that an insurer’s ROR letter in a construction defect case was insufficient to reserve its right to contest coverage.  Harleysville filed a declaratory judgment action seeking a judicial determination that it had no duty to indemnify its insureds (the developers and general contractors of two condominium complexes) regarding judgments entered against them in the underlying lawsuits or, alternatively, if any of the damages awarded in the underlying lawsuits were found to be covered, Harleysville sought an accounting to determine what parts of the underlying jury verdicts constituted covered damages.

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Direct Contact With the Adverse Insurance Adjuster After Appointment of Counsel

By Allan “Al” P. Root

After fruitless negotiations with an insurance adjuster, you file suit and an attorney is retained to represent the defendant. You have been dealing with the adjuster on this and other claims over many years and have developed a relationship, and when your client calls you saying to settle on any terms because she needs the money, you know that the quickest response will come if you call the adjuster. Does the ethical bar on contacting the attorney’s client extend to the insurance company as well as the insured?

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Insurer Violated Lien Statute and Committed Deceptive Trade Practice When Settling With Pro Se Claimant

By Samantha Lloyd

The North Carolina Court of Appeals recently held that, where an insurer settles with a pro se claimant and issues a settlement check to the claimant, the insurer must pay off any valid medical provider liens pursuant to N.C. Gen. Stat. §§ 44-49 and 44-50 before making any payment to the claimant. Nash Hosps., Inc. v. State Farm Mut. Automobile Ins. Co., 803 S.E.2d 256 (N.C. App. 2017). A check made payable jointly to the claimant and the lienholder will not suffice; in fact, it violates the lien statute and is an unfair and deceptive trade practice.

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