PHILADELPHIA, Jan. 13. Zurich American Insurance company has asked the U.S. Court of appeals for the Third Circuit to reverse a lower court’s ruling ordering it to pay $1 million in uninsured motorist (UM) benefits, arguing that a sign down form setting UM limits at $35,oo0.00 was valid and enforceable.
Stefan Freeth alleged injury while working on a truck owned by roadway contractor Road-Con Inc. He sought UM/UIM benefits under Road – Con’s commercial auto policy with Zurich, and was awarded $1 million in U.S. District Court for the Eastern District of Pa., following Zurich’s removal of the case from the Chester County, Pa. Court of Common Pleas.
On appeal, Zurich contends that the sign down form completed by a company executive was a sufficient “express designation” within the meaning of the Pa. M.V.F.R.L. to constitute a valid election of UM/UIM limits lower than the commercial auto policy’s bodily injury limits of $1 million dollars. Freeth’s counsel claims the form is ambiguous, stating, “there is no affirmative written election of the amount of $35,000.00 by Road-Con. There is no handwritten entry by the named insured or check mark or initialing of the amount of $35,000.00 on the Summary Form.”
Stefan Freeth v. Zurich American Insurance Co., No. 15-2924, (3rd Cir 2015)
Editor’s Note: For copies of the briefing, email me at email@example.com
From Legal Project Management (LPM) to the arrival of Legal Operations Officers at Legal Departments, insurers have become far more discerning and discriminating buyers of legal services than ever before. Technology allows for any number of measurements of the performance of outside law firms, and therefore comparison of outside law firms.
Should this data be kept secret? Not if the insurer truly wishes to incentivize outside lawyers become the kind of lawyers the metrics are designed to create in the first place.
There are concerns, of course, about disclosing proprietary data, and information regarding other firms. These issues, however, are easily addressed by 1.) providing metrics outputs to lawyers and law firms, not the methodologies and 2.) showing the outside lawyer or firm how it stacks up against averages, or par, as opposed to providing data on other lawyers or firms.
For an insurer to measure the data and not use it to influence outside lawyers toward the benchmarks the insurer is aiming for is to use but half of the tool.
The metrics themselves are as diverse as the objectives, but some of the more popular ones are:
- Cycle Time – how long a case takes from assignment to closing
- Return on Investment – how much exposure was eliminated or reduced in exchange for payment of legal fees to defend a claim. (This can also be an effective marketing tool for a law firm: I was able to demonstrate to a large national insurer that over the course of several years that for every dollar they invested in legal fees, my firm was able to eliminate six dollars in corporate contingent exposure.)
- Leverage – similar to ROI, a measure of dollars spent in relation to dollars at stake. Designed to prevent lawyers from killing flies with sledgehammers.
- Overall Grade – somewhat subjective, but a great overall metric which allows General Counsel to grade how their outside lawyers are doing
We will delve into metrics in more detail in a future post. In the meantime, remember that what can be measured can be used to steer outside lawyers in the direction the insurer wants to go. Good outside lawyers will neither mind being measured, nor adjusting their performance to suit the insurer’s needs.
Louisville, Jan. 21. A U.S. District Court Judge in Kentucky has ruled that neither Travelers or excess insurer Cincinnati Ins. Co. have a duty to defend Bellarmine University in a wrongful death suit brought by the estate of a university lacrosse player who died while participating in conditioning drills.
On January 21, U.S. District Judge Charles R. Simpson granted the insurers’ motion for judgment on the pleadings, holding that the policy’s Athletic Participants Exclusion Endorsement relieved the insurers of the duty to defend or indemnify Bellarmine in the underlying death suit. The endorsement excluded coverage for bodily injury “to any person engaged in athletic, exercise, or sports activities” sponsored by the university.
The Court held that Travelers did not contract to ensure the exposure for which Bellarmine was seeking defense and indemnity. It also held that the excess policy issued by Cincinnati did not apply, as it contained language disclaiming coverage for any loss which came within an applicable exclusion in the language of the primary policy.
Underwriters Safety et al v. Travelers et al, W.D. Ky. 2016 (Simpson, J.)
Reading, Pa., Jan. 19. U.S. District Judge Joseph Leeson has denied a motion filed by Allstate Insurance Company to sever and stay a bad faith claim, including discovery, in a combined breach of contract and bad faith case, but has ordered that Allstate may properly assert work product privilege protection as to matters genuinely prepared in anticipation of litigation.
In Wagner v. Allstate, Judge Leeson conceded that while there may be a basis for separate trial of the breach of contract and bad faith claims under F.R.C.P. 42 , there was no need to prevent simultaneous discovery in both the breach of contract and bad faith claims.
Judge Leeson also granted in part and denied in part Plaintiff’s motion to compel discovery of Allstate’s claims file, ruling that the Court needed more information to make a complete ruling on the motion. The Court ruled that Allstate did have the right to assert privilege over materials in its claims files which were prepared in anticipation of litigation, while observing the parties disputed the date at which time Allstate’s anticipation of litigation over the underlying UIM claim was bona fide.
Wagner v. Allstate Ins. Co., E.D. Pa. 2016 (Leeson, J.)
Philadelphia, Jan. 20. A Philadelphia Common Pleas Judge has recommended that the Pa. Superior Court affirm her dismissal of breach of contract and bad faith claims filed against Progressive Insurance Company. In an opinion written pursuant to Pa.R.A.P. 1925(a) in Racioppi v. Progressive Ins. Co.,2015 Phila. Ct. Com. Pl. LEXIS 415 , the Court dismissed the Plaintiff’s claims for UM benefits under her Progressive auto policy following an automobile accident. The Plaintiff had previously collected policy limits of the tortfeasor, Insured by Geico.
The Court held that both the breach of contract and bad faith counts suffered from the same fatal defect: The Plaintiff failed to proved that she paid for a policy which was in force at the time of the collision. While the Court conceded there were circumstances in which a bad faith claim could proceed in the absence of a breach of contract claim, it found that such circumstances were not presented by the Plaintiff’s UM claim at issue:
Since the breach of contract claim is without evidence, this component of the bad faith claim must immediately be rejected; Appellee-Defendants cannot have failed to pay in reckless disregard of the contract when Appellant-Plaintiff fails to offer any evidence that there was a contract between the parties on the date of the accident.
The Court dismissed the claims by way of a motion for summary judgment filed by Progressive.
Racioppi v. Progressive Ins. Co., 2015 Phila. Ct. Com. Pl. LEXIS 415 (Shreeves-Johns, J.)
New Jersey, January 20. The New Jersey Supreme Court has unanimously ruled that the state insurance fraud statue does not require the perpetrator to be successful in the effort to sustain a conviction. In State v. Goodwin, A-20 September Term 2014, 07352 (pdf copy attached below), Justice Albin wrote for a 6-0 majority that the making of a statement of a material fact to an insurer “that has the capacity to influence a decision-maker in determining whether to cover a claim” was sufficient proof to sustain a conviction under N.J.S.A. 2C:21-4.6(a).
Justice Albin wrote:
If the falsehood is discovered during an investigation but before payment of the claim, a defendant is not relieved of criminal responsibility. Here, defendant falsely reported that his girlfriend’s vehicle was stolen. It was for the jury to determine whether the series of false statements about the theft generated by the defendant had the capacity to influence the insurance carrier in deciding whether to reimburse for the damage caused by the arson.
Goodwin, at pp. 2-3. The Supreme Court reversed a N.J. Superior Court ruling which overturned the conviction on grounds that the jury instructions permitted conviction without showing harm or prejudice to the insurer, Progressive.
Justice Albin found that the State’s argument that “material fact” required an element of actual prejudice to it was far too strict an interpretation of the statute. He referred to prior state and federal criminal statutes on perjury and false statement to rule that actual harm has never been a prerequisite to a conviction for crimes of falsehood.
Finally, the Court ruled that the Model Jury Charge on insurance fraud accurately set forth the standard for conviction and that the jury was free to conclude that Goodwin’s knowingly false statements affected Progressive’s analysis of whether to pay the claim.
State v. Goodwin, N.J. Supreme Court, 2016
Reading, Pa., Jan. 19. Dickie, McCamey & Chilcote attorneys C.J. Haddick and Christine Line have won a dismissal in a bad faith case in favor of client Harleysville Insurance Companies. The Berks County, Pa. Court of Common Pleas on January 19 granted the motion for summary judgment filed by Haddick and Line in a bad faith suit arising out of a commercial property coverage dispute over an alleged van theft and fire involving business personal property. Haddick and Line are members of the firm’s Insurance Law and Litigation Group.
Harleysville did not dispute it owed coverage for the value of the van, substitute van rental expense, and for the value of certain business personal property under an inland marine policy. It did contest, however, the Plaintiff’s claimed entitlement to a variety of other sums for towing, vehicle storage, loss of business income, and claims for tool losses in excess of the policy limit. The Court agreed that the additional claims were unsupported by the policy language.
The Court also agreed with Harleysville’s position that regardless of the outcome of the several coverage claims, the claims decisions made were made with reasonable legal and factual bases. As a result, the Plaintiff’s bad faith claims were dismissed as well.
For additional details on the ruling, or suggestions how to have your coverage and bad faith claims decided faster and more favorably with greater cost control, contact us at firstname.lastname@example.org or 717-731-4800
Rogers Flooring Co. v. Harleysville Ins. Co., Berks County No. 14-674 (Sprecher, J.)