Portion of P.F. Changs’s Cyber Losses Not Covered By Chubb Policy

cyber-liability

PHOENIX, June 1 – According to an article published last week on businessinsurance.com written by Judy Greenwald, a federal court in Arizona has held hat Chubb Ltd. does not have to reimburse P.F. Chang’s for costs related to  a 2014 data breach under its cyber policy.

Federal Insurance Co., a unit of  Chubb Ltd. unit sold a Cybersecurity policy P.F. Chang’s China Bistro Inc. parent corporation, effective Jan. 1, 2014, to Jan. 1, 2015.  The policy was sold and represented as coverage for “direct loss, legal liability, and consequential loss resulting from cyber security breaches,” according to the opinion, authored by District Judge Stephen M. McNamee.

Chang’s entered into a contract  with Bank of America Merchant Services L.L.C. to process credit card payments made by Chang’s customers.  On June 10, 2014, Chang’s learned that computer hackers had obtained and disclosed 60,000 customer credit card numbers.

Federal had already paid Chang’s more than $1.7 million for breach related costs.

Bank of America separately sought nearly $2 million in costs arising from the breach from Chang’s, which Change’s reimbursed.  Federal, however, denied Change’s request for coverage  of this third party reimbursement, after which Chang’s filed suit.

Judge McNamee agreed with Federal that policy language requiring Federal to pay Chang for losses related to privacy injuries was inapplicable to the B of A claim, holding that the bank’s records were not themselves compromised by the breach.  The judge wrote, “The court agrees with Federal; (Bank of America) did not sustain a privacy Injury itself, and therefore cannot maintain a valid claim for injury against Chang’s.  The judge granted  Chubb’s motion for summary judgment in part on that basis.

P.F. Chang’s China Bistro, Inc. v. Fed. Ins. Co., 2016 U.S. Dist. LEXIS 70749 (D. Ariz. May 26, 2016)

Geico Loses Summary Judgment Bid In Florida Bad Faith Case

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TAMPA, Fla., May 12 — On May 12, GEICO Insurance lost a bid in Florida federal court to dismiss a bad faith suit premised upon its alleged failure to adequately defend a GEICO insured in a personal injury action.  The Court ruled that a genuine issue of material fact existed as to whether the insurer acted in bad faith in its handling of the claim.

The insureds,  Manuel A. and Aleli Gonzalez bought auto insurance from GEICO General Insurance Co. and added their grandson Ishmael Ramjohn as an additional insured. Ramjohn allegedly injured Lisa Anderson in an automobile accident in February 2009, whereupon Anderson’s attorney attempted to settle Anderson’s claim with GEICO .

Anderson’s lawyer and GEICO communicated several times during 2009, leading to his sending a demand for the $100,000.00 bodily injury policy limit insuring Ramjohn. GEICO offered $2,581.16 to resolve the claim.  Later, GEICO increased its offer to $22,500.00 after receiving additional information on Anderson’s injuries.

After  Anderson sued the insureds in the Hillsborough County, Fla., Circuit Court for damages,  GEICO offered the $100,000 policy limits, which Anderson rejected.  A jury in that case returned a verdict for Anderson in the amount of  $398,097.82.

The insureds then sued GEICO in the U.S. District Court for the Middle District of Florida, alleging bad faith in handling Ramjohn’s defense.

In denying GEICO’s motion for summary judgment, Judge James S. Moody Jr. held:

“the record reflects facts that could permit a jury to find that GEICO acted in bad faith…In other words, this case, like most bad-faith cases, presents a genuine dispute that requires a jury’s resolution…For example, [insureds’ expert Peter] Knowe’s testimony creates a genuine issue for trial. Knowe testified that GEICO’s handling of the Anderson claim deviated from industry standards in several key respects. Remarkably, GEICO does not address or reference Knowe’s expert opinion anywhere in its motion…there is also evidence suggesting that GEICO did not evaluate Anderson’s claim from the perspective of a reasonable insured facing unlimited exposure.”

Judge Moody added that a reasonable jury could find that GEICO’s offer strategy in the case was executed in aid of a policy to reduce average loss payments.

Gonzalez et al v. GEICO General Insurance Company, (M.D. Fla. 2016)(Moody, J.)

Insurance Agent Dropped From Bad Faith Suit

insagentTULSA, May 6 – An insurance agent who neither wrote nor issued the insurance policy was dismissed from a federal bad faith and coverage suit by an Oklahoma federal judge last week.

Christopher Wise filed a state court breach of contract suit against two insurers after they denied coverage  to Wise following a motorcycle accident Wise was involved in on the same day he purchased the bike.  The Hagerty Insurance Agency produced one of the policies issued by Essentia Insurance Company.  CSAA General Insurance Co. was the other insurer.

Essentia removed the action to the U.S. District Court for the Northern District of Oklahoma based on diversity jurisdiction, and the Hagerty  agency  moved to dismiss for failure to state a claim for relief on the grounds that it was not an insurance company, and it neither wrote nor issued any policy to Wise.

U.S. District  Judge Claire V. Eagan granted the motion, holding:

“[u]nder Oklahoma law, an insured cannot state a claim against an insurance agent for breach of contract when it is not in privity of contract with that agent…Defendant Hagerty included with its motion to dismiss both the insurance card and the relevant policy. The insurance card clearly states that the insurance company is Essentia and that Hagerty is the agent. The policy itself, in the definitions section, defines ‘we,’ ‘us,’ and ‘our’ as ‘the Company providing insurance.’ The policy does not include any provision involving the insurance agent, nor does it impose any responsibility on the agent under the contract. These documents clearly demonstrate that defendant Hagerty is the insurance agent, not the insurance company. The insurance contract is between Essentia and plaintiff, and Hagerty is a stranger to this contract. As such, plaintiff has failed to state a claim against Hagerty for breach of contract and bad faith. Defendant Hagerty’s motion to dismiss should be granted.”

Wise v. CSAA Insurance Group, Inc. et al  (N.D. Okla. 2016)

Faulty Construction Workmanship Not Covered Under Commercial and Umbrella Policies

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PHILADELPHIA, March 23 – A federal judge in Philadelphia has ruled that Selective Way Insurance Co. need not defend nor indemnify an insured subcontractor from allegations in an underlying suit regarding faulty workmanship, whether the workmanship is cast as negligence or breach of a construction contract.

The Villas, a  condominium owner,  filed suit against the general contractor for defective work, including cracking and water damage, and Lenick Construction was added as an additional defendant in the litigation.  Lenick tendered its defense and indemnity to Selective under a commercial liability policy, and Selective provided a defense to Lenick under a reservation of rights.

After the underlying litigation was settled between The Villas and the general contractor, the general contractor assigned its rights against the subcontractors, including Lenick to the condominium owner.

Lenick sued Selective in the Philadelphia County Court of Common Pleas, seeking a declaration that the insurer had a duty to defend and indemnify it in the underlying lawsuit. Lenick asserted a claim for breach of contract and a bad faith claim . Selective removed the case to the U.S. District Court for the Eastern District of Pennsylvania, and the parties each moved for summary judgment.

Judge Cynthia M. Rufe granted summary judgment to Selective and denied Lenick’s motion, examining the underlying pleadings and finding that defective workmanship was alleged to be the cause of the water infiltration into condominium units.   She wrote:

With regard to Lenick’s argument that the underlying joinder complaint and the Third Amended Complaint did not only allege that Lenick’s own work was deficient, but that its defective work caused damage to the work of others, the Court agrees that this is a plausible reading of the underlying complaints. However, where liability is premised upon poor workmanship, the fact that nearby work was also damaged does not change the analysis, so long as such damage is reasonably foreseeable. It is foreseeable that windows and doors which are not watertight will cause water damage inside the unit, to parts of the unit other than the windows and doors. Accordingly, these additional allegations do not give rise to a duty to defend.

The judge found no facts whch would support a tort claim against Lenick, and which would potentially be covered under the Selective Way policy.

Judge Rufe also granted summary judgment for Selective on Lenick’s bad faith claim, observing that  Selective’s interpretation of the underlying  construction litigation pleadings was not unreasonable.

Lenick Construction v. Selective Way Ins. Co.., (E.D. Pa. March 23, 2006)

 

5th Circuit Finds No Coverage In Crane Collapse Case

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GRETNA, LA., March 22 – The U.S.  Fifth Circuit Court of Appeals  has upheld a trial court determination  that the insurer of a Louisiana-based marine crane builder owed no coverage for a 2009 accident caused by poor welding. The Court ruled that the insurance policy did not apply because it covered only  vessel-related incidents and not incidents on land.

State National Insurance Co. insured Elevating Boats LLC, for losses payable for the liability of the policyholder, as the owner of a vessel, for any incident or loss arising out of ownership of the vessel.  In 2009 worker Larry Naquin Sr. had sued Elevating Boats for personal injuries on the theory negligent welding of the crane in question.  During a test Naquin was running on the crane, the crane separated from its base and fell over, killing one, and causing Naquin two broken feet and a hernia.  The accident occurred on land and nowhere near a vessel, according to the opinion:

“Naquin’s incident in no way arose out of EBI’s conduct as ‘owner of the vessel …Furthermore, the land-based crane did not break on or even in close proximity to a vessel. Thus, EBI’s attempts to craft a causal connection to a vessel are discharged, plainly and simply, by the underlying facts and Naquin’s holding.”

In May 2012 a Louisiana federal jury found that EBI was negligent in welding the crane to its platform and that it was therefore liable for Naquin’s injuries.  During those proceedings the trial judge granted State National’s motion for summary judgment, finding that the policy did not cover incidents on land. 

Naquin urged an interpretation of a  “blanket reading” of State National’s policy such that it would provide coverage for  “any casualty or occurrence,” but the Appeals Court found the argument “strained,” and contrary to common law which required a vessel- related loss in such circumstances.

The 5th Circuit Court concluded,  “Naquin’s incident in no way arose out of EBI’s conduct as ‘owner of the vessel.’”

Naquin v. Elevating Boats, et. al., (5th Cir., March 22, 2016)

Sub-Surface Water Loss Mostly Excluded By Policy, Texas Judge Rules

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HOUSTON, Feb. 16 – A district judge in the Southern District of Texas has dismissed breach of coverage and bad faith claims against Praetorian Insurance Company, ruling that several of the policy’s coverage exclusions defeat the insured’s claims for property damage arising from a water related loss.

In Praetorian v. Arabia Shrine, a building owned by the Shrine suffered a subs-surface water loss which seeped into the building causing more than $1.8 million worth of damage to the foundation and building on March 14, 2014.   While the policy provided for coverage of for the loss of fire suppression equipment, and Praetorian paid nearly $64,000.00, it disclaimed nearly $2 million in other claims made by the Shrine.

The Policy contained an exclusion for damage to foundational elements, as well as an exclusion for damage to sub-surface piping.  The policy was also endorsed with a “Water Exclusion” disclaiming coverage for damage caused the escape or seepage of subsurface water into the building.

Judge Keith Ellison found that Praetorian met its burden of showing that the exclusions precluded the vast majority of coverage for the underground water loss.    The judge also found that since Praetorian had a reasonable basis to deny coverage, claims for breach of the Texas Insurance Code, and for the breach of Praetorian’s duty of good faith and fair dealing should also be dismissed by way of summary judgment as well.

Praetorian Ins. Co. v. Arabia Shrine Center Houston (S.D. Texas Feb. 16, 2016)

Texas Judge Rules Bad Faith Claim Inadequate To Survive Summary Judgment

SHERMAN, Feb 4 – A federal judge has ruled that a bad faith suit against State Farm Lloyds arising out of property damage claims lacked sufficient questions of material fact to avoid dismissal by summary judgment pursuant to F.R.C.P. 56.

After the case, involving breach of contract and statutory and common law bad faith claims was removed from Texas state court to federal court, the Plaintiff voluntarily dismissed common law bad faith claims, but retained statutory bad faith claims under the Texas Insurance Statute and the Texas Deceptive Trade Practices Act.

“Plaintiff has failed to cite any evidence that would create a genuine issue of fact as to whether Defendant acted unreasonably in its handling of the claims.”

Judge Amos Mazzant ruled.

He found that the Plaintiff did not produce any credible evidence that the insurer misrepresented provisions of the policy,  misrepresented the authority of the agents, or that it unreasonably delayed the investigation or the processing of the Plaintiff’s insurance claims.

The Court ruled that the Plaintiffs breach of contract claims for coverage should proceed to trial.

Broxterman v. State Farm Lloyds, (E.D. Tx. 2016)(Mazzant, J.)

-UPDATE- Reconsideration Denied; Summary Judgment for Harleysville Upheld In Bad Faith Case

READING, Feb. 2 – The Berks County Court of Common Pleas has denied Plaintiff’s Motion for Reconsideration on the same day the motion was filed regarding the case discussed in this prior post.

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Reading, Pa., Jan. 19Dickie, 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 chaddick@dmclaw.com or 717-731-4800

Rogers Flooring Co. v. Harleysville Ins. Co., Berks County No. 14-674 (Sprecher, J.)

Bad Faith Case Based On Hailstorm Claim Dismissed in Lousiana

NEW ORLEANS, Jan. 28 – A Federal Judge in New Orleans has dismissed a statutory bad faith suit against an insurer arising out of a hailstorm property damage claim, finding that the insured failed to establish any genuine issue that the insurer acted arbitrarily or capriciously in the handling of the claim.  In Dubois v. Southern Fidelity Ins. Co., Judge Ivan Lemelle granted Southern Fidelity’s motion for partial summary judgment, dismissing the insured’s claim for statutory penalties.

In granting the motion, Judge Lemelle, found the insurer’s failure to pay the hailstorm property damage claim arose out of a genuine dispute about the cause, nature, and extent of the property damage.  The Court went on to note that the insured’s initial claims were both filed after some delay, and were initially unclear, making reference to both damage caused by the hailstorm, but also Hurricane Isaac.  This,  and the plaintiff’s failure to properly identify any facts tending to prove bad faith on the part of the insurer, warranted dismissal of such claims under F.R.C.P. 56, the Court held.

Dubois v. Southern Fidelity Ins. Co., E.D. La. 2016 (Lemelle, J.)

Editor’s Note:  This opinion contains a concise review of Louisiana law regarding insurer bad faith, including review of the applicable statutes, and the bad faith standard of arbitrariness and capriciousness.  The ruling also demonstrates that while the precise language of the bad faith standard may differ from state to state, in large measure they all articulate the same standard, i.e., the lack of a reasonable basis on the part of the insured in handling the claim.

 

DMC Lawyers Obtain Summary Judgment For Harleysville In Bad Faith Suit

Reading, Pa., Jan. 19Dickie, 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 chaddick@dmclaw.com or 717-731-4800

Rogers Flooring Co. v. Harleysville Ins. Co., Berks County No. 14-674 (Sprecher, J.)