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Vol. 6 - Issue 6
July 12, 2017
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Floyd Abrams is the nation’s foremost First Amendment lawyer. Me? The last time I thought about the First Amendment was 1991. I was reading a book that had the word BarBri written across the cover. So, as the hour drew near to interview the man who has been called Mr. First Amendment, I began to think – jeez, maybe this wasn’t my brightest idea. My plan was simple – just stay out of the weeds with the guy.
I’m on the phone with Floyd Abrams to discuss his new book – The Soul of the First Amendment (Yale University Press) – and a lifetime litigating matters on the subject, including Citizens United, the hugely controversial case on campaign finance which Abrams successfully argued before the Supreme Court.
Speaking of keeping out of the flora, that’s exactly what Abrams does in The Soul of the First Amendment. And that’s what makes it such a wonderfully enjoyable read. Abrams could have easily written a book on freedom of speech that mirrors the tax code, both in size and complexity. But Soul is anything but. It is, as Abrams describes it in the first sentence, a book of “ruminations” on the subject. It is you and Floyd Abrams, sitting in a coffee shop, discussing what he calls the “rock star” of the American Constitution. To put it simply, Floyd Abrams wrote a book about the First Amendment that you don’t need to be Floyd Abrams to want to keep turning the pages.
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The 80 year old Abrams, Senior Counsel at Cahill Gordon & Reindel in Lower Manhattan, was kind and generous with his time. And I don’t think he caught on that I can only answer Con Law questions presented as multiple choice.
Abrams was also very thoughtful with his answers. Indeed, he went silent for 23 seconds while pondering what the Founding Founders would say about the First Amendment’s protection of flag burning. And my question whether Citizens United will be overruled at some point led to fourteen seconds of quiet deliberation. Abrams also shared with me what he sees in his First Amendment crystal ball. And he was a very good sport to play along when I asked him if it is constitutionally protected to yell inside a move theater: “Citizens United is a terrible decision and should be set on fire.”
Floyd Abrams Trivia
I told Abrams that I wanted to start off with Floyd Abrams Trivia. He let out a curious-sounding laugh. I informed him that a Lexis search revealed a staggering 569 cases in which his name appears as counsel. Can he tell me the first one? Abrams pondered the question. But then gave up.
It was Great Atlantic and Pacific Tea Co. v. New York World’s Fair, a 1964 decision from the New York County Supreme Court. Abrams, then a first year Associate at Cahill Gordon – along with John Cahill -- represented Great Atlantic and Pacific. A&P had a sign with its name on it that was 250 feet long and had 10 feet high letters. It sat 110 feet above the ground. The New York World’s Fair was taking place nearby and was none too pleased with A&P’s sign. The World’s Fair, concerned that the bright red neon of the gargantuan sign would interfere with the beauty of the Fair’s fountain show, planned to erect a screen of artificial shrubbery to block the sign. A&P saw the screen as a “spite fence,” erected by the Fair in retaliation for A&P’s decision not to be a participant.
To Abrams’s credit, once he heard the name A&P, it all came rushing back and he had a remarkable recall of the facts, issues and people involved. I told him that earned him half credit. In the end, A&P did not succeed in its effort to enjoin the Fair’s construction of the screen. Abrams’s career was off to a slow start. But better days were ahead.
The Soul of the First Amendment
In The Soul of the First Amendment, Abrams takes an unusual approach to the subject. The obvious one, of course, would be to rattle off cases, one after another, where the Supreme Court upheld free speech protection, especially in extreme situations. Look at this, the First Amendment allows people to burn the American flag. And its guarantee is so far reaching that it even protects speech that most would find reprehensible, such as offensive statements made by protestors, in the vicinity of a military funeral, that the soldier’s death was deserved. And to take a case in which Abrams recently served as counsel for an amici curiae – the Supreme Court just ruled that the U.S. Patent and Trademark Office violated the First Amendment when it denied trademark protection to an Asian-American band on the basis that its name, The Slants, was disparaging.
But Abrams didn’t write a hurray for the First Amendment laundry list. Instead he took a different tack. At its heart, he explores the First Amendment by comparing its free speech protections to those offered by other democratic countries. For example, and Abrams provides many, the Canadian equivalent of the First Amendment did not prevent the criminal conviction of an individual who distributed flyers, containing crude language, protesting the decision by high schools in Saskatchewan to teach about homosexuality. American law, Abrams says, “could hardly be more inconsistent.”
Abrams’s comparative approach to free speech also includes a discussion of Europeans’ legally enforceable “right to be forgotten.” Thanks to a 2014 decision from the European Court of Justice, search engines can be forced to remove links to previously published content, including in newspapers, that reveals information that is now determined to be “inadequate, irrelevant or no longer relevant.” “But Americans,” Abrams assures readers, “can take both comfort and pride that no American court would or, under the First Amendment, could require [search engines] to do so.
Speech-protecting judicial decisions are the body of the First Amendment. But for Floyd Abrams that’s just half its being. The other is its “soul.” And that is its uniqueness.
I asked Abrams what made him take this comparative approach. I had a feeling that it didn’t come to him one day last year when he was standing in line at the post office.
Sure enough, to answer my question, Abrams takes me back many years. Shortly after the Pentagon Papers case, Abrams tells me, he and his wife took a trip to England and Israel. In this landmark of landmark Supreme Court decisions, Abrams represented The New York Times, winning the paper the right to publish, during the Vietnam War, top secret Department of Defense documents that assessed how the United States became involved in the war.
Abrams explained that, while visiting those two countries, he was “stunned by the fact that the English and Israeli journalists were all shocked at the result. They had enormous difficulty fathoming how, during the time of war, when the government was saying that publication would irreparably harm the national interest, and perhaps even interfere with the release of American prisoners of war, that the Times could be permitted to publish the Pentagon Papers.” He went on to add: “What struck me was here are two countries with robust presses, and in which internal disagreement and freedom to disagree was very real, and yet they were stunned at the result.” It was from that time on, Abrams said, that he has “followed the degree of differences in approach of the U.S. from other democratic nations in the world.”
As an example of The Soul of the First Amendment being a book of “ruminations,” Abrams pointed out to me that he steered away from a discussion of “what level of scrutiny the courts ought to apply in particular [First Amendment] cases. That is to say, shall we apply a rational basis test or an intermediate scrutiny test or strict scrutiny.” While this is a discussion that appears in briefs, Abrams said he didn’t think it “fit” in the book.
Speaking of the various levels of First Amendment scrutiny, Abrams acknowledged that he’s “dubious that the categorization of cases falling within one or another form of review is as significant as academics in the community might think or even some judges.” While he certainly did not dismiss the labels placed on levels of scrutiny as irrelevant, he concluded that “even if we didn’t have the words, judges would sense what sort of activity of the government ought to be subject to a higher level of scrutiny.”
Hiring Floyd Abrams
I asked Floyd Abrams what he looks for when taking a case these days. He acknowledged – but with no preening whatsoever -- that he “can make certain choices about what to do,” so “it has to be a matter of interest of me.”
He pointed to his current representation of New York Governor Andrew Cuomo, in defending the constitutionality of a statute, requiring the disclosure of the identity of large donors to charitable organizations that engage in political or issue advertising. Abrams explained that it is his First Amendment view that “the price tag for the freedom to spend a lot of money, for corporations and individuals in political campaigns, was that the public had a right to know who was spending it.” But that is not a view, Abrams told me, “that is by any means universally held.” For example, he explained that the ACLU has always been resistant to the notion of public disclosure. Calling this a “matter of real interest to me,” Abrams said it “certainly was one of the reasons I was glad to get the call to take that case.”
The Founding Fathers On Flag Burning
In The Soul of the First Amendment Abrams discusses the debate, between various Founding Fathers, over whether the Constitution should have included a Bill of Rights. The States were unanimous – 10-0 against including it. But individuals’ opinions were not in accord. Thomas Jefferson, Abrams writes, was appalled that there was no express statement of the limits of the power of the government. But to Alexander Hamilton, it wasn’t necessary to place limits on specific powers of a government that had no authority to impose such restrictions in the first place. To have followed the Hameltonian approach, Abrams told me, “would have been a tragic error.”
Abrams is a scholar on the history of the Constitution. And present-day debates over its meaning often include the question -- what would the Founding Fathers have said? So I went right for the granddaddy. After shedding so much blood for the right to have their own flag, what would the Founders have said about the right to burn it? Abrams pondered the question for a very long time. I could hear him thinking through the phone. He concluded that “they would have come out the same way that Justice Brennan did [in Texas v. Johnson (1989) and United States v. Eichman (1990)]. I think they would have allowed it as being protected.”
Citizens United And The Most Burning Question
In 2010 the Supreme Court ruled in Citizens United v. Federal Election Commission that the government’s effort to prohibit certain political campaign expenditures by corporations and unions violated the First Amendment. Criticism of the decision has been far and wide and loud, with its foes generally asserting that excessive corporate money in elections will drown out the voice of ordinary citizens, as well as affect the integrity of the process.
Abrams argued the case before the high court as counsel to Senator Mitch McConnell and was on the prevailing side. He calls Citizens United one of the most unpopular Supreme Court decisions ever with the public. He described the response to Citizens United in a piece appearing in The Nation: “When the Citizens United decision was released, many commentators treated it as a desecration. People who would enthusiastically defend the free speech rights of Nazis, pornographers and distributors of videos of animals being tortured or killed were appalled that corporations and unions should be permitted to weigh in on who should be elected president.”
On one hand, Abrams told me that he “anticipated that the decision would be disapproved of and disagreed with by most of the people with whom I tend to share political views.” But he added that he “did not anticipate the fierceness of the response to it and the fury with which it would be received.” Nor did Abrams anticipate, he told me, that then-MSNBC commentator Keith Olbermann would call him a quisling.” [Olbermann’s full quote, recounted in Soul, is that Abrams “would go down in the history books as the quisling of freedom of freedom of speech in this country.”]
I asked Abrams whether, if the votes are there, Citizens United be overruled at some point or will the Justices feel bound by stare decisis? He tells me that it “almost depends how many years in the future you are looking. I’m confident that the four more liberal members of the Court, if empowered with an additional vote, would have been prepared to either overrule or significantly limit the scope of Citizens United. Indeed they tried to do so in the very next term.” While Abrams does not see Citizens United as being home free, at some point “a case of that magnitude will be better encased in the protective shield of stare decisis. But not yet.”
Abrams has probably been asked everything possible about Citizens United. Well, maybe not this: is it constitutionally protected to yell inside a move theater: “Citizens United is a terrible decision and it should be set on fire.” Abrams let out a hard laugh. But unlike some questions, that gave way to lengthy deliberation, he needed no time to tell me that such conduct would be constitutionally protected. But Abrams carved out an exception – doing it in the Supreme Court and literally putting a match to the decision.
Floyd Abrams’s Crystal Ball
In The Soul of the First Amendment Abrams looks into his First Amendment crystal ball. Not surprisingly he sees issues ahead surrounding the leaking of classified information, such as done by Julian Assange and Edward Snowden. And along those lines is the question how journalists should treat matters related to national security. Abrams puts it this way: “Having sweeping First Amendment rights does not begin to answer the question of how to use them. The question of when and what to publish and at what potential societal cost is not always an obvious one.”
Ironically, despite being the nation’s foremost First Amendment lawyer, Abrams doesn’t relish many more First Amendment decisions. “Let me put it this way,” he told me, “as a First Amendment advocate, I’m not looking to have the Supreme Court decide many new issues since I think that, for the most part, First Amendment law is expansive and rather easily citable already.”
But Abrams did share one case that he sees in the future. “I do think that we will be having a campus speech case one of these days come up to the Supreme Court. I do think that issues will presumably arise at a public university and the university will be arguing that they shouldn’t allow this speech or that speech because it is, at its core, inconsistent with the educational mission of the university.” That will be a blockbuster case. And something tells me that when it hits One First Street, N.E., Floyds Abrams will enter his appearance.
It was an honor to spend a half hour on the phone with the man who has been called Mr. First Amendment. Floyd Abrams even has the initials to prove it.
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Vol. 6 - Issue 6
July 12, 2017
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A few months back I visited Robert Morgenthau at his Midtown Manhattan office. The 97 year old served as district attorney for a staggering 35 years for the city that never sleeps. These days he clocks-in at Wachtell, Lipton, Rosen & Katz. Morgenthau has seen it all and is a library of stories. I was there to hear a few. I had high expectations. But I could have never imagined what awaited me.
Morgenthau served as U.S. Attorney for the Southern District of New York under President John F. Kennedy. The topic of Kennedy’s assassination came up and Morgenthau shared with me where he was on that day—having lunch with the president’s brother, Robert Kennedy, at Kennedy’s home in McLean, Virginia. The phone rang. The caller was FBI Director J. Edgar Hoover, telling Kennedy that the president had been shot. Shortly thereafter Hoover called back: “Jack’s dead.”
I was sitting three feet away from Morgenthau as he told me this. He did so matter-of-factly, no doubt having recounted the story many times over the past 50-plus years. But it was much different for me. A goose would have asked me where I got those bumps. I wondered if this was the greatest story I’d ever heard.
It has long been said that everyone can remember where they were when they heard the shocking news out of Dallas. Morgenthau’s location was breathtaking. It’s up there with that of Abraham Zapruder.
But even those not having tuna fish sandwiches and clam chowder with Bobby and Ethel Kennedy—Morgenthau’s memory is remarkable—have indelible memories of November 22, 1963. May 29th was JFK’s 100th birthday. With Morgenthau’s story tattooed on my brain, and the president’s historic birthday approaching, I set out to hear some of those memories. Some of the nation’s most celebrated lawyers shared with me where they were on the day that changed history.
Silicon Valley titan Larry Sonsini, chairman of Wilson Sonsini Goodrich & Rosati, has memories that are shaped by a close encounter with the president a year before his death. Sonsini was a One L at University of California, Berkeley School of Law and got the news from his car radio while driving away from campus. “I remember saying to myself, ‘But wait; he was just here’ as I recalled the president speaking at U.C.’s Charter Day in March 1962. At the moment of the terrible news, I saw his image and heard the echo of his voice as I remembered from attending his speech that Charter Day in Memorial Stadium on the Cal campus. The power of his presence that day (I had a front row seat) only increased the emotional shock I felt hearing of his death. The rest of the day was a stunned blur...and silence.”
Fred Fielding, White House counsel to Presidents George W. Bush and Ronald Reagan, tells a story with an ironic twist. He was, by happenstance, in the city where he would later work in the president’s former home. Fielding was in Washington’s Union Station. It was a stop-over on his way back to the University of Virginia Law School in Charlottesville, having been in New York for law firm interviews. Fielding recounts: “Having time to kill, I decided to go outside, as it was a beautiful sunny day. As I walked thru the station it was eerie; the only people in the station were in small groups huddled around radio and television sets. I walked outside of the station and looked up and saw the American flag was at half-staff. Rushing back inside I sidled up to one group at a newsstand, huddled by a radio, and heard ‘it was the same Chief Justice Warren who swore in John Kennedy as President ….’ I thought to myself ‘Chief Justice Warren must have died.’ It was then that a man rushed in to the station with a bundle of newspapers. Emblazoned in a glaring bold headline on The Washington Post was the message, ‘JFK Shot.’”
Carter Phillips, Sidley Austin chairman and U.S. Supreme Court frequent trier, with 80-plus arguments under his belt, reminds us that just two days after the assassination there was another monumental event that can invoke memories of whereabouts when the news arrived. Phillips told me that he was a sixth grader in Canton, Ohio, and got the news over the school’s public address system. He added, “I actually have a more vivid memory of Oswald being shot by Jack Ruby because I was at a restaurant across from the stadium where the Cleveland Browns were going to play and it was the first professional football game I was ever going to see in person. I was with my mom and the television in the restaurant was on and suddenly I see Ruby rush up, confront Oswald and shoot him in the stomach. I was pretty shocked and had a hard time getting over it that day. In fact, I have no idea whether the Browns won that game.” [Browns 27, Cowboys 17. Those were the days.]
Perhaps it’s not surprising that, with Kennedy killed on a Friday in the fall, renowned litigator and LegalZoom co-founder Robert Shapiro’s memories also trace back to America’s weekend sports obsession. “The night before, 10 weeks into my 21st birthday, I had attended a UCLA rally for the upcoming football game against U.S.C. on Saturday, a game that wouldn’t take place as scheduled. I had one too many beers and had missed my morning class. At first the news sounded like a fraternity prank and a bad one. It wasn’t possible that JFK had been shot. I put on my sweats and went to the den where a few of my ZBT brothers along with our cook Jessy were glued to the small black and white TV set. Dan Rather was on the air and reported that President Kennedy was at Parkland Memorial Hospital suffering a gunshot wound. Hopefully the surgery would be successful but moments later came the shocking news—the 35th President of the United States had died. Everyone was silent, shocked and tears were shed. At that moment I remember thinking that the world had changed. I was a big fan of our president and it was like a close family member had suddenly passed away. It was 50 years ago, a day that I will never forget.”
Susan Estrich, noted Quinn Emanuel lawyer, law professor, Fox News legal and political analyst and first woman president of the Harvard Law Review, also felt a personal connection to the President: “I was in Miss Waite's history class at the Glover school in Marblehead, Massachusetts. It came over the intercom. She started to cry. We were kids from Massachusetts. He was our president. We cried as we walked home.”
Like Morgenthau, Alan Dershowitz, the Felix Frankfurter Professor of Law, Emeritus at Harvard Law School, was also in a historic setting. “I was a law clerk on the Supreme Court,” he says, “who broke the news to the nine Justices who were in conference. The only television in the Supreme Court was in my office where I had brought it earlier to watch the World Series. All the justices watched Walter Cronkite on my 10-inch TV. The next night I drove Justice Goldberg to the White House to meet President Johnson.” Dershowitz recounts this story in more detail in his 2013 memoir “Taking the Stand,” including his decision to commit the unthinkable act of interrupting the Justices during their weekly conference.
Unlike Dershowitz, Chief Justice Nathan Hecht of the Texas Supreme Court was far from any power center when he got the news. But on that day, everyone was in the same state. Shock. “I was a ninth grader in Clovis, New Mexico, a small farming community where I grew up, 10 miles from Texas. I was manning a student-run concession stand outside the gym where snacks were sold during lunch to some 800 students and teachers to raise money for school activities. ‘Attention!’ the public address system blared. The din continued. ‘Attention!’ it insisted. ‘President Kennedy has been shot.’ Silence fell over the area. We all looked at one another. Teachers came through the halls. The school is closing. Buses are running. Go home. I rode the bus out to our farm. We were all worried. No one spoke. I walked into the kitchen. Papa had come in from the field. He and Mama were sitting at the table. When they said nothing, I knew the president was dead, and I cried.”
Ben Brafman, famed criminal defense lawyer to the high-profile, makes us realize that some people’s reactions to the news were shaped by their personal experiences with the past: “I remember exactly where I was. I was in an appetizing store in Crown Heights, Brooklyn, on the corner of Eastern Parkway and Kingston Avenue buying a loaf of Rye bread for my mom when the news came over the store radio. People began screaming and crying and I raced home with the terrible news. I can still remember my mother bursting into tears as she reached over me to double lock the door. As a Holocaust survivor whose parents were murdered at Auschwitz, she never got over her fear that her new family would be taken away as well and the news of Kennedy’s assassination imposed a special level of fear in the hearts of those who really understood war and murder and pure evil. For the next several days, our family like so many millions of others throughout the world sat glued to our TV sets and slept with our radios, not really sure if the world was coming to an end. As a kid, I knew that the world would never be the same ever again. The next time I felt exactly the same way was on the morning of Sept, 11, as I watched the second plane hit the Towers and then watched in horror as they came down. JFK and the Twin Towers [are] etched in my own mind together forever as pure acts of evil that have transformed the world.”
Frank Shorter’s reaction to the news was also framed in a historical context. The 1972 Olympic gold medal marathoner-turned-lawyer was in the locker room of the Mount Hermon School in the Berkshire Mountains of Western Massachusetts. The junior had skipped a mandatory Friday noon chapel service to add extra runs to his training schedule. “I never thought about the consequences of skipping chapel,” Shorter told me. He heard the news on the radio coming from the equipment manager’s cage: “‘President Kennedy had been shot!’ I felt empty, alone and vulnerable. For about 15 minutes I tried to visualize the circumstances as I heard the details being repeated over and over. I thought of how a year earlier I had also been at this isolated, serene place during the Cuban Missile Crisis. Then, I had listened to President Kennedy’s voice and now, once again, would recall the spoken words of his rationale as he explained his actions. Then, I would sometimes see the contrail of a high flying jet as it flew from North to South over the campus and actually hope it was one of ‘ours’ and not something from the Soviet Union. Now, the voice was gone.”
But for Miles & Stockbridge’s noted litigator Billy Martin, it wasn’t the past that came to mind on November 22, 1963, but the future. The long-time man-to-see in Washington for countless celebrities, politicians and sports figures, was a ninth grader “fascinated by [Kennedy’s] vision of Camelot and hopeful that this President would recognize the need for a change in the way people like me - African-American -- were viewed and treated in America. Martin was at school when it was announced that the president had been shot. “I was overcome by a sense of shock and confusion,” Martin said. “It was more a feeling of defeat - did his assassination signify an end to efforts to provide equal-opportunity to all? To a 14-year-old kid dreaming of those opportunities I was devastated. His death inspired me to give back to my country serving nearly 14 years as a Senior Attorney in the U.S. Department of Justice.”
For many, the unimaginable shock on November 22, 1963, came in two waves. Professor Arthur Miller was on the faculty of the University of Minnesota Law School in Minneapolis. He says: “A group of us had a tradition of going to the faculty club for lunch at 11:30 A.M., a common lunch hour in the upper-Midwest. (As an Easterner I thought it was uncivilized to eat that early, but collegiality dictated I go along.) We were on the serving line when someone burst out of the kitchen yelling that President Kennedy had been shot. We ate in a stunned and depressed silence hoping against hope that it wasn’t serious. The early reports were unclear about his condition. We finished quickly and hurried back to the law school where we learned he had died. It was all surreal—a bad dream we all prayed we would awake from.”
Judge Jack Weinstein, the legendary New York federal jurist, who is still going at it at 95, was in a position to become the center-piece of a hundred other peoples’ whereabouts-stories. He told me that he was County Attorney for Nassau County. For reasons of public safety, the information was provided to the police before it was announced to the public. The police called Weinstein for guidance. He called in his staff of a hundred, reported the news and told them, “‘I want each of you to go home and pray for our country. You’re dismissed for the day.’ And they all left crying.”
Oscar Goodman, the nation’s foremost mob lawyer-turned two-term Mayor of Las Vegas, makes us realize that, while the world truly did change on Nov. 22, 1963, one thing did not. Goodman was in an elevator in Philadelphia City Hall. He was clerking for the District Attorney’s office while attending University of Pennsylvania Law School. He said he “felt the world would never recover. A few days later when Jackie Kennedy stood with her children, as the caisson went rolling along, I saw that I was wrong, and America would remain great!”
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Vol. 6 - Issue 6
July 12, 2017
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Interviewing John Grisham for Coverage Opinions a couple of years ago was a huge thrill! As a lifelong fan, it was very exciting to meet him a couple of weeks back on this book tour – his first in 25 years. And John was a great sport to let me get some pictures with his Coverage Opinions interview.
My November 2015 interview with John Grisham here:
http://www.coverageopinions.info/Vol4Issue11/Declarations.html
Check out John Grisham’s latest thriller Camino Island -- currently #1 on The New York Times bestseller list. |
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Vol. 6, Iss. 6
July 12, 2017
Contest: Insurance Coverage Personalized License Plates
Just Enter And Get A Cool Coverage Opinions Pen (Whoa!)
Winners Get A Copy Of “Insurance Key Issues” – New 4th Edition
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Just enter and get a super cool Coverage Opinions pen. CO is growing-up. It now has swag! |
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I have done a bunch of contests in Coverage Opinions over the years. By far the most popular has been insurance coverage personalized license plates. It’s time to do it again.
Submit your idea for a personalized license plate – up to seven characters -- that clearly tells other drivers that you work in the insurance world -- and especially coverage. And a really good one, and most likely to win, is where the license plate says something that would make no sense to anyone who is not in the insurance or coverage world -- but make complete sense to someone who is.
Prizes: The first 50 people entering will get a super cool Coverage Opinions pen! And you thought your life was already complete. And the two best entries will also receive a copy of the 4th Edition of General Liability Insurance Coverage – Key Issues in Every State as soon as it’s published. The book will be so hot off the presses that it’ll include a warning label. [See separate article in this issue about the 4th Edition of “Insurance Key Issues” coming soon.]
Please send your entries – up to three -- by July 31. [And be sure to include your mailing address so I can send you the ab fab Coverage Opinions pen!]
Fine Print: Employees of Coverage Opinions and their immediate families are not eligible. No purchase necessary. Void where prohibited. If you think your entry was better than a winner, I didn’t. Sorry.
Here are some prior winners:
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Vol. 6, Iss. 6
July 12, 2017
Coming Soonish: 4th Edition Of “Insurance Key Issues”
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Work is well underway on the 4th Edition of General Liability Insurance Coverage – Key Issues In Every State. Julianne Garvey, a rising 3L at Villanova Law School, is spending the summer as a Research Assistant on the project. It’s tedious work but she is learning a lot and seems to be enjoying it (or she’s Meryl Steep). And she doesn’t seem to mind dealing with me every day (or she’s Mother Teresa).
On a serious note, we are striving for the book to be released early next year. That will be three years after the 3rd edition of Insurance Key Issues was published. When it comes to liability coverage cases, three years is a lifetime. The amount of new material in the 4th edition is going to be significant.
I’ll continue to provide updates on the publication date.
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Vol. 6, Iss. 6
July 12, 2017
Insurance For The Summer Road Trip
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Summer is here. And for many that means a road trip. Pack up the station wagon, put the ear-phone wearing, sulking kids in the back seat, and take off to see this great country. And, of course, the best road trip is one that includes stops at roadside curiosities. And the country is full of them – there’s the 55 foot Jolly Green Giant statue in Blue Earth, Minnesota and the 33 foot tall office chair in Anniston, Alabama. And a million more.
Most roadside curiosities seem innocent and safe enough. As far as I can tell from the pictures, the colossal Jolly Green Giant and massive office chair look pretty sturdy.
But, of course, as in all things in life, the unpredictable is always lurking around the corner. Thus, the purveyors of these quirky attractions need to be insured for all possible mishaps. If they are not convinced that this is necessary, consider all of these things that could go awry at some of America’s greatest roadside curiosities:
World’s largest ball of twine (Cawker City, Kansas): The world’s largest kitten shows up and eats two visitors from South Dakota.
World’s largest donut (Inglewood, California): A gale force wind causes the world’s largest sprinkle to come loose and injures a tourist from New Hampshire.
World’s largest chicken wing (1,037 pounds) (Madeira Beach, Florida): The onset of coronary artery disease begins after looking at it for five minutes.
Eight foot tall bronze statue of The Toilet Paper Hero of Hoover Dam (Boulder City, Nevada): Statue blows over and wipes out the nearby shopping center.
World’s largest ketchup bottle (77 feet) (Collinsville, Illinois): Two smart-aleck teens from Seattle disturb wetlands when attempting to build the world’s largest French fry on the site.
World’s largest thermometer (134 feet) (Baker, California): It falls over causing massive mercury contamination of the town’s aquifer.
Plaque marking the spot in Madison, Wisconsin where, in June 1977, Elvis Presley exited his limo and performed karate moves to stop two youths from beating another youth: Visitors take videos for Facebook, recreating the King’s karate kicks, and pull hamstrings.
World’s largest wooden nickel (San Antonio, Texas): While advertised as 13 feet, visitors arrive and discover that it is, in fact, the size of an ordinary wooden nickel. Sued for misrepresentation, the Wooden Nickel Museum (really) asserts the Don’t-take-any-wooden-nickels defense.
World’s largest charcoal grill (90 feet) (Magnolia, Arkansas): Father of five, wearing a “Kiss the Chef” apron, impales himself with the world’s largest skewer, attempting to grill the world’s largest steak kabob.
World’s largest spinach can one million gallons (Alma, Arkansas): World’s largest e-coli outbreak after an overzealous tour group cracks the can, attempting to lug it to Chester, Illinois, for a photo op with the world’s largest Popeye statue (6 feet).
World’s largest clothes pin (45 feet) (Philadelphia, Pennsylvania): Taxi driver is injured in a crash after several pairs of tattered boxer shorts break free from the pin and land on his windshield, obstructing his view. Area frat boys later claim that the dryer was broken in their dorm.
So have fun hitting the road and enjoying the monuments to the imagination and good fun of many people. Send a copy of yourself, standing in front of any of these curiosities, holding this issue of Coverage Opinions, and I will send you a Coverage Opinions coffee mug (next up on the swag to-do list). Believe me, I agree. It’s definitely not worth going out the way for, but if you happen to be in the neighborhood…. |
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That’s my time. I’m Randy Spencer. Contact Randy Spencer at
Randy.Spencer@coverageopinions.info |
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Vol. 6, Iss. 6
July 12, 2017
Encore: Randy Spencer’s Open Mic
Diet-Coke And Insurance Law Forever Changes Your Trip To The Supermarket
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Last week, in a case being closely watched by consumer groups and retailers, the Supreme Court of New Hampshire held that a six-pack of Diet-Coke counted as six items for purposes of the Fifteen Items or Fewer check-out lane in the supermarket. The New Hampshire high court noted that the issue before it had nothing whatsoever to do with insurance law. Nonetheless, the court looked for guidance to the massive body of case law nationally, addressing the “number of occurrences” issue that frequently arises under general liability policies.
After examining decisions that have addressed the two principal “number of occurrences” tests – “cause” and “effect” -- and closely weighing the two methods, the court concluded that the effect test was most consistent with the objectives of the Express Lane. Continuing to take guidance from these coverage cases, the court analogized its decision to those where a court holds that injury or damage was caused by “multiple occurrences.”
Turning to the six pack of Diet-Coke, and viewing the issue through a multiple occurrences lens, New Hampshire’s highest court observed that, because cans of Diet-Coke were available for purchase separately in the store, it was appropriate to treat each can as a separate item. Otherwise, the court concluded, a consumer who purchases six individual cans of Diet-Coke – which would clearly qualify as six items -- would be treated differently than one who purchases six cans that just happen to be held together with a plastic carrier. To further explain its decision, the court stated that a dozen eggs would qualify as one item. While there are twelve eggs in a carton, eggs are not sold individually. Therefore, it is appropriate to treat the carton as just one item.
The New Hampshire Supreme Court was not unmindful that its decision would result in fewer shoppers being able to take advantage of the Express Lane. However, the court responded that this was entirely consistent with the purpose of such lane – allowing some consumers, that meet defined criteria, to complete their purchase and exit the store quickly. Adopting a rule that results in too many consumers having access to the Express Lane would frustrate its very purpose. For this reason it was appropriate to broadly construe the definition of “item” when that term is used in the Fifteen Items or Fewer check-out lane.
In a footnote, the court acknowledged that its new rule may be challenging to apply in the context of fruit. For example, if cherries are for sale individually, then cherry purchasers would effectively be prevented from ever using the Express Lane. However, noting the importance of judicial restraint, the court concluded that it would not address shopping scenarios that were not before it.
The high court remanded the case to the trial court to enter a judgment for plaintiff that he was rightly entitled to give the defendant a dirty look for having, by his count, eighteen items on the belt in the Express Lane. |
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That’s my time. I’m Randy Spencer. Contact Randy Spencer at
Randy.Spencer@coverageopinions.info |
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Vol. 6, Iss. 6
July 12, 2017
If It Looks Like A Business And Acts Like A Business …
Cautionary Insurance Tales For Home-Based Entrepreneurs
Guest Author: Julianne Garvey, Villanova Law School, 3L
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In September 1985, Cody Susnik and his brother began regularly attending a day care run out of Loretta Donnelly’s home. Donnelly received payment to care for four or five children at a time, both on a part-time and full-time basis. While in the care of Donnelly, Cody was injured by another child, who apparently attempted to jump on the young boy. Cody suffered serious injuries. Cody’s parents brought suit against Donnelly, claiming that she was negligent in leaving the children unsupervised. Donnelly turned to her homeowner’s insurance for coverage. Not surprisingly, the insurer argued that the incident occurred during a “business-pursuit,” and, thus, was excluded by the homeowner’s policy. The court concluded that the day care was, in fact, a business, because it was (1) motivated by profit and (2) operated on a continuous basis. Therefore, based on this two-prong test to determine what is a business pursuit, no coverage was available.
The facts, arguments and outcome in the Kansas Court of Appeals’s 1989 decision in Susnik v. Western Indem. Co. are a familiar occurrence in the world of insurance claims, as providing day care services is a common home-based business.
Indeed, this situation is so frequent that some homeowner’s insurance companies have added specific exclusions to their policies to preclude coverage for home-based daycare services. |
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In 2013, Forbes reported that 52% of small businesses were home-based. In March 2016, the United States Census released the 2012 Survey of Business Owners, which showed that there are over 27.5 million home-based businesses being run throughout the country, a nearly 500,000 increase from the 2007 report.
With so many home-based business – and no doubt the internet has a lot to do with that -- courts frequently find themselves needing to apply the two-prong test to determine if the “business pursuits” exclusion is applicable. Specifically, was the activity regular and continuous, and was the activity motivated by profit? Some courts will take the profit motive a step further to decide if it was a significant source of income. Other courts have held that the significance of the profit is not necessary, just that the motivation to make one was there.
Providing day care is a common home-based business and it seems the kind of activity for which the “business pursuits” exclusion was designed. But with so many home-based businesses being carried on, of every shape and size, the potential applicability of the “business pursuits” exclusion is not always so cut and dry. However, despite the diversity of these home-based businesses, these cases share a common theme: when things go wrong with the operation of a home-based business, the mishap is often not covered by the entrepreneur’s homeowner’s policy. Consider the following cautionary insurance tales for all those who dream of starting their own business and doing it from home sweet home.
In Fitchburg Mut. Ins. Co. v. Diamond, a 1989 New Jersey federal court decision, an insured ran an antiques business from her home. A friend helped the insured load an antique cupboard into a van, to take to an antiques show. The friend apparently slipped and fell on the snowy, icy walkway of the insured’s home while in the process of assisting with the cupboard. The friend sued for her injuries and the claim was denied by the insurer, leaving a court to decide whether the injury arose from a business pursuit. The court applied the two-pronged test in determining that the business pursuits exclusion was applicable. The insured had a profit motive in her antiques business, despite the fact that she made only a modest amount of money. Likewise, the storing of the antiques in her home and the regular trips to antique shows to buy and sell her pieces satisfied the continuity or regular engagement standard. This case clearly demonstrates the hurdle that the business pursuits exclusion presents to home-based entrepreneurs that have mishaps. Not to mention why you should always shovel your walkway, especially when you are transporting large pieces of furniture!
A common argument made by insureds, in an attempt to defeat business-pursuits exclusions, is that the activity was more like a hobby than a business. This can be seen in the 2010 decision for the Tenth Circuit Court of Appeals. In Safeco Ins. Co. of Am. v. Hilderbrand, a high school student asked to have her senior pictures taken with a tiger at the animal sanctuary at which she volunteered. The sanctuary was operated on the insured’s farm. The young girl was attacked by the tiger during the photoshoot and died from her injuries. The insureds attempted to argue that the animal sanctuary was more of a hobby than a business pursuit. However, given the extensive training the insureds had in handling the animals, and the consistent maintenance and care of the sanctuary, the court found that this was more of a continuous pursuit and less of a sporadic hobby. Additionally, the sanctuary was intended to generate a profit. Whether or not a profit was actually made was irrelevant. It only mattered that the intent was there. This case serves as an example of a court taking a stricter approach to applying the business pursuits exclusions test.
While babysitting and daycare services are probably the most common business pursuits exclusion cases seen by the courts, it would be no surprise if cases involving the boarding of animals came in a close second. Housing exotic animals, like those in Hildebrand, is not an ordinary occurrence in the United States. However, boarding farm animals is. This leads to a greater potential for animal-related injuries to occur. This is exactly what happened in the 1997 Connecticut case of Pacific Indem. Ins. Co v. Aetna Cas. & Sur. Co.
The insureds owned a stable where people could pay to have their horses housed and cared for. A woman hired to care for the horses was kicked by one of them. The insurer refused to defend and indemnify the insureds, arguing that boarding horses was a business pursuit. The court again sided with the insurer, finding that the stables were run in order to make a profit and that the boarding of the horses was a continuous operation. Therefore, the business pursuits exclusion was applicable.
Dog breeding cases are also commonly seen in the context of the business pursuits exclusion. In State Auto Prop. & Cas. Ins. Co. v. Raynolds, a dog handler was bitten by a dog at the home of insureds, who bred and sold dogs for profit, as well as regularly attended dog shows. The dog handler sued for personal injury and, as expected, the insurers argued that the injury was excluded because it fell under a business pursuit. Unsurprisingly, the Supreme Court of South Carolina found that the insureds’ dog breeding was in fact a business pursuit, because it was a continuous operation and it was profit-motivated. The dogs were regularly bred, showed and sold for nearly fifteen years. Further, the insureds intended to make a profit from their dog breeding operation, even though a profit was never actually made. Despite not actually making a profit, the continuity and profit-motive standards were met, and thus the business pursuits exclusion applied. While each of these cases involves different business ideas, they all ultimately share one thing in common: they qualify as business pursuits and their mishaps were excluded from the insured’s homeowner’s policy. These cases demonstrate that the business pursuits exclusion does not discriminate, and virtually all business ideas could qualify.
There are exceptions to the business pursuits exclusion, which are argued by insureds as a means to maintain coverage of an incident. In these types of cases, there is usually no dispute that there is a business pursuit; however the insured will often argue that the injury occurred outside of the scope of the business, for example, not on the property or through a non-business related act. In some instances, courts are not inclined to accept this argument, as was the case in N. Sec. Ins. Co. v. Rosenthal. In Rosenthal, the insureds operated a couple’s therapy retreat from their home, which included room and board for paying guests. During a breakfast buffet, a guest fell through a trapped door leading to the laundry room. While it was not disputed that the retreat was a business, the insureds argued that falling through a trapdoor into the laundry room had no connection to the operation of the business, and thus fell under the “non-business pursuits exception”. The Supreme Court of Vermont, however, didn’t fall for it. After all, “[i]f [the court] were to adopt that logic, the business pursuits exclusion would seem to have no effect at all in any home-business case involving the condition of the premises.”
In some cases, the court will accept the argument that an incident fell outside of the business pursuits exclusion, evidenced by the Supreme Court of Wisconsin’s 2001 decision in Vandenberg v. Cont’l. Ins. Co. Here, an infant was accidentally suffocated to death by the 5-year old son of the insured. The insured operated a day care out of her home. While the care and supervision of other people’s children in a home day care business is clearly not covered in a homeowner’s insurance policy, the court in this case found that the care of one’s own child, in this case the insured supervising her 5-year old son, qualified as a “usual to non-business pursuits” exception. In other words, being a parent is not a business pursuit motivated by profit; it is an ongoing job that never stops.
With the rapid growth of home-based businesses, it is unlikely that business pursuits exclusion arguments will be slowing down anytime soon. Creativity and ambition are needed when it comes to starting up a new business. Some of the greatest business ideas in history started in a person’s home. But the lesson that every entrepreneur should learn from these cases is simple: make sure the business is insured. If it isn’t, then a great business idea could be over before it even begins.
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Vol. 6, Iss. 6
July 12, 2017
A-L-I Yi Yi: American Law Institute Postpones Final Vote
On The Liability Insurance Restatement
But That Hasn’t Stopped Six Courts From Already Citing It
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It had been expected by many that, after seven years of arduous work, the American Law Institute’s (ALI) “Restatement of the Law, Liability Insurance” would be approved in late May at the Institute’s annual meeting at the Ritz-Carlton Hotel in Washington, D.C. But, despite expectations, no white smoke bellowed from the luxury hotel’s chimney.
Instead, in a surprise announcement, the ALI stated that another year of work would take place on the project. The plan now is to present a final draft to the ALI membership at the next annual meeting in May 2018.
For those not closely following the ALI Liability Insurance Restatement, the project, and its process, can seem mysterious. This decision by the ALI, to delay the final vote, hardly solves this problem. So, what does all this mean?
First, while the ALI delayed the final vote on the Restatement, the membership still voted to approve all eleven of the new sections that were presented, as well as two revised sections. These sections included provisions on such topics as notice and reporting, allocation in long tail claims, known liabilities and bad faith. Thus, the entire text of the Restatement has been approved. However, the necessary final vote of the membership, on the Restatement, as a collective body of provisions, did not take place.
In an effort to work toward such a vote a year from now, the ALI will hold a meeting on September 7th, at its offices in Philadelphia, with the project’s Advisors and Members Consultative Group. [Disclosure – I am a member of the MCG.] Not since the Constitutional Convention in 1787 has there been such an important meeting here in Philadelphia. After that gathering, additional steps will take place to get the Restatement to next May’s vote.
As part of this process, changes to the text will be proposed and debated. Expect to see this debate become, well, spirited. The ALI Liability Insurance Restatement has been a contentious project since its inception in 2000. The insurance industry has generally felt that it offers more benefits for policyholders than insurers – in some cases adopting minority positions, and, hence, not being a “restatement” of the law. For the past several years the industry has mounted an aggressive effort to push back on some of the provisions in this category. They made some progress, but not enough to change their overall belief that the Restatement tilts the field in favor of policyholders. ALI, for its part, maintains that a Restatement is not simply a scorecard of the law, but must also consider various other factors, including trends.
Despite how “us versus them” the Restatement process has been, it reached Coke and Pepsi levels in the run-up to May’s annual meeting and its expected final vote. Motions seeking changes were filed. Insurance industry representatives and trade associations offered up white papers discussing the problems that the Restatement could cause. Supporters of the draft responded with papers of their own that the sky is not falling. Insurance legislators and regulators weighed in, stating that the Restatement vote should be delayed so that its impact on their interests could be considered. Surely all of this was at the heart of the ALI’s decision to delay the final vote.
There is little doubt that both sides are loaded for bear over the next year. This is probably the insurance industry’s last chance to chip away at some of the Restatement provisions to which it objects. Those on the policyholder-side will be looking to stand their ground.
Despite the ALI Liability Insurance Restatement having been in the oven for seven years, details of it (and, in some cases, its very existence) have not achieved wide-spread awareness in the insurance industry. Ironically, delaying the final vote on the ALI Insurance Restatement, and setting up an intense battle over the next year, may do more, in the short-term, to raise the project’s profile than if white smoke had hovered over the Ritz.
Despite The Liability Insurance Restatement Not Being “Final” Courts Are Already Citing It
The ALI’s delay of the final vote, on the Liability Insurance Restatement, may have created a belief in some that it remains on the sidelines for another year. But at least six courts have already cited it in opinions. So some judges are not waiting for any wax seal before considering its impact on matters before them.
Of the courts that have cited the ALI’s Liability Insurance Restatement, the one that best demonstrates its potential impact on coverage disputes is Selective Insurance Company of America v. Smiley Body Shop, Inc., 2017 U.S. Dist. LEXIS 81007 (S.D. Ind. May 26, 2017).
Here an Indiana federal court addressed an insurer’s right to reimbursement of defense costs. There was no Indiana authority and the court ultimately did not need to answer the question. But the court seemed skeptical that the insurer had a right of reimbursement. Then it added the following to further support its skepticism:
“Additionally, the Draft of Section 21 of the Restatement of the Law of Liability Insurance provides that ‘[u]nless otherwise stated in the insurance policy or otherwise agreed to by the insured, an insurer may not seek recoupment of defense costs from the insured, even when it is subsequently determined that the insurer did not have a duty to defend or pay defense costs.’ Restatement of the Law of Liability Insurance § 21 (Discussion Draft, to be considered by the members of the American Law Institute).”
So, while the Restatement may technically be non-final, if courts are starting to cite it, it has reached finality in some way.
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Vol. 6, Iss. 6
July 12, 2017
Must Read: The Most Ridiculous Argument I’ve Ever Seen Made For Coverage
(Believe Me – It’s Staggering)
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I’ve said this before. Part of the business of being a lawyer is having to handle less than ideal cases. All lawyers get bad cases. Counsel must play the hand they are dealt – even a pair of twos -- and their job is to make the most of it. But maybe there’s a limit. I have read umpteen thousands of coverage decisions over my career and have seen a lot of policyholder arguments for coverage that are, well, Hail Mary’s. But the argument put forth for coverage in Allstate Ins. Co. v. Walton, 2004 U.S. Dist. LEXIS 19582 (S.D. Ind. August 10, 2004) is the most ridiculous I’ve ever seen. Sometimes I make up outlandish coverage cases in Coverage Opinions. This one is real. I’m not clever enough to have made this one up.
Allstate v. Walton involved coverage for Kristi Walton, a woman who provided home day care services for children, for financial remuneration, out of her home. A tragedy struck when PT, one of the young children under Ms. Walton’s care, drowned in a swimming pool at her home.
Suit for wrongful death was filed by PT’s parents against Ms. Walton and her husband Richard. Allstate undertook the defense of Mr. and Mrs. Walton, pursuant to a reservation of rights, under a homeowner’s policy. Allstate filed an action seeking a determination that it did not owe coverage to the Waltons on the basis of the following Business Pursuits Exclusion:
“We do not cover bodily injury or property damage arising out of the past or present business activities of an insured person. We do cover the occasional or part-time business activities of an insured person who is a student under 21 years of age.”
“Business” was defined as a) any full or part-time activity of any kind engaged in for economic gain including the use of any part of any premises for such purposes. The providing of home day care services to other than an insured person or relative of an insured person for economic gain is also a business. However, the mutual exchange of home day care services is not considered a business[.]”
The court had no trouble concluding that Ms. Walton’s “home day care services were an activity engaged in for economic gain and thus satisfy the first part of the Policy’s definition of the term ‘business.’”
However, the court noted the home day care services exception in the exclusion and explained that “[b]y negative implication the provision of home day care services to an insured person or relative of an insured person is not considered a “business.”
So the question became whether PT was a relative of the Waltons. If so, coverage for home day care services would be available. The Policy did not define the term “relative.” Looking to dictionaries for guidance, the court concluded relative means a person connected by blood or marriage.
And the parents of PT argued that PT was, in fact, a “relative” of the Waltons. Get ready. Following the accident, a genealogy search determined that PT and the Waltons shared a common ancestor, namely King Henry II, Plantagenet. He was King of England from 1154–1189. Thus, the Waltons and PT are cousins, albeit separated by 95 degrees of kinship! [By comparison, children and their parents are one degree of kinship.]
Shockingly, the court was not convinced that, based on this super-neat fact, PT was a “relative” of the Waltons, at least for purposes of the Business Pursuits Exclusion:
“The Thompsons contend that the appropriate meaning of ‘relative’ is the common, everyday meaning. However, the court parts with the Thompsons’ view that the common, everyday meaning would include a person connected with another by blood who is separated by 95 degrees of kinship. There must be some limit to the common, everyday meaning of ‘relative.’ Even the most charitably and reasonably broad construction of the word ‘relative’ would not result in coverage under the Policy.”
The court added: “No court interpreting policy language should push the meaning of the language to absurd limits; yet, this is what is required in order to reach the conclusion that the ‘business pursuits’ exclusion is inapplicable in this case. Thus, the court concludes that the common, usual meaning of the term ‘relative’ cannot be stretched as far as would be necessary to bring PT within the meaning of that term as used in the home day care provision of the business pursuits exclusion. Would an ordinary policy holder of average intelligence expect that the Policy’s use of the word ‘relative’ included a person with a common ancestor who is separated by 95 degrees of kinship? The answer surely is ‘no.’”
As I said – I didn’t make this up. Because I couldn’t.
Yes, counsel must play the hand they are dealt. But sometimes you just have to push your cards into the center of the table.
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Vol. 6, Iss. 6
July 12, 2017
Editorial
“Whooo Are You?”: I Can See For Miles That It’s Time For ISO To Act
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It is not a state secret buried at Langley that insurers sometimes believe they are affording more coverage to an additional insured than appropriate. The situation often stems from the additional insured obtaining coverage for its own acts or omissions or acts or omissions that are not sufficiently tied to those of the named insured. And insurer frustration is often exacerbated when the premium received for the additional insured coverage is less than the cost of a medium latte.
Some insurers often drafted endorsements designed to provide what they believe to be the appropriate extent of additional insured coverage. Many of these insurers likely believed that the off the rack additional insured endorsements from ISO were not doing the trick. So they got out a pen and drafted couture provisions.
ISO got in the game in 2004 when it amended its principal additional insured endorsements to specify that, in general, an additional insured would only be covered for liability “caused in whole or in part” by the acts or omissions of the named insured. The goal was to avoid additional insureds being covered for their sole negligence, which some courts were doing based on additional insured endorsements that tied the scope of coverage for the additional injury to liability “arising out of” the named insured’s operations. How much of a difference this amendment has on additional insured coverage is a question for another day.
In 2013 ISO introduced more changes to its additional insured endorsements. Here too the amendments were designed to limit additional insured coverage. In general, under these endorsements, the scope and limits of liability of additional insured coverage are not to exceed what’s specified in the contract creating the obligation to name a party as an additional insured. Additionally, the extent of additional insured coverage is tied to what’s permitted by law.
But while ISO has taken steps, in some ways, to limit the scope of additional insured coverage, it has not reacted to court decisions that have, or potentially give, additional insureds the greatest gift of all – a policy with some significant exclusions eliminated. If insurers are not happy providing additional insured coverage for next to nothing in premium, what must they think of coverage for an additional insured that has fewer exclusions than those applicable to the actual purchaser of the policy, i.e., the named insured.
This situation can take place because ISO’s standard commercial general liability policy states that the terms “you” and “your” refer to the named insured. So if “you” and “your” do not refer to an additional insured, then some exclusions, including “your work” and “your product” and the owned property exclusion ((j)(1)), may not apply to additional insureds.
A Georgia federal court recently discussed the “you” and “your” issue in some detail. Employers Mutual Casualty Co. v. Shivam Trading, 2017 U.S. Dist. LEXIS 74490 (S.D. Ga. May 16, 2017) does not involve a “you”- or “your”-based exclusion. However, the decision, and the cases it cites, makes clear that the risk for insurers – of providing fewer exclusions to an additional insured than a named insured -- is a real one. Not to mention America First Credit Union v. Kier Construction Corporation, 2013 UT App 256 (Utah Ct. App. Oct. 24, 2013), which is not addressed in Shivam Trading, also demonstrates this risk.
I have never been one to knee-jerk that insurers or ISO need to go back to the drawing board every time a court interprets a policy provision other than intended. But there have now been enough decisions on the “you” and “your” issue to warrant an ISO response, especially given that ISO has not been shy about addressing the extent of additional insured coverage.
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Vol. 6, Iss. 6
July 12, 2017
Is Denying A Service Dog Entry Into A Restaurant A Covered “Wrongful Eviction?”
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A really good coverage case is when there are two schools of thought on an issue – one that favors the insurer and one that favors the insured – and the court is in the position of having to decide which camp to join. Think absolute pollution exclusion. Pre-tender defense costs. Insurability of punitive damages. And so many more.
That’s what Grand China Buffet v. State Auto Property & Casualty Company, No. 16-159 (N.D.W.V. May 26, 2017) is about. Scott Ullom alleged that he and his friend were refused entry into Grand China Buffet and Grill because he had a service dog. Despite advising the restaurant employee that the dog was not a pet but, rather, provided assistance, the employee still allegedly “frantically wave[d] both hands above his head and in front of his face, and yelled ‘the dog cannot come in, the dog cannot come in.’”
Ullom sued Grand China Buffet, under West Virginia statutes and constitutional laws, alleging that he has hearing and other physical impairments that require him to use a service dog, prosthetic foot and wheelchair. Ullom alleged emotional distress, embarrassment, and humiliation.
Grand China sought coverage from State Auto under its commercial general liability policy. State Auto initially undertook Grand China’s defense and then withdrew it. Grand China filed a declaratory judgment action. State Auto filed a motion for summary judgment.
The court had no trouble concluding that no coverage was owed to Grand China, under coverage A of the commercial general liability policy, because the Ullom complaint did not allege “bodily injury.” The court explained that “[i]n West Virginia, it is well-settled that purely mental or emotional harm that . . . lacks physical manifestation does not fall within a definition of ‘bodily injury,’ . . . which is limited to ‘bodily injury, sickness, or disease.’ . . . Here, the Subject Policy defines ‘bodily injury’ as ‘bodily injury, sickness or disease’. In light of clearly established West Virginia precedent, Ullom’s underlying claims for statutory violations, ‘emotional distress, embarrassment, [and] humiliation,’ without more, do not fall within this definition. Ullom simply has not alleged any physical manifestation of these purely mental or emotional harm[s].”
The more challenging, and interesting, issue was whether coverage was owed under the “personal and advertising injury” section of the commercial general liability policy, specifically, for the “wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor.”
The competing arguments of the parties were simple: To State Auto, “[b]ecause Ullom was not a tenant and had no possessory interest in the restaurant, the underlying complaint [did] not trigger coverage for ‘wrongful eviction.’” Grand China argued that “‘eviction’ is reasonably susceptible to more than one meaning, including ‘to force someone to leave a place,’ and would encompass Ullom’s allegations.”
Noting that West Virginia’s highest court has not squarely addressed the scope of “wrongful eviction,” for purposes of “personal and advertising injury” coverage, the Grand China court looked to dictionaries and cases from other jurisdictions, which went both ways. Some courts interpreted “wrongful eviction” narrowly, to “an individual’s possessory interest in real property,” and some broadly, to “the removal of a person who has an understood right to be in a place from which she is ultimately removed.”
On one hand, the court noted, the split of authority is a coin on the scale for a finding of ambiguity: “[T]he Supreme Court of Appeals has noted that a provision in an insurance policy may be deemed to be ambiguous if courts in other jurisdictions have interpreted the provision in different ways.”
However, the Grand China court also noted that “differing interpretations do not establish that the language at issue necessarily is ambiguous if a term’s ordinary meaning is otherwise clear.” And that’s the dictate the court used to keep going and hold that “the Subject Policy provides the clarifying language necessary to avoid ambiguity. Not every allegation of ‘eviction’ is a covered personal injury; rather, the Subject Policy provides coverage only for ‘wrongful eviction from . . . a room, dwelling or premises that a person occupies’. Thus, although if considered in isolation, ‘eviction’ may carry a number of possible meanings, the plain language of the Subject Policy clearly signals the requirement that Ullom be wrongly deprived of occupation.”
But the court noted that the complaint did not allege any possessory interest in Grand China that gave Ullom a right to occupy the restaurant. Rather, he simply alleged “that Grand China wrongfully denied him the right to be served with certain accommodations required by West Virginia law, namely the presence of his service dog.” Thus, the insurer’s motion for summary judgment was granted.
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Vol. 6, Iss. 6
July 12, 2017
Yahoo! Search For Invasion Of Privacy Coverage
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Coverage litigation over the meaning of invasion of privacy has been equator-hot over the past several years. It has mainly arisen in the context of junk faxes that allegedly violate the Telephone Consumer Protection Act. The issue has been whether invasion of privacy means violation of the right to seclusion, i.e., the right to be left alone, or violation of the right to secrecy, i.e., the right to keep private facts private. The cases are fairly similar. In each the court decides which of the two privacy camps it should join.
In Yahoo! Inc. v. National Union Fire Insurance Company, No. 17-447 (N.D. Cal. June 2, 2017), a California federal court recently addressed this privacy issue in the context of junk fax’s brother – junk texts.
Yahoo! was sued in several class actions for sending unsolicited text messages in violation of the TCPA. The internet giant sought coverage from National Union under several consecutive commercial general liability policies. Coverage litigation ensued.
The policies provided coverage for “personal and advertising injury.” Personal injury was defined to include “injury, including consequential ‘bodily injury’, arising out of one more of the following offenses: . . . (e) oral or written publication, in any manner, of material that violates a person’s right of privacy.”
The decision reads like a junk fax coverage case. The court started out by setting the stage, noting that “[c]ourts have identified two meanings for the right to privacy: (1) secrecy and (2) seclusion. The privacy right of secrecy involves the right to prevent disclosure of personal information to third parties. The privacy right of seclusion involves the right to be let alone. Invasion of the privacy right of secrecy involves the ‘content of communication,’ whereas invasion of the privacy right of seclusion involves means, manner, and method of communication. For example, a person who wants to conceal a criminal conviction from an employer asserts a claim for secrecy privacy. A person who wishes to prevent solicitors from calling on the telephone asserts a claim to the privacy right of seclusion.”
As in junk fax cases, the court, after setting out the two possible meanings of privacy, looked at the policy language and policy context to decide which one to adopt.
Looking at the policy language, the court focused on the word “publication” and stated that, for information to be made known or published, the information must be disclosed to a third party. But that is not what happened: “Here, Yahoo made the text messages known to the recipients, but did not make the content of the text messages known to third parties. It is the content of the material that violates a person’s right to privacy when that material is made known. . . .Here, the disputed provision therefore only plausibly covers injury caused by the disclosure of private content to third parties based on the word ‘publication’ in the provision. Thus, the disputed provision does not cover Yahoo’s alleged legal violations because Yahoo did not disclose the content of the material to third parties, but only to the underlying plaintiffs.”
The court also considered the language at issue in the context of its placement in the policy. In other words, as the saying goes, words can be defined by the company they keep: “The provision immediately before the disputed one – “oral or written publication, in any manner, of material that violates a person’s right of privacy” -- provides coverage for ‘oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products, or services.’ Libel or slander involves ‘a publication of defamatory content about someone to a third person.’ . . . That provision only provides coverage when content is disclosed to third parties. Because the disputed provision immediately follows the provision covering slander and libel, it is reasonable to infer that the disputed provision also provides coverage only when material is disclosed to third parties. This type of disclosure violates the privacy right of secrecy, not seclusion.” Again, because Yahoo! did not disclose the content of the material to third parties, sending the texts was not oral or written publication, in any manner, of material that violates a person’s right of privacy.”
In addition to these reasons, the court was also guided by existing California case law addressing the privacy issue – secrecy versus seclusion -- in the junk fax arena.
Lastly, despite the fact that the court listed six ways from Sunday why no coverage was owed, it added these parting words: “[B]ecause Yahoo’s claim for coverage could possibly be amended by the allegation of additional facts, or by other reasons why the court should not dismiss this case with prejudice, the Court Grants leave to amend.”
Based on the court’s decision, I couldn’t imagine what Yahoo! could possibly say in an amended complaint to bring its claim within coverage. The court gave Yahoo! until June 23 to file an amended complaint. I guess Yahoo! couldn’t either. It declined the court’s invitation.
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Vol. 6, Iss. 6
July 12, 2017
Dog Bite Coverage Case Teaches An Old Insurer A New Trick
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At the heart of many coverage cases is whether policy language has more than one meaning. It is far more unusual to see a coverage case turn on whether a question on an insurer’s application has more than one meaning, i.e., is it ambiguous? But that’s what the question was in Schultz v. Tilley, No. 15-P-1706 (Mass. Ct. App. May 18, 2017). And it arose in an interesting context.
Christopher Tilley obtained a homeowner’s policy for his residence in Peabody, Massachusetts. With the assistance of a customer service representative at an insurance agency, Tilley completed an application for a policy with Vermont Mutual, which has been around since 1828. Tilley responded “Yes” to the question, “Are there any animals or exotic pets kept on premises?” The application then stated “Note breed and bite history.” The employee of the agency noted, “American bull dog — no biting incidents.”
Edith Schultz was walking her two Yorkshire Terriers near Tilley’s home. Tilley’s dog, Bocephus, ran out and attacked and injured Schultz’s dogs. Schultz suffered a broken arm, a laceration to her face, and scrapes to her knees, elbows, and ankles. Tilley sought coverage from Vermont Mutual.
Vermont Mutual investigated and learned that Bocephus, on prior occasions, had bitten two other dogs prior to Tilley’s completion of the application. Bocephus bit a dog named Buddy who was walking near Tilley’s house. Bocephus also bit Bruno who was walking near Tilley’s house.
In a suit filed by Schultz, Vermont Mutual sought to void the policy on the basis that Tilley made a misrepresentation in his response to the “bite history” question on the application. The trial judge, after chewing on the issue, agreed, concluding that “biting history” is “unambiguous, with the general understanding of the word [biting] read to mean biting anything or anybody.”
On appeal, Schultz argued that there was no material misrepresentation because the “bite history” question on the application was ambiguous.
While most ambiguity determinations center around policy language, the court noted that it could also extend to policy applications: “[W]here a question on an application lends itself to more than one reasonable interpretation, an honest answer to one of those reasonable interpretations cannot be labeled a misrepresentation.”
So was there more than one reasonable interpretation of the “bite history” question and was Tilley’s answer to one of them honest? Yes and Yes the court concluded.
Tilley testified that he understood the question, as the agency employee asked it, to mean whether the animal has a history of biting humans. His negative response to that question was honest. The agency employee testified that her custom and practice was to inquire whether the animal was “aggressive” or had “had a biting incident” in responding to the question. An underwriting manager at Vermont Mutual testified that she interpreted the term to mean “bodily injury or property damage to someone else’s pet.” The judge “adopted a broad meaning advanced by none of the witnesses at the trial, namely that it should be read to mean a history of biting “anything or anybody.”
So four people weighed-in on the meaning of “bite history” and there were four different answers. With all these meanings being offered, the appeals court had no problem concluding that “bite history” was ambiguous: “Although we agree with the judge that a fair meaning of the language could be read to mean, literally, anything the animal has ever bitten, that view hardly seems reasonable in the context of insurance given the strong propensity of dogs to chew toys and other inanimate objects of little or no value. We understand the judge to have meant any living thing. However, we conclude that the language remains subject to multiple reasonable interpretations, as the trial testimony demonstrates. . . . [I]n our view, all of those interpretations are reasonable, in that they each would afford the insurer an assessment, at some level, of the risk associated with a given animal. . . . Because the language is ambiguous, we must afford the Tilleys, as the insureds, the benefit of the reasonable interpretation that is most favorable to them; namely, the one that limits the biting history to humans only. Because Christopher answered that question honestly, as it is undisputed that Bocephus had only bitten other dogs, Christopher’s response cannot be labeled a misrepresentation by Vermont Mutual.”
I think Schultz and Tilley caught a break here. Your dog biting another person’s dog is a big deal. The court noted that Buddy’s owner filed a police report and spoke with Peabody’s animal control officer. Buddy’s owner incurred a $200 vet bill, which Tilley voluntarily paid. It seems to me that a dog’s “bit history,” in the context of an insurance application, means dogs and people.
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Vol. 6, Iss. 6
July 12, 2017
Insurers Can Do Nothing And Expand The Employer’s Liability Exclusion
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Over the past few years insurers have been taking various affirmative steps, such as adding endorsements, to attempt to limit their exposure for bodily injury claims on construction sites (not to mention for property damage). But it can also be accomplished by doing nothing -- other than applying the terms of a standard CGL policy. In other words, even insurers that have taken no affirmative steps, to attempt to limit their exposure for construction site bodily injury claims, still very likely have the tools at hand to do so. Keep going. This needs some background. But it’s worth it.
One way that insurers have affirmatively attempted to limit their exposure for construction site BI claims has been to amend their CGL policy’s “employer’s liability” exclusion to preclude coverage for bodily injury to employees of “any insured” -- as opposed to the standard language, which applies to preclude coverage for employees of “the insured.” In this way, coverage may not be owed to general contractors, that are additional insureds under policies issued to subcontractors, for injuries to employees of the subcontractor.
This is a very common claim when there is a construction site injury. Since the amended exclusion precludes coverage for bodily injury to employees of “any insured,” no coverage is owed to the general contractor, even though the injured party is not an employee of the GC. In other words, it does not matter that the insured seeking coverage is not the employer of the injured party. The injured party is an employee of the named insured, which qualifies as “any insured.” There can be other variations of this scenario. And there are sometimes issues whether this interpretation can be supported when a policy has a separation of insureds provision.
Another tack insurers have taken has been to add exclusions that preclude coverage for an employee of any contractor at the site – period -- regardless of the employee’s relationship, or not, to a party seeking coverage.
Over the past couple of years some courts have demonstrated another method for insurers to limit their exposure for bodily injury claims on construction sites. However, its significance, unlike these other methods just described, is that it requires no changes to standard policy language. So those insurers that have made no changes to standard policy language, to attempt to limit their exposure for construction site BI claims, are not precluded from attempting to do so.
Now add Mid-Continent Casualty Co. v. Arpil & Sons LLC, No. 16-21341 (S.D. Fla. May 22, 2017) to the list of those courts that have gone down this road. At issue was coverage for a construction site bodily injury claim. Faith Deliverance Center was the owner of a property and hired Arpin & Sons to serve as general contractor. Lee Blue, an employee of FDC, was working on the project when he was electrocuted and seriously injured.
Putting aside some issue over the scope of Arpin’s work and worker’s compensation, Blue filed a negligence claim against Arpin. Arpin’s insurer, Mid-Continent Casualty, undertook Arpin’s defense under a reservation of rights, including on the basis of the Employer’s Liability Exclusion, which excluded coverage for “‘bodily injury’ to an employee of the insured arising out of and in the course of (a) employment by the insured; or (b) performing duties related to the conduct of the insured’s business.” (emphasis added).
Mid-Continent argued that the Employer’s Liability Exclusion precluded coverage for Arpin for a defense. And the court agreed. But how? The exclusion precludes coverage for “bodily injury” to an employee of the insured, and Blue was an employee of FDC. Therefore, he was not an employee of the insured, Arpin. Ordinarily, when an Employer’s Liability Exclusion precludes coverage for “bodily injury” to an employee of the insured, it is limited to employees of the insured seeking coverage.
Here’s the rub. Florida statutory law provides: “In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment.”
The court concluded that the Employer’s Liability Exclusion applied to Aprin’s “actual and statutory employees.” (emphasis in original). Following an analysis of the issue, the court held that “Arpin was the project’s general contractor and was, by extension, Blue’s statutory employer on the date of the incident.” Thus, the claim fell within the scope of the Employer’s Liability Exclusion.
There are other aspects of the decision that I omitted here in an effort to make the point as succinctly and clearly as possible.
What makes Arpin, and other “statutory employer” decisions like it, is that the Employers Liability Exclusion, contained in the standard ISO commercial general liability policy, precludes coverage for “bodily injury” to an employee of “the insured.” Thus, even those insurers that have made no efforts to expand the scope of their Employers Liability Exclusion still have a potential basis to do so.
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Interesting Pollution Exclusion Decision
It is reasonable to say that, under New York law, the pollution exclusion would not preclude coverage to an insured for bodily injury caused by residential lead paint exposure. But, as the New York Appellate Division shows in Matter of Midland Ins. Co., No. 4357N (N.Y. App. Div. June 22, 2017), not all lead paint situations are the same: “However, in those cases, the courts did not address damage caused by lead paint in conjunction with an acknowledged pollutant, and did not address the peculiarities of liability under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) (see 42 USC § 9607), pursuant to which the EPA sought recovery from claimant in this case. . . . In this case, not only did the damage result from different sources, i.e., lead emissions and lead paint, but, also, one source is excluded from coverage and the other is not. However, the damage resulting from either source is not readily divisible from the damage resulting from the other. The combined effect of the lead emissions and the lead paint was soil contamination - of the same soil. To the extent a particular area was contaminated solely by lead paint, it was not (and could not have been) included in the EPA’s remediation efforts (see 42 USC § 9604). Moreover, claimant would not have had to pay for any damage - including lead paint damage - if not for the accompanying pollution (see 42 USC § 9607). Thus, the entire claim is barred by the pollution exclusions.”
The Pro-Insurer Washington Anomaly
In the last issue of Coverage Opinions, Paul Rosner and Steve Soha, of Seattle’s Soha & Lang, P.C., tackled the My Hometown column and addressed the question: Is Washington really as bad for insurers as everyone says? Following a phenomenal piece, Paul and Steve concluded that, “unfortunately, yes, the coverage landscape for insurers in Washington is as bleak as reputed.” However, they also noted a curiosity. Despite Washington’s incredibly broad duty to defend standard, the Seattle duo had this to say: “[i]t is still the general rule in Washington that, when dealing with covered and non-covered claims, an insurer has a duty to defend only the covered claims, so long as it is able to establish a reasonable means of apportioning the defense costs. Waite v. Aetna Cas. & Sur. Co., 77 Wn.2d 850, 467 P.2d 847 (1970). However, the insurer has the difficult burden to carefully segregate between covered and non-covered defense costs. See Prudential Prop. & Cas. Ins. Co. v. Lawrence, 45 Wn. App. 111, 724 P.2d 418 (1986).”
Wow! An insurer’s ability to defend only covered claims – recognizing the apportionment challenge – is generally unheard of. Rather, the oft-cited rule is that, if a single claim triggers the duty the defend, the insurer has a duty to defend all claims. Coincidentally, this point that Paul and Steve made was just on display in Travelers Property Casualty Company of America v. Northwest Pipe Company, No. 17-5098 (W.D. Wash. June 22, 2017), where the court addressed an insurer’s obligation to defend a “mixed” lawsuit, being one with covered and uncovered claims.
The court stated this do a double-take – especially for Washington – conclusion: “Before the Court issues an order based on this finding, it requests that the parties submit supplemental briefing. The parties have not yet addressed how the Court should proceed in regards to the duty to defend when presented with a ‘mixed’ lawsuit such as this, comprised of both covered and uncovered claims. In some jurisdictions, such as California, "[i]f any claim alleged in a lawsuit could be potentially covered under the policy, the insurer is obligated to defend against all claims alleged, even if some of those claims could not even potentially be covered, and even if such non-covered claims predominate.” (citation omitted). However, at least one Washington decision strongly suggests that ‘mixed’ lawsuits do not require the insurer to defend the entire lawsuit if an ‘effective means exists for prorating the costs of defense between the claims for which the defendant insurer provided no coverage from those which it did cover.’ (citation omitted). In their supplemental briefing, the parties will address how the Court should tailor its final order, particularly in relation to the duty to defend, in light of its conclusion that the only claim conceivably covered by the policy is that for property damage to the circumferential welds.”
Well This Is Neat. Coverage Opinions Included in Xia Supreme Court Brief
There has been lots of chatter lately about the Washington Supreme Court’s recent decision in Xia v. ProBuilders Specialty Insurance Company, where the court held that, based on the “efficient proximate cause” rule, the pollution exclusion did not apply. The court determined that the efficient proximate cause of injuries was the negligent installation of a hot water heater. Because this was a covered occurrence, that set in motion a causal chain, that led to discharging toxic levels of carbon monoxide, being an excluded peril, the pollution exclusion was not applicable.
The insurer in Xia filed a motion for reconsideration. The motion was supported by an amicus brief from Property Casualty Insurers Association of America. PCIAA’s brief included, as an exhibit, Coverage Opinion’s May 1st article on the Xia decision, to make the point that the “Court’s application of the efficient proximate cause rule to liability insurance is unprecedented in American jurisprudence, and has quickly drawn both local and national attention and criticism.” [Other commentary was also included.] When you write a newsletter like this you always worry that nobody is reading it or it’s having no impact. So to see CO included in the Xia brief was satisfying.
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