BSCR Firm News/Blogs Feedhttps://www.bscr-law.com/?t=39&anc=366&format=xml&directive=0&stylesheet=rss&records=10en-us07 Mar 2021 00:00:00 -0800firmwisehttps://blogs.law.harvard.edu/tech/rssCourt Holds COVID-19 Government Closures Do Not Trigger Business Interruption Coveragehttps://www.bscr-law.com/?t=40&an=114101&format=xml&p=5258&stylesheet=blog06 Jan 2021Insurance Law Blog<p>A recent ruling from the U.S. District Court for the Eastern District of Michigan has provided more guidance in predicting how COVID-19 related losses and litigation will be handled.</p> <p>In <i>Turek Enterprises, Inc., d/b/a Alcona Chiropractic v. State Farm Mut. Auto. Ins. Co., et al</i>, the Court ruled that State Farm Mutual Automobile Insurance Co. did not have to cover a chiropractic office&rsquo;s losses alleged from government-ordered closures due to COVID-19. The Court held that the insured failed to allege physical loss and that the virus exclusion bars coverage.</p> <p>This class action lawsuit seeking business interruption coverage was denied because the entire case focused on the definition of &ldquo;direct physical loss;&rdquo; however, did not demonstrate any &ldquo;tangible damage to covered property&rdquo; that was required as a condition precedent to coverage.</p> <p>The chiropractor sued State Farm in June alleging the insurer wrongfully applied a virus exclusion to deny coverage. The insured argued the virus exclusion did not relate to the claimed losses, which were solely caused by government-closure orders. To support its position, the insured also argued COVID-19 was not present on its property, negating the &ldquo;virus&rdquo; related exclusion.</p> <p>In Judge Ludington&rsquo;s Order, the Court noted that even if the chiropractor alleged that the government-mandated closures were the cause of loss, &ldquo;closure orders&rdquo; were <i>in response</i> to curbing the spread of COVID-19 and the virus that causes it. Accordingly, the chiropractor&rsquo;s business losses were barred by the policy&rsquo;s virus exclusion. The chiropractor&rsquo;s position disregarded &ldquo;the anti-concurrent causation clause, which extend[ed] the virus exclusion to all losses where a virus is part of the causal chain.&rdquo;</p> <p>Plaintiff argued the exclusion applied only to decontamination costs and State Farm misrepresented that provision of the policy. In reviewing the applicable policy, Judge Ludington found that &ldquo;[b]y its terms, the policy does not limit the virus exclusion to contamination, and plaintiff has failed to show that the virus exclusion is ambiguous.&rdquo; &nbsp;Furthermore, &ldquo;[e]ven if defendants misrepresented the purpose and extent of the virus exclusion in 2006, the plain, unambiguous meaning of the virus exclusion today negates coverage.&rdquo;</p> <p>In another creative argument, Plaintiff argued it had experienced &ldquo;tangible&rdquo; damage because the business was suspended by government closure orders; therefore, the business necessarily incurred ongoing &ldquo;passive depreciation,&rdquo; instead of a direct physical loss. &nbsp;The &ldquo;passive depreciation&rdquo; damage argued that all business equipment was continuing to lose value based on age and non-use.&nbsp; The Court rebuffed this argument by reasoning &ldquo;[t]he plain meaning of direct physical loss to covered property requires that there be a loss to covered property, and not just any loss.&rdquo;</p> Ultimately, counsel and the plaintiff&rsquo;s bar are both becoming more creative looking for special policy terms which ambiguity could open the door to such an argument as pleaded in this matter. Carriers should be addressing each claim and litigated coverage file on the individual claim&rsquo;s separate and distinct terms, facts and application. No two COVID-19 claims are the same, and each coverage issue must be individually reviewed in order to fairly and accurately determine coverage and its application.&nbsp;https://www.bscr-law.com?t=39&anc=366&format=xml&directive=0&stylesheet=rss&records=10Single-Insurer MDLs Are Among Us - JPML Allows Centralization of COVID-19 Insurance Coverage Caseshttps://www.bscr-law.com/?t=40&an=114102&format=xml&p=5258&stylesheet=blog30 Dec 2020Insurance Law Blog<p>The U.S. Judicial Panel on Multidistrict Litigation initially ruled centralization was not appropriate for businesses seeking business interruption insurance coverage because of varying policy language. See our post <a href="https://www.bscr-law.com/?t=40&amp;an=111354&amp;format=xml&amp;stylesheet=blog&amp;p=5258">here.</a> &nbsp;At that time, more than 450 cases were pending in Federal Courts&mdash;now there are over 700.</p> <p>While the JPML rejected total centralization, in the same ruling the Panel suggested that the creation of smaller &ldquo;single-insurer&rdquo; MDLs could be efficient to centralize those actions. &nbsp;Cases argued against one insurer or insurance group were &ldquo;more likely to involve insurance policies utilizing the same language, endorsements, and exclusions&rdquo; that would make sharing common discovery and pretrial motion proceedings more efficient.</p> <p>Policyholders followed the JPML&rsquo;s suggestion, as there were 300 lawsuits against The Hartford, Cincinnati Insurance Co., Society Insurance Co., Travelers and various underwriters at Lloyd&rsquo;s of London that sought centralization into single carrier MDLs. &nbsp;The JPML had to decide whether to create five separate &ldquo;single-insurer&rdquo; MDLS to centralize all of the COVID-19 coverage actions against these specific carriers. &nbsp;On October 2, the JPML ruled that centralization was appropriate for cases against Society Insurance Co., but declined to centralize actions against The Hartford, Cincinnati Insurance Co., Travelers, and Lloyd&rsquo;s of London.</p> <p><b><i>Opponents of Centralization Argued Varying Policy Language and State Law Made MDL Inappropriate. </i></b></p> <p>The insurers argued to the JPML, as they had previously ruled, that the varying policy language would be inappropriate for centralization. &nbsp;More specifically, the insurers argued that business interruption policy language can vary even among the policies issued by the same insurance company.</p> <p>Additionally, Lloyd&rsquo;s underwriters argued that the phrase &ldquo;single-insurer MDL&rdquo; was a misnomer as they are not the same insurer, but rather forty separate insurance carriers selling various policies to business through the Lloyd&rsquo;s marketplace.</p> <p>Policyholders opposing centralization echoed the insurer&rsquo;s arguments about the policy language and focused their arguments on the differences among states&rsquo; laws interpreting the prerequisites for business interruption coverage. &nbsp;For example, the requirement that a business interruption loss stem from a &ldquo;direct physical loss of or damage to&rdquo; its property. &nbsp;A group of Chicago-area businesses argued that decisions in Illinois (and some other states) do not require a tangible alteration or damage to a property to be considered direct physical loss.</p> <p><b><i>Proponents of Centralization Argued COVID-19 Pandemic Itself Triggering their Losses Gave Rise to Common Factual Issues.</i></b></p> <p>The policyholders supporting centralization argued that the cases filed against the same or related insurers would give rise to numerous common and overlapping factual questions because they all related to the COVID-19 pandemic. &nbsp;Furthermore, the language of the policy was a standard form used by the respective insurer.</p> <p>For example, a Florida restaurant argued that Lloyd&rsquo;s underwriters commonly provided business interruption coverage on standard forms that are approved by the Insurance Services Office; therefore, they shared many common terms and a single court could determine &ldquo;in one stroke&rdquo; if the COVID-19 pandemic triggered standard terms in the policies, including the direct physical loss or damage requirement.</p> <p>The Florida restaurant also addressed the issue of any uncommon questions, e.g., whether or not state and/or municipal civil authority orders prohibited access to covered property. &nbsp;They argued the questions &ldquo;may turn to some extent on common issues, and the resolution of all common and uncommon questions by one judge will allow the just and expeditious resolution of all actions to the overall benefit of the parties.&rdquo;</p> <p>Another group of policyholders added that &ldquo;the sheer volume of similar cases across the country implicating common issues&rdquo; made centralization appropriate. &nbsp;They argued that an insurer &ldquo;consistently utilizes a small subset of template policy forms&rdquo; and has &ldquo;uniformly denied&rdquo; business interruption claims. &nbsp;Furthermore, &ldquo;[w]hether an insurance policy provides coverage cannot be separated from the factual predicate that gives rise to coverage in the first place. &nbsp;Here, the related actions all share the same or similar triggering events: the losses of business income occasioned by COVID19 and/or related stay-at-home orders.&rdquo;</p> <p><b><i>The JPML&rsquo;s Most Important Factor for Centralization was the Geographic Scope of Action</i></b></p> <p>What set Society&rsquo;s policies apart from the other insurers, were the &ldquo;defined geographical scope of these actions&rdquo; implicating the insurance laws of only six states.&nbsp;Judge Chang stated that any potential differences among the cases could be resolved with a number of pretrial techniques including state-specific tracks or a bellwether process.</p> <p>The JPML emphasized that centralization involving Hartford, Cincinnati, and Travelers would not promote efficient resolution because of the sheer number and geographic scope of the cases.&nbsp;Especially when many of the policyholder plaintiffs &ldquo;are on the brink of bankruptcy as a result of business lost due to the COVID-19 pandemic and the government closure orders.&rdquo;</p> <p>For Lloyd&rsquo;s underwriters, the JPML said that centralization was not appropriate because it was not a single insurance company but rather a group of several dozen distinct insurers with varying policies.&nbsp;&ldquo;The inclusion of non-standard and non-common forms and policy language would hinder the ability of the transferee court to organize the litigation and quickly reach the common factual and legal questions,&rdquo; the JPML wrote.</p> <p>Nevertheless, the JPML encouraged the insurers to engage in &ldquo;informal cooperation and coordination&rdquo; to be efficient and avoid duplication.</p> <p>Once again, we see creative arguments utilized successfully to support centralization. &nbsp;Regardless of whether or not an insurer uses standard forms, each claim is unique, and insurers must continue to approach all COVID-19 interruption claims, in addition to all claims, thoroughly and cautiously.&nbsp;</p>https://www.bscr-law.com?t=39&anc=366&format=xml&directive=0&stylesheet=rss&records=10Western District of Texas provides insureds with "out" to skirt federal jurisdiction in COVID-19 business interruption coverage caseshttps://www.bscr-law.com/?t=40&an=112275&format=xml&p=5258&stylesheet=blog20 Oct 2020Insurance Law Blog<p>Like many businesses during the COVID-19 pandemic, Texas dentist Louis Orsatti&rsquo;s practice suffered significant lost business income as a result of the local government&rsquo;s shelter-in-place order in the spring and early summer of 2020. And also like many other businesses, Orsatti made a claim on his practice&rsquo;s insurance policy issued by Allstate. Allstate assigned a claims adjuster, Blesssing Sefofo Wonyaku, who allegedly summarily denied Orsatti&rsquo;s claim without performing any kind of investigation whatsoever.</p> <p>Orsatti filed a bad faith suit in Texas state court against Allstate after his claim was denied, joining Wonyaku as a defendant. Allstate removed the case to the United States District Court for the Western District of Texas arguing that Wonyaku, a citizen of Texas, had been fraudulently joined solely for the purpose of defeating federal diversity of citizenship jurisdiction. Finding that a claim was properly asserted against Wonyaku, the federal magistrate judge recommended the case be remanded back to state court (as of the date of this posting, the district judge has neither accepted nor rejected the recommendation).</p> <p>Despite recognizing that many cases have held a claims adjuster cannot be individually liable for bad faith claims made against an insurer, the court here held that the allegations here implicated Wonyaku based on &ldquo;her conduct as an individual adjuster.&rdquo; Specifically, the court focused on Wonyaku&rsquo;s allegedly pre-textual, results-oriented investigation, her failure to request additional information from the insured, and her &ldquo;immediate&rdquo; issuance of a denial letter. Consequently, the court held the complaint asserted a valid cause of action against Wonyaku and the case was accordingly remanded for lack of subject matter jurisdiction. The case is <i>Orsatti v. Allstate Ins. Co.</i>, No. 5-20-CV-00840-FB-RBF, 2020 U.S. Dist. LEXIS 185935 (W.D. Tex. Oct. 7, 2020), and the magistrate&rsquo;s report and recommendation can be found <a href="https://www.govinfo.gov/content/pkg/USCOURTS-txwd-5_20-cv-00840/pdf/USCOURTS-txwd-5_20-cv-00840-0.pdf">here</a>. &nbsp;</p> <p>Policyholders may be tempted to stretch the <i>Orsatti</i> case to its limits to avoid federal jurisdiction when a non-diverse claims adjuster is involved. This may be especially true if the judicial panel on multidistrict litigation opts to create carrier-specific MDLs,<a href="file:///C:/Users/LJR/Desktop/Western%20District%20of%20Texas%20provides%20insureds%20with%20out%20to%20skirt%20federal%20jurisdiction%20in%20COVID-19%20business%20interruption%20insurance%20coverage%20cases.docx#_ftn1" name="_ftnref1" title="">[1]</a> since struggling business may be looking for some much-needed quick money rather than being bogged down in protracted MDL proceedings. This may be particularly worrisome in jurisdictions such as Missouri, where the waters get murky when it comes to an adjuster&rsquo;s personal liability in first-party claims. While Missouri generally bars such liability in third-party bad faith claims (<i>Shobe v. Kelly</i>, 279 S.W.3d 203 (Mo. App W.D. 2009)), first-party bad faith claims fall within the ambit of Missouri&rsquo;s vexatious refusal to pay statutes (RSMo &sect;&sect; 375.296 and 375.420) which generally displace other causes of action arising from an insurer&rsquo;s denial of coverage. On its face, the vexatious refusal statute only permits a suit to be filed &ldquo;against any insurance company,&rdquo; which would seem to preclude individual liability on the adjuster&rsquo;s part. However, some courts have recognized that despite the vexatious refusal statute&rsquo;s exclusivity, other torts may still be viable where they are not based strictly on the insurer&rsquo;s denial of coverage. In fact, United States District Court for the Eastern District of Missouri specifically held that conduct &ldquo;which may have occurred during the insurer&rsquo;s investigation or claims handling&rdquo; can support a cause of action against an individual adjuster independent from a vexatious refusal claim. (<i>Travelers Indem. Co. of Am. v. Holtzman Props., L.L.C.</i>, No. 4:08-CV-351 CAS, 2008 U.S. Dist. LEXIS 63966 (E.D. Mo. Aug. 21, 2008)). &nbsp;&nbsp;&nbsp;&nbsp;</p> <p>The <i>Orsatti</i> case provides another arrow in policyholders&rsquo; quivers to remain in state court by joining an individual adjuster as a defendant. It specifically brings deficiencies in claims handling to the forefront of the analysis, which prior Missouri precedent demonstrates may be sufficient to support an independent claim aside from a vexatious refusal claim against the carrier. &nbsp;</p> <p>The case also highlights the need not to be too quick to deny a COVID-related business interruption claim. While it may be tempting after reviewing dozens or hundreds of similar claims involving similar policy language to issue a form denial letter without giving it a second thought, <i>Orsatti</i> illustrates how this may expose the adjuster to personal liability and prevent coverage counsel from litigating in their preferred court.</p> <div><br clear="all" /> <hr align="left" size="1" width="33%" /> <div id="ftn1"> <p><a href="file:///C:/Users/LJR/Desktop/Western%20District%20of%20Texas%20provides%20insureds%20with%20out%20to%20skirt%20federal%20jurisdiction%20in%20COVID-19%20business%20interruption%20insurance%20coverage%20cases.docx#_ftnref1" name="_ftn1" title="">[1]</a> As of the date of this writing, requests to create five &ldquo;single-insurer&rdquo; MDLs were under advisement by the JMPL. The carriers in question are The Hartford, Cincinnati Insurance Co., Society Insurance Co., Travelers, and various underwriters at Lloyd&rsquo;s of London. A request to create a single MDL encompassing all carriers was previously denied, which was discussed in another post found <a href="https://www.bscr-law.com/?t=40&amp;an=111354&amp;format=xml&amp;stylesheet=blog&amp;p=5258">here</a>.</p> </div> </div>https://www.bscr-law.com?t=39&anc=366&format=xml&directive=0&stylesheet=rss&records=10Missouri Court of Appeals Upholds Limitations on Stacking of Uninsured Motorist Coveragehttps://www.bscr-law.com/?t=40&an=111817&format=xml&p=5258&stylesheet=blog23 Sep 2020Insurance Law Blog<p>In <i>Johnson v. State Farm Mutual Automobile Insurance Co.</i>, the Missouri Court of Appeals, Southern District, enforced insurance policy language to limit the extent of stacking of uninsured motorist coverage (&ldquo;UM&rdquo;) under multiple personal auto policies. The decision allows insurers with appropriate exclusionary language to limit &ldquo;stacking&rdquo; to the $25,000 limit of the Missouri Motor Vehicle Financial Responsibility Law (&ldquo;MVFRL&rdquo;) as to each additional vehicle insured that was not directly involved in the accident.</p> <p>Plaintiff Tim Johnson appealed the trial court&rsquo;s granting of summary judgment to State Farm, which limited UM stacking. The State Farm policies contained owned-vehicle exclusions with respect to the UM coverage that provided for no coverage in excess of the amount required by the MVFRL for an insured who sustains a bodily injury while &ldquo;occupying a motor vehicle owned by you <b>if it is not</b> <b><u>your car</u></b> or a newly acquired car.&rdquo; At issue on appeal was the definition of &ldquo;your car&rdquo; in the policy language and whether the owned-vehicle exclusion was applicable in this case.</p> <p>Johnson owned three vehicles, all of which were insured by State Farm under separate policies that included UM coverage. Each of the policies stated a UM limit of $100,000 per person, and included the above-referenced owned-vehicle exclusion which allowed the insurer to reduce the amount of UM coverage with respect to insured vehicles that were not directly involved in the collision to the amount required under Missouri&rsquo;s Financial Responsibility Law, or $25,000. Johnson was in one of his three insured vehicles when he was involved in a collision with an uninsured motorist. The insurer provided Johnson with the full limit of UM coverage pursuant to the policy on the vehicle he was driving, $100,000, and the minimum amount of UM coverage required by the MVFRLor &nbsp;on the other two policies, $25,000 per policy, pursuant to the policies&rsquo; owned-vehicle exclusion.</p> <p>Subsequently, Johnson sued State Farm claiming breach of contract and vexatious refusal to pay for failing to pay the maximum $100,000 UM policy limits stacked by each of &nbsp;his two insured vehicles that were not involved in the accident. Johnson moved for partial summary judgment arguing that the owned-vehicle exclusion did not apply, was ambiguous, and conflicted with public policy and Missouri law. State Farm filed a motion for summary judgment arguing that the owned-vehicle exclusion did apply and that its $25,000 payment per policy was proper in accordance with the policy&rsquo;s language and Missouri statutory requirements. The trial court granted State Farm&rsquo;s motion for summary judgment.</p> <p>On appeal, Johnson raised similar issues and the appellate court affirmed the lower court&rsquo;s decision to uphold the owned-vehicle exclusion, limiting the Plaintiff&rsquo;s recovery to $25,000 per policy for Johnson&rsquo;s additional insured vehicles that were not involved in the collision.</p> <p>In his first point on appeal, Johnson claimed that the owned-vehicle exclusion did not apply because the vehicle he was occupying was &ldquo;your car&rdquo; as listed on the Declarations Page in any of his three policies at the time of the collision. However, the policies&rsquo; Declarations Page listed only one vehicle under &ldquo;your car&rdquo; in each policy, and Johnson was only in one &ldquo;your car&rdquo; at the time of the crash. The Court, citing the Missouri Supreme Court&rsquo;s <i>Floyd-Tunnell v. Shelter Mutual Insurance Co.</i> 493 S.W.3d 215 (Mo. banc 2014), upheld the unambiguous policy language as written, finding that Johnson was not in a &ldquo;your car&rdquo; as defined by the policy&rsquo;s language for the two vehicles not involved in the accident and, therefore, the owned-vehicle exclusion applied on those two policies.</p> <p>Points two and three asserted that the trial court erred in granting summary judgment in the insurer&rsquo;s favor because of ambiguities in the policies that should be resolved in Johnson&rsquo;s favor. The Court ruled that both of Johnson&rsquo;s arguments were effectively foreclosed by <i>Floyd-Tunnel,</i> 493 S.W. 3d at 221, wherein the Missouri Supreme Court found similar policy language clear and unambiguous.&nbsp;</p> <p>In his final point on appeal, Johnson argued that the owned-vehicle exclusion reduced the amount of UM coverage available to the insured and was therefore void as against public policy and Missouri law. The court denied Johnson&rsquo;s point. State Farm provided Johnson with the full amount of UM coverage for the insured vehicle he was occupying during the collision, as well as the MVFRL- required amount of coverage on the other two policies, in accordance with the plain owned-vehicle exclusion language of the policies&rsquo; UM coverage.</p> The Court of Appeals decision in <i>Johnson</i> reaffirms the Missouri judiciary&rsquo;s commitment to upholding the plain meaning of insurance policy exclusions as written. Moving forward, insurers should consider checking the language of the owned-vehicle exclusions under their policies&rsquo; UM clauses and ensure that whatever language is used clearly indicates which vehicle the policy applies to and which vehicles qualify under the owned-vehicle exclusion.&nbsp;&nbsp;<br /> <br /> <em>* Hannah Chanin, Law Clerk in the St. Louis office of Baker Sterchi, assisted in the research and drafting of this post. Chanin is a 3L student at the Washington University St. Louis School of Law.</em>https://www.bscr-law.com?t=39&anc=366&format=xml&directive=0&stylesheet=rss&records=10Federal Court Denies Motion to Dismiss Action for COVID-19 Related Losses under an All-Risk Policyhttps://www.bscr-law.com/?t=40&an=111457&format=xml&p=5258&stylesheet=blog14 Sep 2020Insurance Law Blog<p>On August 12, 2020, the United States District Court for the Western District of Missouri, Southern Division, in <i>Studio 417, Inc., et al. v. The Cincinnati Insurance Company</i>, denied defendant Cincinnati Insurance Company&rsquo;s Motion to Dismiss Plaintiffs&rsquo; First Amended Complaint. Plaintiffs alleged losses due to COVID-19 and resulting from COVID-19 county Closure Orders in the Springfield and Kansas City metropolitan areas. Plaintiffs filed suit against Defendant after Defendant denied coverage for Plaintiffs&rsquo; COVID-19 related losses.</p> <p>Plaintiff Studio 417, Inc. operates hair salons in the Springfield, Missouri metropolitan area. The remaining plaintiffs own and operate full-service restaurants in the Kansas City metropolitan area. Plaintiffs purchased &ldquo;all-risk&rdquo; property insurance policies from Defendant. The policies provided payment for direct loss unless the loss was excluded or limited. Under the policies, a &ldquo;Covered Cause of Loss&rdquo; was defined as an &ldquo;accidental [direct] physical loss <i>or</i> accidental [direct] physical damage.&rdquo; None of the policies included any exclusion for losses caused by viruses or communicable diseases.</p> <p>Plaintiffs alleged that their businesses were rendered unusable by the presence of COVID-19 and the issuance of Closure Orders forcing them to either suspend or reduce their business, causing a direct physical loss or damage to their premises. Plaintiffs sought a declaratory judgment against Defendant and sued Defendant for breach of contract based on the following policy provisions: Business Income coverage; Extra Expense coverage; Dependent Property coverage; Civil Authority coverage; Extended Business Income coverage; Ingress and Egress coverage; and Sue and Labor coverage. Plaintiffs also sought class certification for 14 nationwide classes and a Missouri subclass for Defendant&rsquo;s Missouri policyholders that were denied coverage due to COVID-19 losses.</p> <p>Defendant filed its Motion to Dismiss primarily arguing that the policies only provide coverage for &ldquo;income tied to physical damage to property[.]&rdquo; Plaintiffs emphasized that the policy expressly covered for &ldquo;loss&rdquo; <i>or</i> &ldquo;damage&rdquo;, distinguishing the two terms for use of the disjunctive. Neither &ldquo;physical loss&rdquo; nor &ldquo;physical damage&rdquo; was defined by the policy.</p> <p>The Court found, based on the record, that Plaintiffs adequately stated a claim for direct physical loss, relying on the plain and ordinary meaning of the phrase. In so finding, the Court relied on other court cases that recognized a physical loss may occur when the property has been determined to be uninhabitable or unusable. The Court did, however, acknowledge that case law exists to support Defendant&rsquo;s proposition that physical damage is required to show a physical loss. However, the Court found that those cases were distinguishable from the present case in that the cases cited by Defendant were decided at the summary judgment stage and the Plaintiffs here adequately plead the existence of physical and active substances, whether on surfaces or in the air, to have plausibly met their burden. The Court denied Defendant&rsquo;s Motion to Dismiss in its entirety, but the Court made clear that it was not holding that physical loss would be found whenever a business suffers any economic harm, rather under the circumstances this case.</p> <p>Though Defendant&rsquo;s Motion to Dismiss was denied, the Court&rsquo;s ruling is not the final determination in this case on the issue of whether Plaintiffs&rsquo; COVID-19 losses will be covered by the policy. Here, the Court emphasized that to survive a Motion to Dismiss, Plaintiffs must have merely pled enough facts (which are accepted as true) to proceed to discovery. The Court found that they did. Defendant will likely take another bite at the apple and file a motion for summary judgment later in the case.</p>https://www.bscr-law.com?t=39&anc=366&format=xml&directive=0&stylesheet=rss&records=10One [Insurance] Policy Does Not Fit All - JPML Limits Centralization of COVID-19 Insurance Coverage Cases...At This Timehttps://www.bscr-law.com/?t=40&an=111354&format=xml&p=5258&stylesheet=blog02 Sep 2020Insurance Law Blog<p>Hundreds of businesses seeking centralization of litigation for insurance coverage for losses from the COVID-19 pandemic have to file their cases elsewhere.</p> <p>On August 12, 2020, in a much-anticipated ruling, The U.S. Judicial Panel on Multidistrict Litigation rejected two petitions to centralize hundreds of cases filed by the policyholders of businesses suffering losses from the Pandemic; however, the panel did indicate that centralization may certainly be appropriate for cases against single insurer policies.</p> <p>Attempts to centralize the COVID-19 cases date back to April, when two groups of policyholders asserted that the insurance coverage cases pending in numerous Federal Courts across the country were more suited as an MDL. At the time, there were fewer than twenty cases pending in Federal Courts. As of August 12, 2020, there are more than 450 with countless others anticipated in the coming year. Insurance companies were uniformly opposed to creation of any type of MDL; whereas, policyholders&rsquo; positions varied.</p> <p>Policyholders sought centralization in the Northern District of Illinois in Chicago, and in the Eastern District of Pennsylvania in Philadelphia, respectively. The policyholders argued the common fact issues included: whether government closure orders trigger coverage, what satisfies business interruption policies&rsquo; standard requirement of &ldquo;direct physical loss or damage&rdquo; to property, and whether any exclusions apply, (i.e., &ldquo;contamination&rdquo; and/or &ldquo;virus&rdquo; related losses.)</p> <p>Reasoning that the cases involved hundreds of insurers and a wide variety of different policy forms, the JPML found that the movants actually presented very few common questions of fact, and such few facts were outweighed by the efficiency challenges of centralizing the litigation across an entire insurance industry. The panel found that even smaller regional or state-based MDLs would suffer from the same common fact issues, because no two policies are necessarily identical and each claim (while similar) will necessarily have different facts.</p> <p>Ultimately, the JPML ruled that an industry wide multidistrict litigation would &ldquo;not promote a quick resolution&rdquo; of cases where &ldquo;time is of the essence.&rdquo;</p> <p>Pivoting, the JPML did suggest that the creation of smaller &ldquo;single-insurer&rdquo; MDLs could be efficient to centralize those actions. They found that cases argued against one insurer or insurance group were &ldquo;more likely to involve insurance policies utilizing the same language, endorsements, and exclusions&rdquo; that would make sharing common discovery and pretrial motion proceedings more efficient.</p> <p>Attorneys sought centralization hoping that some procedural mechanism would be found to prevent the chaos. Ultimately, maintaining separate and distinct claims and cases will allow carriers to better address individual cases and claims handling on a much smaller, more controlled scale.</p> <p>Carriers should continue to thoroughly and cautiously approach all claims, including COVID-19 interruption claims.&nbsp;<em><br /> </em></p> <p><i>* Kelly M. &ldquo;Koki&rdquo; Sabat&eacute;s assisted in the research and drafting of this post. Sabat&eacute;s earned her J.D. from the University of Missouri-Columbia this Spring and is a current&nbsp;candidate for admission to the Missouri Bar.</i></p>https://www.bscr-law.com?t=39&anc=366&format=xml&directive=0&stylesheet=rss&records=10Court Reaffirms Reach of Vexatious Refusal to Pay Statutehttps://www.bscr-law.com/?t=40&an=110943&format=xml&p=5258&stylesheet=blog10 Aug 2020Insurance Law Blog<p><span data-preserver-spaces="true">On June 26, 2011, Farzad Qureshi was rear-ended by a hit and run driver while traveling westbound on Interstate 270 in Ferguson, Missouri. Mr. Qureshi filed a claim with his insurance company, American Family, the following day reporting back, neck and head injuries. He provided American Family the license plate number of the other driver, but they could not locate the driver or the owner. Thereafter, without advising him about his Uninsured Motorists (&ldquo;UM&rdquo;) benefits, American Family told Mr. Qureshi it would be closing his file.</span></p> <p><span data-preserver-spaces="true">Nevertheless, Mr. Qureshi repeatedly updated American Family regarding his treatment, instead of accepting the claim denial. And, after treating for years and receiving a surgery recommendation estimated at approximately $200,000, he made a UM policy limits demand through his attorney for $75,000. Ultimately, after being provided all his medical and employment records, American Family made a $20,000 counteroffer, which Mr. Qureshi rejected as insufficient. Thereafter, he filed suit against American Family for (1) breaching the UM provision of his insurance policy and (2) vexatious refusal to pay pursuant to &sect;375.420, RSMo., asserting that American Family, without reasonable cause or excuse, refused to pay him the available UM limits.</span></p> <p><span data-preserver-spaces="true">After a three-day jury trial, the court entered judgment on the jury&rsquo;s verdict in favor of Mr. Qureshi for $75,000 on his UM claim, $18,000 in penalties on his &sect;375.420 vexatious refusal to pay the claim, in addition to awarding $96,828 in attorney&rsquo;s fees. American Family appealed.</span></p> <p><span data-preserver-spaces="true">On appeal in the Missouri Court of Appeals, Eastern District, American Family claimed there was insufficient evidence to support the jury&rsquo;s finding of vexatious refusal to pay under &sect; 375.420. American Family made evidentiary challenges stating that: (1) the trial court erred in admitting its corporate representative&rsquo;s testimony (2) the trial court erred in admitting evidence of its coverage limits of the policies and the settlement offers and demands exchanged between Mr. Qureshi and American Family while the suit was pending, and (3) the trial court erred in permitting Mr. Qureshi&rsquo;s expert witness to opine that American Family vexatiously handled Qureshi&rsquo;s UM claim.</span></p> <p><span data-preserver-spaces="true">The Court of Appeals affirmed the trial court judgment in Mr. Qureshi&rsquo;s favor finding that when Mr. Qureshi made reasonable demands during settlement negotiations, his demands went unanswered by American Family, and ultimately resulted in a low-ball settlement offer. Unfortunately for American Family, its refusal to pay or offer a reasonable amount during settlement negotiations was presented to the jury and admitted into evidence.</span></p> <p>The appellate court reiterated the breadth of &sect;375.420 noting that the evidence that American Family sought to omit from trial was admissible to prove vexatious refusal to pay under &sect;375.420. In other words, &sect;375.420 allows a jury to consider all evidence, testimony, circumstances and facts that an insurer had up <em>until</em>&nbsp;trial for purposes of determining whether an insurer accepted reasonably in denying or failing to pay a claim. Under &sect;375.420&rsquo;s standards, the jury need only find (a) that Mr. Qureshi had an insurance policy with American Family, (b) that American Family refused to pay his losses, and (c) that American Family&rsquo;s refusal was without reasonable cause or excuse.</p> <p><span data-preserver-spaces="true">In three other ancillary issues, the court held that the excerpts of deposition testimony of two claims adjusters of American Family who were assigned to Mr. Qureshi&rsquo;s claim were properly admitted into evidence to show vexatious refusal to pay citing Missouri law, which allows depositions to be used &ldquo;for any purpose.&rdquo; Moreover, the court decided that American Family&rsquo;s low settlement offer, and Mr. Qureshi&rsquo;s settlement demands, were properly admitted into evidence to show vexatious refusal to pay, a clear exception to the general rule that evidence of settlement negotiations are not admissible at trial.</span></p> <p><span data-preserver-spaces="true">Finally, the court confirmed that both the policy limits of UM coverage in his American Family policy and Mr. Qureshi&rsquo;s expert&rsquo;s testimony regarding American Family&rsquo;s actions were properly admitted into evidence to show vexatious refusal to pay.</span></p> <p><em>Qureshi</em>&nbsp;stands as a cautionary tale to insurers that their investigations into and evaluations of claims must be fair, thorough and reasonable. Otherwise, &sect;375.420 not only allows for damages and penalties but also attorney&rsquo;s fees, which will almost assuredly be approved where the insured is successful.</p> <p><em>* Kameron Fleming, Summer Law Clerk in the St. Louis office of Baker Sterchi, assisted in the research and drafting of this post. Fleming is a rising 3L student at the Washington University St. Louis School of Law.</em></p>https://www.bscr-law.com?t=39&anc=366&format=xml&directive=0&stylesheet=rss&records=10Insurance Claims in the time of COVID-19https://www.bscr-law.com/?t=40&an=108274&format=xml&p=5258&stylesheet=blog20 Apr 2020Insurance Law Blog<p>Business interruption insurance is a hot topic in insurance coverage law. Most policies afford coverage for lost income only if the business has sustained &ldquo;property damage.&rdquo;&nbsp;Property damage is typically defined to mean direct physical injury to tangible property.&nbsp;Policyholders seeking to obtain coverage for COVID-19 stay-home orders may seek to leverage a recent Pennsylvania Supreme Court decision in a case not related to insurance to advance the argument that COVID-19, and/or governmental stay-home orders, has caused &ldquo;property damage.&rdquo;&nbsp;In that case, the Pennsylvania Supreme Court found that any location, including an individual business, is within a disaster area.&nbsp;We expect policyholders to argue that their business have, thus, arguably sustained &ldquo;property damage,&rdquo; triggering their coverage.&nbsp;</p> <p>In <i>Friends of DeVito, et al. v. Tom Wolf, Governor, et al.</i> 2020 WL 1847100 (PA, April 13, 2020), the Pennsylvania Supreme Court shot down a lawsuit challenging Gov. Tom Wolf&rsquo;s authority under state law to order &ldquo;non-life-sustaining&rdquo; businesses to shut down as a means of reducing the spread of COVID-19.&nbsp;The challengers in the case included Republican state legislative candidate, a public golf course, and a licensed realtor.&nbsp;They all argued that Gov. Wolf lacked authority to issue his Executive Order because the COVID-19 pandemic did not fall under the list of natural disasters outlined in the State&rsquo;s emergency code.</p> <p>The Pennsylvania Emergency Code defines &ldquo;natural disaster&rdquo; as:</p> <p style="margin-left: 40px;">Any hurricane, tornado, storm, flood, high water, wind-driven water, tidal wave, earthquake, landslide, mudslide, snowstorm, drought, fire, explosion or other catastrophe which results in substantial damage to property, hardship, suffering or possible loss of life.</p> <p>While this code points to specific disasters (i.e., hurricane, tornado, storm etc.&hellip;), it also includes a catchall phrase for any &ldquo;other catastrophe which results in <b>substantial damage to property</b>, hardship, suffering or possible loss of life.&rdquo;</p> <p>The challengers argued that pandemics could not be classified as a &ldquo;natural disaster&rdquo; under this code because they are too dissimilar to the natural disasters specifically listed.&nbsp;However, the Pennsylvania Supreme Court disagreed, noting that there was no commonality among the listed natural disaster in the code as some were weather-related and others, were not.</p> <p>Most importantly, and the interesting language we are tracking, the Pennsylvania Supreme Court went on to hold that COVID-19 is a &ldquo;natural disaster&rdquo; because it &ldquo;results in substantial damage to property, hardship, suffering or possible loss of life.&rdquo;&nbsp;Because the virus is spread from person-to-person contact, has an incubation period of up to fourteen days and can live on surfaces for up to four days, any location, including an individual business, is within a disaster area and is thus damaged.&nbsp;Additionally, the Pennsylvania Supreme Court rejected the argument that the actual presence of the disease at a specific location was required before it could be shutdown, thus holding that all properties were damaged because of the manner in which the disease spreads.&nbsp;This could have implications in policy interpretation regarding physical damage.</p> <p>In enforcing the governor&rsquo;s authority, the court held that the &ldquo;COVID-19 pandemic is, by all definitions, a natural disaster and a catastrophe of massive proportions.&rdquo;&nbsp;We expect that policyholders may argue that the Pennsylvania Executive Order, like many other State&rsquo;s orders, is a declaration that business property has been damaged and is unsafe due to the Coronavirus.&nbsp;Because policyholders have the burden of proving that a loss is within a policy&rsquo;s insuring agreement, we expect to see a multitude of approaches to try to bring COVID-19 business disruptions within the ambit of &ldquo;property damage,&rdquo; and the Pennsylvania Supreme Court, while addressing right-to-assemble claims, may have provided one argument that we could see advanced in the skirmishes over coverage for business interruption losses.</p> <p>It should be noted that Pennsylvania, New York, Massachusetts, Ohio, and New Jersey have proposed legislation prohibiting insurers from denying business interruption claims for losses caused by COVID-19 to small business in their respective states.&nbsp;However, Congress is also considering legislation that would cap the insurance industry&rsquo;s exposure to COVID-19 pandemic claims.&nbsp;We will continue to monitor this ever changing, fluid situation.</p>https://www.bscr-law.com?t=39&anc=366&format=xml&directive=0&stylesheet=rss&records=10Illinois Appellate Court Finds Insurer Owes Duty to Defend Biometric Lawsuithttps://www.bscr-law.com/?t=40&an=107271&format=xml&p=5258&stylesheet=blog30 Mar 2020Insurance Law Blog<p>In what is likely to be one of many court rulings to come regarding the scope of an insurer&rsquo;s duty to defend an insured in a biometric privacy lawsuit, the Illinois First District Court of Appeals recently weighed in on this issue. In <i>West Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc.</i>, 2020 IL App (1st) 191834, the court determined that West Bend Mutual Insurance Company owed a duty to defend its insured in an underlying lawsuit filed under the Illinois Biometric Information Privacy Act (&ldquo;BIPA&rdquo;).&nbsp;The complete opinion can be found <a href="https://courts.illinois.gov/Opinions/AppellateCourt/2020/1stDistrict/1191834.pdf">here</a>.&nbsp;</p> <p>In that case, Krishna, a franchisee of L.A. Tan Enterprises, was sued for allegedly violating BIPA.&nbsp;According to the underlying complaint, Krishna&rsquo;s customers were required to have their fingerprints scanned to verify their identification.&nbsp;The plaintiff further alleged that after having her fingerprints scanned by Krishna, the company failed to provide her with, or obtain, a written release allowing Krishna to disclose her biometric data to any third party.&nbsp;She claimed that Krishna disclosed her biometric information to a third-party vendor without her consent.</p> <p>Krishna sought coverage from West Bend for the lawsuit under two insurance policies West Bend had issued to Krishna.&nbsp;West Bend defended Krishna in the underlying lawsuit pursuant to a reservation of rights.&nbsp;Subsequently, West Bend filed a declaratory judgment action seeking a declaration that it owed no duty to defend or indemnify Krishna in the underlying lawsuit.&nbsp;West Bend alleged that the underlying lawsuit did not trigger coverage because the plaintiff&rsquo;s underlying allegations did not describe a &ldquo;personal injury,&rdquo; her allegations did not implicate a data compromise endorsement contained in one of the policies, and coverage was barred by the policies&rsquo; violation of statutes exclusion.&nbsp;In response, Krishna filed a counterclaim, arguing that it was entitled to coverage in the underlying lawsuit and damages under Section 155 of the Insurance Code for vexatious and unreasonable delay in providing coverage.&nbsp;Ultimately, the trial court granted Krishna&rsquo;s motion for summary judgment in part, concluding that West Bend owed a duty to defend Krishna in the underlying lawsuit, but denying the section of the motion seeking damages under Section 155.</p> <p>On appeal, the court first examined whether the underlying complaint allegations were encompassed by the policies&rsquo; definition of &ldquo;personal injury.&rdquo;&nbsp;The policies indicated that West Bend would pay &ldquo;those sums that [Krishna] becomes legally obligated to pay as damages because of *** &lsquo;personal injury&rsquo;&nbsp;***&rdquo; and that West Bend would have a duty to defend Krishna against &ldquo;any &lsquo;suit&rsquo; seeking those damages.&rdquo;&nbsp;The policies defined &ldquo;personal injury&rdquo; to include any injury arising out of &ldquo;[o]ral or written publication of material that violates a person&rsquo;s right of privacy.&rdquo;&nbsp;Krishna argued that the plaintiff in the underlying lawsuit alleged an injury arising from publication because she claimed that Krishna violated BIPA by providing her fingerprint data to a third-party vendor.&nbsp;West Bend argued that publication required communication of information to the public at large, not just to a single third-party.&nbsp;</p> <p>Because the policies did not define the term &ldquo;publication,&rdquo; the court gave the term its &ldquo;plain, ordinary, and popular meaning.&rdquo;&nbsp;Relying on guidance from the Illinois Second District Appellate Court&rsquo;s holding in <i>Valley Forge Ins. Co. v. Swiderski Elecs., Inc.</i>, 359 Ill. App. 3d 872 (2d Dist. 2005), the Oxford English Dictionary, and Black&rsquo;s Law Dictionary, the court concluded that the term publication includes both the broad sharing of information to multiple recipients and a more limited sharing with a single third-party.&nbsp;According to the court, had West Bend intended for the term to apply only to communication of information to a large group of people, it could have explicitly defined it as such in its policies.&nbsp;</p> <p>West Bend further argued that the policies&rsquo; violation of statutes exclusion applied to prohibit coverage.&nbsp;That exclusion indicated that coverage did not apply to &ldquo;*** &rsquo;personal injury&rsquo; *** arising directly or indirectly out of any act or omission that violates or is alleged to violate:</p> <ol> <li>The Telephone Consumer Protection Act (TCPA) ***</li> <li>The CAN-SPAM ACT of 2003 ***</li> <li>Any statute, ordinance or regulation *** that prohibits or limits the sending, transmitting, communicating or distribution of material or information.&rdquo; &nbsp;</li> </ol> <p>According to West Bend, the underlying lawsuit alleged a violation of BIPA, a statute it characterized as prohibiting or limiting the sending of material or information, namely an individual&rsquo;s biometric information or identifier.&nbsp;Section 14/15(d) of BIPA expressly provides that &ldquo;[n]o private entity in possession of a biometric identifier or biometric information may disclose, redisclose, or otherwise disseminate a person&rsquo;s or a customer&rsquo;s biometric identifier or biometric information&rdquo; unless at least one of four conditions is met.&nbsp;</p> <p>In rejecting this argument, the court cited the full title of the policies&rsquo; exclusion, &ldquo;Violation of Statutes That Govern E-Mails, Fax, Phone Calls or Other Method of Sending Material or Information,&rdquo; as evidence that the exclusion applied only to statutes that govern certain methods of communication, not to statutes that limit the sending or sharing of information.&nbsp;The text of the exclusion also expressly referred to certain statutes &ndash; TCPA and CAN-SPAM &ndash; that regulate certain methods of communication.&nbsp;Based upon the exclusion&rsquo;s title and specific references to TCPA and CAN-SPAM, the court reasoned that the final, &ldquo;catchall&rdquo; provision of the exclusion was meant to encompass any state or local statutes, rules, or ordinances that, like the TCPA and CAN-SPAM, regulated methods of communication. &nbsp;Based upon this interpretation of the exclusion, the court determined that it did not apply to bar coverage for the underlying lawsuit.&nbsp;According to the court, BIPA does not regulate methods of communication, but rather, regulates the collection, use, safeguarding, handling, storage, retention, and destruction of biometric identifiers and information.&nbsp;740 ILCS 14/5(g).</p> <p>Because the court found that the underlying complaint allegations triggered West Bend&rsquo;s duty to defend Krishna, it did not examine whether West Bend owed coverage under an endorsement contained in one of the policies titled &ldquo;Illinois Data Compromise Coverage.&rdquo;&nbsp;Krishna, however, relied upon the endorsement to argue that it was entitled to damages under Section 155 of the Illinois Insurance Code.&nbsp;The endorsement provided &ldquo;Additional Coverage&rdquo; for &ldquo;personal data compromise&rdquo; under certain conditions.&nbsp;The policy defined &ldquo;personal data compromise&rdquo; to include disposal or abandonment of personally identifiable information or personally sensitive information without appropriate safeguards such as shredding or destruction, provided that the failure to use appropriate safeguards was accidental and not reckless or deliberate.&nbsp;</p> <p>Under Section 155, an insured may collect attorneys&rsquo; fees and costs where an insurer creates a vexatious and unreasonable delay in settling a claim.&nbsp;Where a bona fide coverage dispute exists, sanctions under Section 155 are inappropriate. &nbsp;Krishna argued that the underlying complaint alleged a personal data compromise by disposal of the plaintiff&rsquo;s personally identifying or personally sensitive information to a third-party without appropriate safeguards.&nbsp;Krishna claimed that appropriate safeguards would have entailed following the data protection requirements of BIPA and that negligent failure to take note of changes in the law was &ldquo;accidental.&rdquo;&nbsp;The court concluded that a bona fide coverage dispute existed and, therefore, Krishna was not entitled to Section 155 damages.&nbsp;The court reasoned that Krishna&rsquo;s argument for coverage hinged on an interpretation of &ldquo;disposal&rdquo; as including Krishna&rsquo;s deliberate sharing of the underlying plaintiff&rsquo;s information, an interpretation that &ldquo;safeguards such as shedding or destruction&rdquo; included following new legal requirements contained in BIPA, and the term &ldquo;accidental&rdquo; meant failure to remain informed of changes in the law (<i>i.e.</i>, the enactment of BIPA).</p> <p>As lawsuits continued to be filed under BIPA, courts likely will see an increasing number of insurance coverage disputes concerning the duty to defend and indemnify in BIPA lawsuits.&nbsp;For example, American Family Mutual Insurance Company recently filed a declaratory judgment action in the District Court for the Northern District of Illinois, seeking a declaration that it does not owe a duty to defend certain companies named in an underlying BIPA lawsuit.&nbsp;That case involves some of the arguments raised in the <i>West Bend </i>case, including whether a violation of state statutes exclusion applies, but American Family also raises arguments not addressed in <i>West Bend</i>.&nbsp;The case is <i>American Family Mut. Ins. Co. SI v. Amore Enterprises, Inc.</i>, No. 1:20-cv-01659.&nbsp;If courts continue to rule that insurers have a duty to defend companies named in BIPA lawsuits, as in <i>West Bend</i>, the already significant number of BIPA filings is likely to increase as well.&nbsp;&nbsp;</p>https://www.bscr-law.com?t=39&anc=366&format=xml&directive=0&stylesheet=rss&records=10Missouri Supreme Court Affirms Prospective Only Application of Amendments to Sect. 537.065 RSMo Providing for Notice to the Insurer and Intervention as a Righthttps://www.bscr-law.com/?t=40&an=96325&format=xml&p=5258&stylesheet=blog28 Aug 2019Insurance Law Blog<p>The Missouri Supreme Court recently held that amendments to RSMo. &sect; 537.065 requiring a valid &sect; 537.065 contract and written notice to insurers for an opportunity to defend did not apply retroactively to a case where the plaintiff and tortfeasor executed the &sect; 537.065 contract before the effective date of the amended statute. The dissent argued that the amended statute should apply retroactively despite the timing of &sect; 537.065 contract in this case because the amended statute was not a new enactment, but rather a continuation of the existing law.</p> <p>In <i>Desai v. Seneca Specialty Insurance Co.</i>, 2019 WL 2588572, No. SC 97361 (June 25, 2019), Seneca sought to intervene in a lawsuit filed by Neil and Heta Desai against Seneca&rsquo;s insured, Garcia Empire, LLC.&nbsp;In October 2014, Neil Desai suffered a personal injury while being escorted from a Garcia Empire establishment.&nbsp;The Desais filed suit in May 2016, and Garcia advised Seneca of the suit.&nbsp;Garcia rejected Seneca&rsquo;s offer to defend Garcia subject to a full and complete reservation of rights regarding coverage.&nbsp;In November 2016, the Desais and Garcia entered into a contract under &sect; 537.065 wherein the Desais agreed to limit recovery of any judgment against Garcia to Garcia&rsquo;s insurance coverage.&nbsp;</p> <p>The parties tried the case on August 17, 2017, and the court entered judgment in favor of the Desais and against Garcia on October 2, 2017.&nbsp;Within 30 days of the entry of judgment, Seneca filed a motion to intervene as a matter of right, arguing it was entitled to receive notice of the &sect; 537.065 contract between Garcia and the Desais and to intervene as a matter of right in the lawsuit based on the August 28, 2017, amendments to &sect; 537.065.&nbsp;Seneca argued the rights afforded to insurers under the amended statute should apply to it and its efforts to intervene in the lawsuit.</p> <p>The trial court denied Seneca&rsquo;s motion to intervene, holding the legislature did not expressly provide for retroactive application of the August 2017 amendments to &sect; 537.065 to cases where the parties executed the &sect; 537.065 contract before the amendments.&nbsp;As discussed in our previous blog post found <a href="https://www.bscr-law.com/?t=40&amp;an=79105&amp;format=xml&amp;stylesheet=blog&amp;p=5258">here</a>, the Court of Appeals for the Western District of Missouri affirmed.</p> <p>The Missouri Supreme Court began its analysis by looking to the language of the 2017 amendments. The amended statute permitted the same type of contract where the plaintiff agrees that, in the event of a judgment against the tortfeasor, the plaintiff will collect money solely from the tortfeasor&rsquo;s insurer or other specified assets, rather than directly from the tortfeasor. The amended statute, however, included two notable additional requirements.&nbsp;First, it provided that before creation of such a contract between the plaintiff and a tortfeasor, the insurer must be given the opportunity to defend the tortfeasor without reservation and refuse to do so.&nbsp;Second, the amended statute provided that before a judgement may be entered against a tortfeasor after such tortfeasor &ldquo;has entered into a contract <u>under this section</u>&rdquo; (emphasis added), the insurer must be provided with written notice of the contract and be given the opportunity to intervene as a matter of right.</p> <p>The key issue before the Supreme Court in terms of whether the amended statute applied in this case was to determine the meaning of &ldquo;under this section.&rdquo;&nbsp;First, the court looked to the relevant differences between the former and amended statutes. Then, it looked to whether the amended statute was merely a continuation of the former statute.&nbsp;This was because any change to the law that could be said to be a continuation of the prior law would not be a new enactment and could be applied retroactively to &sect; 537.065 contract executed before the amendments.</p> <p>The court found that the amended statute and the former statute both permitted the same type of contracts. Because the amended statute contained the two additional requirements noted above, i.e., that a valid &sect; 537.065 contract exists, and that the insurer be given written notice of the execution of the contract and the opportunity to intervene before a judgment is entered, &ldquo;under this section&rdquo; cannot refer to the statute&rsquo;s prior version. The Desais and Garcia could not have &ldquo;entered into a contract&rdquo; pursuant to a prerequisite and requirements that were not yet law. Thus, because the Desais and Garcia executed their contract under the provisions and requirements of the former statute, the amended statute was an inapplicable new enactment. It is important to note that the Supreme Court did not question the validity of the amended statute to any case where the &sect; 537.065 contract was entered into after August 28, 2017 (the effective date of the amendments).&nbsp;</p> <p>The dissent argued that the 2017 amendments simply added a condition precedent to the entry of judgment after a tortfeasor has entered into a &sect; 537.065 contract and did not affect the substantive terms of any contract entered into under that section. It argued that &ldquo;under this section&rdquo; referred to both the amended and prior versions of the statute because the revisions simply gave an insurer the right to written notice and an opportunity to intervene. The revisions did not purport to give an insurer an automatic right to set aside a judgment entered or any other rights beyond what any intervenor would have.</p> <p>As was the case with the Western District&rsquo;s prior opinion in this case, this Supreme Court opinion provides an excellent road map for the court&rsquo;s likely approach to the issue of retroactive vs. prospective application of statutory amendments of not only this statute, but others under Missouri law.<br /> <br /> <em>* Kelly M. &ldquo;Koki&rdquo; Sabat&eacute;s, Summer Law Clerk, assisted in the research and drafting of this post. Sabat&eacute;s is a 3L student at the University of Missouri-Columbia.</em></p>https://www.bscr-law.com?t=39&anc=366&format=xml&directive=0&stylesheet=rss&records=10