THIRD CIRCUIT Sex Trafficking/"Assault or Battery" Exclusion (PA)
In a case arising under Pennsylvania law, the Third Circuit has ruled that allegations by three women that a motel was complicit in allowing them to be commercially trafficked for sex were subject to a CGL exclusion for injuries "arising out of an assault or battery." In Nautilus Ins. Co. v. Motel Management Services, No. 21-2590 (3d Cir. Oct. 28, 2022), the court observed that the Pennsylvania Supreme Court in Pennsylvania has adopted a "but for" rule for applying "arising out of" issues and that in this case, the women's claims clearly arose out the common law meaning of both "assault" and "battery." Thus, the court held: "Each victim alleged that their traffickers treated them in an aggressive or violent manner and made them feel a sense of fear and anxiety while being trafficked. Selling the women for sex under these circumstances qualified as assault because it placed them in imminent apprehension of a harmful or offensive bodily contact. Similarly, the allegations in each of the complaints suffice for battery: by using force and drugs to compel the women's participation in the sex trade, the traffickers subjected the women to harmful or offensive bodily contact without their consent."
FIFTH CIRCUIT Total Pollution Exclusion (LA)
Notwithstanding the unfavorable treatment of absolute pollution exclusions that the Louisiana Supreme Court adopted in its 2000 Doerr decision, the Fifth Circuit has ruled in Central Crude, Inc. v. Liberty Mut. Ins. Co., No. 21-30707 (5th Cir. Oct. 26, 2022) that a Louisiana District Court did not err in declaring that a total pollution exclusion relieved Liberty Mutual of any duty to provide coverage for clean-up claims involving oil that was alleged to have leaked from the insured's petroleum pipelines. Applying Doerr's three-part test, the Fifth Circuit held in this case that the oil was clearly a pollutant, and that Central Crude was a "polluter" and, finally, that the pollution resulted from a discharge by the insured. Despite Crude Oil's argument that its culpability had not been proved and that the release might alternatively have come from natural seepage or a nearby Chevron refinery, the Fifth Circuit found that it was sufficient that the underlying claim alleged that the insured was, at least in part, to blame for the pollution.
SEVENTH CIRCUIT Claims Made (IL)
In a case where "claims made" policies limited coverage to claims "first made" during the policy period, the Seventh Circuit has ruled in Hanover Ins. Co. v. R.W. Dunteman Co., No. 20-1826 (7th Cir. Oct. 24, 2022) that the failure of the insured to report a 2017 lawsuit during the 2017 policy precluded coverage under that policy. Furthermore, even though the insured finally reported this litigation during the term of Hanover's 2018 policy, the court ruled that 2018 amendments to these claims did not allow it to find that the claims were "first made" in 2018.
LOUISIANA First Party/Hurricanes/Frivolous Litigation
A federal judge has threatened to sanction a Louisiana law firm that has recently filed nearly two thousand suits against property insurers for alleged losses arising out of 2020's Hurricanes Laura and Delta. In Wallace v. Shelter Mut. Ins. Co., No. 221-2258 (E.D. La. Oct. 21, 2022), Judge Perez-Montez issued a cease-and-desist order to the McLenney Mosley law firm, declaring that many of these actions involving claims that have already settled or involve duplicate filings as well as filings for damage to property that is outside the typical geographical area where reported damage was caused by Hurricanes Laura and Delta. As a result, the court ordered the firm to submit retention letters from each of their clients in ten days for in camera inspection.
NEW YORK Reformation
The New York Court of Appeals has ruled in 34-06 73, LLC v Seneca Ins. Co. 2022 NY Slip Op 06029 (N.Y. Oct. 27, 2022) that an insured's effort to amend its complaint against a commercial property insurer at the close of trial to conform to testimony of a mutual mistake that was presented during the trial that might support a reformation argument was untimely and that the insured's original complaint for breach of contract did not put the insurer of a reformation claim or allegations of mutual mistake as required by CPLR 3025.
OTHER DEVELOPMENTS OF NOTE
Inside the Insurance Industry
Hartford Financial Services announced last week that its net income for the third quarter of 2022 was $339 million, down 30% from the same period in 2022.
Similarly, Chubb has reported that its third quarter resulted were down 55.7% from the year before. In an earnings call with insurance industry analysts, Chubb Chairman and CEO Evan G. Greenberg observed that "[c]asualty rate in most classes will need to rise at an accelerated rate or else the industry will fail to keep pace," given loss cost inflation and what will be slowing growth and exposure in the future.
Meanwhile, Swiss Re reports that it suffered a $285 million net loss in the first three quarters of 2022 compared with a net profit of $1.3 billion the year before. The company's change in fortunes was generally attributed to the war in Ukraine, inflation and volatile markets.
W. R. Berkley Corporation has formed Berkley E&S Solutions to provide surplus lines coverage to middle-market and large accounts through individual wholesale broker appointments.
Sexual Assault Litigation
U.S.A. Gymnastics has reached a settlement with Liberty Mutual concerning sums incurred to resolve sexual abuse claims against team doctor Larry Nassar.
Privacy Litigation
The State of Texas has sued Google for alleged violations of state statutes by illegally capturing personal photos and other biometric data of Internet users.
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