Insurance Law Fall 2015 page 1 Class Session 1

Transcription

1 Insurance Law Fall 2015 page 1 A B C D Let s get organized What I expect from you: Attendance Preparation What you can expect from me: Attendance Preparation Respect Getting organized Seating chart Getting to know you These damn slides A learning aid Don t use them as a crutch! Other materials: Oklahoma Law Supplement will give Oklahoma law on what is in the casebook This has been ed to you and is available on D2L and my website Let s talk about what we are not going to cover and why The casebook is designed for Insurance Law as a 3 hour course Since here it is a 2 hour course, we will cut out a lot Lot s of litigation about what is and is not insurance

2 Insurance Law Fall 2015 page 2 It makes a lot of difference because insurance is so highly regulated See: McMullan v. Enterprise Financial Group (OK Supp. p. 1) Decides a motor vehicle service contract is insurance. It will support a bad faith case. A large part of the casebook deals with the regulatory aspect of insurance There are maybe three or four firms in Oklahoma which deal with the insurance commissioner s office doing regulatory work We won t cover that, which takes us out of a big chunk of the book, Chapter 6 Page 573 to End There s also a neat section (Part V in Chapter 5) dealing with the impact of liability insurance on tort law We just don t have time in a 2 hour course to cover it What we will talk about will be the part of insurance law which most practitioners deal with - Claims To fully understand that, we need to talk about some of the nuts and bolts of insurance and some concepts and theories you need to know about insurance A lot of this will sound a lot like contracts class - because a lot of insurance law is contract law However, you will find it is contract law with a twist to it Which brings us to our first case Gaunt v. John Hancock Mutual Life Ins. Co.

3 Insurance Law Fall 2015 page 3 Mut. Life Ins. Co. (p. 32) Insured murdered after application and physical but before policy approval Company denies coverage because policy not yet issued at death Trial court held for insurance company based on application language On appeal: Reversed Binding receipt ambiguous so provides coverage before acceptance by insurance company Concurring opinion says: Don t fool around with a case by case analysis Just hold that we won t let insurance companies take money and yet delay coverage Binding receipt (conditional receipt) puts company in a position to do post claim underwriting (company keeps premium if no loss; rejects if there is a loss) Oklahoma Law Wilson v. Mass. Indem. & Life ( OK Supp., p. 1) Enforce literally conditional Receipt provision No coverage unless applicant is insurable If you are just curious and want to see the rest of the story, pull up State of South Dakota v. Rasch (19 NW2d 339) and read it

4 Insurance Law Fall 2015 page 4 Principles of the Law of Liability Insurance (p. 38) is new The Restatements (also by the American Law Institute) are very persuasive to Oklahoma Courts The Restatements are different than this Statement of Principles The Restatements purport to summarize what the law already is on a particular topic These are somewhat different in that they purport to state what the law should be I will certainly mine these when they take a position favorable to my clients position in a case Reasonable Expectations In the jurisdictions which have adopted the pure reasonable expectations doctrine, it has made a tremendous difference in policy interpretation A good example of Reasonable Expectations is C&J Fertilizer, Inc. v. Allied Mutual Ins., (p. 44) C&J v. Allied Policy covered burglary but defined burglary to require visible marks made by tools, explosives, electricity or chemicals upon or physical damage to, the exterior of the premises C&J v. Allied Here, the burglars were able to get in without physical marks and make off with property C&J v. Allied The insurance company denied coverage

5 Insurance Law Fall 2015 page 5 C&J v. Allied The trial court held for the insurance company, based on the policy definition of burglary C&J v. Allied The Iowa Supreme Court reversed, holding the reasonable expectation of insureds would be that the loss would be covered without meeting the policy definition of burglary C&J v. Allied Concise statement of the doctrine (p. 47): The objective expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated the expectations. Max True Plastering Co. v. United States Fidelity & Guaranty Co. (OK Supp., p. 2) Adopts a watered down version of reasonable expectations which applies only if the policy provision is ambiguous See Oklahoma Supplement Advocate Insurance column Reasonable Expectations: New Key to Policy Interpretation Notice the Hurricane Andrew Code Upgrade Problem (p. 57) Homes in Miami area were destroyed in Hurricane Andrew A Dade County ordinance required that any home new or rebuilt had to be built 15 or more feet above sea level Insurance companies, including State Farm, took the position they didn t have to pay to rebuild the house to comply with the ordinance A policy provision (p. 58) commonly called an ordinance or law clause said they didn t have

6 Insurance Law Fall 2015 page 6 to pay a loss caused by such a requirement Dade County filed a parens patriae case arguing the reasonable expectation of insureds would be that replacement cost coverage would require compliance with the ordinance Trial court held for the insured. Court of Appeal reversed The Florida Supreme Court ultimately refused jurisdiction of an appeal so the Court of Appeal decision stood (649 So.2d 234) Waiver and Estoppel These two terms are often used as if they are the same thing - technically, they are not but courts often say this is a case of waiver and estoppel Waiver - Voluntary relinquishment of a known right Estoppel - conduct making it inequitable for insurance co. to take a particular position Note: Good definition of estoppel in Allen v. Allen (OK Supp., p. 5) A good introduction to the subject(s) of waiver and estoppel is next Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co. (p. 61) Car dealer (Darner) leased cars to customers Darner wanted coverage for itself and its customers Darner contracted with its customers to provide $100,000/300,000 liability coverage

7 Insurance Law Fall 2015 page 7 The policy the insurance company wrote provided Darner $100/300 coverage but only $15,000/30,000 coverage for lessees The insurance agent told Darner not to worry because another policy he wrote would bring the customer s coverage up to 100/300 Darner admittedly did not read the policies because the policy was complicated and because Darner thought he knew what the policy provided, based on what the agent said A customer hit a pedestrian while driving a leased car and got sued The pedestrian sued the customer, who sued Darner when he realized he had only $15/30 coverage Darner sued the insurance company for not providing the agreed coverage The trial court granted the insurance company summary judgment and the Court of Appeals affirmed The Arizona Supreme Court reversed, holding the insurance company estopped The agent, by his conduct, induced the insured not to read the policy but rather to rely on what the agent said the policy provided

8 Insurance Law Fall 2015 page 8 The dissent bitterly disagrees, asserting something very like the end of the world Actually, this decision is very much within the mainstream of insurance cases in modern times The casebook authors accurately point out (p. 60) that waiver and estoppel are relative newcomers to insurance law Such devices came into being only in the 1900's when less sophisticated people and companies began to buy insurance Mut. Life Ins. Co. (p. 70) Agent sold coverage to a patient in a mental hospital and collected premiums for it weekly A year and 8 months later, she died Insurance company denied coverage based on policy provision there was no coverage unless she was in good health and not in a hospital when the policy was written Verdict for Plaintiff, affirmed by Appellate Division Affirmed here by N.Y. Court of Appeals (Justice Cardozo) Insurance company was bound by its agent s knowledge, even in the face of a policy provision saying it couldn t be

9 Insurance Law Fall 2015 page 9 So even as early as 1931, the courts are interpreting insurance policies quite differently than other contracts Notice even Justice Cardozo using waiver and estoppel pretty much interchangeably Ins. Co. Of North Amer. (p. 72) Case more often seen as a Conflict of Laws case Mr. and Mrs. Jenkins live in New York; have a car wreck in Connecticut Mrs. Jenkins is injured due to Mr. Jenkins negligence Mrs. Jenkins sues Mr. Jenkins in Connecticut New York has a statute [Sec. 167(3)] which provides a spouse has no coverage for injury by the other spouse Conflicts rule would be that the law of the place where the policy is written (place where the contract is entered into) would apply So, New York law should bar coverage However, after the accident and injury, Mrs. J s lawyer extracted an agreement by the insurance company that it would pay the claim

10 Insurance Law Fall 2015 page 10 Only after the insurance company realized how seriously Mrs. J. was injured did the insurance company back out of the agreement and refuse to provide coverage, based on New York statute Held: Insurance company had waived its right to rely on the New York statute by agreeing to provide the coverage This was so even though there probably was not the detrimental reliance needed to apply estoppel So what s happening here? We say, in a lot of cases, that an insurance policy is a contract so we will apply the policy strictly as written Yet we apply all sorts of exceptions which make the policy provide coverage when that seems to be the right result! One of the cases in which that didn t happen is (p. 76) Insured tells aduster he has all risk policy. Actually has only mortality coverage Adjuster doesn t correct him. Says: Mitigate loss. Insured sells injured cattle at a loss Turns out he has no coverage on cattle so he bears a loss for the sale Claims insurance co. is estopped to now claim it has only mortality coverage Held: No estoppel

11 Insurance Law Fall 2015 page 11 Cannot create coverage by estoppel (majority rule), based on post contract conduct (minority rule) Stands for the proposition that (under majority rule) the only estoppel you can have is pre-contract estoppel I m not sure that s still the majority rule If it is, THERE ARE a lot of exceptions We ll see examples of this later in the course Oklahoma has done the same thing as these other states, sometimes applying other devices to make insurance law make sense Consider Security Ins. Co. of New Haven v. Greer (OK Supp., p. 1) Security of New Haven v. Greer Agent wrote policy covering a farm with a barn holding hay grown on the farm to feed cattle Security of New Haven v. Greer Policy provides no coverage for farming operations or product grown on the land other than for household purposes Security of New Haven v. Greer The barn burns down with hay grown on the land and kept there to feed cattle Security of New Haven v. Greer Under the terms of the policy, the policy doesn t provide coverage Security of New Haven v. Greer Verdict for insured; Held: Affirmed

12 Insurance Law Fall 2015 page 12 Security of New Haven v. Greer The insurance company is estopped if its agent knew the property was being used for farming Consider also: Ins. Co. (OK Supp., p. 1) A contractor is starting a big job and is concerned about theft of materials from job site Goes to his agent and tells the agent he wants theft coverage Agent says something like Not to worry, got you covered and writes him a theft policy which excludes embezzlement Insurance company denies coverage based on the exclusion The trial court reformed the policy to take out the exclusion, based on mutual mistake (both the agent and the insured said they thought the loss would be covered) The Court of Civil Appeals reversed, finding no mutual mistake of fact The Supreme Court reversed the Court of Civil Appeals and held for the insured, based on constructive fraud The Court finds constructive fraud occurs without any intent to defraud when there is a breach of duty which gives an advantage to the one committing it

13 Insurance Law Fall 2015 page 13 Here, the insurance company cannot benefit from its agent s mistake in writing the policy that did not provide the requested coverage There s another lesson here: The lawyer who had the imagination to urge a theory got a really good result for his client! Reading assignment for next class (09/03/15): Pages in the case book