No Knockout for Insurer
A three-judge Missouri Court of Appeals panel affirmed the revival of a case against Chapman-Sander Insurance Agency over the lack of an on-site ambulance during a boxing match at the Regal Riverfront Hotel in St. Louis.
A lower court had granted a summary judgment of the case, which was filed after Fernando Maldonado collapsed in his dressing room after a boxing match.
Doug Hartmann Productions, the fight promoter -- which had procured a $1 million commercial general liability policy and a $4 million commercial excess liability policy from Chapman-Sander and insurance broker Tom Bormann -- failed to have an ambulance on call, as had been required by the contract with the Regal.
The policies excluded bodily injury resulting from athletic or sports participation.
The lawsuit was filed after Maldonado, in a separate suit, won $13.7 million in damages from the Regal for his injuries.
The court ruled on Jan. 29, that a reasonable jury could conclude there were "genuine issues of material fact" that need to be determined regarding conversations between the promoter's request for insurance coverage for injuries to boxers, and Bormann's recollection that the request was for an accident insurance policy as opposed to liability coverage.
The lawsuit also raises questions of a broker's fiduciary duty and whether there was negligence in failing to procure requested coverage.
Scorecard: The $6.7 million lawsuit for indemnity, breach of contract, negligence, breach of fiduciary duty and tortious interference with a contract was remanded to a lower court for further proceeding.
Takeaway: Be as specific as possible when requesting coverage so misunderstandings will not arise. A broker's fiduciary duty is limited, especially when it comes to advising clients, but the broker still needs to exercise reasonable care, skill and diligence.
Utility Avoids Superfund Site Liability
Georgia Power Co. had no intent to pollute and thus was not liable for PCB cleanup at a Superfund site in North Carolina, according to a federal court that granted the utility's motion for summary judgment on Jan. 31.
The case was the first of three test cases in litigation over cleanup at the site, which was used as an electrical transformer repair facility. Georgia Power was selected as the test case for "sales" defendants -- those who sold transformers that were used on the 11-acre Ward site, located near the Raleigh-Durham International Airport.
Broad River Electric Cooperative Inc. was chosen as the "repair" defendant case, while Bonner Electric Inc. was designated as the "consignment" test case. The test cases were chosen as part of the court proceedings to "help expedite the discovery process," according to court documents.
The Bonner case was subsequently settled prior to lengthy court proceedings. An order addressing Broad River's liability will follow, according to the court ruling.
The plaintiff, Carolina Power & Light Co., filed six separate lawsuits that were later consolidated and sought funds from about 144 companies for about $50 million in cleanup costs ordered as part of a settlement with the U.S. Environmental Protection Agency in 2005.
Scorecard: Georgia Power Co. was dismissed from the lawsuit seeking contributions for the approximately $50 million in cleanup costs of the Ward Transformer Superfund site in North Carolina.
Takeaway: Under the Comprehensive Environmental Response, Compensation and Liability Act, plaintiffs must prove there is intent to dispose of hazardous substances.
Insurer Need Not Indemnify Funeral Home for Harvesting Body Parts
State Automobile Mutual Insurance Co. is not required to provide defense and indemnification to a funeral home that harvested organs and tissues from corpses, according to a federal court ruling issued Jan. 29.
In 2008, Gerald Garzone was sentenced to eight to 20 years in prison after pleading guilty to nearly 250 counts of theft and abuse of a corpse for taking organs and tissues without the consent of the deceased or their families and, without regard to safety protocols, falsifying records to sell the items to hospitals worldwide.
More than 50 families of the deceased filed suit against Garzone Funeral Home Inc., in Philadelphia, and other defendants seeking compensation for "injuries suffered when they learned that the bodies of their deceased loved ones had been desecrated," according to the ruling.
The court ruled that none of the damages met the definition of "bodily injury" or "property damage" in the funeral home's Businessowners Liability Coverage form or its Funeral Director's Professional Liability endorsement, and thus do not constitute an "occurrence" during the time the insurance policy was in effect.
State Auto argued that because the families of the deceased learned of the scheme after expiration of the policy, the damages sought for their emotional distress and anguish were not a result of an "occurrence" that took place within the policy period.
The organ harvesting scheme generated nearly $250,000 for the Philadelphia funeral home, although a wider scheme involving three states was said to produce up to $3.8 million.
Scorecard: The insurance company was not required to indemnify or provide defense to an insured being sued by more than 50 families for desecrating their loved ones' corpses.
Takeaway: In Pennsylvania, an "occurrence" happens when the injury is apparent, not when the cause of the injury occurs.
Court Heightens Requirements for Workers' Comp Lawsuits
The Ohio Supreme Court reversed an appeals court and dismissed a lawsuit against ThyssenKrupp Materials N.A. Inc., which had been sued by an injured employee.
In the ruling, the Supreme Court upheld a recently enacted statute that held that employers are only liable for an intentional tort -- or civil wrongdoing -- when there is a "deliberate intent to cause an employee to suffer an injury, a disease, a condition, or death."
In this case, Bruce R. Houdek, who was on light duty after suffering an on-the-job back injury, was struck by a sideloader while working in the dimly lit aisle of a warehouse. The company did not require that he wear a reflective vest or that safety gates or orange safety cones be placed to prevent machinery from entering the aisle.
Houdek was pinned by the sideloader against a scissor lift at the end of an aisle, breaking his leg below the knee and shattering his ankle. Eventually, his leg was amputated above the knee, and he sued ThyssenKrupp, arguing the company "had deliberately intended to injure him by directing him to work in the aisle with knowledge that injury would be certain or substantially certain to occur."
The court ruled there is no evidence that ThyssenKrupp acted with a "deliberate intent" to cause an injury.
Scorecard: ThyssenKrupp won a summary judgment, dismissing the lawsuit against it.
Takeaway: The Ohio Supreme Court all but eliminated the ability of employees to sue their employers for civil wrongdoing, for injuries sustained at the workplace.
Insurer Does Not Need to Foot Bill for Securities Class Action
The U.S. 9th Circuit Court of Appeals reversed a $6.3 million judgment against National Union Fire Insurance Co., an affiliate of AIG, related to a securities class-action lawsuit. The judgment had been awarded to Genesis Insurance Co. for its $13.5 million settlement of a class action involving Magma Design Automation Co.
Magma had faced allegations from investors who claimed the company inflated its stock price, and reaped proceeds of $82.4 million, by failing to disclose an intellectual property rights issue related to a competitor, Synopsys Inc.
Genesis Insurance Co. had sued Magma in 2006, arguing that its $5 million excess executive protection insurance policy provided to Magma did not cover the time of the securities violation. It also named National Union in that lawsuit because it had sold Magma a separate excess policy, and Executive Risk Indemnity, which provided primary coverage.
The 9th Circuit ruled on Feb. 5, that Genesis failed to show that Magma's primary coverage had been exhausted for the policy period, so the secondary insurer should not be required to pay any of the settlement costs. Insurers had been reluctant to indemnify losses associated with the settlement because of the policy dates.
Scorecard: National Union's $6.3 million judgment awarded to Genesis Insurance Co. was reversed.
Takeaway: The 9th Circuit said that since no court ruled that the primary insurance policy limits had been exhausted, the contingent excess coverage need not cover any losses.
--Compiled by Anne Freedman. Please feel free to send tips about legal decisions that impact the insurance industry to email@example.com.
March 1, 2013
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