And then there were five. Despite policyholder hopes that the Washington Supreme Court's track record of finding coverage in difficult cases might help them turn the tide of recent insurer victories in federal appellate (and now state supreme court) COVID rulings), the court issued a unanimous decision last week in Hill and Stout v. Mutual of Enumclaw Ins. Co., No. 100211-4 (Wash. Aug. 25, 2022) declaring that the corona virus does not cause "direct physical loss or damage" to property and that coverage would, in any event, be negated by the policy's virus exclusion because the efficient proximate causes of these losses was the COVID 19 virus.


THIRD CIRCUIT Forum Selection Clauses/Maritime (PA)

The Third Circuit has ruled that a Pennsylvania District Court acted prematurely in giving effect to a forum selection clause in a marine insurance policy requiring that New York law govern the policy. In light of the U.S. Supreme Court's ruling in The Bremen that under federal admiralty law a forum-selection provision is enforceable unless "enforcement would contravene a strong public policy of the forum in which suit is brought," the Third Circuit ruled in Great Lakes Insurance SE v. Raiders Retreat Realty Company LLC, No. 21-1562 (3d Cir. Aug. 30, 2022) that the trial court had erred in granting judgment to the insurer on the basis of New York law without first considering whether voiding the policy due to the insured's failure to properly recertify the insured yacht's fire-extinguishing equipment implicated a strong public policy of the Commonwealth of Pennsylvania.

EIGHTH CIRCUIT Pollution/Issue Preclusion (MO)

The Eighth Circuit has affirmed a Missouri district court's declaration that earlier rulings giving effect to a pollution exclusion in St. Paul's policies precluded a renewed effort to avoid the exclusion on the basis of supposedly newly discovered facts concerning new claims involving the insured's metallurgical plant in Peru. In Doe Run Resources Corp. v. St. Paul Fire & Marine Ins. Co., No. 21-3046 (8th Cir. Sept. 1, 2022), the court ruled that the Missouri Supreme Court's 2017 decision giving effect to the St. Paul pollution exclusion barred any right to relitigate the applicability of the exclusion to nine new lawsuits that have been filed against Doe Run in the interim. The court observed that Doe Run had had ample opportunity to make these arguments earlier and that "new evidence does not create a new, distinct issue when all events giving rise to the claims occurred before the filing of the first lawsuit."

CALIFORNIA Duty to Defend/"Catch All" Exclusions

Despite the general rule that insurers must provide a full defense in cases that present both covered and non-covered claims, the state Court of Appeal has excused an insurer from defending a "mixed case" where an exclusion contains a "catch all" clause that extended the scope of the "habitability" exclusion to any "any claim or suit that also alleges any violation" of habitability. As a result, the First District declared in 24th & Hoffman Investors LLC v. Northfield Ins. Co., A163670 (Cal. App. Aug. 30, 2022), that Northfield had no duty to defend these claims, even though some theories of liability were not premised on habitability violations.

IDAHO Policy Expiration/Late Payment of Premium/Estoppel

The Idaho Supreme Court has ruled that a homeowner's insurer properly denied coverage for a fire loss that occurred after the deadline for paying premium expired but before it received in the insured's tardy payment. In United Heritage Property & Cas. Co. v. Zech, No. 48457 (Idaho Aug. 31, 2022), the Court declared that United Heritage was not required to give notice of cancellation pursuant to Idaho Code § 41-2401(1)(j) in order to affirmatively cancel this policy. The court distinguished between the cancellation of an extant policy and the facts here, where the renewal policy never went into effect because the insured failed to issue payment for the premium due. Writing in dissent, Justice Stegner argued that the insured should have been permitted to go forward on a theory of equitable estoppel based on the insurer's claimed acceptance of the late payment before subsequently denying coverage after learning of the fire loss.

MARYLAND Lead Paint/Settlement/Third Party Beneficiary Claims

The Maryland Court of Appeals has ruled that tort claimants are only "incidental beneficiaries" of liability insurance and therefore may not pursue claims as third party beneficiaries unless they have a final judgment against the insured. In CX Reinsurance Company v. Johnson, No. 47 (Md. Aug. 29, 2022), the court held that "no Maryland statute, regulation or public policy recognizes tort claimants who do not hold judgments against insureds as intended beneficiaries of general liability insurance policies." As a result, the court ruled that numerous apartment building tenants who claimed that they had suffered lead poisoning could not attempt to set aside an agreement limiting this coverage that had been entered by CX Re and its insured to settle a rescission action brought by CX Re due to the insured's misrepresentations concerning the presence of lead paint on the property. Under the circumstances, the court ruled that only those claimants who had procured judgments or entered into settlements with the insured before the rescission case settled could sue for coverage.

MASSACHUSETTS Liquor Liability/Bad Faith/Failure to Settle

The state Appeals Court has awarded double damages to a tort claimant based upon a liquor liability insurer's failure to settle his claim for injuries suffered when he was assaulted by intoxicated bar patrons following a night of beer pong. In Terry v. Hospitality Mut. Ins. Co., No. 21-P-530 (Mass. App. Ct. Aug. 31, 2022), the court ruled that the insurer's pre-trial investigation was inadequate and one-sided and had focused on trying to disprove its insured's liability, whereas a more objective investigation would have shown that liability was "reasonably clear" and that the case should settle. The court ruled that the insurer's offer of $25,000 in a case that resulted in a $250,000 verdict was unreasonable and that Hospitality's violations were "knowing and willful."


Morrison Mahoney In The News

It was a busy week on the home front.

Boston partner Grace Garcia took office this week as the new president of the Massachusetts Bar Association. MM partner Michael Hayden is the MBA's new Treasurer, making this the first time that top offices have been held by lawyers in the same firm.

At the same time, the Super Lawyer folks recognized 23 of our partners, along with a dozen youngsters who were identified as "ones to watch." MM partners who were recognized for expertise in insurance law include Dennis Anti (MA) Michael Aylward (MA), , Mike Edwards (RI),John Graceffa (MA), Ed Landers (MA, Adam Mordecai (NH) and Bill Schneider (MA).

Lawyers, Drugs and Money

Johnson & Johnson has reportedly agreed to pay the State of New Hampshire $40.5 million to resolve opioid litigation claims that were scheduled to go to trial next week.

Restating the Law

The Advisers and Members Consultative Group for the Restatement of the Law, Torts (Concluding Provisions) project are scheduled to meet in Philadelphia later this month for a two day debate concerning more than a dozen topics that the Reporter's Preliminary Draft No. 3 addresses, including estoppel, vicarious liability, medical malpractice, spoliation, medical monitoring damages and first party bad faith.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.