Liberty Mutual Just Lost Big

Discussion in 'P&C Insurance Forum' started by VolAgent, Aug 16, 2017.

  1. VolAgent
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  2. adjusterjack
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    I would love to get into the discussion but not without reading the case decision.

    Where "elsewhere" is the heated discussion? Can you provide a link?

    The article refers to the Illinois federal district court but I have found nothing on PACER the US government's court search website.

    Anybody belong to FC&S who can get more information.

    Funny thing. In 2011 the CEO of Liberty Mutual got his office renovated for $4.5M:

    https://www.bizjournals.com/boston/blog/mass_roundup/2012/05/liberty-mutual-ceo-david-long.html

    I guess Liberty Mutual can well afford the award though the award will probably be reduced on appeal.
     
  3. VolAgent
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  4. InsCommentary
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    The controversy was over permission. If the driver had a "reasonable belief" she had permission to drive, then she's covered. If not, then no coverage. So coverage hinges on a he said/she said disagreement, something often decided by juries. In retrospect, tendering $25K would have been a better way to go. I have doubts that the judgment will stand if the carrier can demonstrate that its denial was reasonable.

    I was helping an agent this week on a claim involving this carrier where damage resulted from the use of a piece of mobile equipment to tear down and replace a concrete structure. Damage to the structure isn't covered due to ISO CGL exclusion j.(5), but damage to nearby property should be covered. The carrier has denied the claim, citing exclusion h.(2):

    h. Mobile Equipment
    "Bodily injury" or "property damage" arising out of:
    (2) The use of "mobile equipment" in, or while in practice for, or while being prepared for, any prearranged racing, speed, demolition, or stunting activity

    The carrier is citing the "demolition" part of the exclusion to deny the claim when that term, in the context of the exclusion, means something else entirely. The legal basis for coverage is noscitur a sociis, something the carrier's counsel should be aware of.
     
  5. VolAgent
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    Reading through the decision, the plaintiff argued there was not clear evidence there was no permission. The judge agreed with them and thus said the duty to defend was triggered, as it is broader than the duty to indemnity.

    In fact, the judge flat out said, LM seemed to mistake them as being the same or similar, which they are not.

    My bet is they settle on appeal. She had the keys and no one has claimed she stole them or otherwise acquired them through nefarious means.
     
  6. adjusterjack
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    Thanks.

    I clicked on document 26 and read the entire decision. You can do the same:

    https://docs.justia.com/cases/federal/district-courts/illinois/ilcdce/1:2015cv01264/63648/26

    I'll first address the underlying lawsuit:

    https://judicial.peoriacounty.org/Portal/Home/WorkspaceMode?p=0

    The 4+ million dollar award of July 2014 was apparently based on the severity of Monteil Hyland's injuries.

    As far as I can tell the amount of the award has not been appealed so that amount is not going to change.

    The federal lawsuit addresses whether Liberty Mutual should pay it due to breaching its duty to defend.

    I agree with the court's ruling that Liberty Mutual pay the 4+ million. The reasoning is spot on.

    Liberty Mutual's claims person made an incredibly dangerous mistake by denying a defense based on a more than sketchy question of whether Smith had permission to use the car.

    Just look at the policy provisions quoted in the decision:

    and

    The policy provisions don't require that a driver have "express permission" only that the driver has a "reasonable belief" that she was permitted to drive the car.

    That Smith had the keys to the car makes it sheer folly to believe Risby's assertion of no permission over Smith's belief that she had permission.

    Even if there was some suspicion that Smith wrongly obtained the keys, like taking them out of a drunk's pocket, the prudent thing for the claim rep to have done was at least provided a defense under a reservation of rights or just given the benefit of the doubt regarding permission and tendered the $25,000 limit.

    That decision to deny a defense was just plain stupid.
     
  7. VolAgent
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    I agree with you completely and that was my thoughts even before I read the decision. I admit I started skimming around the time he started on the estoppel due to failure to defend. The judge had basically stated his case by that point.

    I did like at the end where he basically said it was LM's fault for not sending a reservations of right letter or getting a declaratory judgement that there was no coverage.

    There was a phrase in a section I skimmed through, so I'm not sure if the judge was saying it or citing it, but completely accurate. The insurer's decision not to defend will cost it more than had it paid out policy limits.
     
  8. adjusterjack
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    Not only noscitur a sociis. When a contract provision is ambiguous the provision is construed against the party that drafted the contract. Especially when it's a contract of adhesion where an insured has no opportunity to negotiate the terms.

    When I read that exclusion I picture a demolition derby where backhoes are trying to eliminate each other, and not the use of mobile equipment for the demolition of a building during the construction process.

    I think that carrier is cruisin' for a bruisin'.
     
  9. InsCommentary
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    InsCommentary Super Genius

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    In another claim, a truck damaged a loading dock. The carrier denied the claim under the property policy, citing a Property Not Covered provision for "piers, wharves, pilings, and DOCKS." Noscitur a sociis.

    In this case, the agent just resubmitted the claim, changing the damage to "loading platform" instead of "loading dock" and it sailed right through.
     
  10. adjusterjack
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    Every insurance company has its share of incompetent claims adjusters. Had a few where I worked. Inherited a share of their claims when they were gone and had to fix the messes they left behind.

    One of them was promoted to supervisor of my team. We split up the open claims and they were all disasters. This person is going to tell me what to do? After a couple of months of that I threw up my hands and retired.
     
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