Oregon Court of Appeals Holds that the Insured’s Misrepresentation of a Portion of the Claim Precluded Coverage for the Entire Claim

On June 16, 2021, the Oregon Court of Appeals addressed the insured’s misrepresentation in Kelly v. State Farm Fire & Cas. Co., 312 Or App 361, — P3d — (2021). The insured made a claim for a fire loss. The insurance company advanced $10,000 for personal property and paid $37,000 in additional living expenses (“ALE”) on the claim. The ALE payment included $1,500 per month in rent that the insured had allegedly paid after the fire. Id. at 364. The insurance company subsequently learned that the insured had made misrepresentations regarding, among other things, the rental payment. When the insured sued, the insurance company raised the policy’s Misrepresentation, Concealment and Fraud provision. The trial court granted the insurance company’s summary judgment motion, and the Oregon Court of Appeals affirmed. The insured contended that the misrepresentations were not material. The Court of Appeals rejected the contention, concluding that the misrepresentations as to the ALE precluded coverage for the entire claim:

In sum, the trial court did not err in concluding that [the insured’s] misrepresentation that he was living at the [alleged rental] property at a cost of $1,500 per month was material for purposes of the Concealment, Misrepresentation or Fraud provision in his insurance policy. Forfeiture of the entire policy is undoubtedly a harsh penalty. However, it is the penalty that the legislature appears to have intended …, and it is what the policy requires under existing case law.

Id. at 376.

Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.

Washington Federal Court Dismisses Insureds’ Claims Seeking Coverage for COVID-19

On May 28, 2021, the United States District Court for the Western District of Washington dismissed claims for alleged losses associated with COVID-19. Nguyen, et al. v. Travelers Cas. Co, et al, 2:20-CV-00597-BJR (W.D. Wash. May 28, 2021). The lawsuit is a consolidated action addressing claims under first-party “all risk” property policies. Judge Barbara Rothstein granted the defendant insurers’ motions to dismiss. In line with the majority of courts, the Court determined that there was no coverage for the claims. Among other things, the Court held:

  • COVID-19 did not cause direct physical loss of or damage to property.
  • The Civil Authority provisions did not provide coverage.
  • The virus exclusion barred coverage.

In reaching this result, the Court declined to follow two Washington state trial court decisions, finding their reasoning to be unpersuasive.

Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.

Washington Supreme Court Holds Liability of School District Cannot be Precluded as a Matter of Law Based on Legal Cause

On March 4, 2021, the Washington Supreme Court held in Myers v. Ferndale School District, No. 98280-5, that the alleged acts of negligence of the school in not complying with internal policies and safety precautions for taking students on an off campus walk were not too remote or insubstantial to be the legal cause of the student’s death.

In this case, a wrongful death claim was brought on behalf of a student against the school district after a student was killed by a vehicle while on an off campus walk with his class. The trial court dismissed the negligence claim on summary judgment based on lack of duty. The Court of Appeals reversed, determining that there were sufficient factual issues on duty and proximate causation.

The Washington Supreme Court affirmed. The Supreme Court noted that while the Court of Appeals erred in analyzing legal causation, it properly concluded that material issues of fact existed concerning proximate causation. The Court found that legal causation should not be assumed to exist every time a duty of care has been established. Legal cause is determined by utilizing “mixed considerations of logic, common sense, justice, policy, and precedent.”

The Court found that sufficient evidence was presented to survive summary judgment by establishing a factual question as to whether the school district’s act of taking the students off campus led to the accident. The Court’s legal cause analysis included the underlying policy considerations for imposing liability. The Court held:

[O]ur cases establish a policy based on the special relationship where school districts may be liable for harms suffered by students even where the harm occurs off campus and is caused by the act of a third party. This flows from the custodial relationship and responsibility between schools and students. Since students are involuntarily subject to the school’s control, schools must take affirmative steps to protect students even against reasonably foreseeable acts of third parties.

Here, the off campus walk did not comply with the internal policies and safety precautions. The Court held the alleged acts of negligence were not too remote or insubstantial to be the legal cause of the student’s death. Therefore, the Court could not preclude liability as a matter of law based on legal cause.

In a concurrence, Judge McCloud disagreed with the majority’s application of its legal cause analysis. She agreed that the school district’s failure to obtain required parental permission for the walk suffices to show legal cause. However, she disagreed that the teacher’s decision to take the walk on the sidewalk, at a normal pace, in broad daylight, suffices to show legal cause. She noted that “[i]f legal cause is satisfied here, then legal cause could be satisfied for accidents occurring during many basic recreational and educational activities that students enjoy, from jump rope to dance.”

Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.

Washington Federal Court Rules Notice Prejudice Rule Does Not Apply to Consecutive Claims-Made and Reported Policies

On December 12, 2020, Philadelphia Indemnity Insurance Company, prevailed before the U.S. District Court for the Western District of Washington, in Faithlife Corp. v. Phila. Indem. Ins. Co., 2020 WL 7385722 (W.D. Wash. 2020), on cross-motions for summary judgment.

Philadelphia issued plaintiff two claims-made and reported policies, one effective in 2016 and one effective in 2017. During the 2016 policy, plaintiff was mailed notice of administrative charges from the EEOC, regarding alleged age and disability discrimination against former employees. The charges were not reported to Philadelphia, and were later voluntarily withdrawn by the former employees. Then, during the 2017 policy period, the former employees filed an employment discrimination lawsuit against plaintiff. Plaintiff reported the lawsuit to Philadelphia, who denied coverage under the terms of the policies. Plaintiff filed suit against Philadelphia for coverage.

The parties filed cross-motions for summary judgment regarding coverage. Philadelphia argued that there was no coverage under the claims-made and reported policies, since plaintiff failed to give timely notice of the claim during the 2016 policy. The Court agreed. The Court found that the administrative charges filed by the former employees were a “claim” under the policies. Based on the policy language, the administrative charges and the lawsuit alleged the same wrongful acts, and were not reported during the 2016 policy, and therefore excluded under the 2016 policy.

The Court rejected plaintiff’s argument that the “Prior and Pending” clause does not exclude the claim under the 2017 policy, or that the policies contain a “Loss Aggregation Clause” that is not properly read to exclude the claim. The Court also rejected plaintiff’s arguments that the notice/prejudice rule should apply.

Based on these findings, the Court granted Philadelphia’s motion for Partial Summary Judgment, finding no coverage under Philadelphia’s policies, and denied plaintiff’s motion for partial summary judgment on coverage.

Philadelphia was represented by Soha & Lang attorneys Paul Rosner and Jillian M. Henderson in this matter.

Soha & Lang, P.S. Receives PNW CPCU Chapter President’s Award

Soha & Lang, P.S. is honored to accept this year’s Presidents Award from the Pacific Northwest Chapter of the CPCU Society. The President’s Award recognizes a company’s strong support for insurance education and involvement in the CPCU Society. We also extend our congratulations to Soha & Lang, P.S. shareholders Paul Rosner, Jennifer Dinning, and Geoff Bedell, who earned the CPCU designation and are active in the CPCU Society.

Learn more about the Pacific Northwest Chapter of the CPCU Society at: https://pacificnorthwest.cpcusociety.org/about

Alaska Supreme Court Holds If Policy As A Whole Is Clear, Then It Is Not Ambiguous

On October 9, 2020, the Alaska Supreme Court held in Kathleen M. Downing v. Country Life Insurance Company, —P.3d—, 2020 WL 5988226 (2020), that under the doctrine of reasonable expectations, even if one part of a policy is unclear, if the policy when read as a whole is clear, the policy is not ambiguous. In this case, the daughter purchased an executive whole life policy that paid a flat $500,000 upon her death, and a Paid-Up Additions Rider (“PUAR”) that provided an increasing death benefit and cash value for each year premiums were paid on the PUAR, and that also acted as an investment. The first page of the policy stated the PUAR provided coverage of $1,079,014, but the second page of the policy included a table explaining the guaranteed cash value and paid-up insurance per year of the policy. After a year of paying the premiums, the daughter assigned the PUAR to her mother, who took over paying the premiums for the investment value. The daughter died a short time later, during the second year of the policy coverage. Country Life Insurance Company (“Country”) paid mother the $500,000 from the executive whole life policy, and $108,855 from the PUAR.

The mother sued, arguing that she was entitled to $1,079,014, the coverage on the PUAR. The Alaska Supreme Court upheld the superior court’s ruling on summary judgment that Country did not owe anything further to the mother. In doing so, the Alaska Supreme Court held that although ambiguity in a policy is construed in favor of the insured, under the doctrine of reasonable expectations, ambiguity only exists “when the contract, taken as a whole, is reasonably subject to differing interpretations.” Consequently, although the Alaska Supreme Court found the first page of the policy misleading, when viewing the policy as a whole, including the table on page two, it was clear that the policyholder could stop making payments at any time and withdraw the current cash value.

Disclaimer: The opinions expressed in in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.