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Residential Candle Fires

Posted in Homeowners' Insurance
candle fire


Fires caused by candles result in $390 Million in claims for property loss or damage. It is estimated there are 165 fatalities each year from burning candles. Retail candle sales are increasing every year with a 700% increase in the past 10 years. Women are more likely to be killed or injured in residential candle fires than are men. Upon reading manufacturer surveys, the greater number of injuries to women is no surprise, 95 percent of all candle buyers are female. More candle fires occur during December than any other month with 24 percent of all candle fires taking place in December and January.

Adjusters investigating residential candle fires should be alert to two concerns: (1) arson and (2) subrogation. As every smart arsonist knows, making an intentional fire look “accidental” is a sure way to get paid. For fires that are truly accidental rather than intentional, third-party recovery should not be overlooked. There have been a number of consumer product recalls for candles that posed a fire or burn hazard.

 Fire loss claims are best adjusted from a team approach with an experienced field adjuster, cause and origin expert, and a seasoned Oklahoma insurance attorney.

Arson defenses and subrogation recovery potentials need to be evaluated early in the context of the available evidence and spoliation issues. Engaging an Oklahoma law firm immediately following a reported fire claim can mean all the difference.

The Relationship Between The MCS-90 Endorsement And The Underlying Insurance Policy

Posted in Transportation Cargo Claims

There is some disagreement between the courts in the way they are interpreting and applying the MCS-90 Endorsement and its relationship to the underlying insurance policy.

The majority of jurisdictions consider the insurer’s obligations under the MCS-90 endorsement to be that of a surety and not a modification of the insurance policy. Under the majority view, the insurer’s duty to pay a judgment under the MCS-90 endorsement arises from the endorsement’s specific language which guarantees a source of recovery to an injured party, rather than from an insurance obligation.

Courts who follow this approach have found that the obligation of an insurer to pay under MCS-90 is triggered only when (1) the underlying insurance policy, to which the endorsement is attached, does not otherwise provide coverage and (2) no other insurer is available to satisfy the judgment or the insurance coverage is insufficient to satisfy the federally prescribed minimum levels of financial responsibility.

Under this case law, the MSC-90 endorsement is also only implicated as between an injured member of the public and the insurer. It does not alter the relationship between the insurer and the insured carrier. It also gives the injured person the right to demand payment directly from the insurance company as well as gives the insurer the right to demand reimbursement from the insured carrier. The Tenth Circuit, which includes Oklahoma, has adopted this majority view. See Carolina Cas. Ins. Co. v. Yeates, 584 F.3d 868 (10th Cir. 2009).

The minority view, on the other hand, is that the MCS-90 endorsement indirectly modifies the insurance policy essentially extending the insurance benefits. Under this view, each policy is viewed independently as the endorsements are found to only negate limiting provisions in the policy to which it is attached and does not establish primary liability over other policies. The Tenth Circuit in Carolina Casualty, supra, recognized that under this approach “an insurer may be forced to indemnify the motor carrier for its negligence to a greater extent than it bargained for and without a right to reimbursement from another primary insurer.”

As the law continues to remain in a state of flux, it is a good idea to consult with an attorney with experience and training in cargo losses, damaged cargo, and insurance coverage when adjusting a loss that occurs in transit. Some issues in Oklahoma may need to be analyzed under Oklahoma law for contractual agreements between the brokers, haulers, warehouses, etc. Indemnification can be a contractual commitment separate from Carmack. These agreements to indemnify may or may not be covered by insurance.

Court Lacked Jurisdiction Over Out-Of-State Insurance Holding Company

Posted in Personal Jurisdiction

Plaintiff filed a lawsuit against her automobile insurance carrier, Granite Insurance Company (“Granite”), for breach of contract and bad faith in investigating her insurance claim. Plaintiff also named as a Defendant American International Group (“AIG”), the holding company for Granite. Granite is one of AIG’s subsidiaries. There was no question in this case that the Oklahoma court had jurisdiction to hear the case against Granite. However, AIG filed a motion to dismiss, asserting that the Oklahoma court could not exercise personal jurisdiction over it because it lacked the necessary minimum contacts with Oklahoma to satisfy due process.

AIG presented evidence that it: 1) is a Delaware corporation having its principal place of business in New York; 2) is not licensed to do business in Oklahoma; 3) does not maintain an office or property in Oklahoma; and 4) does not sell, write, or issue insurance policies in the state of Oklahoma. Plaintiff did not dispute the facts submitted by AIG. Instead, Plaintiff argued that, since Granite was a subsidiary of AIG and Granite had sufficient contacts with Oklahoma, those contacts should be imputed to AIG. The Plaintiff argued that AIG exercised control over Granite and therefore, Granite’s contact with Oklahoma should be sufficient to establish jurisdiction over AIG.

 The United States District Court for the Western District of Oklahoma granted AIG’s motion to dismiss, holding: 1) companies conducting business through their subsidiaries can qualify as transacting business in a state; however, to do so, the parent must exercise sufficient control over the subsidiary; 2) the evidence before the court in this case did not demonstrate the pervasive level of control required to permit the exercise of personal jurisdiction over AIG in Oklahoma.

The obvious advantage to AIG in the court’s ruling is that it was not forced to defend an insurance coverage dispute. Competent Oklahoma insurance attorneys attempt to eliminate the expense involved in litigation of insurance policies and allegations of “bad faith”.

 Harris v American International Group. Inc., et al., 923 F.Supp. 2d 1299 (W.D. Okla. 2013).

The MCS-90 Endorsement – Background and Purpose

Posted in Liability, Transportation Cargo Claims

Congress passed the Motor Carrier Act of 1980 (MCA) with the intention of overhauling "outdated and archaic regulatory mechanisms, while retaining the pluses of an industry that has worked by simply conducting itself under the ‘rules of the game.’ " Carolina Cas. Ins. Co. v. Yeates, 584 F.3d 868 (10th Cir. 2009) citing H.R. Rep. No. 96-1069, at 2.

After the passage of the MCA, however, legislators feared that the reduction of regulatory barriers for interstate motor carriers would result in increased safety concerns. One concern the MCA set out to address was abuse by motor carriers who borrowed or leased vehicles to avoid financial responsibility for accidents which occurred during the interstate transportation of goods.

In response, the MCA and other subsequent regulations promulgated by the Federal Motor Carrier Safety Administration (FMCSA) require interstate motor carriers to either maintain insurance or another form of surety "conditioned to pay any final judgment recovered against such motor carrier for bodily injuries to or death of any person resulting from the negligent operation, maintenance, or use of motor vehicles under the carrier’s permit." Carolina Cas. Ins. Co., supra. In particular, the MCA requires that a motor carrier may operate only if it is registered to do so and is willing to comply with certain "minimum financial responsibility guidelines". A carrier can establish proof of financial responsibility by one of three ways: (1) an MCS-90 endorsement, (2) a surety bond, or (3) self insurance.

As opposed to a surety bond or self-insurance, the MCS-90 endorsement states that the insurer agrees to pay, "within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to financial responsibility requirements of sections 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor vehicle is described in the policy and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere. . ."

The Courts vary in their interpretation and application of the MCS-90 endorsement and its interplay with the liability insurance policy. We will discuss these different interpretations in a subsequent post.

The full text of Carolina Cas. Ins. Co. v. Yeates, can be found at 584 F.3d 868 (10th Cir. 2009).

Medical Malpractice Insurer Could Not Cancel Claims Made Policy With Knowledge that A Potential Claim Was Pending

Posted in Damages, Insurance Coverage, Liability

Physicians Liability Insurance Company (“PLICO”), issued a “claims made medical malpractice insurance policy to Defendant Mark Valentine. As a result of Valentine’s negligence during a surgical procedure, David Wurtz died. The Oklahoma Board of Medical Licensure reviewed the situation and revoked Valentine’s medical license.

Shortly thereafter, Valentine sent a letter to his insurance agency requesting that PLICO cancel his insurance policy and a refund a portion of the premiums paid since his suspended medical license left him unable to practice medicine. A few days later, the agency forwarded to PLICO Valentine’s letter along with a newspaper article detailing the medical board’s decision. PLICO agreed to cancel the policy but, the letters from PLICO were inconsistent regarding whether the cancellation was the company’s decision or at Valentine’s request.

Wurtz’ personal representative, Tracey Chandler, filed suit against Valentine for wrongful death and Valentine entered into a consent judgment. Chandler then filed a garnishment proceeding against PLICO for payment of the judgment to determine if there was a duty to indemnify for the damages.

The issue in the case before the Oklahoma Supreme Court was whether PLICO, by cancelling the policy, violated Oklahoma Statute 36 O.S. § 3625 which states in part that no insurance contract insuring against loss through bodily injury or death shall be retroactively annulled by any agreement between the insurer and the insured after the occurrence of any such injury, death or damage for which the insured shall be liable.

The Oklahoma Supreme Court found that: (1) there was no provision in the policy for cancellation based on revocation of a medical license, therefore Valentine had no right to cancel the policy; (2) there was an obvious agreement between the insured and the insurer to cancel the policy; (3) the evidentiary materials clearly establish that PLICO accepted Valentine’s offer to cancel the policy with knowledge of the events that would certainly generate a wrongful death action against the insured; and (4) PLICO’s conduct in cancelling the policy was at best, ignorance of the statute, and at worst, collusion with the insured to deprive the decedent’s estate of the benefits of coverage.

Although the case was resolved in a garnishment action, many insurers prefer to resolve coverage disputes in a declaratory judgment action. Often the insurer will need to address other potential coverage questions, such as the “duty to defend” the insured per the terms of the insurance contract. These strategy decisions are best made with a competent Oklahoma attorney versed in insurance coverage disputes and litigation.

Chandler v. Valentine, 2014 OK 61, ___ P.3d ___.

Intentionally Set Fires or Arson

Posted in Homeowners' Insurance
Condo Fire

Arson or intentionally set fires cost insurance companies $593 Million every year. It is estimated 5% of all residential fires are intentionally set. It is imperative for insurance adjusters to watch for suspicious claims involving house fires. Things to watch for include:

  • Vacancy – 41% of intentionally set fires occur in  vacant buildings
  • Ignite mainly in evening hours, slight peaking from 9 p.m. to 10 p.m.
  • 18% start in the bedroom
  • 24% of the items “first ignited” fall in the category of “general materials” such as books, magazines, newspapers, rubbish, and trash
  • Financial issues, marital problems, and significant factors for needing to transfer financial debt responsibility are common motives
  • Accelerants, flammable fuels such as gasoline, kerosene, diesel fuel, or undue build up of propane or natural gas are often present.

So what should you do when a fire loss is received? Assemble your investigative team immediately, complete with an attorney, cause and origin expert, qualified field adjuster, and investigate fully and promptly. For Oklahoma fire claims, the laws can be complicated and a lawyer experienced with fire investigations is a valuable resource.

“Claims Made” Versus “Occurrence” Based Insurance Policies

Posted in Insurance Coverage, Liability

Different insurance policies identify different events which trigger coverage. Two types of common insurance policies are "claims made" policies and "occurrence" policies.

Under a "claims made" policy, coverage is triggered when, during the policy period, an insured becomes aware of and notifies the insurer of either claims against the insured or situations that might give rise to such a claim. The notice of a potential claim is what invokes coverage in a "claims made" policy. "Claims made policies are often a more economical way to provide coverage for risks like professional responsibility, because the notice requirements allow an insurer to ‘close its books’ on a policy at the expiration date and thus ‘attain a level of predictability unattainable under standard occurrence policies.’ " State ex rel. Crawford v. Indemnity Underwriters Ins. Co., 1997 OK CIV APP 39, ¶ 4, 943 P.2d 1099.

In contrast, under "occurrence" policies coverage is triggered if the insurable event occurred during the policy term. Unlike "claims made" policies, "occurrence" policies allow for notice to be made to the insurer after the term of the insurance contract so long as the insurable event occurred during the policy term.

The proper analysis of an insurance policy or contract to assess coverage as "claims made" or "occurrence" is best approached with an attorney qualified to review the coverages. Familiarity with Oklahoma law is essential to an opinion as to insurance coverage.

Exceptions To Liability Under The Carmack Amendment In Motor Truck Cargo Claims

Posted in Liability, Transportation Cargo Claims

The Carmack Amendment to the Interstate Commerce Act generally imposes strict liability on motor carriers for actual loss or injury to property which occurs during interstate shipments.

However, there are five (5) exceptions outlined in the Carmack Amendment that a motor carrier can use to deny liability for freight claims. The burden of proof for each of the exceptions is on the motor carrier to prove the exception applies.

(1) Act of God: This defense applies when a carrier can show that damage was caused by a physical phenomenon or natural disaster than was not within the control of the carrier. For example, wind blowing over a trailer, or damage caused by tornado or flooding. Not every weather related condition falls under this exception, but rather, only those which are of such unanticipated force and severity that the carrier could not have been expected to take actions to protect against it.

(2) Public Enemy or Act of War: This exception applies to damage caused by hostile acts of military forces that are enemies of the government. This exception does not apply to organized crime.

(3) Act or Default of Shipper: The carrier can avoid liability if it can show that the damage to the cargo was as a result of some act of the shipper such as poor packaging of the product.

(4) Public Authority: Under the Carmack Amendment a carrier can also avoid liability if the cargo damage was caused by the government. For example, quarantines, product recalls, or trade embargos would fall under this exception.

(5) The Inherent Vice or Nature of the Goods Transported: If the goods being transported are naturally subject to defects, diseases, or decay, and the carrier can show that this "inherent vice" in the product was the cause of the damage, and not the carrier’s negligence, there is no liability on the carrier. Examples of these products include fruits, vegetables, and cheese. The burden of proof is on the carrier to show that this exception applies.

Application Of The Carmack Amendment In Motor Truck Cargo Claims

Posted in Liability, Transportation Cargo Claims

Congress enacted the Interstate Commerce Act in 1887 to regulate interstate transportation. Then in 1906 it enacted the Carmack Amendment. The purpose of the Carmack Amendment is to establish uniform federal guidelines designed to remove the uncertainty surrounding a carrier’s liability when damage occurs to a shipper’s interstate shipment. The provisions and limitations of the Carmack Amendment are important to know when dealing with a Motor Truck Cargo (MTC) claim for physical damage.

The Carmack Amendment applies only when there is interstate transportation by a motor carrier. 49 U.S.C. 13501(1). To make a case for carrier liability under the Carmack Amendment it must be shown that (1) that the goods were delivered to the carrier in good condition, (2) that they arrived at the place of delivery in damaged condition, and that (3) the amount of damages is measurable.

The Carmack Amendment subjects a motor carrier transporting cargo in interstate commerce to absolute or strict liability for actual loss or injury to property. As a result, the complaining party does not need to show that the carrier damaged the goods, but only that they arrived in a damaged state. To evidence the condition of the goods being shipped, the carrier issues a bill of lading, which is the carrier’s receipt for the condition and quantity of the goods. 49 U.S.C. 14706(a)(1). The bill of lading can also place limitations on the amount of the carrier’s liability in the event a claim is made. Punitive damages are not allowed under the Carmack Amendment.

The Carmack Amendment also allows a carrier to limit the time for filing a claim. A carrier may require that any claims for damaged goods be brought within nine months.

Train Wreck

Posted in Liability

Plaintiff was injured when the vehicle he was driving was struck by a train at a railroad crossing. Plaintiff drove his vehicle on a road which ran parallel to the railroad tracks and then turned on a road running perpendicular to the railroad tracks. He approached the railroad crossing which was marked by reflective crossbucks. Plaintiff drove his vehicle over the train tracks and his vehicle was hit by the train.

Plaintiff sued the railroad, alleging it was negligent in failing to properly mark the crossing, operating a train too fast, etc. The incident was captured on videotape.

The railroad filed a motion for summary judgment, asserting: 1) the accident was proximately caused by Plaintiff’s negligence; and 2) all of Plaintiff’s claims were preempted by federal law.

The trial court granted summary judgment in favor of the railroad based on the accident video and all of the other evidence available on the record. The approaching train was plainly visible to the driver. Plaintiff appealed the summary judgment entered in favor of the railroad.

The Oklahoma Court of Civil Appeals affirmed the summary judgment for the railroad, holding: 1) all of Plaintiff’s negligence claims were preempted by federal law; and 2) agreeing the Plaintiff’s own negligence was the proximate cause of the accident.

 Short v. Union Pacific Railroad Company, 2013 OK CIV APP 110. 315 P.3d 400

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