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Drones For Christmas? Learn the Laws and Regulations That Apply

Posted in Liability

Drones, also known as UAV’s (unmanned aerial vehicles), are becoming a public sensation.  As their popularity grows and more people own them, legal issues have begun to surface.  For instance, beginning on December 21, 2015, the FAA, Federal Aviation Administration, will require drones weighing between 0.55 lbs and 55 lbs, including cameras, to be registered.  Besides the new administrative rules, there are also other laws that can apply to drones.

One such issue is that of the invasion of privacy.  A man in Kentucky found this out the hard way. His drone was shot out of the air by a homeowner.  The homeowner claimed that the drone was spying on his 16-year-old daughter.  A Kentucky state court judge found that the homeowner did not violate any law by shooting down the drone over his own property.

There have been numerous other reports of drones causing problems with larger aircraft.  Airline pilots have reported close calls with drones when landing or taking off.  This can endanger a lot of people’s lives.  During the California wildfires of 2015 drones reportedly caused helicopters to be grounded.  The drones in the air made it hazardous for the helicopters that were trying to drop water on the wild fires.  Issues like these cause concern in the minds of regulators and insurers alike.  As more and more people take to the sky, via unmanned drones, a whole new area of liability is opening up.  The law will be required to assess what is trespass, invasion of privacy, nuisance, and even if liability coverage is available for negligence.  With new regulations being enacted, it would be wise to make sure you understand and comply with all the laws and regulations that come with drone ownership and operation.  Even with all the new rules, drones can still be fun but it is important to pilot them safely and responsibly.

Turkey Fryers, Fires, and Liabilities, Oh My!

Posted in Damages, Homeowners' Insurance, Liability
Turkey Fryer

Propane turkey fryers have the ability to turn into a fountain of fire, causing fire damage to homes and injuries to people. The holiday season is supposed to be about family, friends, and food. With all the fun to be had at holiday parties there is also the chance that property can be damaged or that a homeowner could be held liable for injuries. The damage or injuries can even happen before the turkey is cooked. In fact, the turkey and the turkey fryer can turn a fun holiday party into a disaster.

The National Fire Protection Association’s 2013 survey revealed that on Thanksgiving the total number of daily fires is estimated to be 230% above the daily average, and on Christmas Day it is 58% above the daily average. Propane turkey fryers have developed a reputation for being dangerous. You can find hundreds of videos on the internet showing the chaos that one little bird and some oil can cause. Nationally Thanksgiving Day cooking annually causes 2,000 residential fires totaling to about five deaths, 21 injuries, and $21 million in property losses. Turkey fryers alone make up about $15 million of the property damage caused by Thanksgiving Day cooking.

It is easy to see how these numbers come about. With people buzzing around, friends and family catching up and telling stories, it is easy to make a mistake that can lead to a fire while cooking. If you add an open flame and gallons of hot oil to the mix, you very likely have a recipe for disaster.

The blame is not always the chef’s, but instead might fit squarely on the shoulders of the manufacturer. Manufacturer’s products liability can be a likely cause of a turkey fryer causing damage to homes and people. If there is a defect in the design of the fryer, or there is a defect in the manufacturing the fryer that caused the fire, the manufacturer could be on the hook for the loss. As such, subrogation recovery potentials need to be evaluated relatively early in order to gather proper evidence and avoid spoliation. Engaging a competent Oklahoma law firm quickly in fire losses benefits greatly. Oklahoma attorneys knowledgeable in fire investigation and preservation of evidence necessary for recovery against the manufacturer greatly increase your odds.

Do Insurance Policies Provide Coverage for Man-made Earthquakes in Oklahoma?

Posted in Homeowners' Insurance
Earthquake damage

Earthquake insurance is not automatically included in a standard homeowners policy. However, insurance companies may provide coverage for earthquakes for an additional charge. Earthquake coverage may be purchased as either an endorsement to a homeowners insurance policy or it may be purchased as a separate policy of its own. Over the past few years earthquake coverage has become more relevant in Oklahoma. Since the 5.6 magnitude earthquake of 2011 the number of Oklahomans with earthquake insurance has increased from 2 percent to about 15 percent, surpassing California’s 10 percent. This increase in earthquake coverage is most likely related to the increase in earthquakes that Oklahoma has witnessed over the past few years. One question presently under discussion is whether “earthquake insurance” includes man-made situations such as waste water disposal or injection wells.

The fact of the matter is, Oklahoma earthquakes are being blamed on waste water disposal wells, or injection wells. Geologists believe that the injection well sites are causing seismic movement leading to earthquakes; however, this is not a 100 percent scientific fact. Many earthquake coverage policies or endorsements will specifically exclude man-made earthquakes. Therefore, insurance companies might exclude earthquakes if caused by injection wells if the scientific and legal community view the earthquakes as caused by the injection wells.

Some insurance companies are already taking the stance that the recent Oklahoma earthquakes are man-made and therefore excluded. In 2014, roughly 100 insurance claims due to earthquakes were made, however, only eight of those claims were paid. In light of this situation, Oklahoma Insurance Commissioner John Doak released a bulletin stating that insurance companies cannot deny earthquake claims based on the “unsettled belief these earthquakes were the result of fracking or injection well activity.” Commissioner Doak further stated that if insurance companies were denying claims on the reasoning that injection wells are the cause, the Insurance Department might take appropriate action. Commissioner Doak also felt that until there is legal precedent to the contrary the earthquakes are to be presumed natural earthquakes.

The denial of some of these claims may be attributed to other situations, such as preexisting conditions or the damages sustained to the home do not meet the deductible threshold. Earthquake insurance is designed to cover a total loss on the home. A number of earthquake policies will have deductibles ranging from 5 to 10 percent of the property value. Therefore, when the damage caused by an earthquake does not break the threshold of the deductible the insurance company is not going to pay on the claim.

Whether Oklahoma earthquakes are assumed natural or man-made is going to be answered by the courts. Specific questions about whether the insurance policy has earthquake coverage requires review by a competent Oklahoma attorney. However, Oklahoma may have an answer on one case soon. It is a pressing concern with great interest by Oklahoma homeowners and insurers alike. Perhaps there will be a definitive answer in the near future, but regardless of the outcome, Oklahoma earthquakes have devastated homeowners.

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.

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