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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Congress passed the Motor Carrier Act of 1980 (MCA) with the intention of overhauling "outdated and archaic regulatory mechanisms, while retaining the pluses of an industry that has worked by simply conducting itself under the ‘rules of the game.’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

Coverage Insurers Each Pay For One-Half Of The Defense

Posted in Insurance Coverage

A physician was sued for defamation and interference with business relations. The physician had liability insurance policies with two different insurers: Physicians Liability and American National. The doctor reported the lawsuit to both insurers.

Physicians Liability agreed to defend the lawsuit, but American National refused to provide a defense or participate in the cost of defense. Physicians Liability sued in federal court asking the court to rule that American National was responsible for one-half of the expenses.

The trial court ruled in favor of Physicians Liability and ordered American National to pay one-half. The trial court also ruled that Physicians Liability was not entitled to recover prejudgment interest from American National on the amount awarded. Both parties appealed.

The Tenth Circuit Federal Court of Appeals agreed with the trial court’s ruling and held: 1) the policy language of the American National policy required the insurer to defend the physician; 2) Physicians Liability had a contractual right of subrogation against American National because the Physicians Liability policy stated "in the event of any payment under this policy, the company shall be subrogated to all the insured’s rights of recovery therefor against any person or organization…"; and 3) Physicians Liability could not recover prejudgment interest on the defense costs that it was entitled to collect against American National because prejudgment interest applies only to liquidated claims. The amount of defense costs was unliquidated therefore no interest could be collected.

Yousuf, et al. v. Cohlmia, et al., appeals # 12-5034 and 12-5038 (N.D. OKLA.) (1/21/14)

Mental Capacity To Knowingly Enter Into Contract With Arbitration Clause Is A Question For The Trial Court

Posted in Damages

The Plaintiffs Walker Bark and Debra Yahquo were parties to two contracts with Lake Country Chevrolet for the purchase of automobiles. The Plaintiffs then brought a lawsuit which sought to have the contracts rescinded (or set aside) and to recover damages for fraud on the part of the car dealer. The car dealership filed a motion to compel arbitration arguing that the contracts signed by the Plaintiffs included an agreement to resolve any disputes through arbitration, not a lawsuit.

In response, the Plaintiffs asserted that Mr. Bark suffered from a service-related disability and cognitive impairment and because of this, he did not knowingly agree to any of the terms of the contract including the arbitration clause. As an alternative, the Plaintiffs requested the court hold a hearing where it could hear evidence on the issue of whether cognitive impairment existed and the affect, if any, it had on the Plaintiffs ability to comprehend the contract. The trial court refused to hold a hearing or hear evidence and instead denied the dealership’s motion and allowed the lawsuit to proceed.

The dealership appealed the decision. The appellate court reversed the ruling of the trial court and remanded the case back to the trial court with instructions that it conduct an evidentiary hearing. As part of this hearing the trial court was instructed to make a determination as to the existence of the Plaintiffs’ mental capacity and ability to knowingly enter into a contract and agree to arbitration.

 Bark v. Lake Country Chevrolet Cadillac, LLC, 2014 OK CIV APP 24, __ P.3d __

Medical Clinic Not Responsible For Patient Who Causes An Automobile Accident

Posted in Liability

An elderly patient was examined during a scheduled appointment with a medical clinic. The patient was observed to be unstable. She advised the doctor’s office that she was under a lot of stress due to concern over her daughter being diagnosed with cancer. Upon examination, the doctor did not find any evidence of impairment. She was determined to be alert, could maintain a conversation, and did not exhibit any behavior warranting concern over her ability to drive an automobile.

After the examination, the patient was taken in a wheelchair to her car in the parking lot. The patient then proceeded to drive, striking the back of the Plaintiff’s car. The Plaintiff alleged that she was injured in the collision and blamed the clinic for allowing the patient to drive when she was incapable.

The medical clinic filed a motion for summary judgment which was granted by the court. The Oklahoma Court of Civil Appeals affirmed summary judgment stating that simply because a patient is unsteady on her feet did not reasonably give the physicians notice that an accident would occur; that a nurse taking a patient to the parking lot in a wheel chair to prevent the patient from falling is not sufficient for the Plaintiff to bring suit; members of society are perfectly capable of knowing when they can safely operate an automobile and the clinic was not responsible.

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