The Law

Legal Spotlight

A look at the latest court decisions impacting the insurance industry.
By: | February 20, 2018

Insurer Must Pay for Hail Storm Damage

A hail storm pelted apartment complex Grand Reserve one wintry March morning. Wind and hail stones wreaked havoc on the 55-building complex. Nine months later, when the complex was able to understand the full scope of the damage done, it filed a claim with its insurer.

Property-Owners Insurance Co. then spent the next seven months investigating the claim. In the end, the insurer decided to cover $159,000 for damages done to the roof and an additional $46,700 in depreciation costs once repairs were made.

Grand Reserve retained an independent adjustor named Brian Dansby, who estimated the complex sustained at least $1.3 million in damages. Property-Owners offered $26,700 for wind and hail damage but refused to pay any more for damages done to the complex buildings’ roofs.

Grand Reserve sued Property-Owners, stating that the insurer’s payments thus far had been “extremely disproportionate” to the total amount of actual loss the complex faced. At trial, the jury rendered a $552,000 verdict for the complex.

Property-Owners filed an appeal. It claimed that Dansby was inaccurate in his assessment of the damages done to the complex’s buildings. The insurer also called into question the validity of the adjustor’s qualifications and methodology during his assessment of damages.

According to Property-Owners, the initial trial abused its discretion when it allowed Dansby to testify. The court had not acted as the “gatekeeper to ensure that speculative and unreliable opinions do not reach the jury.”

In addition to the faulty testimony, Property-Owners said, the complex had failed to introduce sufficient evidence of the damages done by the hail storm to its facilities.

The appellate court did not agree: “Property-Owners argues that Dansby offered ‘at best’ speculative evidence of damages, but its attacks on Dansby’s credibility and the accuracy of his estimate are misplaced because ‘we have stressed’ that ‘[i]t is the jury’s task — not [the court’s] — to weigh conflicting evidence and inferences, and determine the credibility of witnesses,’ ” the court said.

Further, the court reminded Property-Owners that the adjustor in question had been in the business for 26 years and performed more than 1,000 roof assessments in his career. The court ruled in favor of Grand Reserve.

Scorecard: Property-Owners Insurance Co. will cover up to $552,000 in repairs to Grand Reserve’s roofs, which were damaged in a hail storm.

Takeaway: If an insurer does not believe it should have to pay for damages to its insured’s property, it is best practice to write exclusions into the policy before a claim is brought forth. Otherwise, any ancillary argument against payment might not hold up in court.

Worker Can’t Petition for Comp Reinstatement

In 2009, worker Wilner Dorvilus filed a workers’ comp claim petition alleging he sustained a work-related injury while packing machine parts onto a cart. While packing his cart, another cart hit him in his lower back, which left him with a lumbosacral strain and sprain.

The Pennsylvania Workers’ Compensation Judge granted the claim petition, calling for medical and disability compensation from the worker’s employer, Cardone Industries. Dorvilus’s employer appealed to the state’s Workers’ Compensation Appeal Board, which affirmed the judge’s assessment but reversed the award of disability benefits.

Dorvilus petitioned for review, but the court affirmed the board’s decision.

In 2013, Cardone Industries filed a termination petition that stated Dorvilus’s injury had fully recovered, but was denied the petition because Dorvilus was able to provide enough evidence that he needed continued medical treatment.

Keeping an accurate record of each ruling can work in favor of the insurer if a claimant tries to challenge a former ruling.

On July 21, 2013, Dorvilus received his final disability compensation payment.

Then, two years later, Dorvilus filed for a reinstatement petition. According to him, his injury had worsened and caused him a loss of earnings. Cardone Industries was not willing to pay. The employer moved to dismiss the petition, because Dorvilus had not received disability for two years.

Dorvilus argued that his petition was well within the three-year deadline, but the employer argued that Dorvilus was never entitled to any wage loss compensation. He received disability compensation for his injury, but the courts revoked the award of wage-loss compensation.

“[Dorvilus] proved a work injury, but he did not prove that it caused a disability. He cannot now seek reinstatement after the three-year statute of limitations has run, based upon his collection of compensation payments reversed on appeal. For these reasons, we affirm the Board,” wrote the judge.

Scorecard: Wilner Dorvilus’s benefits will not be reinstated. Cardone Industries will not have to continue to pay on the injured worker’s disability compensation.

Takeaway: Long-lasting claims may face more than one court hearing. Keeping an accurate record of each ruling can work in favor of the insurer if a claimant tries to challenge a former ruling.

Negligence Suit Results in Split Decision

Dorel Juvenile Group, Inc. manufactured a faulty car seat that, when involved in a crash, caused a child to be permanently disabled. The parents filed suit.

Schiff Hardin, LLP represented Dorel in the suit against the parents and was the primary contact for Dorel’s excess insurer, Ironshore Europe DAC.

Ironshore was concerned that the case might result in an award or settlement in excess of $6 million, which is when the excess carrier’s policy would kick in.

According to Ironshore, Schiff seemed optimistic. They told Ironshore the trial was going “pretty well” among other affirmative sentiments that predicted a positive outcome.

Yet, Dorel was hit with a $34 million verdict. Ironshore immediately sued Schiff for negligent misrepresentation, blindsided by the court’s decision. The insurer claimed that Schiff falsely “predicted the future” and made Dorel’s trial seem less pressing an issue than it was.

Additionally, Ironshore also alleged Schiff withheld critical information regarding the developments of the lawsuit, which led the insurer to believe its excess policy was not at risk.

Schiff filed to dismiss Ironshore’s claims. Schiff claimed that it had attorney immunity under Texas law, which states that attorneys are allowed “to advise their clients and interpose any defense or supposed defense, without making themselves liable for damages.”

The judge reviewing the case said, “Even if [Schiff’s statements during trial] were the sort of misrepresentations that could give rise to liability … [Ironshore] has not alleged facts showing that it would have been reasonable for Ironshore to rely on Schiff’s assessment that trial ‘was fine’ or that it ‘went pretty well’ in determining whether the jury might award a particular sum of money.”

In regards to omission, however, “Ironshore has alleged that statements made by Schiff were either misleading when made or became misleading based on a failure to disclose subsequent developments. This is adequate to state a claim for negligent misrepresentation.” Ironshore’s suit was allowed to proceed.

Scorecard: The one claim stating Schiff provided negligent misrepresentation in regards to predicting the future was thrown out. However, the court determined negligent misrepresentation partially stands, because Schiff failed to disclose important information during Dorel’s trial.

Takeaway: Insurers that don’t want to get hit with an unexpected bill should be clear upfront on their expectations for communication with counsel. &

Autumn Demberger is a freelance writer and can be reached at [email protected].

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