Washington Court of Appeals Breaks New Ground in Insurers’ Duties When Handling Third-Party Liability Claims Before the Insured is Sued

On July 5, the Washington Court of Appeals issued its decision in Tarutis v. Farmers Insurance, concerning an insurer’s duty to accurately adjust claims and settle within policy limits. The Court held that the insurer breached its duty of good faith and fair dealing by failing to attempt to settle a claim against its insured prior to suit being filed against the insured. It also held that the insurer’s subsequent tender of policy limits after suit was filed against the insured did not cure this breach. As a result, the insurer was exposed to liability far in excess of its policy limits.

Washington Court of Appeals Heralds New Developments in Damages for an Insurer’s Bad Faith Duty to Defend

On April 4, the Washington Court of Appeals issued its decision in Unigard Insurance Company v. Mutual of Enumclaw Insurance Company. The case pertains to the scope of damages that may be assessed for an insurer’s bad faith failure to defend and the applicable rate of prejudgment interest. The Court held that where the policyholder did not admit liability or confess judgment in a specific amount, the presumed harm from the insurer’s failure to defend — and therefore the bad faith damages — was the policyholder’s maximum potential liability in the underlying case. The Court also held that the prejudgment interest rate for torts, rather than the rate for contracts, applied to a bad faith and breach of contract case.

Oregon Court of Appeals Holds “No Duty to Defend” in Insurance Ruling

On April 6, the Oregon Court of Appeals issued its decision in State Farm Fire and Casualty Company v. American Family Mutual Insurance Company. The case pertains to whether an insurer has a duty to defend where the complaint against the policyholder alleges defective construction of a building’s moisture protection system, but does not allege resultant water intrusion and damage. The court held that where such “special damages” are not specifically pled, there is no duty to defend.

Supreme Court Holds That an Amended Pleading “Relates Back” Even When Plaintiff Knew of the Cruise Line’s Existence and Delayed in Amending

Krupski v. Costa Crociere, 560 U.S. __ (2010)

Wanda Krupski brought a diversity negligence claim against Costa Cruise Lines for injuries sustained when she tripped over a cable on a cruise ship. Krupski’s passenger ticket identified the cruise line owner, Costa Crociere S. p. A., as the proper party to sue. After the one-year limitations period expired, Costa Cruise Lines moved for summary judgment on the ground that it was merely the carrier’s sales and marketing agent and not the proper defendant.

Supreme Court Holds That the Principal Place of Business, for the Purposes of Diversity of Citizenship, Refers to the “Nerve Center,” or the Place Where the Corporation’s High Level Officers Direct, Control and Coordinate the Corporation’s Activities

Melinda Friend and John Nhieu (hereinafter “Friend”), two citizens of California, sued Hertz Corporation in California state court for violations of the state wage and hour laws. Hertz subsequently filed a notice of removal to federal court, claiming that the plaintiffs and the defendant were citizens of different states and that the federal court possessed diversity jurisdiction. Friend claimed that diversity jurisdiction was lacking because Hertz was a California citizen. Hertz submitted a declaration from an employee, which opined that the principal place of business was in New Jersey because Hertz’s core executive, leadership and administrative activities are carried out at its headquarters located in New Jersey. The district court accepted Hertz’s declaration as undisputed, but concluded that Hertz was a citizen of California based on Ninth Circuit precedent.

Ninth Circuit Holds that Rule B Attachments Must Be Vacated When the Plaintiff Has Failed to Show a Valid Prima Facie Admiralty Claim

Under Rule B of the Supplemental Admiralty Rules, a plaintiff can only attach a defendant’s property if four conditions are met: (1) plaintiff has a valid prima facie admiralty claim against the defendant; (2) defendant cannot be found within the district; (3) property of the defendant can be found within the district; and (4) there is no statutory or maritime law bar to the attachment. The Supplemental Rules permit the defendant to object to the attachment through a Rule E hearing, at which the defendant argues that one of the four conditions has not been met. The burden is on the plaintiff to demonstrate that the attachment should continue. At issue in this case was whether Equatorial Marine Fuel Management Services (“Equatorial”) had carried its burden to show a valid prima facie admiralty claim against MISC Berhad (“MISC”).

Federal Court Announces That Plaintiffs May Bring Nuisance Claims Against Power Plants for Global Warming

On September 21, 2009, the Court of Appeals for the Second Circuit ruled that plaintiffs may bring federal nuisance claims against owners of power plants.

In 2004, eight states, New York City and three private land trusts (hereinafter the “Plaintiffs”) filed suit against six electric power corporations that own and operate fossil-fuel-fired power plants in 20 states (hereinafter the “Defendants”). Plaintiffs alleged that Defendants, as the largest emitters of carbon dioxide in the United States, are contributing to global warming and causing serious harm affecting human health and natural resources. Plaintiffs brought suit under the federal common law of nuisance to force Defendants to cap and then reduce their carbon dioxide emissions.

The Ninth Circuit Holds That 16-Hour Work Day Requirement May Satisfy a Negligence or Unseaworthiness Claim

On November 25, 2009, the Ninth Circuit Court of Appeals issued its unpublished decision in Ili v. American Seafoods Co., LLC. The Court held that there are genuine issues of material facts as to whether requiring a seaman to work a 16-hour shift is negligent or creates an unseaworthy condition.

The Second Circuit Holds That Electronic Fund Transfers Processed by an Intermediary Bank Are Not Property Subject to Attachment Under Rule B

On October 16, 2009, the Second Circuit Court of Appeals issued its decision in The Shipping Corporation of India v. Jaldhi Overseas Pte Ltd. The Court held that electronic fund transfers (“EFTs”) processed by an intermediary bank are not property subject to attachment under Rule B, overruling its earlier decision in Winter Storm Shipping, Ltd. v. TPI.

U.S. Signs Rotterdam Rules: Changes in Cargo Liability

On September 23, 2009, the shipping industry embraced a new international regime — the Rotterdam Rules (United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea) — to regulate marine cargo liabilities in the global economy.  As a new international regime on contracts of carriage by sea, fifteen signatory nations including the United States, Denmark, the Netherlands, Switzerland, Spain, Poland, Guinea, Senegal, Greece, Norway, Ghana, Nigeria, Togo, Benin and the Democratic Republic of Congo signed the Rotterdam Rules.  France and China are not yet signatories, but are public supporters of the Rotterdam Rules.  The maritime nations of New Zealand, the United Kingdom, Singapore, Bulgaria, Slovenia, Japan, Finland and Croatia have not yet signed the Convention.

View full article (PDF).

Supreme Court Rules Punitive Damages Available in Maintenance and Cure Cases

In Atlantic Sounding vs. Townsend (2009 U.S. Lexis 4732), a sharply divided Supreme Court of the United States ruled in a 5-4 decision on June 25, 2009, that an injured seaman may recover punitive damages for his employer’s willful failure to pay maintenance and cure. Since Miles vs. Apex Marine Corp., 498 U.S.19 (1990), U.S. Courts of Appeal had split on this question. The 1st, 5th and 11th Circuits had awarded punitive damages as a remedy for failure to pay maintenance and cure. The 2nd, 3rd and 9th Circuits routinely awarded pecuniary damages for the failure to pay maintenance and cure.

View full article (PDF).

Ninth Circuit Enforces Forum Selection Clause in Ocean Bill of Lading in Favor of Subcontracting Vessel

Last week in Mazda Motors of America, Inc. and Indemnity Insurance Co. of North America v. M/V COUGAR ACE, ___ F.3d ___ (9th Cir. 2009), a panel of the Ninth Circuit Court of Appeals enforced the Japanese forum selection clause contained within an ocean carrier’s bill of lading in an in rem action filed by the cargo owner seeking damages for cargo damage against the contracting vessel. Specifically, the Court held that the M/V COUGAR ACE, which was operated but not owned by the ocean carrier Mitsui, was entitled to assert the defenses and protection of the Carriage of Goods by Sea Act (“COGSA”), 46 U.S.C. Section 30701, Notes, contained within Mitsui’s ocean bills of lading that were extended to the M/V COUGAR ACE through the Himalaya Clause. View full article (PDF).

U.S. Supreme Court Enforces Arbitration Rights: Potential Tool for Insureds?

On May 4, 2009, the U.S. Supreme Court held that non-signatories to an arbitration agreement may obtain a stay of claims in favor of arbitration under Section 3 of the Federal Arbitration Act (“FAA”). The decision resolves a circuit split and allows non-signatory, third parties to benefit from a stay of litigation while an arbitration proceeds between a plaintiff and co-defendant. Such an intervening arbitration may further benefit third parties by possibly giving rise to preclusive effects on a plaintiff’s claims. View full article (PDF).

Washington Appeals Court Rules No Coverage for Property Damage Caused by Leaking Underground Tanks After Insurance Policies Expire

Last week, the Washington Court of Appeals upheld the denial of insurance coverage for property damage caused by a release of gasoline from an underground storage tank (“UST”). In Walla Walla College v. Ohio Casualty Ins. Co., a panel in Division Three of the Washington Court of Appeals ruled that there was no insurance coverage for damage to property that occurred ten years after the USTs were improperly installed and eight years after the insurance policies expired. View full article (PDF).

U.S. Supreme Court Permits Cost-Benefit Analysis to Relax Regulation of Power Plants Under the Clean Water Act

The U.S. Supreme Court has approved the use of cost-benefit analysis to determine which water-intake technologies power plants must employ under the Clean Water Act (“CWA”), 33 U.S.C. Sections 1251-1387 (1977). The decision in Entergy Corp. v. Riverkeeper, Inc., delivered on April 1, 2009, significantly relaxes decades of regulatory practice and reverses a Second Circuit ruling, Riverkeeper, Inc. v. EPA, that precluded the Environmental Protection Agency (“EPA”) from comparing technology costs and environmental benefits in setting acceptable levels of environmental impact for existing power plants. See Entergy Corp. v. Riverkeeper, Inc., 556 U.S. ___ (2009); Riverkeeper, Inc. v. EPA, 475 F. 3d 83 (2007).

Riverkeeper, Inc. originally brought suit against the EPA in response to the agency’s adoption of a two-phase regulatory scheme that applied different standards depending on whether the power plant at issue was a new or existing facility. For nearly 30 years prior to the scheme, EPA had made “best technology available” determinations, as required under Section 1326(b) of the Act, on a case-by-case basis. The agency’s recent two-phase approach opened the door to potentially relaxed environmental standards for over 500 existing power plants supplying more than half the nation’s electricity. View full article (PDF).

Read the court’s opinion.

Forum Selection Clauses in Intermodal Shipment Under a Through Bill Of Lading: Should COGSA or Carmack Apply to the Inland Shipment

In February 2009, the Ninth Circuit Court of Appeals issued a decision examining “which federal statute governs a maritime case involving a train wreck.” In Regal Beloit Corp., et al. v. Kawasaki Kisen Kaisha, Ltd., et al., — F.3d — 2009 WL 251949 (C.A. 9 (Cal.) (2009)) the Court refused to enforce a Tokyo forum selection clause contained in a through bill of lading issued by Kawasaki Kisen Kaisha, Ltd. (“K-line”). The through bill of lading contained a Himalaya Clause extending the ambit of the Carriage of Goods by Sea Act (“COGSA”), 46 U.S.C. 30701 (Note) to the inland portion of the shipment. The Ninth Circuit held, however, that despite the Himalaya Clause in the bill of lading issued by K-line, the inland shipment was controlled by the Carmack Amendment, 49 U.S.C. Section 10502(e). View full article (PDF).

Washington Supreme Court Rules That Equipment Manufacturers Have No Duty to Warn of Dangers Posed by Products They Did Not Manufacture or Sell

On December 11, 2008, the Washington Supreme Court issued opinions in two asbestos cases that presented the issue whether manufacturers of naval equipment, such as pumps, valves and evaporators, owed a duty under common law products liability or negligence to warn of the dangers posed by asbestos-containing insulation, gaskets and packing, materials they neither manufactured nor sold but that were used in conjunction with their naval equipment. The Court’s decisions were issued in Braaten v. Saberhagen Holdings, Inc. et al. and Simonetta v. Viad Corporation, et al. In both cases the Supreme Court held that the equipment manufacturers did not owe a duty to warn of the dangers of asbestos-containing products that they did not manufacture, sell or otherwise place into the stream of commerce. View full article (PDF).

Where the Insured Alleges only “Procedural” Claims-Handling Violations Proof of “Actual Harm” Required, and Remedies Limited

On 26 November 2008, the Washington Supreme Court issued its decision in St. Paul Fire and Marine Ins. Co. v. Onvia, Inc., concerning an insured’s standing to sue for bad faith and violations of the Washington Consumer Protection Act (“CPA”) where the insurer properly denied defense and indemnity, but violated Washington claims-handling regulations concerning the timing of communications with the insured. The Court held that the insured could maintain a claim for improper claims-handling in the absence of a duty to defend or indemnity, but refused to apply a presumption of harm, and limited the remedies available. View full article (PDF).

Washington Supreme Court Clarifies Distinction between Contribution and Subrogation Claims between Insurers, and Refines Standard for Prejudice for Late Notice Defense

On 4 September 2008, the Washington Supreme Court issued its decision in Mutual of Enumclaw Ins. Co. v. USF Ins. Co., concerning the distinction between contribution and subrogation claims between insurers and the rules of tender that apply to each, and clarifying the standard for demonstrating “actual prejudice” prong of the “late notice” defense. View full article (PDF).

Exxon v. Baker: The United States Supreme Court Limits Punitive Damage Awards Under Maritime Law

On 25 June 2008, the United States Supreme Court issued its opinion in Exxon Shipping Co. v. Baker, concerning the limits of punitive damages which may be assessed under federal maritime law. The Court held that under federal general maritime law governing maritime cases, an award of punitive damages may be greater than a 1:1 ratio as compared with compensatory damages. The Supreme Court reduced the prior $2.5 billion punitive damages award to $500 million. View full article (PDF).

A Sterling (Alaska) Result: The Alaska Supreme Court Denies Coverage for Leaked Gasoline under the Absolute Pollution Exclusion

On 13 June 2008, the Alaska Supreme Court issued its opinion in Whittier Properties Inc. v. Alaska National Insurance Company, concerning the interpretation of the “absolute pollution exclusion.” The Court held that leaked gasoline was unambiguously a pollutant, rejected the insured’s arguments for coverage under the “personal and advertising liability” section, and held that an insured cannot create coverage for an excluded risk by agreeing to indemnify a third party for the same. This case was successfully defended by a team of attorneys from Lane Powell’s Anchorage, Alaska office, including Brewster Jamieson, Andrea Girolamo-Welp, Brad Ambarian and Ben Roesch. View full article (PDF).

Alaska Supreme Court Finds No Coverage Between Policy Cancellation and Reinstatement

On 23 May 2008, the Alaska Supreme Court issued its opinion in Amos v. Allstate Insurance Company, concerning an insurer’s indemnification obligation for bodily injuries occurring in the period between the insurance policy’s cancellation for non-payment of premium and reinstatement. View full article (PDF).

Washington Court of Appeals holds that “Washington law does not, in fact, force insurers to pay for losses that they have not contracted to insure”

On 7 April 2008, the Washington Court of Appeals issued its decision in Polygon Northwest Co. v. American National Fire Ins. Co. et al., concerning trigger-of-coverage, contribution, and allocation of damages between multiple primary and excess insurers on the risk in a construction defects case. View full article (PDF).

Ninth Circuit Applies U.S. Maritime Lien to a Pervasively Foreign Dispute

On 11 March 2008, the Ninth Circuit Court of Appeals issued its opinion in Trans-Tec Asia v. M/V Harmony Container. View full article (PDF).

Court Holds Any Contractual Waiver of Uberrimae Fidei Must be Explicit

On 20 March 2008, the U.S. Court of Appeals for the Ninth Circuit rendered its decision in New Hampshire Ins. Co. v. C’Est Moi, Inc., addressing the maritime insurance doctrine of Uberrimae Fidei, or the duty of the assured and insurer of utmost good faith, for the second time in as many months. View full article (PDF).

Oregon Supreme Court Limits Punitive Damage Awards for Insurer Bad Faith

On 6 March 2008, the Oregon Supreme Court rendered its decision in Goddard v. Farmers Ins. Co. of Oregon, holding that any punitive damage award for an insurer’s bad faith failure to settle a third-party claim within policy limits must ordinarily be limited to four times the amount of compensatory damages. Under the “due process” clause of the United States Constitution, “excessive” punitive damages are prohibited. However, courts have generally held that the determination of “excessiveness” is case-specific and hinges on several non-quantifiable factors. The Goddard case, therefore, represents a potentially significant step towards greater predictability for insurers’ punitive damages exposure. View full article (PDF).

The Decline and Fall of Investment Bank Bear Stearns

The recent and highly publicized fall of Bear Stearns provides a dramatic cautionary tale in the unfolding sub-prime crisis. The chronology of events surrounding Bear Stearns’ demise closely tracks economic developments in the broader U.S. sub-prime lending industry. View full article (PDF).

U.S. Supreme Court Curtails Investor Lawsuits: Possible Effects on Subprime Exposure

The United States Supreme Court dealt a significant blow to investor lawsuits in a decision issued on January 15, 2008. In Stoneridge Investment Partners v. Scientific-Atlanta, Inc. (06-43), the Supreme Court curbed the ability of shareholders to recover damages from “secondary” parties, which could include investment banks, lawyers, accountants, consultants and other parties. View full article (PDF).

Voters Approve Insurance Fair Conduct Act

On November 6, 2007, Washington voters approved R-67, a referral to the people of the legislation entitled “Insurance Fair Conduct Act.” We first reported on this legislation in May, when it was signed by Gov. Christine Gregoire. The referendum effort to repeal the legislation stayed the effective date. Now that voters have approved this legislation, the Act will go into effect on December 6, 2007. View full article (PDF).

Court Puts Teeth (Well, Tusks, Actually) into Duty to Defend

Washington Passes Stringent Insurance Fair Conduct Act

On May 15, 2007, Washington State Governor Christine Gregoire signed the Insurance Fair Conduct Act into law. The Act allows recovery of uncapped treble damages for unreasonable denial of a claim for coverage or payment of benefits, and recovery of uncapped treble damages for violation of certain insurance regulations. View full article (PDF).

London Market News – Summer 2004

London Market News – Summer 2004:  View full article (PDF).

Comparison of Shipowners

Nearly all maritime nations, with the exception of the United States, have ratified either the 1957 or 1976 Conventions. View full article (PDF).