Holden Benon – Duane Morris Insurance Law

On June 15, 2022, the National Highway Traffic Safety Administration (NHTSA) released its initial summary reporting on autonomous vehicle crashes collected through its Standing General Order. According to the NHTSA, in the last year, there were 130 reported crashes involving vehicles with levels 3-5 automated-driving systems. Although NHTSA’s recent summary does not specify what caused these accidents, we might anticipate two eventualities going forward: the number of reported crashes may increase as autonomous vehicle technology becomes more widely adopted, and the question of whether crashes were caused by the driving system or the driver will increasingly be a factor in determining liability. Against this backdrop, one might wonder how personal auto insurance will evolve to meet these changes.

By way of background, road vehicles come with varying degrees of automation technology. To differentiate between these varying degrees, the Society of Automotive Engineers defined different levels: “level zero” refers to fully manual vehicles, while “level one” refers to cars with basic driving assistance features (e.g., adaptive cruise control) and “level two” refers to cars with more advanced driving features (think Tesla Autopilot). Meanwhile, levels three and four refer to “conditional driving automation” and “high” automation, respectively. Level five, the highest defined level of autonomy, refers to “full” automation, where no driver is needed at all.

This article focuses on personal auto insurance for owners of level four autonomous vehicles, i.e., vehicles equipped with artificial intelligence systems capable of performing all driving tasks, but which also permit the driver to take full control if necessary or if desired.

Continue reading “A Split Usage Based Auto Insurance Model for Owners of Level Four Autonomous Vehicles?”

April 16, 2022 by Duane Morris

Coverage Was Not In the Cards for Circus Circus Casino, Holds Ninth Circuit

By Max H. Stern and Holden Benon

Yesterday, the United States Court of Appeals for the Ninth Circuit issued a succinct but well-reasoned decision that there was no coverage for a Las Vegas Hotel & Casino’s COVID-19-related business interruption loss under the coverage provided by an “all risks” insurance policy. See Circus Circus LV, LP v. AIG Specialty Ins. Co., No. 21-15367 (9th Cir. Apr. 15, 2022).

Even though Nevada law governed the analysis, the court’s written opinion leaned heavily on appellate authorities that applied California law (in particular, the California Court of Appeal’s Inns-by-the-Sea decision and the Ninth Circuit’s Mudpie decision). The Circus Circus court followed the Inns-by-the-Sea causation analysis in holding that, despite Circus Circus’ allegation that the coronavirus was present on its premises, it failed to identify any direct physical damage to its property caused by the virus which led to the Casino’s closure. “Rather,” the court observed, “the allegations surrounding Circus Circus’s closure are based on the local Stay at Home Orders.” Citing Mudpie, the court also held that Circus Circus failed to allege it suffered a direct physical loss of its property, reasoning the loss must be due to a “distinct demonstrable, physical alteration of the property.”

The Circus Circus decision adds to the line of appellate authorities that have adhered to the same reasoning articulated in the initial COVID-19 appellate decisions that came down last year. In the cases that are still currently pending, the odds certainly seem to favor the carriers.

March 23, 2022 by Duane Morris

Ninth Circuit Applies Nevada Law and Finds No Coverage for COVID-19 Business Interruption Loss

By Max H. Stern and Holden Benon

Late last week, the United States Court of Appeals for the Ninth Circuit ruled there was no coverage for the policyholder’s COVID-19-related business interruption loss under the coverage provided by a commercial property policy. See Levy Ad Group, Inc. v. Federal Ins. Co. et al., No. 21-15413 (9th Cir. Mar. 17 2022, applying Nevada law). In reaching its decision that the insured’s economic losses did not constitute “direct physical loss or damage,” the Levy court simply stated it agreed with “the numerous published decisions interpreting nearly identical policy language . . . and unanimously concluding coverage does not exist.”

Levy represents the first appellate authority applying Nevada law ruling to these issues in the COVID-19 context, and we are confident it will not be the last to come down in favor of the insurers. Earlier this month, the Ninth Circuit heard oral arguments in Circus Circus LV, LP v. AIG Specialty Insurance Co., another COVID-19 business interruption case that originates in the Silver State. With Levy now decided, it seems unlikely that Circus Circus will break ranks for the “numerous published decisions” in the insurers’ favor.

If you have any questions regarding the Levy decision, or questions regarding business interruption insurance issues generally, please feel free to contact us. Duane Morris has an extensive insurance coverage practice within the Ninth Circuit states and beyond.

March 11, 2022March 12, 2022 by Duane Morris

California’s Highest Court Rejects Inns-by-the-Sea’s Petition for Review

By Max H. Stern and Holden Benon

This week, the California Supreme Court declined to hear the Policyholder’s appeal of the Court of Appeal’s decision in The Inns by the Sea v. California Mutual Ins. Co., which we previously reported on. For those tracking the COVID-19 business interruption appellate landscape, this should come as no surprise. The Court of Appeal’s decision is well-reasoned, and it is aligned with many COVID-19 business interruption decisions across the nation that have reached very similar conclusions. Policyholder attorneys expressed it is “hard to feel hopeful at this point.” We can understand why.

December 28, 2021February 4, 2022 by Duane Morris

Carriers Enjoy Unanimous Success in Recent Wave of COVID-19 Business Interruption Decisions in Federal Appeals (Update)

By: Max H. Stern & Holden Benon

Recently, we began to see real decisions being made by the appellate courts on COVID-19 Business Interruption issues. The U.S. Circuit Courts of Appeals have established a uniformly favorable trend for insurance carriers – these courts have affirmed the district court decisions that have ruled in favor of the insurers, and in one case, the Sixth Circuit vacated a district court’s decision that ruled in favor of the policyholder. Since our original blog post on this issue in October, this trend continued in December with a Tenth Circuit decision.

Ninth Circuit

Starting with the Ninth Circuit (where Duane Morris’ insurance group maintains a strong presence), carriers have enjoyed successful outcomes in a trio of much-anticipated decisions. In Mudpie, Inc. v. Travelers Casualty Insurance Company of America, Case No. 20-16858, 2021 WL 4486509, at *1 (9th Cir. Oct. 1, 2021) (applying California law), Mudpie, a San Francisco-based children’s store, brought a proposed class action asserting breach of contract and bad faith against its property insurance carrier. As in many COVID-19 business interruption cases, the carrier had denied its insured “Business Income” and “Extra Expense” coverage in 2020, after government authorities issued public health orders in response to the COVID-19 pandemic. Id. at *2. (For more background on business interruption insurance, please refer to one of our earlier blog posts on this topic.)

Mudpie made the argument that its inability to use its premises amounted to “direct physical loss or damage to” its property, sufficient to bring its claim within the scope of the policy’s business interruption coverage. Id. The court rejected this argument, however, reasoning that the phrase “direct physical loss of or damage to” requires some kind of physical alteration to the property in question. Id. at *5. The court also held that the policy’s virus exclusion bars coverage for the insured’s claims. Id. at *7. As many policyholders have tried arguing, Mudpie claimed that its losses were not subject to the policy’s virus exclusion because its losses were caused not directly by the virus, but by stay-at-home orders that restricted the insured’s use of its property. But the court didn’t buy this argument because Mudpie failed to meet the “efficient proximate cause” test. Id. (“Mudpie does not plausibly allege that ‘the efficient cause,’ i.e., the one that set others in motion was anything other than the spread of the virus throughout California, or that the virus was merely a remote cause of its losses.”) (internal citation omitted). In the end, the court affirmed the district court’s decision ruling in favor of the insurer. Id. at *7.

Continue reading “Carriers Enjoy Unanimous Success in Recent Wave of COVID-19 Business Interruption Decisions in Federal Appeals (Update)”

November 19, 2021January 7, 2022 by Duane Morris

Yet Another Win for Insurers on COVID-19 Business Interruption Claims: The Inns by the Sea California Court of Appeal Decision

By Max H. Stern and Holden Benon

The first California state appellate decision on COVID-19 Business Interruption coverage is now in the books, and it’s one more victory for insurers. In The Inns by the Sea v. California Mutual Ins. Co., Case No. D079036 (Cal. Ct. App. 4th Dist., Div. 1, Nov. 15, 2021), the California Court of Appeal for the Fourth District found there was no coverage, notwithstanding the absence of a virus exclusion in the relevant policy. The court’s 36-page opinion provides a thorough and careful analysis of several important COVID-19-related business interruption issues, some highlights of which we summarize below.

Inns-by-the Sea operates lodges in the California coastal communities of Carmel and Half Moon Bay. In March of 2020, Inns closed its facilities in response to shutdown orders issued by Monterey and San Mateo counties. Then, Inns made a claim under its property insurance policy for its claimed loss of business income caused by the pandemic. (For more background on business interruption insurance, refer to one of our earlier blog posts on this topic.) Inns’ insurer denied coverage, and Inns filed suit in Monterey Superior Court.

Continue reading “Yet Another Win for Insurers on COVID-19 Business Interruption Claims: The Inns by the Sea California Court of Appeal Decision”