3 Days Gone: New Federal Rules Take Effect Today

A quick reminder to all federal court practitioners: 2016 just keeps piling it on. Not content to simply let us rest after everything we’ve been through this year, new Federal Rules of Civil Procedure take effect today, and the primary change this time is eliminating the extra 3 days you used to get to respond when something was served electronically.

Out with the old Rule 6(d), and in with the new:

(d) Additional Time After Certain Kinds of Service.

When a party may or must act within a specified time after being served and service is made under Rule 5(b)(2)(C) (mail), (D) (leaving with the clerk), or (F) (other means consented to), 3 days are added after the period would otherwise expire under Rule 6(a).

So, time to change those calendaring rules, or you might blow a deadline.

Rule 4 also got amended a bit as well. Here’s a summary of all the changes taking effect today.


Now go back 3 days…

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Seventh Circuit: Remember, Service-of-Suit Clauses Can Keep You Out of Federal Court

I know, I know. It’s been forever since I’ve posted, and I’m not even going to bother making excuses. So, here goes with the first case update…

Last month, the Seventh Circuit held that a reinsurance agreement’s service-of-suit clause barred removal to federal court.

Following the liquidation of an insurance company, some of its accounts receivable were assigned to Pine Top for collection. Transfercom, a UK insurer, had assumed certain obligations of Nissan Fire & Marine Insurance Company, another UK insurer that reinsured the liquidated insurer under two treaties from the early 1980s. Pine Top sued Transfercom in Illinois state court to collect on those obligations. Since there was complete diversity of the parties, Transfercom removed the case to federal court.

Pine Top moved to remand under the treaties’ service-of-suit clauses, which stated:

It is agreed that in the event of the failure of the Reinsurer hereon to pay any amount claimed to be due hereunder, the Reinsurer hereon, at the request of the Company, will submit to the jurisdiction of any Court of competent jurisdiction within the United States and will comply with all requirements necessary to give such Court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such Court.

The district court agreed with Pine Top that the service-of-suit clause waived the reinsurer’s right to remove the case to federal court because the clause expressly gave the insurer the exclusive authority to select both the jurisdiction and the venue. 

Transfercom appealed, arguing that the waiver of its statutory right of removal must be “clear and unequivocal” and, in any event, the service-of-suit clause was rendered ambiguous by the treaties’ arbitration clauses, which stated:

As a condition precedent to any right of action hereunder, any irreconcilable dispute between the parties to this Agreement will be submitted for decision to a board of arbitration.

The Seventh Circuit disagreed. First, an “overwhelming majority of federal courts” hold that similar service-of-suit clauses “foreclose a defendant’s right of removal.” Second, the court refused to adopt Transfercom’s heightened “clear and unequivocal” standard because that standard was normally applied to “litigation-based waivers,” where a party’s conduct in litigation can be considered to waive its right to remove or arbitrate. Instead, the waiver here was contractual, so courts should use the same standard of interpretation as they do with other contractual issues.

Finally, the court found that the service-of-suit clause was unambiguous and worked in conjunction with the arbitration clause:

Read as a whole, the reinsurance agreement requires Transfercom to submit to the jurisdiction of any court of competent jurisdiction chosen by PTRIL, whether it be to determine the arbitrable nature of the dispute, to confirm an arbitration award, to compel arbitration, or to resolve on the merits, a claim not subject to arbitration—including [Pine Top’s] breach of contract claim.

Pine Top stands as a reminder to insurers (one that can’t be said enough) that the language in the contract matters. If you want to preserve your right to have your case heard in federal court, make it clear that you have that right.

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Indiana Adopts Guidance On PBR Implementation

In early 2013, Indiana became one of the first states in the country to pass legislation (HEA 1321) enacting the principled-based reserving method for calculating life insurance policy reserves (i.e., the Standard Valuation Manual).  However, before the law could become effective, it had to be adopted in at least 42 U.S. jurisdictions that account for at least 75 percent of U.S. insurance premiums combined.

Today, there are 44 states that have adopted the Standard Valuation Manual representing more than 75 percent of insurance premiums combined.  Now that the thresholds have been met, states have begun issuing guidance on the effective date of their respective standard valuation law.

Recently, the Indiana Department of Insurance published Bulletin 230 (Notice of Implementation of Standard Valuation Law) wherein it specifies that Indiana’s standard valuation law will become effective January 1, 2017.


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What You Need to Know About the New Federal Rules in 90 Seconds or Less

Litigation partner Brian Jones describes the important changes to the Federal Rules of Civil Procedure in this fast-paced video:

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Fourth Circuit: Insurer Has a Duty to Defend Because CGL Policies Might Cover Data Breach

Here’s an interesting development in two areas close to my professional heart: technology and insurance coverage. It’s been said with some frequency in recent years that traditional CGL policies do not cover losses arising from data breaches. Last week, however, the United States Court of Appeals for the Fourth Circuit affirmed a district court’s finding that a CGL policy might cover a data breach and that the insurer therefore had a duty to defend.

In Travelers Indem. Co. of Am. v. Portal Healthcare Solutions, LLC, patients whose private medical records were exposed online filed a class action in New York. The patients alleged that Google searches of their names revealed their private medical records from when they were patients at a New York hospital, and that Portal was partially to blame. (The records were apparently the first links listed by Google, further proving the axiom that if it’s not on the first page of Google, it doesn’t exist.) Portal was covered by two consecutive Travelers CGL policies, and after Portal demanded coverage, Travelers filed a declaratory judgment action in the Eastern District of Virginia, seeking a finding that its 2012 and 2013 CGL policies did not cover the alleged injuries.

Specifically, Portal alleged that the personal and advertising injury clauses in Coverage B applied to the alleged data breach. The two policies had slightly different language. In the earlier policy, Travelers was obligated to pay if Portal became legally liable for damages resulting from an advertising or website injury that arose from the “oral, written, or electronic publication of material that…gives unreasonable publicity to a person’s private life.” The later policy changed this slight to over electronic publication that “discloses information about a person’s private life.”

Travelers argued the patient’s claims were not covered because there was no “publication” because the records were not released intentionally and were not viewed by third parties. The district court, however, held that coverage applied because putting private medical records online was a “publication” that gave “unreasonable publicity to” or “disclosed information about” a person’s private life–even though unintentional and not viewed by third parties. Specifically:

Publication occurs when information is “placed before the public,” not when a member of the public reads the information placed before it…By Travelers’ logic, a book that is bound and placed on the shelves of Barnes & Noble is not “published” until a customer takes the book off the shelf and reads it.

Hence, Travelers had a duty to defend.

The Fourth Circuit wholeheartedly agreed with the District Court, stating:

[W]e commend the district court for its sound legal analysis…[T]he class-action complaint “at least potentially or arguably” alleges a “publication” of private medical information by Portal that constitutes conduct covered under the Policies…Such conduct, if proven, would have given “unreasonable publicity to, and disclose[d] information about, patients’ private lives,” because any member of the public with an internet connection could have viewed the plaintiffs’ private medical records during the time the records were available online.

Fortunately, Portal is an unpublished, per curiam decision, which means it has no precendential value. Moreover, on a factual level, Portal should also be limited in impact because of the specific language in the policies in issue, language that many insurers have subseqently changed in their more recent CGL policies–proving, once again, that policy language is always what matters.

There are going to be many more twists and turns in the data breach coverage area before the dust finally settles, so stay tuned.


Admit it, you Googled yourself after reading this…

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Brian Jones Presents at the National Business Institute’s “Personal Injury Claims: The Insurance Defense Perspective” Seminar

On Friday, August 21, 2015, Brian Jones presented “Ethical Issues in the Tripartite Relationship” at the National Business Institute’s “Personal Injury Claims: The Insurance Defense Perspective” Seminar in Indianapolis. Here is a .pdf copy of the presentation.

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Indiana Department of Insurance Prohibits Price Optimization in Setting Rates

The Indiana Department of Insurance this week issued Bulletin 219 stating the Department’s position that the practice of “price optimization” in setting personal lines insurance rates is prohibited.

According to the Bulletin, “price optimization” involves “using data collection and analysis to predict which consumers will accept higher rates without changing insurers and/or varying premiums based upon factors that are unrelated to risk of loss so that each insured is charged the highest price that the market will bear.” This practice is prohibited, the Department said, because it views “a rating factor or rating methodology that adapts rates based on considerations other than risk to be at high risk of violating Indiana insurance laws, particularly IC 27-1-22-3, which requires that rates not be excessive, inadequate, or unfairly discriminatory.”

The Department advised that all companies using price optimization to set rates for policies sold in Indiana should submit a new rate filing within 90 days. Companies that don’t and are later found to be using price optimization in setting rates could be subject to discipline.

Please contact me or any member of the Bose Insurance Group with any questions.

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The Latest Indiana Legislative Update is Here!

Here’s the latest Indiana Legislative Update from our colleagues at Bose Public Affairs Group. In this issue, developments in legislation regarding:

  • uninsured motorist damages;
  • transportation networks;
  • financial institutions and trade regulation;
  • mine subsidence insurance coverage;
  • securities;
  • vehicle rentals; and
  • political subdivision risk management.

Stay tuned for more developments!

Also, to make sure the record’s complete, here are the two prior updates. I’ll confess: I got busy and was not able to get these out. Bad lawyer-blogger! Bad lawyer-blogger!

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Crash and Burn: Magistrate Recommends Dismissal of Indiana and Tennessee Body Shop Antitrust Cases; District Court Dismisses Mississippi Case

The ongoing multi-district body shop antitrust case has hit more roadblocks.

First, last week, Magistrate Judge Smith in the Middle District of Florida recommended dismissal of all counts in the Indiana case. (Full disclosure: The Bose McKinney & Evans team of Brian Jones, Curtis Jones, and Joel Nagle represents one of the defendants in the Indiana case.) Regarding the plaintiffs’ Sherman Act claims, the magistrate adopted the District Court’s reasoning in dismissing those claims in the related Florida case. (See our post here.) The magistrate dismissed the plaintiffs’ others state law claims based on Indiana law.

Second, yesterday, Judge Smith recommended dismissal of the Tennessee case along similar lines.

And finally, last Friday, District Judge Presnell adopted Magistrate Smith’s report and recommendations dismissing the Mississippi case. All of these documents are provided below.

I wanted to make some kind of humorous remark that illustrates the subject matter, but instead, just go Goggle “Russian dashcam videos.” You won’t be disappointed.

Be sure to follow the Bose Insurance Blog for more updates.

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The Third Indiana Legislative Update is Here!

From our insurance colleagues at Bose Public Affairs Group, here’s the third Indiana Legislative Update. Topics inside include developments in:

  • Unclaimed Life Insurance Benefits;
  • The Indiana Department of Insurance;
  • Dental and Optometry Service Coverage;
  • Inmates and Medicaid; and
  • Medical Malpractice.

Stay tuned for further developments!

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