In meetings with employers who have a history of high workers’ compensation claims costs and related expenses, we hear a common story: “The insurance adviser does not to take an active role on the problem. The adviser provides little or no supervision of the claims process. Nor are the true costs of each claim incident evident to the employer.”
These employers tell us that they rely solely on the insurance company claims adjuster’s process and the recommended insurance carrier medical clinic treatment protocol. There seems to be no one enhancing communications with the injured employee.
This communication void can lead to misunderstandings and a lack of trust and cause injured employees to seek legal representation. The result can be higher claims costs and delays in closing claims.
In most of these situations, the insurance adviser goes through an annual exercise to obtain rate quotations in an attempt to “control employer costs.” But the quoting process fails to help the employer understand the costs of each claim. Nor does the process inform employers how to lower costs.
Some time ago, Dave Smith, a safety consultant in Lafayette, Calif., shared a comprehensive list of items and costs that affect employers when a work-related injury or illness occurs. I've attached a copy of Dave’s creation that I share with employers.
In our experience, this guide helps employers rethink the claims management process and their experience with their insurance adviser. The guide helps employers come to the conclusion that they must make some changes to achieve better financial outcomes.
Cost transparency helps an employer to understand where the costs are coming from. Employers will also be better able to see if they truly have a valuable insurance adviser or if the adviser's process is just too costly.
Many employers seem to forget that it is their money at work in workers' comp claims and that they must be involved in all aspects of their workers’ comp insurance and risk management program.
Remember that the expenses listed in this chart are all in addition to the increase in future workers' comp premiums that come because of the change in the employer’s experience modification factor.
This is the third part of a six part series of articles discussing insurance coverage for claims that can be brought against individuals or companies because of the use of Social Media websites. Earlier articles in this series can be found here: Part 1 and Part 2. This article discusses coverages potentially triggered under Coverage A – Bodily Injury.
Bodily Injury Coverage
Even if the policy contains a personal injury coverage part (as discussed in part 2 of this series), analysis should still be made whether the policy provides coverage under the bodily injury coverage part. Oftentimes, this is dependent on the policy’s definition of “bodily injury” and “occurrence.”
Does The Defamatory Comment/Posting Made On A Blog/Website Constitute An Occurrence?
In order to trigger coverage under the policy’s insuring agreement there must be a defined “occurrence” that results in defined “bodily injury” during the policy period. Policies typically define “occurrence” as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions” which results in bodily injury. Most jurisdictions hold that it is the insured’s standpoint that controls in determining whether there has been an “occurrence” that triggers the duty to defend under the policy. A majority of jurisdictions have held that an accident is “an unexpected, unforeseen, or undesigned happening or consequence from either a known or an unknown cause.” A deliberate act, therefore, is not an accident.
If the defendant publishes an internet posting that referred to the plaintiff in a derogatory manner, e.g., accusing the person of being a pedophile, then this is a deliberate act which does not constitute an occurrence as defined by the policy. Stellar v. State Farm General Ins. Co., 157 Cal. App. 4th 1498, 69 Cal. Rptr.3d 350 (Cal. App. 2007). Some jurisdictions have held that the very nature of defamation precludes the conclusion that it can occur “accidentally.” See, e.g., Uhrich v. State Farm Fire & Cas. Co., 109 Cal.App.4th 598, 135 Cal.Rptr.2d 131 (Cal. App. 2003); Rogers v. Allstate Ins. Co., 938 So.2d 871, 876 (Miss. App. 2006); Iafallo v. Nationwide Mut. Fire Ins. Co., 299 A.D.2d 925, 926, 750 N.Y.S.2d 386, 388 (N.Y. App. Div. 2002). Some jurisdictions, however, recognize negligent defamation and, therefore, there may be an occurrence triggering coverage. Cincinnati Ins. Co. v. Eastern Atlantic Ins. Co., 260 F.3d 742 (7th Cir. 2001); cf., Baumann v. Elliott, 704 N.W.2d 361 (Wis. App. 2005) (finding no occurrence because complaint did not allege a negligent defamation); Farmers Ins. Exchange v. Hallaway, 564 F.Supp.2d 1047 (D. Minn. 2008) (reversing summary judgment and holding that there may be personal injury coverage because underlying lawsuit alleged negligent defamation and intent to injure had not been decided).
There are, obviously, certain factual situations that may at first blush appear to be intentional, but, upon further, investigation, may constitute an occurrence triggering coverage. For example, an individual intends on posting a defamatory comment on Facebook, spends time typing out the comment, but later decides against posting the comment, but accidentally hits “share” rather than “cancel” and so the item is accidentally posted on Facebook against the user’s wishes. Although the individual may have originally intended to post a defamatory comment, at the moment the comment was indeed posted, the individual did not have that intention. This may constitute an “occurrence” triggering coverage.
Similarly, an individual may have intended to respond to a message on Facebook with defamatory or libelous remarks, but rather than clicking the “reply” button, the individually mistakenly clicked the “reply all” button and, consequently, the message is sent to everyone on the list, rather than just the individual that the user originally intended.
Another example includes attaching a video or picture to a social media website. The individual may have intended to attach file A, but when selecting the file, the individual selected file B, which contained a picture/video of a person in a compromising position such that the individual’s privacy is invaded.
These are a few examples where the claim or complaint may allege conduct that may at first blush appear intentional, but the true facts may reveal that coverage is triggered. Further investigation may be needed to determine coverage.
Does The Emotional Distress Or Other Alleged Damages Resulting From The Defamation Constitute Bodily Injury?
“Bodily injury” is typically defined in a policy as “bodily injury, sickness or disease sustained by a person, including required care, loss of service and death that results.” Courts have held that “bodily injury” encompasses only physical injury and its consequences and does not include emotional distress in the absence of physical injury. Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995); Nguyen v. State Farm Lloyds, Inc., 947 S.W.2d 320, 323 (Tex. Ct. App. 1997); Wiard v. State Farm Mutual Auto Ins. Co., 132 N.M. 470, 50 P.3d 565 (N.M. Ct. App. 2000). Thus, pure emotional distress does not constitute “bodily injury” for purposes of a policy unless there is specific policy language providing coverage for pure emotional injuries.
Because most social media claims do not involve direct physical contact, there is generally no “bodily injury” triggering coverage in the traditional sense. However, physical manifestations of emotional distress may be covered by the policy even if there was no direct physical contact with the claimant. This may include loss of hair, loss of weight, exacerbation of existing illnesses like Crohn’s disease, etc. If the claimant alleges such physical manifestations resulting from social media torts, then there may be qualifying “bodily injury” as defined by the policy.
Hopefully, this article makes the reader aware that social media torts may not only trigger coverage under the typical personal and advertising injury provided under Coverage B of the policy, if available, but that such social media torts may also trigger “bodily injury” coverage under Coverage A, depending on the particular factual circumstances.
Yesterday the California Supreme Court issued its long-awaited decision in State of California v. Continental Insurance, No. S170560. In its latest ruling, which will affect all long-tail insurance cases, including Environmental, Asbestos and latent injury, and Construction Defect cases, the Court rejected the “pro rata” time on the risk allocation scheme advocated by the insurers and held:
- For indemnity relating to “long tail” claims1, the “all sums” language in the Comprehensive General Liability (CGL) policies obligates a carrier to indemnify up to the policy limits, so long as some portion of the “property damage” that is the subject of the suit occurred during the policy period; and
- The insured is entitled to “stack” the limits of successive policies up to the policy limits for indemnity relative to that loss.
The case arose out of the State of California’s claim for indemnity under its excess Comprehensive General Liability policies in connection with a federal court-ordered cleanup of the State’s Stringfellow Acid Pits waste site. The State designed the Stringfellow site, and operated it as an industrial waste disposal facility from 1956 to 1972, when groundwater contamination was discovered. In 1998, a federal court found the State liable for all past and future cleanup costs for the site. Each of the six insurers that were parties to the appeal issued excess Comprehensive General Liability policies to the State between 1964 and 1976.
The Stringfellow site, and the resulting insurance litigation, has given rise to several insurance rulings already, including Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645 — adopting the continuous injury trigger for defense, and State of California v. Allstate Ins. Co. (2009) 45 Cal.4th 1008 — holding that the relevant event to determine if there is an “occurrence” is the discharge into the environment from a contained area, and that where there is an indivisible injury, the insured is not obligated to prove the amount of any property damage resulting from any discrete cause.
There are several critical aspects of the Court’s decision.
First, there was no dispute that the environmental damage began shortly after the operation of Stringfellow began, and that it continued throughout the defendant insurers’ policy periods and beyond. According to the opinion, the site was uninsured prior to 1963, and after 1978. The issue, therefore, was whether the State of California could be allocated partial responsibility for the cleanup costs for the amount of property damage occurring in years where it was self insured. This fact pattern — where there is insurance for some but not all of the affected years — is common in “long tail” or “progressive loss” type cases. A carrier with only one year of coverage could potentially be responsible for all damages regardless of the length of time over which the property damage occurred.
However, the second critical aspect of the Court’s decision, and one that may temper its precedent value, is the specific policy language. The Excess Policies at issue utilized older Comprehensive General Liability policy language. The Court observes:
Under the heading “Insuring Agreement,” insurers agreed “[t]o pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of liability imposed by law … for damages … because of injury to or destruction of property, including loss of use thereof.” Limits on liability in the agreements were stated as a specified dollar amount of the “ultimate net loss [of] each occurrence.” “Occurrence” was defined as meaning “an accident or a continuous or repeated exposure to conditions which result in … damage to property during the policy period …” (at pg.4) (emphasis added)
In newer Commercial General Liability policies, the Insuring Agreement reads: “We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies … This insurance applies to “bodily injury” and “property damage” only if … the “bodily injury” or “property damage” occurs during the policy period …” (e.g., ISO form CG 00 01 10 01) (emphasis added)
The State of California Court noted that the “pro rata,” or time on the risk allocation approach advanced by the carriers assigns liability for those years of the continuous progression of property damage to all affected years, including those where the insureds chose not to purchase insurance. The Court determined the “all sums” language of the policies was inconsistent with this result, emphasizing that its holding follows directly from the policy language, rather than any general principle, and is therefore arguably inapplicable to policies using the revised language:
Under the CGL policies here, the plain “all sums” language of the agreement compels the insurers to pay “all sums which the insured shall become obligated to pay … for damages … because of injury to or destruction of property …” (Ante, at p. 4.) As the State observes, “[t]his grant of coverage does not limit the policies’ promise to pay ‘all sums’ of the policyholder’s liability solely to sums or damage ‘during the policy period.'”
The insurers contend that it would be “objectively unreasonable” to hold them liable for losses that occurred before or after their respective policy periods. But as the State correctly points out, the “during the policy period” language that the insurers rely on to limit coverage, does not appear in the “Insuring Agreement” section of the policy and therefore is neither “logically [n]or grammatically related to the ‘all sums’ language in the insuring agreement.” (emphasis added)
Under later ISO policy forms, the Insuring Agreement requires that property damage occur during the policy period. Accordingly, there are valid arguments — at least for carriers using later versions of the Commercial General Liability policy forms — to distinguish the “all sums” holding by this decision, and that explicit language requiring that property damage occur during the policy period is unambiguous and should be applied. It is therefore an open question whether the allocation approach advanced by the carriers would have been successful with the newer policy forms.
The third critical aspect of the decision is its rejection of FMC Corp. v, Plaisted & Cos. (1998) 61 Cal.App.4th 1132. The Court noted that in this case, like FMC, the policies had no specific prohibition on stacking of policy limits. The Court concludes:
We agree with the Court of Appeal, and find that the policies at issue here, which do not contain antistacking language, allow for its application. In so holding, we disapprove FMC Corp. v. Plaisted & Companies, 61 Cal.App.4th 1132
In conclusion, this decision from the California Supreme Court is significant, because it firmly extends the “all sums” language to indemnity. For policies with the applicable language, if any part of the property damage that is part of a “long tail” case, the carrier will be obligated to pay up to the policy limit, and then seek equitable contribution between other carriers on the risk.
1The kind of property damage associated with the Stringfellow site, often termed a “long-tail” injury, is characterized as a series of indivisible injuries attributable to continuing events without a single unambiguous “cause.” Long-tail injuries produce progressive damage that takes place slowly over years or even decades. (Pg 7-8)