Woolfson Difference BW All Risk & Named Perils and Shift of Burden of Proof Questions

Description

Please write no more than one paragraph to address the topic in the short answer.

1.Explain the difference between All Risk and Named Perils and the shift of the burden of proof associated with both, explain the difference between RCV and ACV.

2.Please briefly describe how Lloyds of London worked?

3.Please briefly explain the 8 corners rule?

4.Please briefly describe the differences between the Duty to Defend and the Duty to Indemnify?

5.When a client seeks your advice on the defense of a civil matter, in Texas, do you have an obligation to inquire about possible insurance coverages and advise? Why or why not?

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Essay Portion

1. Answer the following question in 1-2 pages:

Given the changes recently in legislation, new regulatory enforcement and court decisions regarding small captive insurance companies making an 831(b) tax election, how would you advise a client seeking alternative risk transfer today? Please address specifically a recommendation regarding the below fact pattern.

Client is a health services provider based in California. “HealthToYou, LLC” provides mobile testing for various health markers. Client has come to you seeking review and recommendations of how to more efficiently use operate its captives.

HealthToYou has commercial liability from a third-party carrier. Client formed 5 captives over 4 years, all making an 831(b) election. In 2019, the client paid a premium of $2,000,000 to each captive for a total of $10,000,000 and $50,000,000 in coverage. These 831(b) captives are located in North Carolina and cover non-traditional risk. There is a captive manager that has client participating in a risk pool to share 51% of the reserves in the pool. The client formed another captive in 2017 with another captive insurance manager. The captive is located in Bermuda. The coverage provided by this captive is deducible reimbursement. Premium has been $5,000,000 for the last 3 years with coverage written at $15,000,000. The captive does not participate in a third-party risk sharing arrangement.

Management’s main considerations are: Cost savings and regulatory compliance. Discuss the history, benefits, drawbacks, and status of the captive market and how it applies to these facts. How would you advise HealthToYou,LLC?

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2. Write an essay that addresses the concerns expressed in the question at the top of the fact pattern. You should identify legal issues impacting on the outcome of the claim, review the rule(s) and apply it to the facts.

Situation: 

You are either 1) a risk manager employed by the “Bluebonnet ‘We’re on it’ Insurance Company” (BWIC) or 2) an in-house coverage attorney in the trial division of “Bluebonnet ‘We’re on it’ Insurance Company” (BWIC).

Question:

You have been asked to draft a memo for the SVP of Claims addressing the coverage implications arising from the claim situation described below.

Facts:

“Bluebonnet ‘We’re on it’ Insurance Company” (BWIC) has presented the following set of facts for review to determine coverage and duties.

The insureds, Bob & Torchie Dole lived in a nice two-story craftsman style bungalow in the Mistletoe Heights neighborhood of Fort Worth, Texas. The home has been insured for a year and a half on a Texas Homeowners Insurance Policy, Form B, (HOB Policy) on the date of loss. The current policy period was from October 1, 2018 to October 1, 2019. On April 7, 2019 a fire occurred completely destroying the home.

The Dole’s Homeowners Form B policy had the following policy limits:

Structure: $400,000

Contents: $350,000

Comprehensive Personal Liability: $300,000.

The insureds reported an April 7, 2019 claim on April 8, 2019. They left a voicemail message for their insurance agent, Mr. Bob Lilly. Their agent never got the message and never reported the claim to BWIC.  On May 1, 2019 the Dole’s were served with a lawsuit, which they submitted, in person, to their insurance agent later that day.

The loss on April 7 was a structure fire. The home owned by Mr. & Mrs. Dole burned flat to the ground. The next-door neighbors to the Dole’s immediate east were Mr. & Mrs. Wilhelm Prentiss Heflin. The Heflin’s home was damaged by fire which spread from the Dole home. The Heflin’s claim to have overheard a loud, raucous party at the Dole home on the evening of the fire. After the party ended, at about 10:30pm, they claim to have heard Mrs. Dole scream at Mr. Dole that she would “burn this bitch down” before she would ever let him divorce her and sell her dream home. Subsequently, the Helfins observed Mr. Dole retrieve his personal clothing (that had been tossed out of the master bedroom’s second floor window) and drive away dejected. 

Documentary and video evidence subsequently showed Mr. Dole checking into the Worthington Hotel at 11:15pm and renting a suite for the evening. Mr. Dole did not emerge from his suite until 1pm on the following afternoon.

At midnight a fire alarm was sounded at Fort Worth Fire Department regarding a structure fire at the Dole’s home. Mrs. Dole claimed to be out for a stroll at midnight and did not know how the fire began. The Fort Worth Fire Department Arson & Bomb Unit found forensic evidence indicating the fire was intentionally set.

Mr. & Mrs. Heflin allege in their lawsuit that the fire loss to their home was caused intentionally by their neighbor, Mrs. “Torchie” Dole. They want the cost of their repairs, they want a “pound of flesh”, but will settle for $1.5 Million in punitive damages.

Subsequently, the Heflins amended their pleadings and allege the fire to have been caused negligently. They lower their demand to an even $1.5 Million but offer a full and final release of their claims upon payment of their demanded sum.

Mrs. Dole was arrested and released on $50,000 bond after indictment by a Tarrant County Grand Jury of 1st Degree Arson and 1st Degree Insurance Fraud.

Mrs. Dole is claiming the entire cost of repair of her home, the replacement cost of her personal property, and demanding defense and indemnity for the lawsuit brought by the Heflins.

Mr. Dole has provided a statement and cooperated fully with the Texas Department of Insurance prosecution team at the Tarrant County Criminal District Attorney’s Office as well as the FWFD Arson Unit. He showed the investigators his hidden camera footage from a ‘nanny cam’ he placed in the home of his wife, very inebriated, on the night of the fire waving around a fireplace lighter and trying to light something on fire…something about the size of a large candle or a rolled-up newspaper. Mr. Dole also provided printouts of a text message from Mrs. Dole telling him that all his worldly possessions were going up in smoke…and ending in ‘burn baby burn’.

Mr. Dole has asked the insurance carrier to 1) deny his wife’s claim as an intentional act, 2) pay him a 50% share of all damages to the home and personal property as an “innocent spouse”, 3) defend him, and 4) indemnify him with regard to the Heflin lawsuit. Mr. Dole also specifically made a claim for $3,500 to replace his beloved French Bull Dog “Rocket” who expired from smoke inhalation on April 7, 2019.

Upon further review it was determined that when Mrs. Dole was 18 years old she pled guilty and was sentenced to deferred adjudication for setting an ex-boyfriend’s car on fire. Additionally, Mrs. Dole’s personal vehicle was destroyed by fire when she was 21 years old, 2 years before she met Mr. Dole. Mrs. Dole completed the insurance policy application and answer “No” to the question of whether either party had ever suffered a fire loss before. Records reflect that Mr. Dole had, in fact, never suffered a fire loss of any kind before April 7, 2019.  Finally, the application question enquiring whether the Dole’s owned a dog was answered “no.” 

The mortgage company has asserted a claim for the proceeds of the building portion of the claim because they are proceeding with foreclosure on the Mistletoe Heights home for non-payment of the mortgage.

Please advise “Bluebonnet ‘We’re on it’ Insurance Company” as to all of the coverage exposures and generally applicable rules.