AIG Off The Rails

This hasn't been the best couple of weeks for AIG. Today, in Maxwell v. AIG Domestic Claims, Inc., No. 07-P-1858, the Appeals Court lays into the crippled insurance giant. And it seems that this laying-into is entirely justified. AIG denied workers' comp benefits to the plaintiff because he was doing volunteer work as part of a community service program -- a program in which he had to participate to keep his spot at a YMCA homeless shelter. And then it got the Suffolk County District Attorney to institute charges against him for insurance fraud.* Shortly thereafter, the plaintiff tried to kill himself. The Commonwealth pursued the charges for a time and then dropped them when it became clear that AIG's fraud contentions were not based on, well, actual facts.

Maybe AIG thought it had a blank check to browbeat homeless people since it put cute kids in its advertisements. Who knows? But if you can't believe an insurance company's advertising campaign, you just have to wonder what you can believe.

*Charges to which he initially pled guilty and then withdrew the plea given his precarious mental state.

"You keep using that word. I do not think it means what you think it means."

Inigo Montoya would have been all over Reliance Ins. Co. v. City of Boston, No. 07-P-066, a case decided today by the Appeals Court.

A statute requires performance and payment bonds on public construction projects. Performance and payment bond companies (a/k/a sureties) occasionally step in to take over for general contractors that can't get their acts together. As a stop-gap, the sureties require the contractor to assign any rights they might have against the owner of the project (though these probably automatically pass to a surety when they step in for general contractors that can't get their acts together).

In this case, the City of Boston included a provision in the contract forbidding the general contractor from assigning any of its rights or duties under the contract to anybody else.

The Appeals Court, in a decision that feels right, essentially reads additional language into this provision to the effect of "but assignment to a performing surety is okay."

If you wait around long enough, you'll find that sometimes common sense rears its head in the courtroom. Just don't hold your breath while you wait.

Paul Bunyan Is Smiling Somewhere

The legal profession is as guilty as any logger when it comes to deforestation. The Appeals Court today reminds us why this is so.

The Court determined that a nonparty to an arbitration doesn’t have to pay damages awarded at the arbitration. There’s a (weak) argument that things were slightly complicated because the nonparty was a surety and there were punitive damages involved. But this really looks more like something that the Appeals Court could have dealt with in one or two pages and not ten. Alas.

October 25, 2007

Covered

One thing that some insurance companies are very good at is getting in fights with people they insure. And they’re good at it in the sense that, regardless what you think of them, they tend to win. Not so today, in Utica Mut. Ins. co. v. Fontneau, Mass. App. Ct. No. 06-P-930.

A property owner guy owned two parcels of land right next to each other. He had liability insurance for one but not for the other. His policy for the insured parcel covered him for losses that happened on that parcel and on parcels used in connection with it. The property owner stored antique cars and other personal items on the adjacent parcel. A police officer came by to investigate vandalism complaints at the adjacent parcel and hurt himself on a path connecting the two parcels. The insurance company, Utica, refused to cover the loss, sued the property owner, and lost at trial and in this appeal.

The crux of the Court’s rationale was that the insurance company didn’t introduce evidence it was surprised it had to cover the loss on the path. What’s interesting here is that in a different case three years ago, the Appeals Court held that a regularly used private beach was not “used in connection” with the owner’s main parcel 500 feet away. Which means that Utica is probably shaking its head in disbelief at this point.