The interpretation of a property insurance policy may seem like a dull endeavor, but courts sometimes face fundamental questions about what words mean, or how we conceptualize cause and effect. In Taja Investments LLC v. Peerless Ins. Co., No. 16-1854 (4th Cir. Oct. 11, 2017), the Fourth Circuit Court of Appeals confronted both issues to determine that two exclusions in a builder’s risk policy applied to bar coverage for the collapse of a row house under renovation in ... Keep Reading »
Poisoning the Well: Washington Supreme Court Applies Efficient Proximate Cause to Eviscerate Pollution Exclusion in Liability Policy
Professionals and practitioners in first party property insurance are likely familiar with the efficient proximate cause rule, which requires an insurance policy to provide coverage where "a covered peril sets in motion a causal chain," even if subsequent causes-in-fact of the loss are excluded by the policy. As indicated by our previous coverage [1, 2, 3] of this doctrine, this can be a confusing analysis that leads to unpredictable results. Until recently, the ... Keep Reading »
Shot Through the Heart, But the Excess Carrier Isn’t to Blame: Georgia Federal Court Finds Policy’s Broad Firearms Exclusion Bars Coverage
On June 1, 2017, the U.S. District Court for the Northern District of Georgia granted summary judgment in favor of AIG Specialty Insurance Co. in a case involving the application of the firearms exclusion in Powe v. Chartis Specialty Insurance Co., No. 1:16-CV-01336. The court dismissed the case, in which claimant Christopher Powe sought the remaining $3 million of a $4 million settlement against the insureds, property management company HMI Property Solutions, Inc. ... Keep Reading »
Peerless, This is Not: Sixth Circuit Finds No Latent Ambiguity in Consent to Settle Requirement in Excess Policy
Disputes between policyholders and excess insurers often involve events that occurred before the underlying defense costs or indemnity payments reached the excess layer. In Stryker Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 842 F.3d 422 (6th Cir. 2016), reh’g denied (Dec. 13, 2016), the U.S. Court of Appeals for the Sixth Circuit addressed a situation where a policyholder settled a claim without obtaining the excess insurer’s consent to the settlement, ... Keep Reading »
Greed is Not Good: The Personal Profit Exclusion
As this blog has frequently discussed, many limitations and exclusions in liability policies address “moral hazard” situations by declining to provide insurance for bad behavior. One such exclusion is the “personal profit exclusion” contained in most D&O policies, which bars coverage for claims where an insured gains a profit or other advantage to which it is not legally entitled. This exclusion was recently addressed by a Massachusetts appellate court in Winbrook ... Keep Reading »
Ninth Circuit Leaves it to Policyholder to Pay Eddie Haskell’s Attorneys’ Fees
Eddie: Well, look, there's nothin' to be so shook about. Lumpy's insurance'll take care of it. Moral hazard lurks around the edges of many disputes about liability coverage. Everyone agrees in principle that insurance shouldn’t help bad actors benefit from their wrongdoing, but parties often clash over where the principle applies. Some courts have addressed the problem by asking if the insured has suffered an insurable “loss.” E.g., Ryerson Inc. v. Federal Ins. Co., ... Keep Reading »
Conflict Resolution: Illinois Appellate Court Finds No Conflict in Defending Two Insureds, and No Duty of Primary to Excess Insurer to Settle Case
When an insurer defends its insured under a liability policy, the insurer has a duty to act in good faith to the insured in responding to settlement offers. In Illinois Emcasco Insurance Co. v. Nationwide Mutual Insurance Co., No. 1-14-0928 (Ill. Ct. App. Aug. 3, 2015), the Illinois Court of Appeals determined that, where a primary insurer and excess insurer provide coverage to a common insured, the primary does not owe the same duty to the excess – at least where the ... Keep Reading »
Off Schedule: Texas Supreme Court Rules That Ambiguity Produces Blanket Coverage
Owners of multiple commercial properties can significantly reduce their insurance premiums by purchasing a scheduled policy, under which each item of covered property is separately reported (or "scheduled"), and the coverage limit for any one item is determined independently of damage to any other item. The alternative is a blanket policy, which applies a single coverage limit to the aggregate losses of all the covered properties. Recently, in RSUI Indem. Co. v. The ... Keep Reading »
Rumors of Revival Were Greatly Exaggerated: Fifth Circuit Reverses Opinion on Contractual Liability Exclusion
We previously discussed the opinion of the U.S. Court of Appeals for the Fifth Circuit in Crownover v. Mid-Continent Cas. Co., No. 11-10166 (5th Cir June 27, 2014)—an opinion that seemed to revive the contractual liability exclusion by distinguishing a landmark Texas decision that had narrowed the exclusion's scope. That was then. Late last year, the U.S. Court of Appeals for the Fifth Circuit withdrew that order and issued a new opinion on rehearing. The new opinion ... Keep Reading »
Apartment Complexity: Appellate Court Sorts Out Multiple Coverage Claims for Construction of Uninhabitable Residence
In QBE Ins. Corp. v. Adjo Contracting Corp. (N.Y. App. Div. 2d Dep't Oct. 29, 2014), an intermediate appellate court in New York confronted cross-appeals involving 15 different insurers embroiled in multiple lawsuits, including consolidated class actions. The core issue of the case was whether the insurers for a variety of subcontractors were obligated to provide a defense to tenants' lawsuits against the developer and general contractor of a doomed residential ... Keep Reading »