Given the broad duty to defend rules in most jurisdictions, liability insurers often find that they must — or perhaps should out of an abundance of caution — defend an insured against a claim that in all likelihood will not implicate the duty to indemnify, such as when extrinsic evidence strongly suggests that an exclusion will apply. In these situations, insurers in many states are permitted to offer a defense under a reservation of rights to withdraw and seek ... Keep Reading »
Additional Insured
New York’s High Court Holds Additional Insured Coverage Extends Only to Injuries Proximately Caused by Named Insured’s Fault
On June 6, the New York Court of Appeals in Burlington Insurance Co. v. NYC Transit Authority held that where liability is limited to injuries “caused, in whole or in part” by the named insured’s “acts or omissions,” coverage extends only to those injuries proximately caused by, not just causally linked to, the named insured’s actions or omissions. The 4-2 decision reversed the intermediate appellate court’s (Appellate Division, First Department) holding that under such ... Keep Reading »
Tenth Circuit Drills Down Into Roots Of Moral Hazard, Comes Up Dry
Moral hazard (one of this blog’s preoccupations) usually comes up in disputes over the scope of coverage under an insurance policy. (See, for example, here, here and here.) But state legislatures often address it, too—for example, by imposing limits on agreements to indemnify a party against the consequences of its own negligence. This week, in Lexington Ins. Co. v. Precision Drilling Co., No. 15-8036 (10th Cir. July 26, 2016), the U.S. Court of Appeals for the Tenth ... Keep Reading »
Additional Insureds Deserve Attention Too: New York Court Finds Insurer’s Reservation of Rights to Named Insured Did Not Constitute Notice to Additional Insured Under § 3420(d)(2)
Liability insurers issuing or delivering policies in New York are well apprised of the statutory requirement that the insured is to be provided written notice of a disclaimer or denial of a bodily injury or death claim “as soon as is reasonably possible.” N.Y. Ins. Law § 3420(d)(2). Also well-known is that an insurer may face severe consequences from delaying issuance of a disclaimer on a ground that is known to be valid, while still investigating other possible grounds ... Keep Reading »
Keeping it Basic: NJ Supreme Court Limits Amount Owed to Innocent Third Parties
The New Jersey Supreme Court recently held that an automobile insurer must pay an innocent third party the contracted $10,000 amount of basic coverage following an auto accident involving the insured's vehicle, despite that the policy was procured by fraud and rescinded. Luckily for the insurer, the Court held that the insurer was only responsible for the amount of coverage provided by the rescinded policy, which was $5,000 less than the $15,000 per person/$30,000 per ... 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 »
Who’s the Boss? In Policies Covering Multiple Insureds, the Details Matter
Liability policies for businesses are subject to a number of common exclusions; many, for example, do not cover liability to employees of the business who are injured on the job. Frequently, those policies do provide coverage to additional insured parties, such as lenders or property owners, that deal with the business. Recently, in Mutual Benefit Ins. Co. v. Politsopoulos, No. 60 MAP 2014 (Penn. May 26, 2015), the Supreme Court of Pennsylvania addressed the question ... Keep Reading »
Fourth Circuit: If You Want to Limit Additional Insured Coverage to Vicarious Liability, You Should Say So
In Capital City Real Estate, LLC v. Certain Underwriters at Lloyd's, London, No. 14-1239 (4th Cir. June 10, 2015), the Fourth Circuit Court ruled that a Maryland federal court erred in granting summary judgment to Certain Underwriters at Lloyd's, London (“Lloyd's") in a coverage dispute between it and its insured, a construction contractor, by misinterpreting the “additional insured" endorsement in the policy issued by Lloyds. The lawsuit arose out of a construction ... Keep Reading »
Insurance is Big in Texas: In Deepwater Horizon Case, Texas Stretches a Policy’s Four Corners to Include Other Contracts
Last month, in In re Deepwater Horizon, Relator, the Supreme Court of Texas applied a fundamental principle of insurance law to a case with enormous financial implications. The owner of the Deepwater Horizon drilling rig had made BP an additional insured under its liability policies, but it did so pursuant to a drilling contract in which BP had agreed to be responsible for some of the losses those policies covered. When BP submitted a claim, therefore, a court had to ... Keep Reading »
Like Hats and Belt Buckles, Indemnity Agreements in Texas Must be CONSPICUOUS
It pays to be obvious, especially if you have a reputation for subtlety. –Isaac Asimov Earlier this month, the U.S. Court of Appeals for the Tenth Circuit held that Texas law allows an indemnity agreement to insulate a party from the consequences of its own, allegedly negligent conduct, but only if that feature of the agreement is disclosed conspicuously. In Martin K. Eby Construction Co., Inc. v. Kellogg Brown & Root, Inc., No. 13-3027 (10th Cir. Dec. 9, ... Keep Reading »