Claims-made liability insurance policies typically require the policyholder to notify the insurer of a claim within a set amount of time — typically during the policy period, or within a specific period of time after the end of the policy period — to obtain coverage. When policyholders fail to do so, they often argue that the “notice-prejudice rule” should apply, such that the insurer can only deny coverage if it was prejudiced by the policyholder’s untimely notice. ... Keep Reading »
Duty to Defend
South Carolina Supreme Court’s Quiet Erosion of Insurers’ Attorney-Client Privilege Rights
One decision that flew under the radar in 2019 continues the recent trend of courts to dispense, under among other things the previously discussed “at-issue” waiver doctrine, with insurers’ fundamental rights to confidentiality with respect to legal advice. In the June 2019 decision In re Mt. Hawley Insurance Co., No. 2018-001170 (S.C. June 12, 2019), South Carolina directed, in response to a certified question from the Fourth Circuit Court of Appeals, the circumstances ... Keep Reading »
Eleventh Circuit Rejects Insurer-Defended Policyholder’s Bid to Expand Florida’s Bad Faith “Excess Judgment Rule” to Include Collusive Settlements Concocted Without Insurer’s Consent
In Cawthorn v. Auto-Owners Insurance Co., No. 18-12067 (11th Cir. Oct. 25, 2019), the Eleventh Circuit affirmed the U.S. District Court for the Middle District of Florida’s grant of summary judgment in favor of Auto-Owners Insurance Co., ruling that a consent judgment does not constitute an excess verdict, which is an essential element of a Florida bad faith claim. This appeal arose from an April 2014 underlying automobile accident in which David Cawthorn and Bradley ... Keep Reading »
Seventh Circuit Finds “Based Upon or Arising Out of” Language in Contract Exclusion Renders Coverage “Illusory”
In Crum & Forster Specialty Insurance Co. v. DVO, Inc., No. 18-2571 (7th Cir. Sept. 23, 2019), the Seventh Circuit reversed a decision of the U.S. District Court for the Eastern District of Wisconsin, finding that the contractual liability exclusion in an E&O policy containing “based upon or arising out of” language rendered coverage under the policy “illusory” and therefore must be reformed to match the policyholder’s “reasonable expectations.” The appeal ... Keep Reading »
When Should an Insurer Deny Coverage? The Second Circuit Provides Guidance on What Constitutes a Reasonable Time by Which to Deny Coverage Under New York Law
Under New York law, a liability insurer is required to deny coverage for bodily injury resulting from an auto accident “as soon as is reasonably possible.” N.Y. Ins. Law § 3420(d)(2). The Second Circuit recently shed light on what constitutes a reasonable time within the meaning of this statute in United Financial Casualty Co. v. Country-Wide Insurance Co., No. 18-3022 (2d Cir. July 1, 2019). In that case, Juan Pineda was involved in a three-vehicle accident while ... Keep Reading »
EDNY “Teas” It Up On Additional Insured, Finds Insurer May Withdraw Defense and Recoup Defense Costs
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 »
California Federal Court Holds Scope of Duty to Defend Is Determined by the Language of the Contract
In Harper Construction Co. v. National Union Fire Insurance Co. of Pittsburgh, No. 3:18-CV-00471-BAS-NLS (S.D. Cal. Mar. 28, 2019), the Southern District of California rejected an insured's attempt to expand a CGL policy's definition of "suit" to encompass mere demands without a formal proceeding for damages. In 2007, the federal government awarded a contract for a military training facility in Fort Sill, Oklahoma, to an insured general contractor. After structural ... Keep Reading »
Coverage Issues Relating to Drones Take on New Heights: A California District Court Finds Drone-Related Injury Falls Within Policy’s Aircraft Exclusion
In Philadelphia Indemnity Insurance Co. v. Hollycal Production Inc. et. al., No. 5:18-cv-00768-PA-SP (C.D. Cal. Dec. 7, 2018), a California district court held that Philadelphia Indemnity Insurance Co. was not obligated to defend or indemnify a photography firm whose drone blinded a wedding guest in one eye, finding that the drone-related injury fell within the policy’s aircraft exclusion. Darshan Kamboj, a guest at a California wedding, claimed that she lost sight in ... Keep Reading »
Homeowners Insurance Has Unintended Consequence, Insurer Must Defend Teen in Cyberbullying Suit
In State Farm Fire and Casualty Co. v. Motta, et al., No 18-cv-3956 (E.D. Pa. Dec. 11, 2018), the Eastern District of Pennsylvania Court held that State Farm Fire and Casualty Co. had a duty to defend a teenage boy against a lawsuit accusing him of cyberbullying one of his classmates that led her to commit suicide, under the boy’s mothers’ homeowners insurance policy. Julia Morath died by suicide within a couple of days of Zach Trimbur attacking her, via text message ... Keep Reading »
Second Circuit Holds “Offering for Sale” Is “Advertising Injury” Under CGL Policy, But Allegation Not Enough to Trigger Duty to Defend
Several months ago we blogged about the duty to defend advertising injury claims under commercial general liability (CGL) policies, noting that many courts continue to struggle with the practical application of basic duty to defend principles in this context. The court in that particular case had no such issues. In a more recent decision, however, the potential complexities of this task were on full display. See High Point Design LLC v. LM Insurance Corp. et ... Keep Reading »
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