An insured corporation settles a class action, and a portion of the settlement pays the plaintiffs’ attorneys. Payments to the class are excluded from coverage under the terms of the corporation’s liability policy. But can the company still get coverage for the attorneys’ fees? In April, this blog discussed a case in which the answer turned on the nature of the company’s underlying conduct. The following month, in PNC Financial Services Group, Inc. v. Houston Casualty ... Keep Reading »
Duty to Indemnify
Defining the Contours of Cyber Coverage for Data Breach: a Warning in Arizona
A year ago in this space, we looked at the receding wave of coverage litigation regarding whether various cyber-related exposures were covered under traditional policies, such as CGL and professional liability policies. Deemed “square peg” litigation, those cases were mostly a mixed bag. And, as predicted, since the advent of the now burgeoning cyber-specific coverage market, those cases are largely becoming irrelevant, as insurers have begun to place exclusions in ... Keep Reading »
Step-Up, Insurer! Your Step-Down Provision Is Not Triggered
“Sometimes nothin' can be a real cool hand.” -- Frank Pierson Where an automobile policy covers someone other than the named insured, a “step-down” provision may subject the amount of available coverage to the limit on “similar coverage” that is imposed by the injured person’s own policy. Sometimes, however, that second policy does not cover a particular risk at all. Last month, in Rivera v. McCray, No. A-2337-14T1 (N.J. App. Div. May 2, 2016), a New Jersey appellate ... Keep Reading »
Alabama Puts The Mystery Back Into All-Risk Coverage
“There is, one knows not what sweet mystery about this sea …” -- Moby-Dick Insuring property against loss creates an unavoidable moral hazard: policyholders often have an incentive to cause or allow their property to disappear. Early efforts to limit insurers’ exposure to that risk—such as requiring the insured to prove the cause of a loss by “direct and affirmative evidence”—proved unsustainable. Eventually, the problem gave rise to express exclusions for losses ... 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 »
How General is “General Aggregate?”
“It’s a big enough umbrella, but it’s always me that ends up getting wet.” - Sting (1981) “Here’s a second umbrella” – Montana Supreme Court (2016) Although the terms are often used interchangeably, there are several key differences between umbrella and excess coverage. One such distinction is that an umbrella policy can apply to multiple underlying policies. This makes it essential to clearly delineate and define the policy’s aggregate limit of liability— the maximum ... Keep Reading »
For Excess Liability Insurers, Consent-to-Settle Clauses Still Count
When a liability insurer defends its insured under a reservation, recent decisions limit the insurer’s right to enforce a policy’s consent-to-settle clause. But can the reservation affect the rights of an excess carrier? And does it matter if the carrier declines to participate in an upcoming mediation? Last month, in The Doe Run Resources Corp. v. The Fidelity & Cas. Co. of N.Y., G050689 (Cal. Ct. App. Feb. 1, 2016), a California appellate court (applying Missouri ... Keep Reading »
There’s A Problem With Your Reservation: Citing Reservation of Rights, Mississippi Court Nullifies “Defense Within Limits” Provision
When liability insurers have reasonable questions about coverage, courts traditionally encourage them to defend their insureds, subject to a reservation of rights. E.g., Drawdy v. Direct Gen. Ins. Co., 586 S.E.2d 228 (Ga. 2003) (“[b]y acting in this manner, the insurer eliminates any detriment to the insured …”). But the decision to reserve can have serious, negative consequences for the insurer. In some states, a reservation is deemed to create a conflict between ... Keep Reading »
Arise and Exclude: Artful Pleading Fails to Circumvent Contractual Liability Exclusion
Awake, arise or be forever fall'n. - John Milton It's not uncommon for plaintiffs to couch their pleadings in terms that attempt to avoid exclusions in defendants' liability coverage. The plaintiffs in Bond Safeguard Ins. Co. v. National Union Fire Ins. Co. of Pittsburgh, Pa., No. 14-15233 (11th Cir. Oct. 5, 2015), appear to have had this goal in mind when they sought to recover payments it had made under certain surety bonds. The plaintiffs sued for negligence, but ... Keep Reading »
Third Circuit Decides that “Publication” Doesn’t Include the Collection of Customer Data
On September 15, 2015, the Third Circuit Court of Appeals declared that Lamorak Insurance Company (formerly OneBeacon America Insurance Company) and the Hanover Insurance Group don't have to defend their insureds, Urban Outfitters, Inc. and its subsidiary Anthropologie, Inc., under "personal and advertising injury" coverage in three putative class action lawsuits challenging the stores' collection of customer zip codes. The putative class actions are in the District ... Keep Reading »
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