In disputes over the scope of liability coverage, courts must often draw a line between (1) providing insurance against errors that harm others and (2) broadly guaranteeing the work product of the insured. The problem is most obvious in construction cases, when claims against the insureds arise from their own faulty workmanship. Recently, it has also emerged in connection with the food and drug industries. Last month, in Hot Stuff Foods, LLC v. Houston Casualty Co. ... Keep Reading »
Duty to Indemnify
“Voluntary” ≠ “Obligatory”: Good Deeds Do Not Trigger Coverage
Liability policies typically provide coverage for amounts the insured "become[s] legally obligated to pay"—but they leave open the question of how that obligation should be determined. Judgments and settlements clearly create "legal obligations." Sometimes, a statute can, too: several courts require insurers to pay for remediation efforts mandated by environmental laws, even if government authorities have not yet ordered any action at the polluted site. But the ... Keep Reading »
Well, That Seemed Exhausting: When Is an Excess Insurer Obligated to Post an Appellate Bond?
"You say to-may-toe; I say to-mah-toe," or so the saying goes. According to the Eastern District of Pennsylvania in Charter Oak Insurance Company v. Maglio Fresh Food, No. 12-3967 (E.D. Penn. Sept. 9, 2014), the same can be said of a "cost of appellate bond" provision in a liability policy: Debating whether this "hybrid" term is part of the duty to defend or the duty to indemnify "is not easily nor necessarily answerable." The underlying Maglio Fresh Food case involved ... Keep Reading »
New Jersey Appellate Court Keeps “Running Spigot” Open on Allocation of Defense Costs Under Non-Eroding-Limit Fronting Policies (and Other Spooky Tales from the Towers of Coverage Past)
New Jersey's Appellate Division recently affirmed each of several challenged rulings rendered in a long-running coverage dispute between plaintiff IMO Industries and its many historical insurers arising from asbestos exposure-related injuries dating back to the 1940's. IMO sought declaratory and other relief to establish IMO's and the defendant insurers' respective obligations for defense and indemnity of underlying personal injury lawsuits against IMO. Plaintiff IMO ... Keep Reading »
“Mend the Hold”: A Nineteenth-Century Wrestling Doctrine Keeps its Grip on Coverage Litigation in the WWE Era
The issue confronting an Illinois appellate court in BNSF Railway Company v. Probuild North LLC, No. 1-12-3648 (Ill. App. Ct. June 11, 2014), was not uncommon. The plaintiff sought coverage from its insurer under a commercial general liability policy. In defending the suit, the insurer asserted a different defense from the one it had identified in its original denial letter. The plaintiff argued that the insurer was estopped from changing its rationale for denying ... Keep Reading »
If the Suit Fits: A Washington Court Clarifies Triggers for the Duty to Defend
Like many other federal and state environmental laws, Washington’s Model Toxics Control Act (MTCA) exposes property owners to strict liability, regardless of fault or intent, for certain types of environmental contamination. Twenty years ago, in Weyerhaeuser Co. v. Aetna Cas. & Surety Co., 874 P.2d 142 (Wash. 1994), the Supreme Court of Washington held that a property owner’s efforts to remediate polluted sites triggers a liability insurer’s duty to indemnify the ... Keep Reading »
Peeking Around Four Corners: Wisconsin Insurers Have Found a Way to Use Extrinsic Evidence to Excuse the Defense of Pending Claims
It is a truism that a liability insurer’s duty to defend is extremely broad—especially in states that apply the “four corners rule.” Under that rule, the insurer has a duty to defend whenever the underlying complaint alleges facts that could constitute a covered claim—“even though facts outside the four corners of those pleadings indicate that the claim may be meritless or not covered.” Capstone Building Corp. v. American Motorists Ins. Co., 67 A.3d 961, 992 (Conn. ... Keep Reading »
Is There a Duty to Defend Pollution Claims? It’s the Complaint, Stupid
This Spring, cases from Florida and Wisconsin reaffirmed the general proposition that a liability insurer’s duty to defend must be determined from the specific claims in the underlying complaint against the insured, and not from facts available from other sources. Both cases dealt with contamination or pollution conditions, and, in both instances, the courts held it was the nature of the underlying claim, rather than the actual presence of a pollutant, that established ... Keep Reading »
On Remand, District Court Expands Subcontractor Exception to Rule Against Coverage for Faulty Workmanship
Recent decisions from the U.S. Courts of Appeal for the Tenth and Second Circuits have partially overturned a longstanding rule against coverage for faulty workmanship under commercial general liability policies. The rule, known as the “fortuity doctrine,” was based on insuring clauses that provided coverage only for claims arising out of an “occurrence,” and which defined “occurrence” to mean “accident.” For many years, courts held that claims based on the insured’s ... Keep Reading »
It’s All About the Pleadings: Florida Court Expands Insurers’ Obligation to Provide Separate Counsel for Insured Co-Defendants
The duty of a liability insurer to provide a defense for its insured is controlled by the contents of the pleading against that insured: the duty can arise on the basis of allegations that establish grounds for coverage, even if the insurer knows those allegations to be false. If, in those circumstances, the insurer reserves its right to dispute coverage (and especially if, in doing so, it relies on a theory that would prejudice the insured’s position in the underlying ... Keep Reading »
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