“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 »
Exclusions/Exceptions
Eighth Circuit Orders Coverage For Hackers’ Fraudulent Wire Transfer
Financial institution bonds come in various forms, depending on the nature of the insured business (e.g. bank, broker, insurance company). Common forms are fidelity bonds and commercial crime policies. These policies provide first party coverage against losses caused by employee dishonesty, forgery, kidnap, ransom & extortion, computer fraud and other specified financial frauds. These policies are common, and in some cases required by law, for banks, insurers, and ... Keep Reading »
Colorado Takes A Stand Against Unauthorized Settlements
The “notice-prejudice” rule gives a pass to policyholders who breach the notice or cooperation provisions of their policies, if the breach is found not to have prejudiced the insurer. Sometimes, the late notice does not arrive until after the policyholder has settled an underlying claim; even in those cases—and even where the policy contains a “no voluntary payments” or a “consent-to-settle” clause—dozens of cases have found that the notice-prejudice rule applies. Last ... Keep Reading »
NY Appellate Court Rules “Blanket Ordinance or Law Coverage” not as Blanket as Insured Hoped
In 1947, some Bedouin shepherd boys were tending their sheep and goats near the ancient settlement of Qumran, near the Dead Sea. One of the boys threw a rock into an opening on the side of a cliff and heard something break. Curious, they entered what was a small cave. Inside, they discovered a large clay vessel that had been broken by the thrown rock. It contained several scrolls. This led to the discovery of more clay jars and more scrolls, what would later be come ... Keep Reading »
Grateful Marijuana Grower Scores Coverage Victory in Colorado Federal Court
The refusal of the Senate to fill a Supreme Court vacancy has put gridlock back on the front page, as it leaves important questions about immigration and clean energy unresolved. Uncertainty about federal policy is also affecting other areas of American life, including one of our most popular pastimes. Recently, in The Green Earth Wellness Center, LLC v. Atain Specialty Ins. Co., No. 13-cv-03452-MSK-NYW (D. Colo. Feb. 17, 2016), a federal court in Colorado held that the ... 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 »
None Of Your Business: Eleventh Circuit Enters A Gray Area For Contract Liability Exclusions
Businesses have responsibilities; they buy liability insurance to cover losses that arise if they fail to perform them all. Businesses also “assume” responsibilities under contracts; those responsibilities are typically excluded from coverage. Sometimes the two kinds of responsibility overlap. Last month, in Payroll Management, Inc. v. Lexington Ins. Co., No. 15-10314 (11th Cir. March 1, 2016), the U.S. Court of Appeals rejected an insured’s attempt to exploit that ... 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 »
No Contractor Is An Island: Florida Court Narrowly Applies “Your Work” Exclusion
When an insurer issues a Commercial General Liability policy to a contractor, the policy typically excludes coverage for the cost of repairing or replacing the contractor's own defective work, but covers the cost of repairing damage to other parts of the property which the defective component might cause. As this blog has explained, the "your work" exclusion serves to distinguish a liability policy from "a performance bond or warranty of a contractor's product." But ... Keep Reading »
As TCPA Class Actions Soar, Issues Emerge in TCPA Coverage for Claims
Both the number of cases under the Telephone Consumer Protection Act (TCPA) and the types of practices that those cases challenge have mushroomed within the last several years. Yet a dedicated form of insurance against TCPA claims has not yet developed. Instead, businesses seeking defense and indemnification of TCPA suits have resorted to traditional policy provisions dealing with property damage, personal and advertising injury, and (more recently) the language of ... Keep Reading »
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