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 »
Apartment Complexity: Appellate Court Sorts Out Multiple Coverage Claims for Construction of Uninhabitable Residence
In QBE Ins. Corp. v. Adjo Contracting Corp. (N.Y. App. Div. 2d Dep't Oct. 29, 2014), an intermediate appellate court in New York confronted cross-appeals involving 15 different insurers embroiled in multiple lawsuits, including consolidated class actions. The core issue of the case was whether the insurers for a variety of subcontractors were obligated to provide a defense to tenants' lawsuits against the developer and general contractor of a doomed residential ... Keep Reading »
Ask the Experts About Bad Faith; Just Be Careful How You Do It
In bad faith cases, juries must often decide if the way an insurer processed a claim lacked a "reasonable" basis. Courts have consistently held that experts can help—by explaining how a claim is supposed to be handled. The same courts also insist, however, that experts may not "tell the jury what result to reach." Three recent cases from an assortment of federal courts enforced that rule by excluding expert opinions. But the real lesson of these cases might be that ... 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 »
McCarran-Ferguson vs. the FAA: Judge Posner Declares TKO in Favor of Arbitration
In a bout before the U.S. Court of Appeals for the Seventh Circuit, two heavyweight federal statutes squared off, with coverage for hundreds of long-tail, asbestos-related personal injury lawsuits on the line. In one corner: the Federal Arbitration Act, enacted by Congress to overcome federal courts’ erstwhile reluctance to enforce arbitration agreements. In the other corner: the McCarran-Ferguson Act, created to curb those courts’ over-reach into insurance regulation ... Keep Reading »
A Unilateral Scrivener’s Error Can Reflect a Mutual Mistake Requiring Policy Reformation (or, Don’t Expect $20 Million in Additional Coverage Without Paying Additional Premium)
It is, of course, an indispensable part of a scrivener's business to verify the accuracy of his copy, word by word. - Herman Melville October 29 marked the second anniversary of Superstorm Sandy's assault on New York and New Jersey. Although the insurance litigation arising from this storm is just beginning, we have already seen a number of decisions out of New York that limited coverage, based on applicable flood sublimits. Last month, in Cammeby's Management ... 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 »
My Advice? Pay Me!
Shopping for insurance can raise hard questions: How much coverage do I need? What types of risk should be covered? What must I do to get the maximum benefits allowed? Policyholders who get the wrong answers often end up in litigation—claiming their homes were underinsured, their agents failed to obtain the coverage they requested, or they were tricked out of reimbursement for full replacement cost. In many contexts, courts have shown a good deal of indulgence for ... Keep Reading »
Cut! Eighth Circuit Excludes Non-Board Member from CGL Coverage for “Directors”
Directors and Officers liability policies are typically precise in defining the job descriptions of the individuals to whom they offer coverage. Recently, in United Fire & Cas. Ins. Co. v. Thompson, No. 13-2352 (8th Cir. July 11, 2014), the U.S. Court of Appeals for the Eighth Circuit had to decide whether the term "director," which was left undefined in a corporation's Commercial General Liability policy, could apply to a supervisory employee, whom one party ... Keep Reading »
Get Exhausted! The Tenth Circuit Schools an Excess Insurer on How to Preserve Subrogation Claims in a Settlement
When I die, I want to be exhausted. –Bryan Cranston Claims against insured businesses sometimes implicate multiple liability policies issued by several different carriers, and it is sometimes prudent for some of those carriers to settle the underlying action, even if others are unwilling to contribute to the settlement. At that point, it is important for the settling insurer carefully to analyze the relevant coverage terms, before the structure of the settlement has ... Keep Reading »
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