In the realm of liability insurance, the terms “deductible” and “self-insured retention” are often used interchangeably, but the two provisions have important differences. Among other things, “policies which are subject to self-insured retentions are ‘excess policies' which have no duty to indemnify until the self-insured retention is exhausted.” Century Indemnity Co. v. The Marine Group, No. 3:08-CV-01375-AC (D. Ore. Dec. 3, 2012), quoting Pacific Employers Ins. Co. ... Keep Reading »
Live Free of Actual Knowledge or Coverage Will Die
In September 2012, the highest court of the Granite State reversed a decision that rescinded an insurance contract on the basis of a material false statement in the application. The Supreme Court held that rescission was unavailable, because the policy was ambiguous. The court suggested, in other words, that an insurance policy must clearly express the insurer’s intention not to be forced to provide coverage on the basis of misrepresentations. Parties to other types ... Keep Reading »
Excess is Enough: Courts Decline to Expand Liability of Excess Insurers
Judicial opinions that purport to construe “the policy as a whole” are often bad news for insurers, but two recent decisions used that analysis to defeat plaintiffs with novel arguments for making their excess insurers liable for losses within the primary layer. Intel Corp. v. American Guarantee & Liability Insurance Co., No. 692, 2011 (Del. Sept. 7, 2012), arose out of antitrust litigation against the chip manufacturer, in which Intel paid more than $50 million ... Keep Reading »
Be Careful what you Incorporate: Insurer Bound by Insured’s Arbitration Agreement
When an insurance policy relates to particular contractual obligations of an insured, having the policy specifically identify the underlying contract can help define the insurer’s obligations with precision. But the reference needs to be precise, too. In a recent Fourth Circuit case, an insurer’s performance bond recited the fact that the principal had entered into a construction subcontract, and it stated that the “subcontract is by reference made a part hereof.” ... Keep Reading »
Excess Policy Covers Liability for Occurrence Continuing After the Policy Period Ends
The Second Circuit has held that property damage occurring after the term of an excess liability policy may be included in the calculation of whether damages from a single occurrence reach the policy’s attachment point. In Olin Corp. v. American Home Assurance Co., 11-4055-cv (2d Cir. Dec. 19, 2012), an insured manufacturer of industrial chemicals filed suit against its excess liability insurers, claiming they owed a duty to indemnify it for its costs of remediating ... Keep Reading »
A Porous Border: Insurers Finding it Hard to Exclude Coverage for Additional Insureds
Landlords and tenants, contractors and sub-contractors, even fathers and sons often establish relationships that make one party potentially liable for the acts of the other. One way to manage the risk these relationships create is for one party to add the other to its liability insurance policy as an additional insured. On the other side, insurers try to limit their exposure to additional insureds by defining coverage in a way that applies only to risks the additional ... Keep Reading »
The Limits of the Real: Narrow Readings of Policy Terms put Losses in a Virtual Realm
Ludwig Wittgenstein famously declared that “[t]he world is everything that is the case.” In three recent cases involving liability policies, courts remind us that injury can occur beyond the limits of the world that consists of “property”—or even of “substance.” 1. PPI Technology Services, L.P., was hired to “assist in well-planning” on three oil leases in Boudreaux, Louisiana. Its responsibilities included overseeing the drilling of wells. When PPI dug an empty ... Keep Reading »
Reservation of Rights can put Insurers on the Hook for Cost of Independent Counsel
When a liability insurer provides a defense subject to a reservation of rights, it seeks to preserve its own rights, while avoiding prejudice to the insured in the underlying claim. If the insurer ultimately wins the coverage battle, it can try to recover the cost of the defense it provided. Whether it can succeed is a question that different states answer in a wide variety of ways. In New York, insurers can recoup defense costs by establishing a lack of coverage. ... Keep Reading »
Giving Short Rate: Farmers Potentially Liable for Unused Premium
Certain homeowners policies issued to California insureds by Farmers Group, Inc., contained the following cancellation terms: “(1) If you cancel this policy, we shall return the short rate unused share of the premium. (2) If we cancel this policy, we shall return the prorated unused share of the premium.” While indicating in this way that cancelling homeowners would receive something other than a “prorated” share, the policies did not state what the “short rate” share ... Keep Reading »
Slamming the Door: Innovative Procedural Gambits Fared Poorly Last Month
Procedural hurdles to maintaining cases in certain courts, or in a certain configuration of parties, can sometimes affect the outcome of litigation as much as the underlying merits. For a class action plaintiff (and especially for class counsel), the ability to resolve disputes over the defendant’s insurance coverage can be an immense boost in formulating a litigation and settlement strategy. For an insurer disputing coverage, access to federal court might be what makes ... Keep Reading »