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 »
Courts Leaning Anti-Anti-Assignment
In October, in a case of first impression, the Kentucky Supreme court decided that Kentucky will follow the “majority rule,” under which anti-assignment clauses in insurance policies may not be enforced, if the assignment is made after the underlying loss has occurred. In December, the Supreme Court of California agreed to decide whether to extend that rule to “assignments” that occur by virtue of the merger of an insured into another business. In re Wehr ... Keep Reading »
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