Hunton Insurance Recovery Blog

In the linked Client Alert, my colleagues, Lorie Masters and Brittany Davidson, discuss the recent New Jersey appellate court decision in Haskell Prop., LLC v. Am. Ins. Co., No. A-1452-14T2 (N.J. Super. Ct. App. Div. June 29, 2017), where the court again confirmed that, in “occurrence” policies, an insured can assign its policies after a loss even if the policy has an anti-assignment provision.

My partner, Walter Andrews, recently commented in a Law360 article concerning the top insurance cases to watch in 2017.  The Law360 article, titled Insurance Cases to Watch in the 2^nd Half of 2017, features Andrews commenting on the impact of Global Reinsurance Corp. of America v. Century Indemnity Co., case number CTQ-2016-00005, in the Court of Appeals of the State of New York, where he points out how a win for Global Re could result in a huge windfall for the reinsurer by saving on its defense costs, since reinsurers typically must pay both indemnity and defense costs.  Andrews also ...

Last week, my partner, Syed Ahmad, commented on some of the biggest insurance rulings of the year in a Law360 feature article that can be found here.  Among those decisions is USAA Texas Lloyd’s Co. v. Menchaca, where the Texas Supreme Court ruled that that policyholders may recover for bad faith in the absence of coverage under their policy.  Ahmad also discussed the Connecticut appeals court decision in R.T. Vanderbilt Co., Inc. v. Hartford Acc. And Indem. Co., and its ruling that insurers may not force policyholders to act as an insurer during policy periods in which insurance was not ...

Hunton & Williams' Insurance Coverage lawyers Syed Ahmad, Andrea DeField and Jennifer White were featured in the Firm’s Recall Roundup, where they discuss recent noteworthy decisions on insurance coverage for product recalls:

The RIMS 2017 Annual Conference & Exhibition is just around the corner.  Visit members of Hunton & Williams LLP’s Insurance Coverage Team at Booth #2421 to learn more about our legal services.

Hunton & Williams insurance partner Syed Ahmad was recently quoted in Law360 regarding a recent trend in judicial decisions favoring policyholders. Ahmad addresses an apparent trend by courts to refuse to allow technical violations to void coverage under complex insurance policies. A link to the Law360 article containing Ahmad’s comments can be found at 5 Insurance Rulings You May Have Missed In The 1st Quarter.

Attorneys Syed Ahmad and Jennifer White contributed to the Hunton Retail Law Resource’s “Recall Roundup” for the month of March with a discussion a new cases in the world of recall-related insurance coverage litigation, including a new case filed by a policyholder against its insurance broker alleging that the broker was liable for misrepresentations in the electronic application that led the insurer to rescind coverage.  Check out the blog post here.

Product recalls are on the rise in many industries. As regulatory and consumer protection standards are getting tougher, product supply chains are becoming more complex. This increases the risk of errors, defects and contamination at all levels of operation. Too often, these problems do not manifest themselves until after a product hits the market. All of this can lead to staggering expenses for food and product manufacturers facing the risks and realities of product recalls.

A California appellate court has affirmed a finding that a property insurer acted in bad faith when it searched for a reason to deny coverage for a fire loss and conducted an incomplete and non-objective investigation, even though the carrier subsequently paid the claim. The decision in Saddleback Inn, LLC v. Certain Underwriters at Lloyd’s London, No. G051121 (Cal. App. 4^th, Mar. 30, 2017, which can be found here, illustrates the principle that an insurer’s conduct should be determined based on what the carrier knows when it refuses to pay the claim, and that subsequent developments cannot be used to salvage prior bad faith conduct.

As posted earlier today on Hunton & Williams' Retail and Privacy blogs, and as reported in Law360, Hunton & Williams announces the formation of a cross-disciplinary legal team dedicated to guiding companies through the minefield of regulatory and cyber-related risks associated with high-stakes corporate mergers and acquisitions.

As posted earlier today on Hunton & Williams' Retail and Privacy blogs, and as reported in Law360, Hunton & Williams announces the formation of a cross-disciplinary legal team dedicated to guiding companies through the minefield of regulatory and cyber-related risks associated with high-stakes corporate mergers and acquisitions.

Earlier today, Hunton & Williams LLP insurance coverage lawyer Andrea DeFIeld was named “Rookie of the Year” by the Greater Miami Chamber of Commerce in their annual HYPE Awards ceremony.  The awards recognize Miami-Dade County’s brightest young professionals who have demonstrated outstanding achievements in their professions.  Andi certainly has done that, and much more, said Hunton’s Insurance Coverage practice leader, Walter Andrews, who attended the awards ceremony with Andi.  Andrews added, “Andi is an integral part of our practice and a leader among young ...

Last week, nearly 200,000 people were evacuated from areas downstream of the Oroville Dam in Northern California. Today, separate recommended and mandatory evacuation orders continue for roughly 50,000 San Jose residents due to rising flood waters along Coyote Creek. Between the Oroville Dam crisis and the torrential storms battering Northern California, California businesses face significant loss arising from the flooding, the threat of flooding, landslides and the like. Fortunately, some of the damage to property and businesses can be mitigated by insurance.

On February 3, 2017, members of Hunton & Williams’ insurance group, led by Insurance Practice Head Walter Andrews, and firm associate Anna Lazarus, achieved a significant victory in the Eleventh Circuit U.S. Court of Appeals, in Hillsborough County v. Star Insurance Co.  The 11^th Circuit’s published opinion, available here, addressed an issue of first impression under Florida law involving the impact of Florida’s statutory limitations on liability and an excess liability policy’s self-insured retention.  The decision provides substantial guidance under Florida law ...

Hunton & Williams insurance partner, Syed Ahmad, tells Law360 about trends in D&O liability insurance that are likely to grab headlines in 2017, including the impact of privacy and cyber breaches on corporate executives and the continued fallout from 2015’s “Yates Memo,” emphasizing an increase in government prosecution of individual corporate wrongdoers and incentivizing companies to cooperate in cases against their executives.  A link to the article featuring Syed’s comments can be found here

Hunton & Williams insurance partner, Syed Ahmad, tells Law360 about trends in D&O liability insurance that are likely to grab headlines in 2017, including the impact of privacy and cyber breaches on corporate executives and the continued fallout from 2015’s “Yates Memo,” emphasizing an increase in government prosecution of individual corporate wrongdoers and incentivizing companies to cooperate in cases against their executives.  A link to the article featuring Syed’s comments can be found here

Hunton & Williams Insurance practice head, Walter Andrews, provides a brief, 5-minute overview, of why members of the real estate industry should be thinking about and obtaining appropriate cyber insurance protection for their real estate operations.  Mr. Andrews explains why cyber insurance is different from other insurance products and requires a careful examination of the particular assets and exposures that are to be protected.

Law360 sought the perspective of Walter Andrews, head of Hunton & Williams LLP’s insurance coverage practice, when collecting its list of cases to watch in 2017. Andrews identified a case pending with the Texas Supreme Court – USAA Texas Lloyds Co. v. Menchaca, which we reported on in October.  As Andrews explained to Law360, “If the Texas Supreme Court comes down in the policyholder’s favor here, it would provide a substantial weapon for policyholders’ arsenals, as far as what they have to [use against] insurers that don’t reasonably investigate claims. That would ...

A California appellate court held on Tuesday in Navigators Specialty Ins. Co. v. Moorefield Constr., Inc., 2016 WL 7439032, __ Cal.Rptr.3d __ (Dec. 27, 2016), that a general liability insurer must cover amounts paid as attorneys’ fees in an underlying settlement even where no duty to indemnify was owed under the policies. The coverage was required under the policies’ Supplementary Payments provision – an often overlooked and underutilized section of the CGL policy that can be of significant value to policyholders.

Insurance coverage law continued to evolve through 2016. As the year draws to a close, we take this opportunity to reflect on the cases and law that made this year memorable and will influence coverage decisions and disputes in 2017.

Two decisions issued on December 21, 2016, drive home the critical significance that policy-based “suit limitations” provisions can have on an insurance claim. In both instances, federal courts rejected policyholders’ attempts to obtain coverage for plainly covered losses simply because they failed to follow their policies and filed their lawsuits after the proscribed cutoff. These decisions serve as sharp reminders that policyholders must not only read their insurance policies, but they must understand how they work and, most importantly, calendar critical dates and time periods.

On December 6, 2016, a Connecticut appellate court held that a contract exclusion in a public entity errors and omissions liability insurance policy did not relieve the insurer's duty to defend when there was at least a possibility of coverage based on the allegations against the insured. The court reasoned that the fact finder could determine that the underlying negligent misrepresentation claim may not have arisen out of contract, thereby putting the claim beyond the scope of the policy's contract exclusion.  For a more detailed analysis of the Town of Monroe v. Discover Prop. & ...

On November 2, 2016, a federal judge in California ruled that a Real Estate Property Managed endorsement in policies issued to a real estate manager negated a standard policy exclusion, but also rendered the policies excess to other available insurance. The case involved a dispute over coverage for a bodily injury claim involving “Pigeon Breeders Disease,” allegedly contracted due to the insured’s failure to keep pigeons away from a condo complex’s rooftop HVAC units. The plaintiff sued the property owners, Jerry and Betty Lee, and the property manager, Sierra Pacific Management Co. Inc. (Sierra Pacific).

On November 14, 2016, a federal judge in California denied summary judgment to Hanover Insurance Co. (Hanover), finding that class claims alleging a failure to reimburse reasonable business expenses were not excluded by a "wage-and-hour" exclusion contained in EPLI policies issued by Hanover. The lawsuit, brought by a former student of the Bellus Academy beauty school, alleged that Poway Academy (the owner of Bellus) and Beauty Boutique, Inc. (BBI) (operator of two other schools under the "Bellus" name), failed to compensate students for working on paying clients at an onsite salon and also failed to reimburse them for out-of-pocket costs to purchase necessary supplies. The lawsuit alleged a variety of wage-related claims. The lawsuit also alleged that the schools failed to reimburse necessary business expenses in violation of Section 2802 of the California Labor Code.

Retailer Tesco Plc’s banking branch reported earlier this week that £2.5 million (approximately $3 million) had been stolen from 9,000 customer bank accounts over the weekend in what cyber experts said was the first mass hacking of accounts at a western bank. The reported loss is still being investigated by UK authorities but is believed to have occurred through the bank’s online banking system. The loss, which is about half of what Tesco initially estimated, is still substantial and serves as a strong reminder that cyber-related losses are a real threat to retailers and other ...

On November 9, 2016, my colleagues Syed Ahmad, Shawn Regan and Shannon Shaw, published an article in Corporate Counsel discussing a recent decision from New York’s highest court that may impact the exchange of information between policyholders and their insurers. The article addresses the impact of Ambac Assurance v. Countrywide Home Loans, in which the New York Court of Appeals held that an attorney-client communication disclosed to a third party during the period between the signing and closing of a merger will remain privileged only if the communication relates to a common ...

On November 4, Michael Levine and Matthew McLellan provided commentary for Westlaw about the Fifth Circuit’s recent decision in Apache Corp. v. Great American Insurance Co., No. 15-20499, 2016 WL 6090901 (5^th Cir. Oct. 18, 2016), on which Michael Levine had previously written a blog post. In the Westlaw Journal: Computer and Internet, Mike and Matt discussed a frustrating gap in coverage for “computer fraud” that may be found in some crime policies. They encourage policyholders to review their legacy and cyber policies to ensure that complex cyber risks are actually covered ...

As reported in the Privacy & Information Security Law blog, on October 25, 2016, the Federal Trade Commission released a guide for businesses on how to handle and respond to data breaches (the “Guide”). The 16-page guide details steps businesses should take once they become aware of a potential breach. The guide also underscores the need for cyber-specific insurance to help offset potentially significant response costs.

As reported in the Hunton Retail Law Resource blog, a federal judge in Alabama ruled Tuesday that a grocer could not rely on its legacy business insurance policies – including an "electronic data" coverage extension – to protect against third-party claims after customer data was compromised by a point-of-sale cyberattack. The decision in Camp's Grocery, Inc. v. State Farm Fire and Casualty Company is yet another reminder to policyholders to ensure that their cyber security programs include both adequate cyber security safeguards and appropriate first-party and third-party cyber/crime insurance coverages. Failure to maintain either may jeopardize coverage for resulting cyber losses.

In a seemingly illogical decision, the Fifth Circuit Court of Appeals ruled in Apache Corp. v. Great American Ins. Co., No 15-20499 (5th Cir. Oct. 18, 2016), that loss resulting from a fraudulent e-mail did not trigger coverage under a crime policy's "computer fraud" coverage because the loss was not the "direct result" of computer use.

Hunton & Williams LLP’s insurance coverage counseling and litigation team has relocated its core group of lawyers to Washington from McLean, Va. Hunton’s Washington office is home to more than 150 lawyers and is the firm’s second-largest office.

“The move is good for us and great for our clients,” says practice head Walter J. Andrews. “Being in the nation’s capital better provides us with national exposure and a central location to assist our clients nationally and internationally.”

Hunton’s insurance coverage counseling and litigation lawyers have kept pace ...

Hunton & Williams LLP’s insurance coverage counseling and litigation team has relocated its core group of lawyers to Washington from McLean, Va. Hunton’s Washington office is home to more than 150 lawyers and is the firm’s second-largest office.

“The move is good for us and great for our clients,” says practice head Walter J. Andrews. “Being in the nation’s capital better provides us with national exposure and a central location to assist our clients nationally and internationally.”

Hunton’s insurance coverage counseling and litigation lawyers have kept pace ...

On September 22, 2016, the Oregon Supreme Court rejected an insurer’s attempt to separately relitigate issues of liability previously decided in an underlying lawsuit.  The decision in Fountaincourt Homeowners’ Ass’n v. Fountain Dev., LLC, 360 Or. 341 (2016), reaffirms the settled liability paradigm that “an insurer cannot, in a subsequent proceeding, retry its insured’s liability, or alter the nature of the damages awarded in that proceeding.”  Id.

Congratulations, your cracker-jack defense team just won the underlying case. They also just lost your insurance coverage and you now must repay millions of dollars of defense costs. Seem odd? Not according to the Second Circuit in Petroterminal de Panama, S.A. v. Houston Cas. Co., No. 15-2941-cv (2d Cir., Sept. 8, 2016).

A federal judge in Georgia held last week that a Commercial Crime Policy must cover a $1.7 million wire-transfer of funds precipitated by a fraudulent e-mail, purportedly authored by one of the insured's managing directors. The decision marks yet another attempt by insurers to improperly narrow the scope of coverage afforded for cyber and technology-related losses.

Insurance-giant American International Group (AIG) announced that it will be the first insurer to offer standalone primary coverage for property damage, bodily injury, business interruption, and product liability that result from cyberattacks and other cyber-related risks. According to AIG, “Cyber is a peril [that] can no longer be considered a risk covered by traditional network security insurance product[s].” The new AIG product, known as CyberEdge Plus, is intended to offer broader and clearer coverage for harms that had previously raised issues with insurers over ...

Consumer class actions are on the minds of virtually all consumer product manufacturers and service providers. Class actions based on privacy and consumer protection statutes are increasing at a remarkable rate, and can be a challenge to predict, budget, and defend, given the difficulty in valuing consumer privacy rights. In their article, “Second Circuit Reminds Consumer Product Companies That Insurance Options Exist For Big Data Blunders And Privacy Faux Pas,” as published in FC&S Legal’s Eye on the Experts column, Syed S. Ahmad, Neil K. Gilman, and Paul T. Moura address ...

A federal appeals court ruled on Wednesday that the absence of a duty to defend does not foreclose the potential for indemnity coverage under primary and umbrella liability policies. The decision in Hartford Casualty Insurance Co. et al. v. DP Engineering LLC, stems from a March 31, 2013, incident where an industrial crane collapsed at a nuclear generating facility near Russellville, Arkansas, causing significant damage and injuries, including one death.

Hunton partner, Syed Ahmad , was quoted yesterday in a Law360 feature discussing how corporate policyholders can maximize their D&O insurance coverage. As Ahmad explains, "[g]iven the ever-changing regulatory landscape, directors and officers are getting involved in matters earlier and earlier and in a wider range of situations than before.” As a consequence, directors and officers should be looking for insurance that affords the broadest possible protection against the most diverse range of claims that the company is likely to face. One way to achieve this is use of a broad ...

Hunton partner, Syed Ahmad , was quoted yesterday in a Law360 feature discussing how corporate policyholders can maximize their D&O insurance coverage. As Ahmad explains, "[g]iven the ever-changing regulatory landscape, directors and officers are getting involved in matters earlier and earlier and in a wider range of situations than before.” As a consequence, directors and officers should be looking for insurance that affords the broadest possible protection against the most diverse range of claims that the company is likely to face. One way to achieve this is use of a broad ...

Last week’s torrential rains have caused widespread flooding in West Virginia and surrounding areas. It is important that policyholders in these and other areas remain mindful of the substantial benefits that may be available to them for resulting economic and physical losses under ordinary business insurance policies. Policyholders also should be mindful of the interplay between coverage for flood under business insurance policies and assistance that may be available from state and federal agencies (e.g., FEMA). Finally, policyholders should stand ready to enforce their ...

On Tuesday, Syed Ahmad and Jennifer White published an article in Risk Management magazine about how commercial general liability (CGL) policies may help policyholders looking to recover attorney’s fees or fund settlements in trademark infringement litigation. Historically, like the Johnny Lee song “Lookin’ for Love,” CGL policies were the wrong place to look for coverage, and insurers raised often successful defenses to covering such trademark infringement cases under CGL policies. Or, policyholders would avoid CGL insurance altogether in favor of intellectual ...

In a June 1, 2016 decision, the Second Circuit Court of Appeals in National Fire Insurance Co. of Hartford et al. v. E. Mishan & Sons Inc. required CNA Financial Corporation to defend E. Mishan & Sons, Inc.("Emson") – best known for its "As Seen on TV" products –in two class actions alleging a conspiracy to trap customers into recurring credit card charges and that Emson sold private consumer information that it obtained through its product sales.

Hunton & Williams' insurance practice head, Walter Andrews, was quoted in a Law360 article yesterday regarding the confusion that is likely to result from a federal bankruptcy judge's decision in Rapid-American Corp. v. Travelers Casualty and Surety Co., where the court concluded that a majority of excess insurers owe no coverage to Rapid-American Corp. for underlying asbestos claims until the company exhausts the limits of its underlying primary and excess coverage through actual payment, not just accrued liability. According the Andrews, "the public policy clearly ...

Two of three of Rapid-American Corp.'s excess liability insurers do not have to respond to underlying asbestos claims unless and until all underlying coverage is exhausted by the payment of claims, says Judge Bernstein of the United States Bankruptcy Court for the Southern District of New York in a June 7, 2016 decision. Rapid-American has been involved in asbestos litigation since 1974 and settled disputes with many of its underlying insurers, but an amount sufficient to reach its excess coverage policies has not yet been paid. Rapid-American argued that it was not necessary for the primary policies' underlying limits to be exhausted by actual payment before insurers' excess liability coverage attaches.

Hunton & Williams insurance lawyers, Mike Levine and Sergio Oehninger, were quoted today in a Law360 article analyzing the impact of the recent decision in P.F. Chang's bid for coverage for certain losses stemming from a 2013 cyber breach. In a June 1, 2016 blog post, Levine and Oehninger criticized the court's decision and forewarned policyholders that disputes of this sort are likely to be common, given the continually evolving nature of cyber coverages. According to Levine in a subsequent comment, "until insurance markets arrive at policy language that clearly sets forth the ...

In a May 31, 2016 decision, a federal court in Arizona rejected P.F. Chang's attempt to recover an additional $2 million it paid following a 2013 breach in which hackers obtained and posted on the Internet approximately 60,000 credit card numbers belonging to P.F. Chang's customers.  P.F. Chang's was insured under a "CyberSecurity by Chubb Policy," which it had purchased from Federal Insurance Company for an annual premium of $134,000.  On its website, Federal marketed the policy as "a flexible insurance solution designed by cyber risk experts to address the full breadth of risks associated with doing business in today's technology-dependent world" including "consequential loss resulting from cyber security breaches."

In an article recently published in Bloomberg/BNA Privacy and Security Law Report, Hunton lawyers Syed Ahmad, Sergio Oehninger and Patrick McDermott discuss a recent decision finding insurance coverage for a cyber-related incident.  In the article, the authors dissect whether information made available on the internet is “published” if there is no evidence that anyone ever accessed the information.  As the authors and the court conclude, coverage is indeed available under the general liability policy at issue, demonstrating that general liability insurance can provide ...

As a follow-up to my post yesterday concerning the New York Court of Appeals' decision in In the Matter of Viking Pump, Inc. and Warren Pumps, LLC, Insurance Appeals, where the New York high court confirmed that policyholders may allocate all amounts of loss to a single policy and a single policy year, Syed Ahmad, a partner in our Insurance Coverage Counseling and Litigation team, was interviewed by Law360 about the decision's broad-ranging implications. As Mr. Ahmad explained in an article appearing today in Law360, titled NY Allocation Ruling Speeds Policyholders' Road To ...

On Tuesday, May 3, 2016, the New York Court of Appeals held that each of several excess liability insurers can be wholly responsible for the entire extent of their policyholders' asbestos liabilities.  The Court further held that "vertical" exhaustion would apply; rejecting the insurers' attempt to apply "horizontal" exhaustion before upper-layer policies must respond.  The decision, in In the Matter of Viking Pump, Inc. and Warren Pumps, LLC, Insurance Appeals, comes in response to two questions certified from the Delaware Supreme Court:

The Eleventh Circuit confirmed in First Mercury Insurance Company v. Excellent Computing Distributors, Inc., No. 15-10120 (11th Cir. Apr. 20, 2016), that policyholders need not await adjudication of underlying liability litigation before obtaining a confirmation of coverage. The decision arose from a declaratory judgment action concerning the availability of insurance coverage for an underlying negligence suit against the policyholder. The district court dismissed the declaratory judgment action, finding it "inappropriate to exercise jurisdiction over an action seeking a declaration of the plaintiff's indemnity obligations absent a determination of the insureds' liability.” The court also noted that "significant factual questions necessary for a resolution of [the] declaratory judgment action are at issue in the state [court] action, and have yet to be resolved.” But the court did not identify the factual questions.

An article titled “A Primer On Insurance Coverage for Food Contamination Losses”, written by Syed Ahmad and Matthew McLellan, was published in the April 2016 issue of Food Logistics Magazine. The article provides an overview of insurance protection for food contamination events confronted by companies in the food and beverage supply chain. The article describes the availability of coverage under standard-form policies as well as specialized coverage for food contamination events. Through illustrations based on recent high profile contamination events and product ...

An insurance claim service in the UK is now offering policyholders a unique way to replace lost, damaged or stolen property – 3D printing. SBS Insurance Services says it is the first 3D printed jewelry insurance claim service to offer the technology, which allows it to "replace the irreplaceable."  Using the technology, SBS touts that "thanks to 3D printing technology and a first-of-its-kind insurance claim service, UK policyholders at SBS Insurance will be able to receive identical, high value, 3D printed jewelry models that replace the previously irreplaceable."

Syed Ahmad, a partner in the Hunton & Williams LLP insurance recovery practice, was quoted in an article by Law360 concerning the Fourth Circuit’s April 11, 2016 decision in Travelers Indemnity Company v. Portal Healthcare Solutions, No. 14-1944. In the decision, a panel of the Fourth Circuit affirmed the decision of a Virginia district court, which held in August 2014 that Travelers must defend Portal Healthcare Solutions LLC against a proposed class action alleging that the policyholder’s failure to secure its server made medical records accessible by unauthorized users ...

Earlier this week, Eustis Insurance Co. (Eustis) filed a third-party complaint against wholesale insurance broker, R-T Specialty, Inc. (R-T Specialty), after the broker allegedly failed to properly advise New Hotel Monteleone, Inc. (Hotel Monteleone) about its cybersecurity exposures and coverage that R-T Specialty was tasked to procure. The case represents another example of the exposure that might result from a failure to engage brokers and coverage counsel experienced in the risks to be insured. This potential is especially significant when it comes to cyber exposures, which are vastly different from the legacy exposures that brokers and insurers are accustomed to handling.

With nearly 2000 locations, the recent outbreaks linked to Chipotle restaurants involving three strains of E. coli, norovirus and Salmonella, have had a substantial impact on the fast-food chain’s supply chain.  In a recent article appearing in Risk Management Magazine, The Chipotle Outbreaks Highlight the Risks of Supply Chain Failures, Syed comments on the insurance issues that are likely to arise, and the ways those issues might be affected by the post-event conduct of affected companies.

A New York trial court has ruled that TransCanada Energy USA Inc. (TransCanada) is entitled to recover $58 million from its property insurers for loss caused by a cracked generator turbine rotor.  The recovery encompasses approximately $7 million in property damage to the cracked turbine and more than $50 million in lost profits.

Hunton & Williams LLP attorneys Mike Levine and Matt McLellan, along with Tim Monahan of Lockton Companies, LLC., presented to a group of risk managers and insurance professionals on Wednesday evening, February 17^th, about strategies and pitfalls in the claim presentation process. The event was well-attended and the audience was lively with questions for the presenters. A copy of the PowerPoint can be downloaded here. Key points discussed with the group include:

Winter Storm Jonas has finally departed the mid-Atlantic, leaving behind snow depths best measured with a yardstick and, now, mounting reports of significant damage to property and resulting interruptions to businesses near and far from the path of the storm. Roof collapses under weight of snow and ice; flooding from burst pipes and broken water mains; fires caused by downed electrical lines; and food spoilage caused by losses of electrical power are but just a few of the impacts Jonas has left in his wake.

A federal judge in Indiana recently found that an insurer is not entitled to control the defense of its insured because a conflict of interest exists where the insurer is in litigation with the insured over an alleged policy breach arising out of the manner in which underlying litigation would be defended. Valley Forge Insurance Co. v. Hartford Iron & Metal Inc., et al., No. 1:14-cv-00006-RLM-SLC, N.D. Ind. (Dec. 7, 2015).

The Georgia Court of Appeals held on November 20, 2015, that compliance with an excess liability policy’s notice provision is not a precedent to coverage. Plantation Pipe Line Co. v. Stonewall Insurance Co., No. A15A1359 (Nov. 20, 2015 Ga. App., 3rd Div.). In Plantation Pipeline, the insured sought coverage for ground contamination originating from a 1976 pipeline leak. The leak was fixed and remediated shortly after it was discovered. In 2009, Plantation discovered further contamination at the site, which it again remediated. Plantation sought coverage for the remediation. Stonewall denied coverage based on the policy’s notice provision, contending that notice of the leak and remediation was untimely. The parties cross-moved for summary and the trial court granted Stonewall’s motion. On appeal, the Georgia Court of Appeals affirmed, finding that Plantation’s notice was not timely as it did not report the claim to Stonewall for more than two years. However, the majority agreed with Plantation that the notice provision does not “expressly stipulate that compliance with the notice provision is a condition precedent to coverage.” The panel further found that “the policy does not even contain a general provision that no action will lie against Stonewall unless, as a condition precedent thereto, Plantation shall have fully complied with all terms of the policy.” Thus, the panel found it was error for the trial court to preclude coverage based on a failure to provide timely notice.

A federal court in Virginia recently held in Travelers Casualty and Surety Company v. Schur, No. 3:15CV60-HEH (E.D.Va., Nov. 24, 2015), that a liability insurer’s so-called “business pursuits” and “known falsity” exclusions do not preclude a defense against defamation allegations where the allegations raised at least a potential for coverage under the policy.  The decision illustrates the continued application of Virginia’s “eight corners” and “potentiality” rules, which mandate a narrow application of the underlying allegations against the language of the policy and require a defense if any allegation raises even a potentiality for coverage.

The Supreme Court of Texas has ruled that CERCLA enforcement proceedings brought by the EPA are a “suit” as that term is used in commercial general liability insurance policies.  In doing so, Texas joins the majority of other jurisdictions to consider the issue. McGinnes Industrial Maintenance Corp. v. The Phoenix Insurance Co., No. 14-0465 (Tex. June 26, 2015).

The Tenth Circuit Court of Appeals recently held in KF 103-CV v. American Family Mut. Ins. Co., No. 14-1403 (10th Cir. Oct. 29, 2015), that a general liability insurer owed a defense to a real estate developer who allegedly trespassed on nearby easements, causing a loss of use of those easements and a diminution in value to the dominant property.  The decision illustrates the expansive defense coverage owed under ordinary general liability insurance, with coverage extending to claims alleging only a loss of use or property value.

Background 

Judges – Not Juries – Award Attorney’s Fees In Virginia Bad Faith Cases, FC&S Legal
November 10, 2015

In REVI, LLC v. Chicago Title Insurance Company, the Virginia Supreme Court held that a trial judge, rather than a jury, should determine whether an insured is entitled to attorney’s fees as a result of the insurer’s bad faith.

Insurers To Indemnify $132 Million Loss From Train Collision Allegedly Caused By Texting Engineer, FC&S Legal
November 9, 2015

In Those Certain Underwriters at Lloyd’s London et al. v. Connex Railroad LLC, a Los Angeles trial court found that an insurer must indemnify its insured railroad for $132 million in claims arising out of a commuter train collision caused by alleged texting by engineer.  In finding for the insured, the court rejected application of the policies' "intentional acts" exclusion, holding that the exclusion only applies where the insured would have known that ...

Maryland’s Court of Special Appeals recently ruled in James G. Davis Construction Corporation v. Erie Insurance Exchange¹ that a subcontractor’s insurer was obligated to defend the general contractor against allegations that it was negligent in its supervision of the subcontractor. In doing so, the court reversed the trial court’s ruling that the general contractor was covered only for claims of vicarious liability for the subcontractor’s actions.

In a decision of import to businesses facing intellectual property infringement lawsuits, the Southern District of Florida has ruled that a commercial general liability policy’s “knowing violation” and “infringement” exclusions do not apply to lawsuits involving allegations of intent and knowledge in the context of advertising injury. E.S.Y., Inc., et al. v. Scottsdale Insurance Company, No. 15-21349 (S.D. Fla. October 14, 2015) (“E.S.Y.”).

In a decision of import to employers and contractors in particular, the First Circuit Court of Appeals has limited the scope of a commercial general liability policy’s “employer liability” exclusionary endorsement, finding that in the case of contractors and subcontractors, the exclusion applies only to bodily injury claims brought by persons who have contracted directly with the policyholder. United States Liab. Ins. Co. v. Benchmark Constr. Servs., Inc., No. 14-1832 (1st Cir. August 12, 2015) (“Benchmark”).

In a landmark decision, the California Supreme Court on August 20, 2015, held that enforcing an anti-assignment clause in an insurance policy as a bar to coverage – where the assignment occurred post-loss – was contrary to California Insurance Code Section 520, which provides that consent-to-assignment clauses are invalid if invoked after a loss has happened.  See Fluor Corp. v. Superior Court (Hartford Accident & Indemnity Co.), Case No. S205889 (Cal. Aug. 20, 2015).  The opinion overruled the California Supreme Court’s prior decision in Henkel Corp. v. Hartford Accident & Indemnity Co., 29 Cal. 4th 934 (2003). Henkel had held that corporate successors were not entitled to recovery under an insurance policy assigned without the insurer’s consent, even if the assignment was post-loss and therefore imposed no additional obligations on the insurer. The California Supreme Court’s overruling of Henkel stands to facilitate corporate transactions by making it easier for companies to rely on insurance policies issued to their corporate predecessors.

A federal court in New York recently found that litigation concerning damages related to a third party’s product recall required a defense under a commercial general liability policy. Thruway Produce, Inc. v. Mass. Bay Ins. Co., 2015 U.S. Dist. LEXIS 94846 (S.D.N.Y. July 20, 2015).

On July 28, 2015, the New York Supreme Court in Navigators Insurance Company v. Sterling Infosystems, Inc., Index No. 653024/2013, (N.Y. Sup. Ct. July 28, 2015), held that Navigators Insurance Company must defend and indemnify its policyholder for claims seeking statutory damages under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., despite a policy exclusion for claims involving “[f]ines, penalties, forfeitures or sanctions.”  The decision may have broad implications for policyholders pursuing coverage for the defense of lawsuits seeking statutory damages under privacy and consumer credit statutes, as well as other statutes that have traditionally been viewed to be punitive in nature.

On July 28, 2015, the New York Supreme Court in Navigators Insurance Company v. Sterling Infosystems, Inc., Index No. 653024/2013, (N.Y. Sup. Ct. July 28, 2015), held that Navigators Insurance Company must defend and indemnify its policyholder for claims seeking statutory damages under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., despite a policy exclusion for claims involving “[f]ines, penalties, forfeitures or sanctions.”  The decision may have broad implications for policyholders pursuing coverage for the defense of lawsuits seeking statutory damages under privacy and consumer credit statutes, as well as other statutes that have traditionally been viewed to be punitive in nature.

On July 27, 2015, the United States Court of Appeals for the Fifth Circuit held in Kinsale Insurance Company v. Georgia-Pacific, LLC, No. 14-60770 (5th Cir. July 27, 2015), that a claim brought by one insured against another insured is not barred by an “insured versus insured” exclusion where the claim is not for “property damage,” but for indemnity arising from a third party’s claim for “property damage.”

The Appellate Division of the Superior Court of New Jersey recently ruled in Cypress Point Condominium Association, Inc. v. Adria Towers, L.L.C.¹ that consequential damages to the common area and units of a condominium complex caused by a subcontractor’s defective work constituted “property damage” and an “occurrence” under the building developer’s standard-form CGL policies, even though the policies were unlikely to cover direct damages like replacement costs. The case serves as a reminder that not all damages are treated alike by insurance policies, and policyholders therefore should not assume that an adverse determination as to one type of loss will apply to all resulting loss.

On May 27, 2015, the First Circuit Court of Appeals in Cardigan Mountain School v. New Hampshire Ins. Co., CV 14-2182, 2015 WL 3393771 (1st Cir. May 27, 2015), held that the policyholder, sufficiently pled a plausible case that an insurance policy had been issued by New Hampshire Insurance Company for the period 1967–1968, even though neither party could locate the policy.  The decision demonstrates a favorable application of the “plausibility” pleading standard articulated by the Supreme Court in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly, in the murky context of a lost insurance policy case.

The Eleventh Circuit recently ruled, applying Alabama law, that a breach of warranty claim constitutes an “occurrence,” triggering coverage under a general liability insurance policy, and that the policy’s contractual liability exclusion does not bar coverage from any resulting liability. See Pa. Nat’l Mut. Cas. Ins. Co. v. St. Catherine of Siena Parish, No. 14-12151, 2015 U.S. App. LEXIS 9659 (11th Cir. June 10, 2015). The decision underscores that coverage exclusions must be construed narrowly and in favor of coverage, and that insurers must use precise language when they seek to exclude coverage for a particular type of exposure.