Hunton Insurance Recovery Blog

Third-party funding of high-stakes litigation can often make the difference between litigating the case or walking away.  The financial arrangement often makes good sense, with investors helping to facilitate the pursuit of bona fide claims that might otherwise be forgone in exchange for a piece of the recovery.  Insurance coverage disputes fit this model well, since those claims typically involve an insured who has already suffered some financial or other hardship and an insurance company with deep resources that refuses to pay the claim.  It should come as little surprise, therefore, that the Insurance Services Office (ISO), an advisory and rating organization for the property/casualty insurance industry, recently approved a new endorsement that requires disclosure of third-party litigation funding agreements. The approval comes as courts and state legislatures step up demands for transparency in funding to curtail influence that funders may have over litigation strategy.

The recent Illinois federal court decision McDonald’s Corporation, et al., v. Homeland Insurance Company Of New York illustrates the perils that policyholders may face if they fail to understand the contours of key defined terms in their insurance policies. In McDonald’s, the court agreed that an insurer who sold a general liability policy did not have a duty to defend its insured against claims alleging fear and emotional distress because that harm did not meet the definition of bodily injury in the insurance policy.

A recent decision by the Eastern District of Virginia illustrates the tricky problem of relatedness in claims-made liability insurance policies. When a claim is made that relates to an earlier claim, the second claim is covered under the same insurance policy as the original claim, even if that policy has expired. However, determining when two claims are related is not always straightforward and involves a highly fact-specific analysis. As shown in Navigators Specialty Insurance Company v. Avertest, LLC, sometimes even identical allegations, describing the same allegedly negligent business practice, may not be enough to make claims related. Instead, under typical policy language, what matters is whether the claims arise from the same or related occurrences.

In April 2025, the Eleventh Circuit reversed a judgment against a Florida lodge and held that a jury should determine whether the failure of the lodge’s insurer to initiate settlement proceedings before a claim was filed constituted bad faith. In reversing the district court, the Eleventh Circuit reinforced the key duty imposed on insurers under Florida law to diligently and carefully investigate claims and act with an appropriate degree of care to protect their insureds or face consequences such as bad faith liability.