Hunton Insurance Recovery Blog

In a recent opinion, the 8th Circuit rejected an insurer’s attempt to expand insurer victories in a COVID-19 context to other more traditional claims of property damage. Reaffirming long standing principles, the court held soot and water damage associated with a fire constituted “direct physical loss or damage” under a commercial property insurance policy.

The decision of when to sue insurance companies, especially excess insurers, can be difficult, especially in disputes involving multiple claims, long timelines, and conflicting coverage positions between insurers. A recent federal court in Delaware, General Cable Corp. v. Scottsdale Indemnity Co., No, 1:24-CV-00797-TMH, 2025 WL 2576384, (D. Del. Sept. 5, 2025) underscores the timing risks in pursuing recovery in and out of litigation. In a word of warning to Delaware policyholders, the court dismissed a lawsuit against a manufacturer’s directors and officers excess liability insurers because its claims were either not ripe for adjudication or untimely filed.

California law has become more favorable toward companies facing liabilities based on alleged events spanning multiple years. Previously, California intermediate appellate decisions favored “horizontal exhaustion,” which means that in cases involving a continuous loss, a first-level excess policy that sat over a primary policy could not be accessed until the applicable limits of any other underlying collectible insurance had been exhausted.

But now the California Supreme Court has ruled that vertical exhaustion applies to determine how a policyholder can access its excess insurance policies. Truck Ins. Exch. v. Kaiser Cement, 16 Cal.5th 67 (2024) (“Kaiser”). This means that the excess policy for a policy period can be accessed as soon as the underlying primary policy for that same period is exhausted. There is no need to wait for other years’ policies to be exhausted.

In a recent article published in PropertyCasualty360, Hunton attorneys Syed S. Ahmad, Scott P. DeVries and Yosef Itkin examined the Kaiser decision in more detail. In short, the court found support for its decision relying on the language of the excess policies, along with the policyholder’s reasonable expectations and the history of “other insurance” provisions.

Because insurance law is a creature of state law, it is rare for the United States Supreme Court to wade into insurance matters. But as our colleagues explained last fall, the Supreme Court agreed to do just that when it granted certiorari in Truck Insurance v. Kaiser Gypsum, a Fourth Circuit bankruptcy case. On June 6, 2024, the Supreme Court issued an opinion unanimously reversing the Fourth Circuit. In doing so, the Court held that insurers with financial responsibility for bankruptcy claims are “parties in interest” under the United States Bankruptcy Code and, therefore, may appear and be heard, including to object to Chapter 11 reorganization plans. This decision clarifies an important issue and paves the way for potentially greater participation by insurers in the Chapter 11 process.