Hunton Insurance Recovery Blog

Two recent decisions addressing allocation of long-tail liabilities demonstrate that resolution of the issue under New York law depends upon the policy language at issue. Judge-made rules on “equity” and “fairness” do not control.  As the New York Court of Appeals held on March 27, 2018, in Keyspan Gas East Corp. v. Munich Reinsurance America, Inc., 2018 WL 1472635 (2018), under New York law, “the method of allocation is covered for most by the particular language of the relevant insurance policy.” Both Keyspan and the April 2, 2018 decision in Hopeman Brothers, Inc. v. Continental Casualty Co., No. 16-cv-00187 (E.D. Va. Apr. 2, 2018), by the United States District Court for the Eastern District of Virginia, illustrate the importance of reviewing insurance policies - both before purchase, to ensure that they contain optimal language for coverage; and after claims arise, to ensure that the policyholder receives the benefit of insurance coverage under “legacy” and all other potentially applicable policies.

On April 17, 2018, the Ninth Circuit affirmed a district court decision finding that an exclusion barred coverage for a $700,000 loss resulting from a social engineering scheme. Aqua Star (USA) Corp. v. Travelers Cas. & Surety Co. of Am., No. 16-35614 (9th Cir. Apr. 17, 2018). The scheme involved fraudsters who, while posing as employees, directed other employees to change account information for a customer. The employees changed the account information and sent four payments to the fraudsters.

A New York appellate court ruled recently in Hanover Insurance Co. v. Philadelphia Indemnity Insurance Co., 2018 NY Slip Op 02121 (1st Dep’t March 27, 2018), that an insurance policy did not cover an additional named insured over a personal-injury lawsuit arising from its alleged negligence because coverage was limited only to injuries caused by the named insured.  This decision again underscores, as we advised in a recent Blog Post addressing JP Energy Marketing LLC v. Commerce and Industry Insurance Co. (which can be found here), the importance of carefully evaluating the wording of “additional insured” provisions, which can vary widely in scope and effect.

In a ruling earlier this month, an Eleventh Circuit Court of Appeals judge ruled in Scott, Blane, and Darren Recovery L.L.C., Anova Foods Inc. v. Auto-Owners Insurance Co., No. 17-12945-E, 2018 WL 1611256 (11th Cir. 2018), that an insurer did not have a duty to defend and indemnify its insured in a false marketing suit. Anova Food Inc. was sued by its competitor, King Tuna, for allegedly falsely asserting in its advertising that it treated tuna meat with a smoking process using filtered wood chips. King Tuna claimed that, in reality, Anova treated its tuna with synthetic carbon monoxide. In finding that King Tuna’s lawsuit did not trigger Auto-Owner’s duty to defend, the court held (1) that the lawsuit did allege a covered “advertising injury”; (2) that coverage was excluded under the policy’s “failure to conform” exclusion; and (3) coverage was barred by Anova’s untimely notice of the lawsuit.

The Daily Business Review, an ALM publication covering the south Florida business community, has named Hunton’s Insurance practice head, Walter Andrews, as a recipient of its 2018 Professional Excellence Award.   The award recognizes exemplary work by attorneys in the legal profession and community.  The award is a precursor to an event hosted by the Daily Business Review on May 30 at the Rusty Pelican in Miami, where one of this year’s three Professional Excellence Award winners will be named Attorney of the Year.  Congratulations, and good luck Walter!

Hunton insurance recovery partner, Syed Ahmad, was recently asked to comment by Law360 on a Delaware Superior Court decision finding that state law does not preclude D&O insurance coverage for fraud-based claims against two Dole Food Co. executives, who are seeking to force several excess insurers to help pay for $222 million in settlements they reached to resolve stockholder suits accusing them of driving down Dole’s price before a 2013 take-private deal.  According the Ahmad, the ruling is likely to carry strong precedential effect due to the solid reasoning of the court’s decision, which is premised on the Delaware Supreme Court’s 1986 decision in Whalen v. On-Deck Inc., which upheld the availability of coverage for punitive damages under Delaware law.

Hunton & Williams Insurance Recovery partner, Lorelie (Lorie) S. Masters, has been selected to Law360’s 2018 Insurance Editorial Advisory Board, whose purpose is to analyze Law360's coverage of significant developments in the practice of insurance coverage law, and gain insight from experts in the field on how best to shape future coverage.  An article in Law360 discussing the Editorial Advisory Board and each of its members can be found here.

Congratulations to Lorie and the other members of the 2018 Editorial Advisory Board!

In a ruling earlier this month, an Oklahoma appellate court ruled in JP Energy Marketing LLC v. Commerce and Industry Insurance Co., No. 115285, 2017 WL 7903997 (Okla. Civ. App. March 01, 2018), that additional insured status would be afforded to a project owner despite the absence of a direct contract between the project owner and the subcontractor requiring that the project owner be named as an additional insured, finding that a direct contract was not required where the insurance policies did not use the words “between” or “direct” to describe the level of contractual relationship that would give rise to additional insured status.  The decision underscores the importance of carefully evaluating the language used in “additional insured” provisions, which can vary widely in scope and effect.

A federal court in New Jersey recently held that the construction of an ambiguous policy term is not a matter suitable for judgment on the pleadings, thus denying AIG from avoiding coverage for a $67 million antitrust settlement. Rather, the only way to establish the meaning of an ambiguous term, the court explained, is to ascertain the intent of the parties, which requires “meaningful discovery.”

Last month, we reported on the ongoing insurance coverage dispute between commercial landlord KVP Properties, Inc. and its property insurer, Westfield Insurance Company. The dispute arises from an October 2015 DEA raid on KVG-owned rental units in Novi, Michigan, which uncovered damage to the units related to the tenants’ marijuana growing operations. The arguments raised by KVG on appeal highlight a number of important marijuana-related coverage issues, which Westfield has now addressed in opposition.