Hunton Insurance Recovery Blog

Last February, a Pennsylvania federal court ordered rescission of an accidental contamination and government recall insurance policy issued to the H.J. Heinz Company after Heinz sought $25 million from its insurer for its business interruption losses sustained due to lead in its baby cereal. The district court based the rescission on findings that Heinz materially misrepresented its claim history when it purchased the policy. Heinz claimed the incorrect information was an inadvertent error by its new Global Insurance Director. Although a jury agreed that Heinz’s errors were unintentional, the district court found that even unintentional material misrepresentations were sufficient to void the contract.

The Eleventh Circuit recently held in G.M. Sign, Inc. v. St. Paul Fire and Marine Ins. Co., that, by denying coverage for a lawsuit filed against its insured, St. Paul waived the policy's notice requirements, thus obviating the need for the policyholder to provide notice of a second similar lawsuit arising out of the same acts and asserting the same claims. The policyholder, MFG.com, was sued in a class action filed in November 2008 by GM Sign, Inc., which alleged that MFG.com had sent numerous unsolicited faxes in violation of the Telephone Consumer Protection Act (TCPA), among other things. After St. Paul denied coverage, MFG.com and GM Sign stipulated to the dismissal of the first lawsuit without prejudice in July 2009. The next day, GM Sign filed a new class action complaint against MFG.com alleging the same claims on behalf of the same class of plaintiffs as the first suit. MFG.com did not tender the second suit to St. Paul. As part of the $22.5 million settlement of the second suit, GM Sign took an assignment of MFG.com's right to payment from St. Paul and filed suit to recover insurance proceeds and for bad faith. St. Paul responded, contending that MFG.com breached the policy's notice provision by failing to provide notice of the second lawsuit.

Law firms have become a popular target for cyberattacks. Sergio Oehninger and Patrick McDermott recently authored an article in the ABA’s TYL magazine regarding insurance coverage for law firms for cyber-related risks. In the article, Oehninger and McDermott identify the potential coverage issues firms may face under their typical liability policies and provide guidance for firms seeking coverage specifically written to cover cyber-related risks.

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.

On December 20, 2016, a New York federal district court granted a petition to compel arbitration, filed by Zurich Insurance Co.’s (“Zurich”), as a subrogee of Adidas Group (“Adidas”), against Crowley Latin America Services LLC (“Crowley”), a transportation and logistics company. The underlying dispute involves losses from a fire-damaged shipment of Adidas clothing.  The Court allowed Zurich to compel arbitration based on its service contract with Adidas.

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. & ...

Many communities are breathing a sigh of relief as winter weather kills off a good portion of the Zika-carrying mosquito population – at least in some parts of the US, and at least until next spring.  But dwindling mosquito populations have not diminished business concerns about Zika-related losses.  Since the health effects of Zika may not be apparent until months after birth, businesses in mosquito-popular locales should assess their option to cover the losses caused by Zika, or the mere threat of Zika.  Read my colleagues Walter Andrews, Michael Levine, Andrea DeField’s ...