Hunton Insurance Recovery Blog

Insurance policies typically require a policyholder to provide notice to the insurer. And the notice requirements can vary between policies. That is why the language of the notice provision can be critical to interpreting its requirements. But the language is not always clear. In a recent article published by Mealey’s Insurance, Hunton attorneys Syed Ahmad and Yosef Itkin examine this type of scenario where a court determined that the language of a policy’s notice requirement was indeed ambiguous and construed it in favor of the policyholder, finding that the notice requirement was satisfied.

NL Industries recently prevailed against its commercial general liability insurers in the New York Appellate Division in a noteworthy case regarding the meaning of “expected or intended” injury and the meaning of “damages” in a liability insurance policy. In Certain Underwriters at Lloyd’s, London v. NL Industries, Inc., No. 2021-00241, 2022 WL 867910 (N.Y. App. Div. Mar. 24, 2022) (“NL Indus. II”), the Appellate Division held that exclusions for expected or intended injury required a finding that NL actually expected or intended the resulting harm; not merely have knowledge of an increased risk of harm. In addition, the court held that the funding of an abatement fund designed to prevent future harm amounted to “damages” in the context of a liability policy because the fund has a compensatory effect. NL Industries II is a reminder to insurers and policyholders alike that coverage is construed liberally and exclusions are construed narrowly towards maximizing coverage. 

Law360 recently published a roundup of the biggest general liability rulings in the first quarter of 2022. As part of that roundup, it discussed Omega Protein, Inc. v. Evanston Insurance Company, which the Mississippi Supreme Court decided in January 2021. And it quoted Hunton Partner and practice group leader Syed Ahmad’s analysis of the opinion.

Hunton Andrews Kurth’s insurance coverage team recently published a client alert discussing a D&O coverage dispute arising from a contractual liability exclusion.

The Eighth Circuit Court of Appeals held that a D&O liability insurer could not rely on ambiguous endorsements as a basis to deny coverage for claims brought by investors against its insured company and its CEO. Reversing the Eastern District of Missouri, the appellate court in Verto Medical Solutions LLC, et al. v. Allied World Specialty Insurance Co., No.19-3511 (8th Cir.), found the policy ambiguous as to whether a contractual liability exclusion had been deleted by endorsement and thus, the insurer must provide coverage for the underlying claims.

The First Circuit recently held that a “Special Hazard and Fluids Limitation Endorsement” was ambiguous and therefore there was excess coverage for a fuel spill that occurred after a tanker-truck overturned.

In Performance Trans. Inc. v. General Star Indem. Co., the First Circuit reversed the District Court’s grant of summary judgment in favor of General Star Indemnity Company. The District Court held that the excess policy General Star issued to Performance Trans. Inc. precluded coverage for a spill that resulted in the leaking of thousands of gallons of fuel. The District Court relied on the existence of a total pollution exclusion to bar coverage and held that the policy’s Special Hazards and Fluids Limitation Endorsement could not create an ambiguity that would afford coverage.

The Fourth Circuit recently held that an insurance company was obligated to cover millions in legal fees incurred in defending an employment suit against the owners of DARCARS, a DC-area based car dealership. The court ruled that the relevant policy exclusion was ambiguous and, as a result, construed the exclusion narrowly against the insurer and in favor of coverage.

The Seventh Circuit recently withdrew its controversial opinion that broadly interpreted an exclusion in Emmis Communications Corporation’s D&O policy, thereby barring coverage for losses in connection with claims of circumstances “as reported” under Emmis’ other insurance policy. The reversal, while very rare, was the correct result that alleviated concerns about the chilling effect the court’s broad reading of the exclusion may have on policyholders’ decisions to provide notice under all potentially applicable insurance policies.

A federal appeals court reversed an auto parts manufacturer’s summary judgment win, construing a policy limitation on flood hazards to apply broadly to all types of losses, even though the limit “does not expressly say what losses it limits.” In Federal-Mogul LLC v. Insurance Company of the State of Pennsylvania, manufacturer Federal-Mogul suffered more than $60 million in property and time-element losses following a 2011 flood in one of its factories in Thailand. Federal-Mogul submitted a claim to its insurer, but the insurer refused to pay more than $30 million because the flood occurred in a high hazard flood zone, to which the insurer argued a sublimit in the policy applied.

The Scott Fetzer Co. v. Zurich American Insurance Co. matter involved a dispute over coverage for sexual assault claims against Fetzer. Three women filed suit against Fetzer, claiming that John Fields, an independent dealer of vacuums manufactured by Fetzer, verbally and sexually assaulted them. Fetzer’s alleged liability was premised on, among other things, its negligence in supervising its independent contractor’s hiring process. Fetzer settled with each of the three women.

The Tennessee Supreme Court has refused to construe an ambiguous definition of actual cash value to allow for deduction of labor costs as part of depreciation calculations where that subset of repair costs are not clearly addressed in the policy. Despite the split of authority nationwide, the Tennessee case presents a straightforward application of policy interpretation principles to a common valuation issue in first-party property claims.

In January we wrote about Rosen Millennium Inc.’s (“Millennium”) appeal to the Eleventh Circuit, whereby Millennium took the position that a Florida federal court ignored well established Florida insurance law when it ruled that St. Paul Fire & Marine Insurance Co. had no duty to defend it against a multimillion dollar claim arising out of a 2016 cybersecurity breach.

Rosen Millennium Inc. (“Millennium”), the cyber security and IT support subsidiary of Rosen Hotels & Resorts, Inc., has appealed to the Eleventh Circuit contending that a Florida federal court ignored Florida insurance law when it ruled that Travelers Insurance Company has no duty to defend it against a multimillion dollar claim arising out of a cybersecurity breach.

The Second Circuit recently held that competing “anti-concurrent cause” provisions in a commercial property policy present a potential ambiguity that could result in favor of coverage for losses sustained by Madelaine Chocolate after storm surge from Hurricane Sandy combined to cause substantial damage to Madelaine’s property and a resulting loss of income.

Hunton Andrews Kurth insurance practice head, Walter Andrews, recently commented to the Global Data Review regarding the infirmities underlying an Orlando, Florida federal district court’s ruling that an insurer does not have to defend its insured for damage caused by a third-party data breach.

There was nothing ambiguous in former U.S. Supreme Court Justice David Souter’s ruling in AIG Property Cas. Co. v. Cosby, No. 17-1505 (1st Cir. June 7, 2018), where, sitting by designation, Justice Souter ruled that AIG Property and Casualty Co. (“AIG”) must defend Bill Cosby in suits brought by eight women alleging that Cosby defamed them after they accused him of sexual misconduct.  Cosby held two insurance policies issued by AIG:  a homeowner’s policy and a personal excess liability policy (the “umbrella policy"”).  Under each policy, AIG has a duty to “pay damages [Cosby] is legally obligated to pay [due to] personal injury or property damage caused by an occurrence covered[] by this policy anywhere in the world . . . .”  Both policies define “personal injury” to include “[d]efamation” and require AIG to pay the cost of defending against suits seeking covered damages.  Both policies also contain so-called “sexual misconduct” exclusions.  The homeowner’s policy’s exclusion bars coverage for liability or defense costs “arising out of any actual, alleged[,] or threatened . . . [s]exual molestation, misconduct or harassment[,] . . . or . . . [s]exual, physical or mental abuse.”  The umbrella policy contained similar wording.  However, that policy also contained another “sexual misconduct” exclusion under the “Limited Charitable Board Directors and Trustees Liability” coverage part.  That exclusion applied more broadly to claims for damages “[a]rising out of, or in any way involving, directly or indirectly, any alleged sexual misconduct” (emphasis added).

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.”

The United States Court of Appeals for the Ninth Circuit recently held in Federal Deposit Insurance Corporation v. BancInsure, Inc., that an action by the FDIC against a failed bank’s former directors and officers was excluded by a D&O policy’s “insured vs. insured” exclusion. Against the backdrop of recent decisions finding similar exclusions to be ambiguous as to FDIC actions, such as St. Paul Mercury Ins. Co. v. Federal Deposit Ins. Corp., No. 14-56830 (9th Cir. Oct. 19, 2016) (previously discussed in this client alert), this decision shows how insurers continue to proactively adjust policy language to fit evolving and new exposures.  Policyholders should be doing the same.

The Supreme Court of Wisconsin ruled yesterday that a construction company's builder's risk policy issued by Assurance Company of America ("Assurance") applied to cover a fire loss at a home under construction, even though the prospective purchasers of the home were residing in the home at the time of the fire and had already recovered from their homeowner's policy.