Clayton D. Waterman

All articles by Clayton D. Waterman

 

Former FIFA Executive Entitled to Criminal Defense Costs in Bribery Case; D&O Insurers Required to Pay

Eduardo Li, one defendant of a widespread racketeering and fraud prosecution against FIFA and its members, brought this case seeking a declaration his insurers have to pay and advance his criminal defense costs regarding those prosecutions. The Eastern District of New York Court found that the insurers must immediately reimburse and advance legal costs for Li under a directors and officers liability policy. Eduardo Li and other members of FIFA are the subject of criminal actions for corruption related to
Continue reading...  

Rescission Available to Insurer Whose Insured Lied in Insurance Application About Use of Experimental Weight Loss Techniques

In Essex Insurance Company v. Galilee Medical Center S.C d/b/a MRI Lincoln Imaging Center, the insured, Galilee, represented to its insurer, Essex, that it did not offer any weight loss drugs to its patients. After a former patient brought suit against Galilee based on complications from injections of a weight loss drug, Essex sought to rescind its policy. The Seventh Circuit Court upheld summary judgment granted to Essex, finding that false statements made by Galilee provided a basis for rescission.
Continue reading...  

No Smoking! Pollution Exclusion Bars Coverage For Claims Arising Out of “Smoky” Beverage

While Florida courts have typically refused to limit pollution exclusions within insurance policies to traditional environmental claims, a District Court in Florida has extended the application of such exclusions even further by finding that a pollution exclusion applies to claims against a bar for injuries allegedly caused by an “exotic” cocktail served by the bar. In Evanston Insurance Company v. Haven South Beach, LLC, et al., Case No. 15-20573 (S.D. Fla. Dec. 28, 2015), the insured, a bar, served an
Continue reading...  

Non-Party’s Claim of Employment Relationship with Plaintiff Creates Question of Fact in DJ Action

A complaint clearly and repeatedly alleges the plaintiff was the employee of the defendant, but for purposes of the employment practices exclusion, was she really? At this point, it’s unclear after her “real” employer claims her as its own in the declaratory judgment action. Bikram Choudhury founded the popular Bikram (or hot yoga) in the 1970s. A former student accused Bikram of raping her in 2010. As Bikram’s legal counsel was looking into that rape accusation, she alleges that Bikram
Continue reading...  

Insurer Required to Pay Policyholder Attorneys’ Fees Despite Policyholder Misrepresentations

The Florida Third District Court of Appeal found that an insurer was required to pay attorney fees that homeowners incurred during a coverage dispute despite a finding that the policyholders committed fraud. The Third District affirmed the lower court’s decision, finding that the insurer was required to pay the policyholders’ attorneys’ fees because the insurer lost its counter-claim against the policyholders. The court found that there was no exception for fraud. In Citizens Property Insurance Corp. v. Bascuas, (Third District
Continue reading...  

Feels like a Fraud: Fifth Circuit Rules in Favor of Insurer; Awards $6M in Fraudulent Claims Case

In Allstate Insurance Company et al. v. Michael Kent Plambeck, DC, et al. United States Court of Appeals for the Fifth Circuit, September 17, 2015, an insurer was awarded a $6 million verdict against a group of chiropractors, lawyers and telemarketers that coerced individuals into making fraudulent claims against the insurer. The District Court awarded the verdict based on the Racketeer Influenced and Corrupt Organizations Act (RICO). On September 17, 2015, the Fifth Circuit Court upheld the verdict. The insurer
Continue reading...  

Bad Faith in Louisiana: Insured’s Claim for Bad Faith Not Limited to Statutory Cause of Action

In a multi-layered decision, Century Surety Company v. Belvins, (United States Court of Appeals for the Fifth Circuit, August 18, 2015), the Fifth Circuit found that a policyholder could assert non-statutory bad faith claims against an insurer under Louisiana law.  It also held that a district court could not sua sponte dismiss unchallenged counterclaims without notice to the parties, and affirmed that Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942)’s broad abstention doctrine (applicable in declaratory judgment
Continue reading...  

Under Virginia Law, Despite the Separation of Insureds Provision, Insurer has No Duty to Defend Suit Alleging Insured is Liable Under Respondeat Superior for Intentional Acts of Agent

On July 10, 2015, the Fourth Circuit Court of Appeals held that an insurer had no duty to defend the insured university in a suit alleging that the insured participated in a kidnapping plot. The court found that the insurer had no duty to defend because the suit was based on the intentional acts of the insured’s employees. In this case, the plaintiff alleged that the insured participated in a plot to kidnap the student in order to remove the
Continue reading...  

Bad Faith Decision Vacated as Insurer Not Responsible for Punitive Damages Where Insurance for Punitive Damages is Prohibited

In Jared Wolfe v. Allstate Property & Casualty Insurance Company, the insurer brought an appeal to the Third Circuit seeking to vacate a jury award against it for bad faith and breach of contract asserted by a plaintiff who was injured in a motor vehicle accident caused by the policyholder of the insurer. The Third Circuit agreed with the insurer and vacated the award, finding that the lower court made a mistake in allowing the plaintiff to introduce evidence of
Continue reading...  

Policyholder Required to Pay Back Insurer $900,000 Based on Misrepresentations

A Texas appellate court upheld a substantial jury award against a policyholder on fraud claims in Jackson Fulgham v. Allied Property and Casualty Ins. Co.. The insurer counter-sued the policyholder real estate firm over fraudulent claims it had made about hailstorm damage, resulting in a $900,000 jury award in favor of the insurer. The appellate court upheld the verdict claiming that the evidence supported such finding. In 2009, the policyholder made a claim under its property insurance policy for damage to the
Continue reading...  

No Sanctions for Policyholder Discovery Abuses

An insurer brought a claim for sanctions in dismissing a property owner’s lawsuit over coverage for damage from Hurricane Ike over discovery abuses. The insurer sought what is commonly known in Texas as “death-penalty” sanctions over the discovery abuses. The lower court had granted the sanctions, but this court found that the trial court had imposed excessive sanctions when it dismissed the plaintiff’s pleadings against the insurer and claims adjuster. This court determined that, while the purported discovery sanctions may
Continue reading...  

Trial Court Judge Erred in Requiring Insurer to Produce Claim Files in Bad Faith Lawsuit

The South Dakota Supreme Court found that an insurer did not waive its attorney-client privilege and, thus, was not required to produce 200 unredacted workers’ compensation claim files in a bad faith lawsuit. The Supreme Court found that the trial court judge erred in allowing the evidence in by not conducting an in camera inspection of the files before finding that the insurer had implicitly waived its attorney-client privilege regard its claim files. This case involved a policyholder that sued
Continue reading...  

Law Firm’s Policy Rescinded For Misrepresentation in Application

The Supreme Court of Illinois held that the insurer was entitled to rescind a law firm’s malpractice policy based on material misrepresentations in the firm’s renewal application. The main issue in this case was whether the policy could be rescinded despite one of the firm’s attorneys being unaware of the misrepresentation. The appellate court had ruled that, under the innocent insured doctrine, the insurer was required to maintain coverage for the innocent partner despite the misrepresentation on the application when
Continue reading...  

Judge Throws Out Yacht Club’s Hurricane Sandy Suit: Insurer Must Be Allowed to Inspect “Damaged” Property

A District of New Jersey Federal Judge dismissed a yacht club’s case with prejudice and ordered the yacht club to show cause for why its counsel should not be sanctioned for filing a baseless claim after the yacht club refused to let the insurer inspect its property after making a claim. The Judge stated that the yacht club refused to let the insurer inspect its property, yet claimed $540,000 worth of wind damage to its buildings from Superstorm Sandy. After
Continue reading...  

Health Care Providers Ordered to Pay Insurer $8.4M for Billing Fraud

Three health care providers were forced to pay a judgment for defrauding an insurance company of millions of dollars. A Texas Federal Judge found that the defendant health care providers were wrongfully posing as emergency rooms in order to bill the insurance company at higher rates, in violation of Texas law. The judge stated that a hospital sold the right to use its license-derived billing codes to various clinics in exchange for 15 percent of each of the clinics’ bills.
Continue reading...  

Superfund Site Results in $3 Million Coverage Row

An Oregon Judge required RLI Insurance to reimburse three other insurers more than $2.9 million in defense costs surrounding litigation over a Portland Oregon Superfund site. The other insurers defended Northwest Pipe Co. in its litigation over the Superfund site after Northwest’s facility was identified as part of the superfund site by the EPA and state departments. Northwest’s insurers expended money in the required investigation of the site and facility as well as the defense to claims brought by the
Continue reading...  

Insurer Reforms Policy to Avoid Coverage for Police Officer

The insurer was allowed to reform its policy to exclude coverage for law enforcement after a police officer was involved in an altercation with two town residents. The Eighth Circuit held the inadvertent failure to include a law enforcement exclusion was a mutual mistake and the policy would be reformed to reflect the parties’ true intentions. The insurer issued a commercial insurance policy to a property owners’ association, and both the insurer and the association intended for the policy to
Continue reading...  

In an Effort to Curb Gun Violence, Massachusetts Bill Could Require Gun Owners to Purchase Liability Insurance

The Commonwealth of Massachusetts, House Docket, No. 2678, A Reduce Act to Gun Violence and to Protect the Citizens of the Commonwealth.   In an effort to curb gun violence in reaction to the Sandy Hook shootings, a Massachusetts state representative proposed a bill which would require all gun owners to maintain liability insurance. The bill was proposed on Friday, January 18, 2013, by Democratic state representative David Linsky. It would require that anyone in possession of a firearm, rifle
Continue reading...