Enough is Enough: Fifth Circuit Holds Duty to Defend Does Not Include Costs of Prosecuting Insured’s Fee-Dispute Counterclaim

Aldous v. Darwin National Assurance Co., No. 16-10537 (5th Cir. Mar. 16, 2017), presents a thicket of coverage issues. However, the clearest and most significant one for the insurance industry is that the duty to defend, under Texas law, does not extend to the cost of prosecuting an insured’s counterclaim. This coverage litigation started as an attorney-client dispute over the non-payment fees and then morphed into a legal malpractice action. Darwin National Assurance Co. insured Aldous under a professional liability
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Professional Services Exclusions Found to Bar Coverage for Insureds’ Administration of Medications Leading to Meningitis Outbreak

In Westfield Insurance Co. v. Orthopedic and Sports Medicine Center of Northern Indiana, Inc. (N.D. Ind. Mar. 28, 2017), an Indiana federal court held an insurer had no duty to defend or indemnify its insured against over scores of malpractice and negligence claims that allegedly caused a meningitis outbreak. The district court concluded that, under the subject CGL and umbrella policies, the underlying claims did not involve an “occurrence” and, further, professional services exclusions precluded coverage entirely. As background, NECC
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Insured Stuck Defending Itself Against Claims of False Advertising an Elastic Tape Product

In Cincinnati Insurance Company v. KT Health Holdings, LLC et al. (D. Mass. Mar. 27, 2017), a Massachusetts federal district court held that an insurer had no duty to defend or indemnify its insureds, finding that allegations by a putative class that the insureds falsely advertised their product did not trigger bodily injury coverage under a CGL policy. As background, the defendants, KT Health Holdings and KT Health (collectively “KT”), manufacture and sell KT Tape for sports and fitness activities.
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Congress Rolls Back FCC Privacy Regulations

On March 28, 2017, Congress passed legislation (S.J. Res. 34) that rolled back privacy regulations recently adopted by the Federal Communications Commission. The resolution passed the Senate by a vote of 50-48 and the House by a voted of 215 to 205. This is one of several sets of regulations Congress is rolling back under the authority of the Congressional Review Act of 1996. Under this statute, Congress can nullify administrative regulations by simply passing a joint resolution of disapproval.
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The NAIC Appeals to the Secretary of the Treasury Over the Covered Agreement

While the U.S. and EU governments are deliberating on whether to accept the negotiated Covered Agreement (Agreement), state insurance regulators in the U.S. are continuing to express concerns about the Agreement. In February 2017, the National Association of Insurance Commissioners (NAIC) testified before Congress against the Agreement. On March 15, 2017, the NAIC continued these efforts by submitting a letter to the U.S. Treasury Secretary Steven Mnuchin detailing the NAIC’s concerns. One of the NAIC’s central concerns centers on the
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ELANY Publishes Practical Tips on Applying New York’s New Cybersecurity Regulation to “Unique Situations”

There has been a lot of commentary on New York’s new regulation entitled Cybersecurity Requirements for Financial Services Companies (23 NYCRR 500) (the Regulation) which went into effect on March 1, 2017. On March 16, 2017, The Excess Line Association of New York (ELANY) released Bulletin 2017-12 which contains some practical guidance for insurance producers that will face some “unique situations” not addressed in the other commentary. Specifically, the bulletin refers to insurance producers that “may not meet the technical
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Do Not Pass Go, Do Not Collect Hundreds of Thousands of Dollars: Seventh Circuit Parses Through Insured’s Gamesmanship to Find No CGL Coverage for Settlement of Faulty Workmanship Claim

In Allied Property & Casualty Insurance Co. v. Metro North Condominium Ass’n, No. 16-1868, 2017 U.S. App. LEXIS 4107 (March 8, 2017), the Seventh Circuit found coverage unavailable for a settlement of a lawsuit against a subcontractor alleged to have improperly installed windows at a condominium building. The court’s holding, in essence, was that the bases for the settlement were inconsistent with the claims against the subcontractor, and the only such viable claims could not possibly have been covered under
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Illinois Coverage Litigations Beware! Attorney’s Failure to Properly Investigate Results in Severe Sanctions

In American Access Casually Co. v. Alcauter, 2017 IL App (1st) 160775, the Illinois Appellate Court, First District, affirmed the district court’s imposition of sanctions against the plaintiffs, American Access Casually Company (AACC) and its coverage counsel, James Newman, pursuant to Illinois Supreme Court Rule 137. Specifically, the Appellate Court held that there were sufficient grounds to uphold the sanctions because of the plaintiffs’ failure to properly investigate the continuing validity of their lawsuit, their failure to turn over pertinent
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Massachusetts Ruling Costs Plaintiff More Than $4 Million in Bad-Faith Litigation Lawsuit: Post-Judgment Interest Not a Factor in Punitive Damages Calculations

In Anderson et al. v. National Union Fire Insurance Company of Pittsburgh PA & Others, the Massachusetts Supreme Judicial Court held that post-judgment interest should not be factored into a punitive damages calculation against an insurer when it was found to have acted willfully and egregiously by engaging in unfair trade practices and refusing to settle the underlying tort suit. In reversing the lower court’s grant of trebled post-judgment interest, the court left other parts of the verdicts undisturbed, ending
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New York Issues Final Cybersecurity Regulation

On February 13, 2017, the New York Department of Financial Services (NYDFS) adopted the final version of its first-of-its-kind cybersecurity regulation, “Cybersecurity Requirements For Financial Services Companies” (23 NYCRR 500). This regulation took effect on March 1, 2017. The final regulation reflects several of the comments offered during the final comment period that concluded on January 27, 2017. For a prior list of significant changes from the initial version to the second version, please see our blog post located here.
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