The Insurance & Reinsurance Report

May 21, 2019 Bad Faith and Extra-Contractual Liability

Absent Policyholder Demand To Settle, Seventh Circuit Affirms Dismissal of Bad Faith Action Against Insurer After Unexpected Excess Judgment

The Seventh Circuit, applying Illinois law, recently tackled the highly-charged issue of a bad faith claim against an insurer for failing to settle for the policy limit. In Surgery Center at 900 North Michigan Avenue, LLC v. American Physicians Assurance Corp., Inc., the Seventh Circuit closely scrutinized the facts and affirmed the trial court’s decision that the insurer did not act in bad faith.

The coverage dispute arose between the Surgery Center at 900 North Michigan Avenue, LLC (Surgery Center) and its insurer when …

May 16, 2019 Uncategorized

Climate Change Litigation: Where Are the Coverage Suits?

There is an interesting question surrounding the present generation of climate change lawsuits currently working their way through the court system. Specifically, where are the duty to defend actions related to these suits?

Background

By way of background, there are two types of climate change lawsuits currently working their way through the courts:

Those filed by government entities that seek to hold energy companies responsible for the costs that government entities are forced to expend in adapting to climate change, and which could be susceptible

May 14, 2019 Occurrence

Contractual Liability Exclusion Defeats General Contractor’s Bid Against Six Insurers for Defense and Indemnity in West Virginia

West Virginia’s highest court recently handed down a well-articulated decision on the scope of a CGL policy’s insuring agreement and exclusion for contractual liability, which could be influential to other courts who struggle with these commonly-litigated issues.

On May 1, 2019, the West Virginia Supreme Court of Appeals unanimously upheld summary judgment to six insurance companies in a declaratory judgment action relating to a property developer’s suit against its general contractor over construction defects at a shopping center. The insurers had issued a series of …

May 1, 2019 Duty to Defend

Florida Appellate Court Narrows Exception to Four Corners Rule

The general rule for determining whether a duty to defend exists for a particular claim is easily stated. If the allegations against the insured fall within the scope of coverage afforded by a liability policy, then the insurer has a duty to defend its insured. This general rule is commonly referred to as the four corners rule.

However, insurers frequently face a dilemma in determining whether they have a duty to defend where the allegations in a tendered suit arguably fall within the scope of coverage under …

April 24, 2019 General

Can You Depreciate Labor? Tennessee Supreme Court Says No.

When calculating the actual cash value (ACV) amount of property damage, the labor component cannot be depreciated according to the Tennessee Supreme Court in a unanimous decision answering a certified question. Lammert, et. al v. Auto-Owners (Mutual) Ins. Co., 2019 WL 1592687 (Tenn. April 15, 2019).

At issue were two homeowner policies, one policy which contained a definition of ACV and the other which did not, but neither policy explicitly stated whether labor costs were included within the scope of depreciation. While it was …

April 23, 2019 Emerging Issues / General

ALI’s Restatement of Liability Insurance Advocates a “Split-the-Baby” Approach to Allocation of Long-Tail Claims

“All sums” or “pro rata” – which one is the majority view for allocation of long-trail claims? Well, after eight years of iterative revision, the proposed final draft no. 2 of ALI’s Restatement of the Law, Liability Insurance was approved in May 2018. The restatement has received very critical feedback from both sides, chiefly that the ALI has abandoned its mission to “restate” common law in favor of advocating what the law should be. One of the more hotly contested sections is section 41, titled “Allocation …

April 17, 2019 Reinsurance

Reinsurance Trial Resolved after 10 Days and 15 Witnesses: “Follow the Fortunes” Cannot be Read into Reinsurance Contracts! Reinsurers Can Voluntarily Pay!

An insurer and reinsurer litigated their breach of contract actions against each other under two facultative reinsurance certificates in a New York federal court culminating in a 10-day bench trial presenting 10 fact witnesses and five experts. Utica Mutual Insurance Company v. Munich Reinsurance America, Inc. (N.D.N.Y., March 29, 2019). The heart of their dispute was the reinsurer’s liability for additional loss expenses; that is, whether it must pay for expenses the ceding insurer incurred to investigate, adjust and litigate claims supplemental to the …

April 16, 2019 Duty to Defend

The Evolving Impact of Burlington v. NYC Transit: In New York, is Proximate Causation Necessary to Trigger the Duty to Defend an Additional Insured?

In previous blog posts this year, and to keep up with how courts are interpreting the New York Court of Appeals 2017 decision in Burlington Ins. Co. v. NYC Transit Auth., 29 N.Y.3d 313 (2017), we discussed the trial court’s decision in M & M Realty of New York, LLC v. Burlington Ins. Co. and the First Department’s reversal in the same case. Recently, a New York Supreme Court Judge decided American Empire Surplus Lines Ins. Co. v. Arch Specialty Ins., No. 655234/2018, …

April 10, 2019 Policy Conditions, Considerations, Construction, and Formation / Regulatory

Second Circuit Holds That Policy May Be Rescinded Before a Claim is Submitted for Coverage

The Second Circuit has held that an insurer need not wait until a claim is submitted under its policy in order to seek rescission of the policy based on a material misrepresentation by the insured. U.S. Underwriters Ins. Co. v. Orion Plumbing & Heating Corp., 18-2286-CV, 2019 WL 1253325.

The dispute arose under a policy issued in May 2012, which was later cancelled as a result of the insured’s failure to pay premiums. However, an incident involving bodily injury occurred prior to the policy’s …

April 9, 2019 Duty to Defend

Eleventh Circuit: When an Insurer Has a Duty to Defend, Its Duty to Indemnify Is Not Ripe Until Resolution of the Underlying Lawsuit

With limited exception, an insurer that owes a duty to defend to its insured cannot litigate whether it also has a duty to indemnify the insured for the same matter until after the insured’s liability has been resolved. In a unanimous decision, the U.S. Court of Appeals for the Eleventh Circuit, applying Florida law, affirmed this principle and held that an insurer’s duty to indemnify is not justiciable until the insured’s liability has been adjudicated in the underlying case. Mid-Continent Cas. Co. v. Delacruz Drywall …