Claims And Issues

EXCESS AND UMBRELLA IN OHIO.

Under Ohio law, more than one order or sale of the same type of allegedly defective product gave rise to multiple occurrences under a commercial Follow-Form Excess Liability insurance policy issued by American Guarantee. The American Guarantee excess policy followed the form of the primary Commercial General Liability (CGL) policy issued by Arch.

"As a follow-form excess insurance policy, the American Guarantee Policy 'incorporates the terms and conditions of the underlying insurance,' and defines 'underlying insurance' to include the Arch Policy." Big Lots Stores, Inc. v. American Guar. & Liab. Ins. Co., 240 F. Supp. 3d 725, No. 2:14–cv–02635, 2017 WL 821671 (S.D. Ohio March 2, 2017).

Under the Arch primary policy, which was incorporated into the American Guarantee Follow-Form Excess policy, multiple sales gave rise to multiple occurrences. So it was also true of the American Guarantee excess policy which followed it, the federal court held in this case involving Ohio substantive law.

Please Read The Disclaimer. ©2017 by Dennis J. Wall. All Rights Reserved.

"FOLLOWING FORM" EXPLAINED. CONCISELY.

A "following form" commercial umbrella liability policy provided excess coverage over a primary general liability policy in Ace Am. Ins. Co. v. American Guar. & Liab. Ins. Co., No. 16 Civ. 8773 (JSR), 2017 WL 2840286 (S.D.N.Y. July 2, 2017).

Judge Rakoff concisely explained what a "following form" umbrella policy is:

In other words, the American Guarantee Policy adopted in general the NGM Policy's underlying substantive terms and thus provided the same basic coverage at the excess layer.

Ace Am. Ins. Co. v. American Guar. & Liab. Ins. Co., No. 16 Civ. 8773 (JSR), 2017 WL 2840286, at *2 (S.D.N.Y. July 2, 2017).

This handy reference will be of tremendous potential use to coverage lawyers who have trouble explaining to some judges what a "following form" policy is, and how it is the same as the underlying general liability policy it follows.  (In cases where the issues include why the following form umbrella policy is different from the form it follows, such as not including the duty to defend, more expansive definitions may of course be required, for issues of difference are not addressed in this reference.)

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

EXCESS INSURERS ENTITLED TO INTERVENE IN PRIMARY CARRIERS' DEC ACTION.

Excess insurers were held entitled to intervene as of right in the primary insurers' declaratory relief action that they did not have either a duty to defend or to indemnify under their general liability insurance policies.  Liberty Mut. Fire Ins. Co. v. Lumber Liquidators, Inc., 314 F.R.D. 180 (E.D. Va. 2016).

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Insurance Claims and Issues" (forthcoming Thomson Reuters 2016).  All rights reserved.

"INSURANCE CLAIMS AND ISSUES," THE BOOK: COMING IN 2016!

 

 Storm Clouds lined up over the Gulf of Mexico.  Photograph and text copyright 2015-2016 by Dennis J. Wall.

I am hard at work on an anthology of the best blogs from "Insurance Claims and Issues."  The anthology I submit to my publisher will keep all hyperlinks intact, including links to the Insurance Claims and Bad Faith Law blog.  When articles posted on Insurance Claims and Bad Faith Law blog are important to the anthology of "Insurance Claims and Issues," I am including them in the anthology too.

As each previously posted article is updated, the posted articles will remain just as available here as they always have been.  New articles will benefit from me being better informed and better equipped to discuss future insurance claims and issues.

I have contracted with Thomson Reuters (West Publishing Company to those fortunate to have the experience) to publish "Insurance Claims and Issues," the Book, in the late Spring or early Summer of 2016.  Best wishes to everyone for a joyous and Happy New Year!

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Insurance Claims and Issues" (forthcoming Thomson Reuters 2016).  All rights reserved.

Related articles

Convincing Anyone Yet? Coverage, Contraception, and the Court.

CYBERINSURANCE:  MANY DATA-LESS RISKS TO UNDERWRITE & PREMIUMS TO CHARGE.

THE ALI RESTATEMENT PROJECT OF THE LAW OF LIABILITY INSURANCE.

Majority Holds No Negligence Cause of Action by Insured Against I.A.

BAD FAITH BY PRIMARY CARRIER AFTER TRIAL, NOT BEFORE TRIAL.

FEDERAL COURT AWARDS $400,000.00 TO PLAINTIFF EXCESS CARRIER IN FLORIDA.

           Westchester Fire Insurance Company and Mid-Continent Casualty Company insured the same policyholder, Continental Manufacturing.  Continental purchased a primary liability policy from Mid-Continent and an umbrella liability policy from Westchester.

          After a judgment was entered upon a verdict against Continental in excess of Mid-Continent's primary policy limits, Westchester sued Mid-Continent for alleged bad faith, alleging both common law and statutory claims.

          After a bench trial, the Court entered judgment for the Defendant Mid-Continent as to its conduct before the underlying trial.  Mid-Continent's pretrial settlement conduct in the underlying case was not bad faith, the Court found based on the evidence presented in the bad faith bench trial.

          However, Mid-Continent's conduct after the underlying trial was a different story, said the Court, which found that Plaintiff Westchester proved by a preponderance of the evidence that Mid-Continent acted in bad faith after the underlying verdict against their common insured, by not telling Westchester that there was a settlement demand after the verdict.  Both the underlying verdict and the post-verdict settlement demand were above the primary carrier's policy limits and within the umbrella liability carrier's limits.

          The defense counsel in the underlying case, who was retained by Mid-Continent to defend Continental, informed Mid-Continent by EMail that he had received a post-verdict settlement demand.  Although the defense attorney had "cc'd" Westchester "on previous reports regarding the underlying action," the defense counsel did not include Westchester on this EMail to Mid-Continent.  Mid-Continent's claims adjuster testified in the bench trial on bad faith that she "inadvertently" did not include Westchester in her EMail back to defense counsel.  She could not notify Westchester by hitting "Reply to All" on his EMail since Westchester was not on the original EMail of course, and she did not affirmatively forward it or independently write to or telephone Westchester, in other words.  See Westchester Fire Ins. Co. v. Mid-Continent Cas. Co., 2013 WL 3189053 *4 (S.D. Fla. June 21, 2013).

          Finding bad faith on the part of the primary liability carrier after the underlying trial, the Federal Court entered judgment in favor of the plaintiff umbrella carrier in the amount of $390,173.00.  Westchester Fire Ins. Co. v. Mid-Continent Cas. Co., 2013 WL 3189053 *1 (S.D. Fla. June 21, 2013).

To be continued on Insurance Claims and Bad Faith Law Blog, www.insuranceclaimsbadfaith.typepad.com.    Please Read The Disclaimer.

Primary and excess carriers: Working definitions of primary, excess insurance.

          Nothing illustrates the distinction between primary and excess policies more clearly than the respective notice provisions of these policies:

    The notice provisions found in primary and excess insurance policies are often not the same. Because excess coverage is contingent on exhaustion of the primary insurance policy, “excess insurers generally do not require notification of occurrences until the excess policy is reasonably likely to be implicated.” Lumbermens Mutual Casualty Co. v. RGIS Inventory Specialists, LLC, 682 F.3d 46, 52 n. 4 (2d Cir.2010) (per curiam) (emphasis added) (citation omitted); see also Evanston Ins. Co. v. Stonewall Surplus Lines Ins. Co., 111 F.3d 852, 861 (11th Cir.1997) (“Excess policies [ ] usually require an assured to give notice of claims that appear ‘likely to involve’ the excess.”). Not so for primary insurance policies. Primary insurers generally only require notification of any occurrence or law suit that may (as opposed to one that is reasonably likely to) give rise to a claim covered under the policy.[1]

---

[1] American Guarantee & Liab. Ins. Co. v. Simon Roofing & Sheet Metal Corp., 2013 WL 961158 *4 (S.D. Fla. March 12, 2013).  [Emphasis by the Court.]

Please Read The Disclaimer.

 

FOLLOWING FORM ENVIRONMENTAL DAMAGE EXCESS CARRIER'S "ATTACHMENT POINT" ISSUES.

          In a recent Second Circuit decision in a case involving New York law, the issue of a following form Excess Carrier's "attachment point" for environmental damage could not be resolved by Summary Judgment.   The Trial Court's Summary Judgment was vacated and the case remanded.  Olin Corp. v. American Home Assurance Co., 2012 WL 6602909 *12 (2d Cir. December 19, 2012).

          This recent appellate decision came about in this way:

    This case began in 1984 when Olin brought a diversity action against its insurers seeking indemnification for environmental damage at Olin manufacturing sites throughout the United States.  Because each site raised its own factual and legal issues, the district court has addressed coverage on a site-by-site basis.  This appeal arises out of the most recent of these site-specific proceedings, concerning contamination at Olin's manufacturing site at Morgan Hill, California, between 1957 and 1987.  In the course of this proceeding, the district court granted summary judgment to American Home, which issued two excess policies during this period, on the ground that the attachment point for these excess policies could not be met. That ruling is the basis of the present appeal.

Olin Corp. v. American Home Assurance Co., 2012 WL 6602909 *1 (2d Cir. December 19, 2012).  It should be noted that Olin had many Insurance Policies.  The case involved what appears to be most of the Insurance Companies doing business anywhere in the United States where Olin conducted its operations.

          The law of the case was set by the time of this recent appellate decision.  The Second Circuit previously ruled that the cleanup cost of each individual site which was allegedly environmentally contaminated, "should be equally divided among the years in which property damage occurred."  Olin Corp. v. American Home Assurance Co., 2012 WL 6602909 *2 (2d Cir. December 19, 2012).  Under this pro rata allocation rule, cleanup of the Morgan Hill site (the site in question) totaled $102 Million over 31 years, "yielding a per-year damage figure of $3.3 Million."  Olin Corp. v. American Home Assurance Co., 2012 WL 6602909 *2 (2d Cir. December 19, 2012).  Simple arithmetic shows that the $30.3 Million "attachment point," or the point at which the American Home Excess Policies incepted, was never reached in any year for this site.  That is what the Trial Judge thought, too.  The Trial Court followed the Second Circuit's earlier decisions in this case and granted American Home's Motion for Summary Judgment on the ground that the attachment points of American Home's Excess Policies were never reached for the Morgan Hill site.

          However, the Second Circuit panel vacated the Summary Judgment on the ground that the record presents genuine issues of material fact concerning a "Condition C" in an underlying policy.  For at least some of the years its policies were on the risk, underlying policies were issued to Olin by Lloyd's, and the Lloyd's Policies contained Condition C.  Since American Home's Excess Policies were all "following form," American Home's Excess Policies incorporated and followed form to Lloyd's Condition C.  In this case, Lloyd's Condition C caused the Second Circuit panel to vacate American Home's Summary Judgment and remand:

    This provision, the principal subject of this appeal, states the following:

 It is agreed that if any loss covered hereunder is also covered in whole or in part under any other excess policy issued to the Assured prior to the inception date hereof, the limit of liability hereon ... shall be reduced by any amounts due to the Assured on account of such loss under such prior insurance.

Subject to the foregoing paragraph and to all the other terms and conditions of this Policy, in the event that personal injury or property damage arising out of an occurrence covered hereunder is continuing at the time of termination of this Policy, Underwriters will continue to protect the Assured for Liability in respect of such personal injury or property damage without payment of additional premium.

Olin Corp. v. American Home Assurance Co., 2012 WL 6602909 *2 (2d Cir. December 19, 2012).

          The appellate panel's reasoning in this Second Circuit decision under New York law will be explored in a future article.

Please Read The Disclaimer.

 

"OTHER INSURANCE" CASE: GENERAL MAXIMS SPECIFICALLY EXPLAINED IN ILLINOIS DCA.

            In order to decide a case of competing "other insurance" clauses, an Illinois District Court of Appeal needed to specifically define general maxims of "horizontal exhaustion" and "target tender of a defense".

            The principle of horizontal exhaustion requires an insured who has multiple primary and excess policies covering a common risk to exhaust all primary policy limits before invoking excess coverage.

 Vedder v. Continental Western Insurance Co., 2012 IL App (5th) 110,583, 2012 WL 5331563 *5 ¶ 21 (Ill. 5th DCA October 29, 2012).  [Emphasis added.]

            "Targeting" an Excess Carrier to be tendered a defense is simply not done in such a "horizontal exhaustion" jurisdiction:

Our courts have consistently held that an insured cannot target tender a defense to his excess insurer while primary coverage remains unexhausted.

 Vedder v. Continental Western Insurance Co., 2012 IL App (5th) 110,583, 2012 WL 5331563 *5 ¶ 21 (Ill. 5th DCA October 29, 2012).  [Emphasis added.]

            To rephrase Oliver Wendell Holmes, general maxims and phrases are more often an excuse for lack of accurate analysis, than an aid in interpreting an Insurance Policy, and the decision in this case proves it.  In the Vedder v. Continental Western Insurance Company decision, the Judges had to define general words and phrases before they could decide the case before them.

Please Read The Disclaimer. 

EXCESS-PRIMARY INSURANCE ISSUES IN OHIO: ...

...SIXTH CIRCUIT COURT OF APPEALS HOLDS THAT PAYING FULL UNDERLYING AMOUNT MEANS FULL PAYMENT OF UNDERLYING AMOUNT.

             Ohio substantive law dictated the outcome in Goodyear Tire & Rubber Co. v. National Union Fire Ins. Co., 2012 WL 4054122 (6th Cir. September 17, 2012), Download Goodyear Tire & Rubber Co. v. National Union Fire Ins. Co. (6th Cir. No. 11.4145, Opinion Filed Sept. 17, 2012) PUBLIC ACCESS.  In that case, Goodyear sued for recovery of $30 Million "of legal and accounting costs" which Goodyear incurred in defending class-action shareholder lawsuits and an SEC investigation of alleged securities violations. 

            Goodyear sued for Coverage of these costs from two Insurance Companies, National Union and Federal.  National Union had issued a policy to Goodyear with an aggregate liability limit of $15 Million and a $5 Million self-insured retention.  Federal had issued Goodyear an "excess" policy above the National Union policy and above the SIR, with limits of $10 Million.

            The Federal excess policy further provided that the face amount of the underlying National Union policy  had to be paid out in full before the Federal policy incepted or attached:

Coverage hereunder shall attach only after [National Union] shall have paid in legal  currency the full amount of the Underlying Limit [i.e., National Union's policy limit of $15 million] for such Policy Period.

Goodyear Tire & Rubber Co. v. National Union Fire Ins. Co., 2012 WL 4054122 *1 (6th Cir. September 17, 2012).  [Emphasis and bracketing by the Sixth Circuit Court of Appeals.]

            National Union settled with Goodyear by paying Goodyear $10 Million, not the full $15 Million policy limit on the National Union policy.   Accordingly, the express language of Federal's policy was not met and for that reason alone, the Sixth Circuit held, Federal had no Coverage for the costs claimed as covered damages by Goodyear under Federal's policy.  Goodyear Tire & Rubber Co. v. National Union Fire Ins. Co., 2012 WL 4054122 *1-*2 (6th Cir. September 17, 2012).

The decision taken on appeal to the Sixth Circuit from the Northern District of Ohio was rendered one year ago, on September 18, 2011.  It is addressed in an interesting article posted on October 3, 2011 on "The Insurance & Regulatory Report" blog.

Please Read The Disclaimer.

Four For Other Insurance: Recent Primary vs. Excess Cases.

    An "other insurance" clause is found in an Insurance Policy that would otherwise be Primary.  The purposes of an other insurance clause are many, and its language changes depending on the purpose it was intended to serve in the Policy at issue.

    Entire Books and chapters of Books have been written on the subject of "other insurance" clauses.  See, for example, Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith Ch. 6 "Relation of Primary Insurer With Excess Carriers and Reinsurers" (West Publishing Co. Third Edition 2011).  In general terms, language of an "other insurance" clause as distinct from an "escape clause," for example, will be something like the following language which is adapted generically from the specific language appearing in published cases:

   This policy is primary except when certain other insurance applies.  When there is other primary insurance written on the same terms or basis as this policy, we will share pro rata with that other insurance to pay the covered amounts you may be legally obligated to pay as damages.

     However, when certain types of other insurance are available to you as an insured under them, we will be excess of all such other insurance.

    Insurance Companies which issue Policies with "other insurance" clauses contest their interpretation all the time.  This may be one reason why Books, and Chapters of Books, have been written about them.  Recently, four newly decided cases have contributed to the continuously growing collection of reported judicial interpretations of "other insurance" clauses.

 1.  DIFFERENT TYPES OF COVERAGES, SAME INSURED.

    In Federal Insurance Co. v. Firemen's Insurance Co., 2011 WL 2710458 (D. Md. July 11, 2011), the Court followed Fourth Circuit case law in a conflict situation.  The Court recognized that there is a conflict of authority over the issue of whether "other insurance" clauses need to be compared when the Policies containing them cover different risks, i.e., afford different types of coverages.  The Court in this case followed Fourth Circuit holdings that require the different Policies to cover the same risk in order for courts to apply the Policies' "other insurance" clauses.  Id. at *4 - *5.  Here, the Court refused to compare two Policies' other insurance clauses, having previously found one to be a CGL or Commercial General Liability Policy, and a second to be a D & O or Directors and Officers Liability Policy, even though both Policies were issued to the same Insured.  Id. at *3.

  2.  SAME TYPES OF COVERAGES GENERALLY, SAME OR DIFFERENT INSUREDS, BUT ONE INSURANCE POLICY IS AN UMBRELLA.

    In California and in this country, it is settled law that where one of the Policies to be compared is an Umbrella or True Excess Policy, all bets are off.  There is nothing to compare.  Umbrella Policies are simply not on the same level of Coverage as Primary Policies which have an other insurance clause, and the Courts will not compare the two.  See Continental Casualty Co. v. St. Paul Surplus Lines Insurance Co., 2011 WL 1103345 *6 (E.D. Cal. March 22, 2011).  In pure and simple terms, wrote the Federal Court, in previous California State case law, the California Courts settled the issue that

 ... the umbrella carrier was entitled to full reimbursement from a primary insured [sic] for sums paid out on behalf of a mutual insured regardless of the terms of the underlying indemnity agreement between the insureds.  This holding is conclusive with respect to the present matter.

 Id. at *8.  Parenthetically, this decision is rich with rulings on Insurance Coverage issues related to Primary - Excess Carriers.  Future posts will address them here.

3.  WHERE UMBRELLA EXCLUSION APPLIES, NO NEED TO COMPARE ANYWAY:   NO UMBRELLA POLICY COVERAGE AT ALL.

    In some cases, the outcome is determined not by a Primary vs. Excess Carrier contest over levels and layers of Coverage, but the outcome may be determined after such an altercation simply by applying an Umbrella Policy Exclusion.  If an Exclusion in the Umbrella Policy appears to the Court to apply, then the Court will apply it regardless of whether there is a Primary Policy in the case.  Such was the case in Amerisure Insurance Co. v. Scottsdale Insurance Co., 2011 WL 2446277 *4, * 9 (S.D. Ind. June 15, 2011)("Having concluded that the cross liability exclusion applies and renders the Scottsdale umbrella policy inapplicable, the Court need not address these other arguments herein.').

 4.  WHETHER INSURANCE POLICY APPLIES IN FIRST INSTANCE UNDER ITS INSURING AGREEMENT, IF A QUESTION OF FACT, THEN THERE WILL BE A TRIAL.

    The heading was the holding in Employers Mutual Casualty Co. v. Arbella Protection Insurance Co., 24 A.3d 544, 554, 2011 WL 2693228 *10 (R.I. July 12, 2011).  In this case, the Supreme Court of Rhode Island reversed a Partial Summary Judgment in favor of the Plaintiff.

    The Supreme Court pointedly noted the Trial Court's observation that there was no Expert Testimony to guide the Court, although the Trial Court held that the Plaintiff had no legal duty to introduce Expert Testimony in this "declaratory judgment action related to issues of coverage."  Id. at 552, 2011 WL 2693228 at *8.

 5.  ONE MORE HOLDING OF INTEREST, FROM THE FOUR RECENT CASES:

DIFFERENT RULES OF INTERPRETATION WHEN THE COVERAGE CONFLICT IS BETWEEN TWO INSURANCE COMPANIES?

   Under Indiana law, even apparently where an Insurance Policy is arguably ambiguous, "when the dispute is between an insurance company and a third party (or between two insurance companies), the policy is construed from a neutral stance."  Amerisure Insurance Co. v. Scottsdale Insurance Co., 2011 WL 2446277 at *3 (S.D. Ind. June 15, 2011).

    Whether and when this rule will be applied in other cases by other Courts in other jurisdictions remains to be seen, and will definitely be the subject of future posts here.

 The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida.  The author will be speaking.  Here is a link to the American Conference Institute Website Page which features this Conference including registration, if you or someone you know would like to attend.

Please Read The Disclaimer.

When Doctrines Decide ... Are These the Results We Want?

   A unanimous panel decision in Illinois' Second DCA provides two examples of "Doctrines" at work.

   First, the decision has an interesting twist on equitable subrogation when it is sought by an Insurance Company.  In Iliniois, the Second District held, equitable subrogation generally arises when one party pays a debt for which another party is primarily liable and seeks to be repaid, the debt being one which "in equity and good conscience" should have been paid by the latter party.  Except when it comes to Plaintiff Insurance Companies claiming equitable subrogation, apparently:

   A plaintiff insurance carrier claiming a right to equitable subrogation must establish that:  (1) the defendant carrier is primarily liable to the insured for a loss under a policy of insurance; (2) the plaintiff carrier is secondarily liable to the insured for the same loss under its policy; and (3) the plaintiff carrier discharged its liability to the insured and, at the same time, extinguished the liability of the defendant carrier.

Download State Farm Mut. Auto. Ins. Co. v. DuPage County (Ill. 2d DCA Case No. 2.10.0580, Opinion Filed June 16, 2011) PUBLIC ACCESS, also published as State Farm Mutual Auto. Insurance Co. v. DuPage County, 2011 WL 3422800 *5  ¶ 34 (Ill. 2d DCA June 16, 2011)(authorized password required to access Westlaw).  [Emphasis added.]  The emphasized word, "carrier," was essential to the panel's decision in this case.  Among other things, the Court held that a self-insured municipality like the Defendant in this case could not be a "defendant carrier," and so there could be no equitable subrogation available to the Plaintiff Insurance Carrier.

   The panel's equitable subrogation decision may or may not be appropriately based on an apparent Illinois "Doctrine" of equitable subrogation in cases in which it is invoked by Plaintiff Insurance Carriers.  However, most if not all other jurisdictions follow the view that Equitable Subrogation applies in cases in which the facts show a primary liability on the part of the Defendant who (or which) in equity and good conscience should have paid the debt which in reality was paid by the Plaintiff -- regardless of who or what the Plaintiff is, and regardless too of who or what the Defendant is.  Courts in other jurisdictions accordingly do not discriminate among either Plaintiffs or Defendants whenever Plaintiffs seek the remedy of equitable subrogation, even if at least one of them is an Insurance Carrier.  See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith  § 7:9, "Actions by Excess Carriers--Subrogation"   (West Publishing Third Edition 2011).

    The Illinois Second DCA's decision in this case reads more like a "Doctrine of Insurer Contribution," see generally id. § 7:14, "Actions by Excess Carriers--Doctrine of Insurer Contribution," or perhaps "Equitable Indemnity" which is a specific remedy recognized in Illinois and perhaps nowhere else.

   There is not enough time or room here to mention the panel's second invocation of a "Doctrine" in this decision.  It involves relationships and ordering of Coverages between Primary Carriers and Excess Carriers, and it is a doozy.  To be continued on the next post .......

Please Read The Disclaimer.

 

New York: Primary CGL, Excess D&O Means No Defense Contribution.

"Millions" for Defense From CGL Primary Carrier, Not One Darn Penny From Director's and Officer's Carrier, the way that their Other Insurance Clauses are written.

   The New York Court of Appeals just held that where both a CGL carrier and a D&O carrier insured the same Property Owners Association, the question of who pays for defense expenses incurred for defending the Insured depends on the language of the two carriers' competing Other Insurance Clauses.  Download Fieldston Property Owners Assn v. Hermitage Insurance Co. (N.Y., Opinion Filed Feb. 24, 2011) PUBLIC ACCESS, STATED UNCORRECTED, SUBJECT TO REVISION,, also published as 2011 WL 649812 (N.Y. Feb. 24, 2011)(authorized password required to access Westlaw; page numbers not available at the time of this post).

   The Commercial General Liability policy was written with a Primary Other Insurance Clause.  The D&O policy was written with an Excess Other Insurance Clause.  In a dispute between the two carriers over who pays for their common Insured's defense expenses for underlying suits, the New York Court of Appeals held that the Primary CGL pays all of the defense expenses of the underlying suits on behalf of that Insured, and the D&O Carrier pays none.

   The way that the Other Insurance Clauses are written in the Insurance Policies determines the outcome in this situation, every time.

Please Read The Disclaimer.

 

Prior Litigation Exclusion Applied to Bar All D&O Coverage: ...

   ... Primary and Following Form, Too.

   Acosta, Inc. and Acosta Sales, LLC were provided D&O Coverage pursuant to a series of Insurance Policies, both Primary and Excess.  National Union Fire Insurance Company's Policy was treated by the Courts in this case as Primary.  The National Union Fire Policy contained a "prior litigation" Exclusion which excludes all Loss in connection with a Claim made against the Insured, here, both Acosta corporations.  As published by the Florida Appellate Court, that Exclusion reads as follows:

(e) alleging, arising out of, based upon[,] or attributable to as of the Continuity Date [November 1, 2001], any pending or prior:  (1) litigation; or (2) administrative or regulatory proceeding or investigation of which an Insured had notice, or alleging any Wrongful Act which is the same or Related Wrongful Act to that alleged in such pending or prior litigation or adminstrative or regulatory proceeding or investigation[.]

Acosta, Inc. v. National Union Fire Ins. Co., Download Acosta, Inc. v. National Union Fire Insurance Co. (Fla. 1st DCA Case No. 1D09.3215, Substituted Opinion on Denial of Rehearing) PUBLIC ACCESS also published as 39 So. 3d 565 (Fla. 1st DCA July 30, 2010)(Westlaw subscription required to access Southern Third via Westlaw; page numbers not provided at time of this post).  [Bracketed material except for Continuity Date by the Court; Continuity Date added.]

   The Trial Court entered Summary Judgment in favor of National Union Fire under its "prior litigation" Exclusion, based largely upon the following observation:

The policy issued by National Union is a claims made policy.  These policies offer coverage for claims filed during the time when the policy is in effect[;] however[,] the exclusions protect the insurers from being "sandbagged" when the insured was aware of pending claims likely to be filed or as a result of prior litigation.  [citation omitted].

Id. [Bracketed material again by the First District.] 

   This is a case of first impression in Florida.  The First District affirmed the Trial Court's grant of Partial Summary Judgment to National Union and Summary Judgment to Arrowood in this case, based upon National Union's above-quoted prior litigation Exclusion:

The trial court determined that National Union and Arrowood properly denied coverage under a "prior litigation" exclusion due to the relationship between the underlying suit and a suit brought by Marketing Specialists Sales Co. ("Marketing Specialists") against Acosta in 2001 ("the turnover suit").

Id.  The Arrowood D&O Policy was excess and "following form" to the National Union Fire D&O Policy here.  Id. n.2.  The First District affirmed entirely on the basis of the National Union Fire prior litigation Exclusion.  Id.

"Relation of Primary Insurer With Excess Carriers and Reinsurers" is the subject of an entire Chapter in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" Ch. 6 (Second Edition Shepard's/McGraw-Hill; 2010 Supplement West Publishing Company).

Please Read The Disclaimer.

 

 

 

Title Insurance Company's 'Inspection, Audit' Held a Right, Not Duty.

   The case of Bluehaven Funding, LLC v. First Am. Title Ins. Co., 594 F.3d 1055 (8th Cir. 2010), involved questions about the rights and duties of a Title Insurance Company under Missouri substantive law.  In that case, a real estate lender sued a title insurance company on several theories, after the lender lost approximately $2.4 million dollars.  The District Court entered summary judgment against the plaintiff-lender and in favor of the defendant-title insurance company on all claims and the Eighth Circuit affirmed.  Id. at 1056.

   One aspect of the decision will likely be of great interest to Excess or Umbrella Liability Insurance Companies everywhere in the United States.  Umbrella Liability Insurance Policies often contain a provision which affords the excess carrier a 'right but not a duty' to associate co-counsel in the insured's defense in the underlying liability case.  There was an analogous provision In First American's "Title Agreement".  First American's agreement afforded First American the right to "'periodically inspect and audit'" its alleged agent's "'escrow accounts and escrow files'".  Id. at 1061.  The Eighth Circuit held that under Missouri law no duty of due care could be constructed on that agreement which, it held, "does not obligate" First American to review the files, in part here pertinent.  Id. 

    Further in the First American case, "First American exercised its right under the Agency Agreement to review Capital Title's files."  Id.  [Emphasis added.]  This did not affect the outcome, which as noted was totally in First American's favor in that case.  Rather, the "right to review" provision made it "evident" that the right "was for First American's own benefit and protection, and not for the benefit of any third party."  Id.

 

Title Insurance Policy Issues in particular in an increasing number of cases of Good Faith - Bad Faith claims and issues are discussed in in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Second Edition Shepard's/McGraw-Hill, 2009 Supplement West Publishing Company).  Excess and Umbrella Liability Insurance Issues are also discussed throughout the nearly 4,000 cases and statutes and other citations analyed there.  

Please Read The Disclaimer.

 

 

Proof of Loss Provision Did Not Require Additional Documentation, So ....

   **Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.**  

... Federal Appellate Court Declined to Rewrite It.

   The Federal Fifth Circuit recently considered an appeal involving Louisiana substantive Insurance law in Download Versai Management Corp. v. Clarendon America Insurance Co. (5th Cir. Case No. 08.30874, Opinion Filed February 19, 2010), also published as Versai Management Corp. v. Clarendon American Insurance Co., 2010 WL 572532 (5th Cir. February 19, 2010).  Specifically, one of the issues in that appeal involved the Excess Property Insurers' "Proof of Loss" provision.  The Excess Property Carriers argued that the provision required the Policyholder to support its Proof of Loss with additional documentation, although the provision did not say that at all.

   The Fifth Circuit rejected this argument.  The Court declined to rewrite the Excess Property Conditions Insurance Policies to require additional documentation where the Underwriters of those Companies had not done so:  "The plain reading of this section reveals no requirement for additional documentation to support a proof of loss."   Versai Management Corp. v. Clarendon American Insurance Co., 2010 WL 572532 *3 (5th Cir. February 19, 2010). 

   The Insurance Companies argued that "everyone does it," in essence, arguing that the Insurance Industry as a whole requires that additional documentation be produced when a Proof of Loss is submitted on a Property claim.  "If this is so, their policy breaks the mold," wrote the Fifth Circuit.  "We will not read in such a requirement where none exists."  Versai Management Corp. v. Clarendon American Insurance Co., 2010 WL 572532 *3 (5th Cir. February 19, 2010).   The Fifth Circuit reversed the District Court's grant of summary judgment to the Insurance Company Defendants and remanded in that case.

   Underwriters.  You gotta love 'em.

There is a useful post about Proofs of Loss and how Florida Courts treat them as one example of the decisions across the nation, on Insurance Claims Bad Faith Law Blog, on April 1, 2010.

Please Read The Disclaimer. 

Excess Insurance, Risk Management, and Reserves.

    **Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.** 

   Excess Insurance incepts, or begins its Coverage, over and above Primary and other underlying Insurance.  In an interesting article, Robert S. Schimek, Chief Financial Officer of Chartis (formerly known as AIG's Property and Casualty lines of business, according to the article), is quoted as saying that Excess lines are "among the most complex lines of business to reserve for."  Robert S. Schimek, quoted by Mary Williams Walsh, "A.I.G. Posts Loss of $11 Billion on Higher Claims" p. B1, col. 5 (New York Times Nat'l ed., "Business Day" Section, Saturday, February 27, 2010).

   Mr. Schimek observed that two (2) lines of Insurance accounted for some 90% of the additional monies which AIG posted to its Reserves on Friday, February 26, 2010:  Excess Worker's Compensation and Excess Casualty.  Id.

Please Read The Disclaimer. 

Second Circuit Holds State-Court Judgment Not Adjudication of Liability.

   Confronting an extremely confusing fact situation,  Download General Star Nat'l Insurance Co. v. Universal Fabricators, Inc. (2d Cir. Opinion Filed Nov. 2, 2009, amended December 28, 2009), the Second Circuit Court of Appeals held that a state-court judgment was not an adjudication of the policyholder's liability.

   This ruling came in a lawsuit pursued by a primary carrier against an excess carrier in which, in pertinent part, the primary carrier sought reimbursement of a judgment in a state court personal injury action.  The judgment was against the primary carrier's insureds and the insureds of the excess carrier.  It followed the primary carrier's rather complicated settlement among several co-defendants including its own insureds -- but which did not include an insured of the excess carrier or the excess carrier itself.  In fact, the excess carrier was not told about the settlement agreement and apparently was not provided an opportunity to participate in it.  The judgment exceeded all expectations and was large enough to invade the excess carrier's policy in amount alone.

  Thereafter, the primary carrier pursued its reimbursement rights in the Federal Court Action, resulting in the adverse ruling by the Second Circuit on appeal.

Please Read The Disclaimer.

Direct Liability to Excess, for Excess, or Not?

    Two cases decided by the same Florida Appellate Court decades apart, leave the existence of a direct duty in doubt from a Primary Liability Carrier to an Excess Liability Carrier.

    In the earlier of the two cases, Florida's First District Court of Appeal held that there is no direct duty to an Excess Carrier from the Policyholder's (or other Insured's) Primary Carrier.  Hartford alleged that it was the Excess Carrier and claimed that The Travelers was the Primary Carrier acting in Bad Faith.  "We further find Hartford's remaining claim that Travelers owes a direct duty to Hartford not cognizable under Florida law."  Download Hartford v. Travelers (Fla. 1st DCA 1989), review denied, (Fla. 1990).

    In 2007, three different distinguished Judges of Florida's First District Court of Appeal reached the opposite conclusion.  "Therefore, [the Primary Carrier] owed [the Excess Carrier in this case] a duty of good faith."  Download Progressive American Insurance Co. v. Nationwide Insurance Co. (Fla. 1st DCA Case No. 1D06-2159, Opinion Filed February 14, 2007). 

   Primary Liability Carriers will have a hard time adjusting their conduct to meet the demands of Florida Insurance Law, until the apparent conflict in the Florida case law is resolved.

Please Read The Disclaimer.

 

Level of Insurance Coverage Levels the Playing Field.

     Disputes between Insurance Companies and their Policyholders is nothing new.  In California, for example, there is a dispute brewing about who is responsible for maintaining levels of Insurance Coverage necessary to provide the money to rebuild after recent wildfires there, the Insurance Companies or the Policyholders, or both.  Marc Lifsher, "Wildfires Heat up Debate on Inadequate Insurance Coverage" (Los Angeles Times Online, Friday, June 6, 2008, a link which may or may not work if TypePad issues are not resolved, but available online at www.latimes.com.

     One thing remains certain.  Maintaining the level(s) of Insurance Coverage which provide payouts adequate to rebuild a home after a covered loss is a very good idea if the desired result is to rebuild a home after a covered loss.

Please Read The Disclaimer.

Let Coverage (and a Smile) be Your Umbrella.

    The problem with Umbrella Insurance Policies is not that Policyholders do not buy them.   The Premiums are way lower on average than the Premiums charged for the same amount of Primary Insurance Coverage.

    Rather, the problem with Umbrella Insurance Coverage is that the vast majority of Policyholders are not insured with adequate limits on their Umbrella and other Excess Insurance Coverages over and above their Primary Homeowner's Insurance or Automobile Insurance Policies, for example.  Joseph B. Treaster, "Umbrella Coverage for Preventing Your Ruin" (New York Times.com, Tuesday, March 18, 2008).

    There is no time like the present to take the counsel of this respected reporter in the article linked above, and check on your own Umbrella Insurance Policy Limits, or to counsel others you may represent to do the same.

Please Read The Disclaimer.

Primary and Excess Flood Insurance ... And CatClaim Computer Models.

   Chubb has just issued a Press Release announcing that in addition to its Primary Flood Insurance offering, "Chubb Introduces Broad Excess Flood Policy ...."  Link to the Chubb December 20, 2006 Press Release here.

    A valuable gift is given us at this time of the rolling year, by taking a closer look at where Chubb is going.  A concise and valuable education is available in Coverage issues for Catastrophe Claims and what to offer to address and relieve them, as perceived by one of the world's leading Insurance Companies.  Chubb currently offers Primary Flood Insurance in 20 States in the United States.  Chubb's Primary offering is both broader in potential Coverage than the mainstay Federal Flood Insurance Policy provisions, and it offers much higher Policy Limits:  $15,000,000.00 in Home and Contents Coverage, attractive to high-tax-bracket Policyholders.

    The new Excess Flood Insurance Policy offered by Chubb will be made available in 15 of the 20 States in which the Primary Flood Policy is offered.  In the future, more States will receive the Excess offering, according to the linked Press Release. 

   Imagine a map of the United States with me for a moment.  10 of the 20 States where Chubb offers it Primary Flood Insurance are located inland.  These are places where rivers and lakes are likely to be the primary sources of flooding, such as Illinois, Missouri, and Pennsylvania.  8  States in this group are located on the Atlantic Coast.  Florida is the only State located on the Gulf Coast, and Florida is the only State on the list which is located on the Atlantic Coast south of Virginia.   Finally, 2 States on the Pacific Coast are on Chubb's Primary offering list.   15 of these 20 States make the cut for Chubb's Excess Flood offering:  Currently, Arizona, Colorado, Idaho, Ohio and Utah do not.

   Anyone would ask why, with several Insurance Companies refusing to tread where many different kinds of Claim risks are associated with Hurricanes and other Catastrophes -- such as from Wind -- why is Chubb, an admittedly bright group of people, offering any sort of new Coverage that would be available only in the event of a Catastrophe?

   One reason appears in a newspaper report apparently based at least in part on Chubb's linked Press Release, above.  The newspaper report contains a quote that is not found in the Press Release, along with other additional and useful information.  Stated on Web Site as Available ONLY TO WALL STREET JOURNAL ONLINE SUBSCRIBERS:  Lavonne Kuykendall, "Chubb to Offer Flood Insurance for Some Upscale Coastal Customers" (Wall Street Journal, Thursday, December 21, 2006, p. D2, col. 1).    In the newspaper report, Chubb's spokesperson who was responsible for rolling out this new Flood Insurance product is quoted as stating that some other Insurance Carriers are adjusting their offerings because those other Insurance Carriers are relying on "'new catastrophe models'" which suggest that "'they are more exposed than they thought they were.'"  In other words, Chubb is basing its projections and thus its new Flood Insurance offerings on the reliable fact-based Computer Model for Hurricanes and other Catastrophes.

   The clear and obvious result of some, but by no means all other Insurance Companies, buying in to a new 'model' based instead on opinions about past and future claims is that those other Insurance Companies are adjusting their own offerings down. 

   Hoping for protection to All which addresses Catastrophes in the United States and the World, Happy Holidays to All!

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

 

 

When a Primary Carrier Becomes Excess ....

                     Then the Excess-Once-Primary Becomes the Insured!
                                                            
    Federal District Judges have to decide State Law Questions.  It is not easy because they are not State Court Judges.  Still, what Federal Judges say usually counts for something.  Sometimes even in Insurance, if not always.  A recent example comes from the decision in the case of St. Paul Fire & Marine Insurance Co. v. Lexington Insurance Co., 2006 WL 1295408 (S.D. Fla. Case No. 05-80230-CIV Opinion Filed April 4, 2006)(subscription required), Download St. Paul v. Lexington (S.D. Fla. April 4, 2006).pdf.

    In St. Paul v. Lexington both insurance companies had what the Federal  District Judge called "virtually identical" provisions that made them both primary.  Nonetheless, in the space of about 6 pages the Federal Court made Lexington primary, and St. Paul excess.

    This involved St. Paul having a right of "equitable subrogation" against Lexington by which St. Paul stood in the shoes of the insureds "and assumes the rights of those insureds."  In other words, St. Paul became the insureds because of equitable subrogation.

    Then the Federal Court put this holding into action.  Lexington should have defended the lawsuit against the real insureds, said the Federal Court, "in good faith, and, at a minimum, to give notice to St. Paul as the following carrier of the critical aspects of the case as it progressed."  The problem there is that when equitable subrogation is involved, the case against the insureds is always over.    Which it was.

    When the case against the insured is over, there is, at a minimum, nothing to give notice about because nothing is happening.  Not notice to anyone, including a "following carrier" whatever that may mean.  Much less to give notice about "critical aspects" since those are not happening, either, of course.
   
    St. Paul v. Lexington is a Federal Court's honest answer with undoubtedly good intentions to address Florida Insurance Law Questions decided otherwise in other cases in Florida State Courts.  St. Paul and Lexington are doubtless bound by the result in the Federal case regardless.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.