Insurer Convinces Court That Conditions Actually Disclosed Were Not Disclosed

A Massachusetts company learned the hard way that you need to pay close attention to policy endorsements when you negotiate them. In Market Forge Industries, Inc. v. Indian Harbor Insurance Company, the Appeals Court of Massachusetts held, in an unpublished decision, that a Pollution and Remediation Legal Liability Policy did not cover the costs of cleaning up certain pollution because the “Pollution Conditions” were not specifically listed in the “Known Conditions” endorsement. This despite the fact that the policy was intended to cover known pollution conditions, and the policyholder had… More

What Triggers Excess Coverage: Not Necessarily the Payment of the Full Underlying Policy Limits

More and more excess insurers are taking the position that a policyholder which settles with primary or low level excess insurers for less than the full amount of the policy limits has waived its right to obtain coverage from any of the high level excess insurers. A Texas appellate court recently rejected this position in Plantation Pipe Line Company v. Highlands Insurance Company in Receivership.  There, the policyholder had expended over $18 million to clean up a contaminated site in North Carolina. Because the policyholder had settled with the lower level insurers and recovered less than the full $8… More

How Zurich Turned A $50,000 Policy Into A $2.5 Million Obligation

A recent decision by a Massachusetts court is startling not for its rulings but for the sheer amount of the judgment. Through its incompetence or arrogance (and the Court suggests the former), Zurich American Insurance Company managed to take a garden-variety personal injury claim against a policy limit of $50,000 and convert it into a judgment against it for more than $2.5 million.

The facts in Boyle v. Zurich American Insurance Company are somewhat convoluted, but the simple version is that having been notified by its insured of a potential personal injury claim… More

Absolute Pollution Exclusions Are Absolute When There Has Been Pollution

Pollution exclusions first became routine in liability policies in the early 1970s. After a decade of often unsuccessful litigation trying to enforce those exclusions, insurers introduced a so called “absolute” pollution exclusion into their commerical liability policies. Given that the language of absolute pollution exclusions has almost universally been found to be unambiguous, there has been a surprising amount of litigation on the subject. What emerges from that litigation is a general rule: the exclusion will virtually always be enforced where the claim involves contamination of the environment, but enforcement is far less certain where the claim involves damage to… More

Will The Second Circuit’s 9/11 Decision Have Implications For Insurance Claims?

The Second Circuit recently affirmed a district court’s dismissal of a CERCLA claim, holding that the terrorist attacks of September 11th were “Acts of War” for which CERCLA liability did not attach. The Court in In Re September 11th Litigation acknowledged that the district court’s decision (and, by implication, its own) was a narrow one and specifically cautioned that it “was not necessarily applicable in contexts presenting different considerations, such as ‘cognate laws of insurance’”. Nevertheless, given that most insurance policies exclude coverage for “Acts of War”, one can envision insurer arguments that the Second Circuit decision applies with equal… More

Selection of Counsel — Policyholder’s Choice, At Least In Illinois

As all lawyers know, selection of counsel is no trivial matter.  It is often a battleground between policyholders and insurers with each side seeking to control the choice of counsel.  In Illinois, policyholders are entitled to select counsel at the insurer’s defense when there is a conflict between the interests of the policyholder and the insurer.  Typically that conflict of interest arises when the insurer agrees to defend subject to a reservation of rights.

A recent federal case applying Illinois law, however, held that a conflict of interest can arise even when the insurer agrees to defend without a reservation of… More

Liability Insurer May Have to Cover Knockoff Jewelry Site for Allegedly Violating Reese Witherspoon’s Right of Publicity

kateHave you always wanted to own “The One Ring to Rule Them All” of Lord of the Rings fame?  Do you dream of an engagement ring just like Kate Middleton’s?  Your dreams can come true with a visit to, a website that sells costume jewelry, including imitations of celebrity baubles.  There you can search for “Middleton” and find several versions of the famous royal sapphire-and-diamond band, next to pictures of the Duchess herself wearing the real thing.  But… if you long for your very own copy of Reese Witherspoon’s engagement… More

No Privilege for Claims Handling Documents

Insurance companies often utilize lawyers as claims handlers to determine whether there is coverage for a particular claim.  Because a lawyer was making the determination, insurers routinely take the position that any documents relating to that coverage determination are privileged. 

An intermediate appellate court in New York recently rejected that position.  In National Union Fire Insurance Company v. TransCanada Energy USA, the court held that an insurance company cannot insulate its claims handling function from discovery by having a lawyer act as a claims handler: 

Documents prepared in the ordinary course of an insurer’s investigation of whether to pay or deny a claim are… More

Whose Expectations Matter — Named Insured or Additional Insured?

In many instances, the interpretation of an insurance policy hinges on the expectation of the policyholder.  For example, many definitions of “occurrence” require property damage that was neither intended nor expected from the perspective of the policyholder.  Where there is an Additional Insured, however, an issue arises whether the expectation to be considered is that of the Named Insured or that of the Additional Insured.  This issue recently arose in a California case,  Transport Insurance Company v. R.R. Street & Co.  with the court holding that the expectations that governed coverage were those of the Additional Insured when it is the Additional Insured that was the party claiming coverage.

 The Transport… More

Coverage for Corporate Liability in Delaware Is Forever

Ever since the Supreme Court’s decision in Citizen’s United, an effort has been made to humanize corporations, culminating in Mitt Romney’s infamous pronouncement that “Corporations are people my friend.”  Now it turns out that corporations may not be entirely like people.  In a recent decision, the Delaware Court of Chancery in In the Matter of Krafft-Murphy Company, Inc. ruled that corporations are in at least one respect immortal in that their liability to third parties lives forever. 

In Krafft-Murphy, asbestos claimants sought to reach the unexhausted liability insurance of a dissolved corporation long after the expiration of the Delaware three year wind-down period.  The… More

Insurer Communications with Reinsurers As A Source of Factual Admissions in Coverage Litigation

In coverage litigation, policyholders can often find valuable factual admissions in an insurer’s communications with its reinsurers.  Yesterday’s New York Times reported on a case that provides a good example.  There, the owner of $15 million in commercial properties discovered that someone he had done business with had somehow been able to take out mortgages on those properties by forging the loan documents with the owner’s name.  The owner found out about the mortgages when the lenders began foreclosure proceedings. 

The lenders and the owner sought to have the falsified loans paid off by the title insurer, Stewart Title,  whose policy… More

Is The Absolute Pollution Exclusion Absolute? It Depends On Which State Answers the Question

The battle over the scope of the absolute pollution exclusion in general liability policies continues to be fought in the context of defective drywall manufactured in China.  An earlier blog entry discussed a Virginia court that had concluded that there was no coverage for defective drywall claims, rejecting decisions from a number of states that had ruled that the absolute pollution exclusion should be limited to industrial pollution claims, particularly Superfund claims.

In Probuild Holdings, Inc. v. Travelers Property Casualty Company of America, a Colorado court relying on Massachusetts and Florida law recently took the other side from the Virginia court.  The Colorado court denied… More

Who Is Owed A Duty Of Care When the Insurer Pays for the Defense?

Ever wonder what duty of care and loyalty a lawyer providing a defense paid for by an insurer owes to the insurer?  A recent decision by the Washington Supreme Court suggests that the lawyer’s duties run to the policyholder, not the insurer.

In Stewart Title Guaranty Company v. Sterling Savings Bank, a title insurance company brought a malpractice claim against the attorney it had retained for its policyholder.  The attorney defended on the ground that it owed no duty to the insurer even though the insurer was paying for the defense of the policyholder.  Although acknowledging that several  other jurisdictions came… More

Is a Pre-Suit Voluntary Payment Always Fatal To Coverage — Not In Colorado

Settling a claim before a suit has been filed and before the insurer has been given notice will often result in forfeiting coverage under the so called “no voluntary payment” provision in most liability policies.  Those provisions routinely state that any voluntary payment made by the policyholder without the consent of the insurer will be at the policyholder’s expense.   Many states strictly enforce the no voluntary payments clause, except where the payment is necessitated by an emergency circumstance or where the insurer has disclaimed coverage. 

An appellate court in Colorado in Stresscon Corporation v. Travelers Property Casualty Company of America recently ruled that a policyholder… More

Your Broker Can Be Your Insurer If He Fails To Obain Coverage For You As An Additional Insured

Baseball is not just a game of balls and strikes, and insurance is not just about contracts, as a recent case by the Sixth Circuit Court of Appeals found.  In Cleveland Indians Baseball Company, L.P. v. New Hampshire Insurance Company, the Cleveland Indians had contracted with an event company to arrange for inflatable slides to be used before a regularly scheduled game.  The events company arranged with an insurance broker to have coverage for the inflatable slides and that coverage would name the Cleveland Indians as an additional insured.  Unfortunately, the insurance policy that the broker obtained contained an express exclusion for inflatable slides.

It is well settled… More