National Insurance Law Forum : Insurance Litigation Lawyer & Attorney : National Insurance Law Forum : Insurance Coverage, Bad Faith Litigation

In what can only be called a significant turn around, the New Mexico high court recently overruled twenty-four years of precedent when it announced that actual notice from any source to a liability insurer of a lawsuit against its insured could trigger the duty to defend, even when the insured failed to provide notice of the suit or ask for a defense.   In proving the old adage "bad facts make bad law," the New Mexico Supreme Court ruled notice of a liability claim against the insured could come from any source and the insured's failure to demand a defense didn't excuse the insurer from defending covered claims.   Continue Reading...

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In Mamaroneck Avenue Corp. v. Hartford Fire Ins. Co. (N.Y.App., 2nd Dept., April 22, 2008), a New York Appellate court held that invasion of an organization’s leasehold interest is not covered under the “personal and advertising injury” provisions of a CGL policy. The underlying complaint alleged that the insured “embarked on a plan of harassment and coercion with the intention of causing [claimant] to terminate its leasehold,” which included allegations of “[t]respassing upon [claimant's] premises and interfering with [claimant’s] business by appearing, unannounced, accompanied by Fire Department personnel and the City Building Inspector . . . to solicit or elicit non-existent fire code violations.” The policy’s definition of “personal and advertising injury” included “wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor.” Noting that other "personal and advertising injury" offenses distinguish between "persons" and "organizations," the court held that wrongful eviction claims apply only to natural "persons."  The court relied on several cases from other jurisdictions to support of its holding, including Stonelight Tile v. California Ins. Guar. Assn., 150 Cal App 4th 19; Mirpad, LLC v. California Ins. Guar. Assn., 132 Cal App 4th 1058; and Supreme Laundry Servs. v. Hartford Cas. Ins. Co., 2007 US Dist LEXIS 18134 (ND Ill. 2007).

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In ExxonMobil Corp. v. Certain Underwriters at Lloyd’s, London (N.Y. App., 1st Dept., April 15, 2008), a New York appellate court applies New York’s “unfortunate event test” to find that an insured’s manufacture and sale of two defective products did not constitute a single occurrence for the purpose of determining applicable deductibles, where each installation of polybutylene resin into a municipal water system, and each introduction of a lubricant into an aircraft engine, created exposure to a condition that resulted in property damage to multiple claimants on different dates over many years. In so holding, the court relied on the Court of Appeals' recent  decision in Appalachian Ins. Co. v General Elec. Co., 8 NY3d 162 (2007), and its own holding in International Flavors & Fragrances, Inc. v Royal Ins. Co. of Am., 46 AD3d 224 (1st Dept.2007).

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On April 14, 2008, the Sixth Circuit applying Illinois law ruled that six umbrella insurers owed no duty under their advertising or personal injury coverages to defend or indemnify an insured accused of monopolizing the synthetic thyroid market. The gravamen of the complaints against the insured was that its wrongful monopoly of the synthetic thyroid market caused consumers and health insurers to have to pay higher prices for its product, Synthroid, and kept them from being able to buy lower-cost, equally effective alternatives. The complaints alleged the insured asserted monopoly control by suppressing a physician’s study critical of Synthroid, criticizing her methodology and results, concealing known facts about it and marketing it as a uniquely superior drug despite knowing it was not. The complaints sought economic damages for consumers and health insurers who overpaid for Synthroid. They did not seek damages on behalf of competing thyroid manufacturers and they did not allege defamation, libel, disparagement, or slander. Continue Reading...

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The Ninth Circuit has struck down Nevada’s countersignature law which required out-of-state insurance agents to get a resident agent to sign off on business written in Nevada. The Nevada statute provided that no authorized insurer may make, write, place, or renew any insurance policy on persons, property, or risks in Nevada, “except through its duly appointed and licensed agents resident in [Nevada], any one of whom shall countersign the policy.” The statute further required that the resident agent be paid a 5% commission for all work written in Nevada. The Ninth Circuit found that the statute created “two classes of insurance agents in Nevada, one class of licensed resident agents that can finalize insurance contracts, and a second class of licensed nonresident agents that cannot.” The Ninth Circuit found that the Nevada law violated the Privileges and Immunities Clause of Article IV of the Constitution on the basis that “it discriminates against citizens of other States where there is no substantial reason for the discrimination beyond the mere fact that they are citizens of other States.”

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On April 7, 2008, Division I of the Washington Court of Appeals ruled in Great American Ins. Co., et al. v. Assurance Co. of America on a number of allocation, exhaustion and supplementary payment issues. The case concerned the apportionment of “financial obligations” arising out of the equitable reapportionment of financial obligations arising from the settlement of a large construction defect lawsuit against Polygon Northwest Company, a property development company. In that case, several insurers funded a settlement of the underlying action while an umbrella insurer for Polygon, Great American, did not participate in the settlement. Great American argued in this appeal that the trial court erred by finding it liable because its underlying insurer, United Capitol, was insolvent and made no payments towards the settlement. Great American further argued that even if its excess coverage was triggered, the trial court erred by ordering it to pay amounts exceeding the limits of its policy.


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On Tuesday, the Louisiana Supreme Court upheld the standard flood exclusion in the standard commercial property policy rejecting the claims of the citizens and business owners of New Orleans who claimed the flood exclusion was ambiguous and should not exclude "man made" disasters such as levee breeches or the failure to operate drain pumps.   In Joseph Sher vs. Lafayette Insurance Co., No. 07-2441, the high court of Louisiana was presented with an opportunity to evaluate the Fifth Circuit's determination of the same issue last  August in the consolidated Katrina Canal Levee Breech Litigation where the Fifth Circuit held the flood exclusion to be unambiguous and precluded coverage for the Katrina flooding in New Orleans under the standard homeowner's policy.   The Fifth Circuit's decision prompted plaintiffs' lawyers to select Sher to expedite an appeal through the Louisiana appellate courts in an effort to essentially "reverse" the Fifth Circuit's earlier decision.   The holding of the Louisiana Supreme Court actually echoed that of the Fifth Circuit when it ruled: "The entire English speaking world recognizes that a flood is the overflow of a body of water causing a large amount of water to cover an area that is usually dry land....[T]his definition does not change or depend on whether the event is a natural disaster or a man-made one....The plain, ordinary and generally prevailing meaning is all-inclusive."

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As a general matter, course of performance evidence is admissible to interpret insurance policies, explained California’s Appellate Court in Employers Reinsurance Company v. The Superior Court Of Los Angeles County (2008) __Cal.App.4th__ [08 C.D.O.S. 3935] (2^nd District).  However, in the case before it, some of the course of performance evidence was not admissible because much of the performance was pursuant to settlement and claims handling agreements (which contained reservation of rights to dispute coverage), and not pursuant to the insurance policies. 

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