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

Despite the growing body of case law that has emerged in recent years construing the limits of coverage under CGL policies, there is still a surprising dearth of first party "occurrences" jurisprudence. 

Although most of the original "occurrences" cases involved disputes between policyholders and insurers in which policyholders sought a finding of multiple "occurrences" to trigger additional limits, most of the recent cases have falled into two different areas:  (1) disputes between primary and excess insurers over the applicable limits and (2) disputes with policyholders with respect to the number of SIRs for which the insured is responsible.

• Email This
• Print
• Comments
• Trackbacks

It appears that Chief Justice Roberts recent sabre rattling about punitive damage awards is having some impact.

In the years since the court’s seminal decision in State Farm v. Campbell, which had suggested in dicta that punitive damage awards should generally not exceed the amount of compensatory damages in most cases, only the Eighth Circuit has consistently applied a 1:1 ratio. By contrast, most state and federal appellate courts ignored this language as dicta and have generally sustained punitive damage awards so long as they are less than ten times the size of the compensatory award.

• Email This
• Print
• Comments
• Trackbacks

Of great significance to environmental coverage involving landfills and “indivisible” damages from covered and non-covered releases of pollution, the California Supreme Court issued rulings in the latest chapter of the Stringfellow case. The court found for the State of California on several significant points, and remanded the case for trial on factual issues, since these ruling arose out of summary judgment. (See earlier blogs for reports on other decisions from this long-standing litigation.)

Three main legal issues were addressed in this latest decision:

• Email This
• Print
• Comments
• Trackbacks

A bill has been introduced in the Oregon Legislature that would allow "any person" suffering injury or loss as a result of a practice prohibited under Oregon’s unfair claim settlement practices statute to sue for triple damages plus attorney’s fees. Oregon law currently does not provide a private right of action for a violation of the unfair claim settlement practices statute.

Under Washington's Insurance Fair Conduct Act, an unfair claims settlement practice can provide a basis for trebling damages and awarding attorney's fees and costs but is not itself a basis for a private action. The right of action under the Washington statute is limited to a "first party claimant."

View the Oregon bill here.
View Oregon's unfair claim settlement practices statute here (scroll down to ORS 746.230).

• Email This
• Print
• Comments
• Trackbacks

In Lifestar Response of Alabama, Inc. v. Admiral Ins. Co., 2009 Ala. Lexis 39, Lifestar Response of Alabama, Inc. (“Lifestar”) brought a legal malpractice action against its defense lawyers and its insurer, Admiral Insurance Company (“Admiral”), for failing to have a default judgment set aside in the underlying action. Admiral had agreed to defend Lifestar under a reservation of rights. The primary question before the Court was whether Admiral could be held vicariously liable for the alleged negligence of defense counsel. Lifestar alleged Admiral had a duty to defend Lifestar in the underlying action and that Admiral retained defense counsel as Admiral’s agent to perform the defense obligation. (There was some dispute over whether Admiral first retained defense counsel or if Lifestar retained them and Admiral then agreed to pay their fees, but that did not appear relevant to the Court’s ultimate decision.) Lifestar essentially argued that Admiral breached its insurance contract by providing a substandard defense and that because defense counsel were agents of Admiral, defense counsel’s negligence and/or wantonness should be imputed to Admiral.

• Email This
• Print
• Comments
• Trackbacks

In General Security Indem. Co. v. Mountain States Mut. Cas. Co., 2009 Colo. App. LEXIS 215 (February 19, 2009), the Colorado Court of Appeals addressed the definition of occurrence in the context of property damage to work done by a subcontractor and that company’s sub-subcontractors. The homeowners’ association for the Summit at Rock Creek filed suit against D.R. Horton for alleged construction defects. D.R. Horton in turn sued its subcontractors, including Foster Frames, for indemnity. Foster Frames in turn filed a fourth-party complaint against its sub-subcontractors. General Security insured Foster Frames. General Security then brought an action against the insurers of the sub-subcontractors for contribution and indemnity. General Security brought motions for summary judgment against the defendant insurers arguing that each had a duty to defend Foster Frames, as an additional insured, against the D.R. Horton complaint.

• Email This
• Print
• Comments
• Trackbacks

Disputes concerning the applicability of Coverage B to intellectual property disputes have flared anew in three recently filed suits.

On January 29, 2009, Intel sued American Guarantee & Liability Insurance (Zurich) in the federal district court in San Francisco seeking to impose coverage for claims by Advanced Micro Devices that Intel engaged in unfair marketing practices in the sale and distribution of computer microprocessor chips. Beginning in mid-2005, chip rival Advanced Micro Devices and consumers filed lawsuits against Intel, alleging that the chipmaker engaged in anticompetitive conduct and unfair business practices in the sale, promotion, and marketing of its microprocessors. Intel claims that it has exhausted a $5 million fronting policy and $11 million in coverage afforded by Old Republic and may now access the $50 million excess policy issued by American Guarantee. Intel claims that it is entitled to $50 million in defense costs. American Guarantee has filed an action of its own in Delaware Chancery Court

Seagate Technology has sued National Union seeking recovery of $6 million out of a total of $10 million spent defending patent infringement claims with Cornice, Inc. that the insurer refused to pay owing to disputes over hourly rates, the reasonableness of the sums and costs attributable to prosecuting claims that were not “defense” related. Seagate is represented by Orrick Herrington; National Union by Drinker Biddle.

MGA Entertainment has brought suit against its liability insurers in the federal district court in Riverside, California seeking a declaration that it is entitled to CGL coverage for trade disparagement dispute with Mattel involving its popular line of Bratz™ dolls. It has been reported that more than $63 million in legal fees is at issue. In April 2008, MGA filed three separate DJs against Crum & Forster; Hartford and Lexington. The cases have since been consolidated into a single proceeding
 

• Email This
• Print
• Comments
• Trackbacks

The debate over whether “collapse” coverage extends to buildings that are in structural disrepair but have not yet fallen down has reached a new low in New York. The U.S. Court of Appeals for the Second Circuit has ruled in Dalton v. Harleysville Worcester Mut. Ins. Co., 07-3545 (2nd Cir. February 19, 2008) that a New York District Court erred in interpreting a first party policy’s coverage for “collapse” as being limited to cases involving “total or near total destruction.” Given conflicting New York rulings with respect to this coverage, the Second Circuit declared that “collapse” was ambiguous and should be extended to cover this case where hidden decay had substantially undermined the structural integrity of the insured’s property but had not yet caused it to fall.

• Email This
• Print
• Comments
• Trackbacks

In Pritchard v. Regence Bluecross Blueshield of Oregon, 2009 Or. App. LEXIS 51 (January 28, 2009), Oregon’s Court of Appeals reversed a trial court judgment that dismissed an insured’s claim as untimely. The Complaint, filed in December of 2006, alleged that the insurer, Regence Bluecross, breached its health insurance policy by unilaterally changing the terms of the policy in May of 1999 to cover the insured’s growth hormone medical treatments as a prescription drug benefit instead of as a major medical benefit. The change resulted in Regence Bluecross paying only 50% of the medication expense rather than the 80% it had been paying previously.

• Email This
• Print
• Comments
• Trackbacks

Legislation has been proposed in the Florida Senate that would ameliorate present law with respect to the liability of insurers for failing to accept “time limited” policy limit demands.

Since the Florida Supreme Court’s ruling in Berges v. Infinity Ins. Co. 896 So.2d 665 (Fla. 2004), liability insurers have been plagued by set up claims in cases with severe injuries and relatively low limits. The signature aspect of these cases is a demand by counsel for the tort claimant soon after the accident that the insurer pay its full limits within a short period of time (e.g. 30 days) that is generally less than the insurer would ordinarily need to conduct an investigation of the claim against its insured. Failure to accept the settlement as presented has been held tantamount to a counter-offer, subject the insurer to liability far in excess of the policy limits when the plaintiff thereafter withdraws the offer of settlement and pursues the case to trial.

• Email This
• Print
• Comments
• Trackbacks