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

If your company has recently seen an uptick in coverage claims involving allegations that an insured’s advertising falsely claimed that its products were protected by patents, it’s no accident.

An article in the April 5, 2010 issue of The National Law Journal details the recent surge in suits against such familiar corporations as Brunswick, Clorox, Ace Hardware, Timex, Hallmark and Kimberly Clark in the wake of a December 2009 federal appellate ruling that vastly expanded the damages that plaintiffs could recover for “false marking” suits under the Federal Patent Act.

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What do Thomas the Train and the Abu Graig prison have in common? Both have been the focus of major insurance coverage disputes concerning the extent of extra-territorial liability insurance coverage. In light of our increasingly interconnected international markets, U.S. businesses must consider not only their liability for claims involving imported products but also the need to ensure that appropriate insurance is available to cover these different risks.

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Taking the brave step of deciding an insurance case on its own without certifying questions to the Florida Supreme Court, the Eleventh Circuit has ruled in Mid-Continent Cas. Co. v. American Pride Building Co., No. 09-11238 (11th Cir. March 29, 2010) that a Florida district court erred in granting summary judgment to a liability insurer in a copyright infringement case where the insurer was defending under a reservation of rights but ignores the view of defense counsel in assessing whether to settle. Without reaching the issue of whether American Pride had breached the duty to cooperate, the Eleventh Circuit found disputed issues of fact with respect to whether Mid-Continent had changed the terms pursuant to which its defense was being provided when it added a later condition that it be entitled to recoup its defense costs if coverage was held not to apply. If such facts were found to exist, the Eleventh Circuit ruled that Mid-Continent would have been entitled to withdraw its assent to the defense being provided and would therefore have been free to enter into a settlement of its own volition without breaching the duty to cooperate.

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As my friend and mentor Steve Paris used to say, where you stand often depends on where you sit.  Such has been the case in several recent rulings where insurers played dual roles in the same case.

 Back in 2008, a federal court in Seattle ruled in Mutual of Enumclaw v. Cornhusker Cas. Ins. Co., 2008 WL 4330313 (E.D. Wash. September 16, 2008) that statements that it made at the mediation of its insured's liability claims were not privileged in an ensuing DJ because the communication had occurred in the course of a mediation concerning the insured’s liability and had not concerned coverage issues.  More recently, the California Court of Appeal has ruled in Risely v. Interinsurance Exchange (Cal. App. March 26, 2010) that an insurer that defended under an auto policy but denied HO coverage for the same claim was subject to the same rules concerning a consent judgment claim under the HO policy as if it had denied coverage under both lines of coverage.

Now a court in Maine has addressed the puzzling issue of whether an automobile liability insurer that coincidentally finds itself on both sides of a UIM arbitration is  collaterally estopped to dispute the results of the arbitration, 

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A tip of the cap to White & Williams coverage maven Randy Maniloff for his hilarious satirical send up of a surprising opinion issued yesterday by the New Jersey Supreme Court in  Three Jokers recanting the heresy of its 1994 "triple trigger" decision in Owens-Illinois as no longer being worthy of predecential value.  I had to check the Supreme Court's web site to make sure it wasn't the real thing.  Now if wishes were horses...

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Summary judgment was recently granted to State Farm in the case of Ass'n of Unit Owners of Nestani v. State Farm Fire & Cas. Co., 2009 U.S. Dist. LEXIS 102150 (D. Or. 2009). At issue was potential collapse coverage for substantial and pervasive decay damages at the Nestani Condominiums in Gresham. The State Farm policy provided “collapse” coverage, but only in the event of a “sudden, entire collapse of a building or any part of a building.” The policy defined “collapse” as “actually fallen down or fallen into pieces.”

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We report here on major developments in case law, but also on practical points – cautionary tales, reality checks, and reminders.

Last year, one such case involved the issue of whether an insurer had an obligation to search for policies issued to other parties in the lawsuit – in that situation, the insurer did have that obligation. Safeco Ins. Co v. Parks, 170 Cal.App.4th 992 (2009). Today’s case concerns an insurer’s duty to examine coverage under multiple policies issued to the same insured and the risk of denying coverage under one policy even though there is coverage (at least in part) and a full defense being provided by another policy issued by that insurer. Risely v. Interinsurance Exchg. Of the Auto. Club, 2010 Cal.App. Lexis 399 (2010). The situation presented also created an opportunity for the insured to enter into a stipulated judgment even while being defended by the insurer.

The Risely case arose out of a car accident. Risely was riding in a car driven by Turner (the insured) who was allegedly driving erratically. Risely tried to get Turner to take her home or drive better. Risely claims Turner kept her in the car against her will. An accident occurred. Risely claims to have been severely injured.

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In Century Surety Co. v. Casino West, Inc., 2010 U.S. Dist. LEXIS 19807 (D. Nev., March 4, 2010), the court addressed whether the total pollution exclusion and a separate indoor air exclusion applied to all indoor air pollution.  In Century Surety, four people were killed by carbon monoxide poisoning when vapors from the motel’s pool heater room permeated their room because air intake vents had been blocked. 

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