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

Today, we inaugurate a new feature on our blog.  The Monday Tip will consider a practical problem faced by claims professionals and outside coverage counsel, presenting a dialogue created by our five editors.

The question that we posed is how to write the "right" reservation of rights letter?  Is it better to err on the side of caution and throw in everything but the kitchen sink (is there a kitchen sink exclusion?)?  Alternatively, is there a risk of waiver or estoppel if a conceivably applicable policy term, condition or exclusion is omitted from the RoR?

Sara Thorpe: The purpose of a reservation of rights letter is to communicate and reserve rights. As the California Supreme Court observed in Buss:

"Through reservation, the insurer gives the insured notice of how it will, or at least may, proceed and thereby provides it an opportunity to take any steps that it may deem reasonable or necessary in response--including whether to accept defense at the insurer's hands and under the insurer's control or, instead, to defend itself as it chooses. . . . Through reservation, the insurer avoids waiver . . ."

Chris Martin: There has to be a balance between inclusiveness and comprehensibility. In Texas, I advise insurers to balance the scope of a reservation of rights with understandability concerns. An overly inclusive reservation of rights runs the risk of incomprehensibility.

• Email This
• Print
• Comments (3)
• Trackbacks

A recent Illinois opinion of the 7th Circuit has explored the extra contractual liability of a primary insurer that failed to give timely notice to its policyholder of the possibility that the claims against it would exceed its $1 million limit.  In so holding, the esteemed panel (Easterbrook, Posner, Tinder) held that primary insurer's not only have a fiduciary duty to give notice of the risk of an excess verdict but this risk creates a conflict of interest entitling the insured to appoint its own defense counse.

• Email This
• Print
• Comments (1)
• Trackbacks

Fee disputes between insurance companies and their outside counsel are far from uncommon these days. Even so, one would have to look long and hard for one as nasty as the litigation between Liberty Mutual and one its New York law firms firm that surfaced last week in the U.S. District Court in Manhattan. 

• Email This
• Print
• Comments
• Trackbacks

In recent years, insurers have increasingly adopted so-called “wasting limits” provisions within general liability policies. Such provisions, which cause the overall limits of coverage to be reduced by incurred defense costs, are particularly prevalent in add on coverages where insurers seek through endorsements to limit the scope of their obligations with respect to claim types, such as abuse, assault and battery, liquor liability and the like, that would otherwise be excluded altogether. The efficacy of such defense within limits (DWL) provisions has been called into question by a recent opinion of a federal district court in NIC Ins. Co. v. PJP Consulting, LLC, No. 09-0877 (E.D. Pa. October 22, 2010).

• Email This
• Print
• Comments
• Trackbacks

When do statements on an insured’s web site constitute “libel” or disparagement so as to trigger Coverage B? That was the issue before the Wisconsin Court of Appeals in its recent opinion in Acuity v. Community Living Solutions, 2009 AP 2165 (Wis. App. December 28, 2010).

Community Living Solution was sued by a competitor (Hoffman) for deceptive advertising, unfair competition, unfair trade practices and tortious interference with business relationships. Community Living, which had been founded by several of Hoffman’s former employees, had posted information on the “staff experience” page of its web site listing a number of projects that its employees had worked on but failed to specify that those projects were completed while the employees had been working for Hoffman. In its lawsuit, Hoffman claimed that Community’s web site was “untrue, deceptive and/or misleading” and that Community employees had made “untrue, deceptive and misleading statements to Hoffman’s employees, clients and/or potential clients for the purpose of harming Hoffman by trying to adduce Hoffman clients or potential clients to terminate their contractual and business relationships with Hoffman in favor of a relationship with Community.”
 

• Email This
• Print
• Comments
• Trackbacks

As we start a new calendar year, I want to reflect over the next several weeks on lessons learned through multiple bad faith trials across the country during last year in an effort to spur both creative thought and further dialogue on several diverse issues. In 2010, I tried 7 bad faith cases to a verdict in multiple jurisdictions across the country. (Now you know why I haven’t been blogging as much as my co-authors would prefer). I try a lot of cases, but I’ve never tried as many as I have this year. Having so many back-to-back trials regarding very significant coverage and extra-contractual issues taught me several important lessons which I would like to share over the next dozen blog entries. Today I want to debunk the myth of juror "bias and prejudice" and instead introduce a new concept of “filters.” 

• Email This
• Print
• Comments
• Trackbacks

2010: The Year in Review

Greetings from the beaches of Vieques where I've repaired to contemplate the goings on of the past twelve months. 

The Most Influential Rulings of 2010:

In New Orleans, the MDL Judge overseeing Chinese Drywall claims rules that first party losses due to Chinese drywall are subject to “corrosion” and faulty materials exclusions.

Seventh Circuit ruled in Santa’s Best Craft v. St. Paul that an insured that settles a case involving covered and non-covered claims can obtain coverage from its insurer so long as it proves that the covered claims were the “primary focus” of the settlement.

The Seventh Circuit also ruled in ACE American v. RC2 that a policy that only insured foreign “occurrences” did not apply to U.S. claims for exposure to Chinese leaded toys.

Eighth Circuit ruled in Eyeblaster v. Federal Ins. Co. that downloaded cookies that caused plaintiff’s computers to freeze up set forth a covered claim for “property damage” and was not subject to “impaired property exclusion under Minnesota law.

A federal district court in Alabama dismissed the federal government’s Stricker suit against insurers of Monsanto defendants on grounds that MSP claims were time-barred.

California Supreme Court ruled in Minkler v. Safeco that a “severability” clause in a homeowner’s policy precluded the application of the insured’s son’s intent to cause injury to negligent supervision claims against his parents.

Illinois Supreme Court rules in West American Ins. Co. v. Yorkville National Bank that an insurer’s actual knowledge of a suit may satisfy insured’s notice obligations.

Massachusetts SJC rules in Billings v. Commerce that an insurer may avoid a duty to defend based upon extrinsic facts unknown to the insurer at the time.

Texas Supreme Court rules in Gilbert Texas Construction LP v. Underwriters at Lloyd’s, London that contractual liability exclusions extend beyond mere indemnity undertakings.

• Email This
• Print
• Comments
• Trackbacks