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

With respect to the fortuity doctrine, Oregon courts generally recognize that there is a public policy against providing insurance for intentionally inflicted injury.  A-1 Sandblasting v. Baiden, 293 Or. 17, 26, 643 P.2d 1260 (1982) (although painter acted intentionally, his act was not the kind of purposeful infliction of injury that public policy places outside of insurance indemnification); Isenhart v. General Casualty Co., 233 Or. 49, 53-54, 377 P.2d 26 (1962) (same). The Oregon Supreme Court has held that where the “fortuity” concept is expressed in the coverage grant (e.g., where the coverage grant specifically limits coverage to liability arising from unexpected and unintended damages) the burden is on the insured to show that the damages were not expected or intended.  ZRZ Realty Co. v. Beneficial Fire & Cas. Ins. Co., 349 Or. 117, 132 (2010).  However, where the fortuity concept is embodied in an exclusion, is merely implied or depends on public policy, the burden is on the insurer.  Id., at 138.  This methodology reflects the general rule that the insured has the initial burden of proving coverage but the insurer has the burden of proving the application of an exclusion.  Employers Ins. of Wausau v. Tektronix, Inc., 211 Or. App. 485, 509 (2007).  This methodology also highlights the importance, in Oregon, of expressly barring coverage for expected or intended injuries, preferably by a clause in the coverage grant rather than through an exclusion.

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It is black letter law that in order to recover under an all risk policy, the insured has the burden of showing that its loss resulted from a fortuitous event. "Fortuitous" means happening by chance or accident, or occurring unexpectedly or without known cause. Black's Law Dictionary 664 (7th ed. 1999).   If the insurer knows of a substantial risk of loss at the time it issues its policy and fails to exclude that risk, does the insurer thereby “waive” the fortuity requirement under its policy if a loss subsequently (and predictably) occurs?   Yes, according to one federal district court in Illinois. Nipponkoa Ins. Co., Ltd. v. NDK Crystal, Inc., 3:11-cv-50205 (N.D. Ill. Dec. 29, 2011).   Can that determination be made on the pleadings? Yes again. 

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After thirty years in this business, there are a few colleagues who have both earned my respect and still have a full head of hair that they can call their own.  One is Michael Blair of Gen Re, who has now agreed to shave his head to raise funds for the St. Baldrick's Foundation for childhood cancer research.  If you're curious what Blair will look like bald or just think that this is an unusually decent thing for a reinsurance guy to do, go on line to support Mike's bid:

http://www.stbaldricks.org/participants/mypage/521362/2012

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Although unexpectedly large jury verdicts have prompted disputes between excess and primary insurers for years, the phenomenon of excess carriers suing defense counsel hired by the primary insurer is relatively new. The issue presented in such cases is whether, in the absence of a direct attorney/client relationship, the excess carrier has any right to sue counsel or, in the alternative, pursue a claim for equitable subrogation based upon counsel’s client relationship with the insured?  A new opinion from the Mississippi Court of Appeals has ruled, however, that a client relationship may be implied where the carrier's cause of action is based upon direct dealings with defense counsel.

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Massachusetts is one of a handful of states that allow third party claimants to sue liability insurers for failing to promptly settle their claims.  It is unique in allowing tort claimants to recover punitive damages in such cases.   In the wake of the Supreme Judicial Court's ruling this week in Rhodes v. AIG Domestic Claims it is evident that the price of failing to settle claims in which liability is reasonably clear can be high indeed.

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We are into a new year and with it comes a glimmer of hope that insurers will be heard (at least to some extent) in asbestos bankruptcy proceedings. However, two new decisions from the Ninth Circuit are a mixed bag, on the one hand allowing insurers standing to be heard on a debtor’s reorganization plan, but holding that insurance policy anti-assignment clauses and pre-petition agreements to arbitrate are not enforceable when they “conflict” with the purposes of the bankruptcy code.

The Ninth Circuit in In Re Thorpe Insulation, (January 24, 2012) __ F.3d _ (12 C.D.O.S. 939), reversed a district court’s finding that non-settling insurers lacked standing to challenge the asbestos debtor’s reorganization plan under 11 U.S.C.§ 524(g).  The Ninth Circuit found the plan has a financial impact on the insurers despite the bankruptcy court’s decision the plan was “insurance neutral.”  The Ninth Circuit held the insurers’ appeal was not moot even though the plan was already in force and operational.  However, the Ninth Circuit held California law upholding an insurance policy’s anti-assignment clause is preempted by federal bankruptcy law.

In In Re Thorpe Insulation, (January 31, 2012) __ F.3d __ (2012 US App Lexis 1691), the Ninth Circuit held the insurer (Continental) could not enforce its pre-petition agreements with Thorpe to arbitrate disputes because the issues to be arbitrated were core issues, intertwined with other issues to be decided in the reorganization. Further, the bankruptcy court had discretion to deny the request for arbitration where in conflict with the purposes of the bankruptcy code.

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