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

Last Friday, a divided Texas Supreme Court held liability insurers are permitted to use staff attorneys to defend claims against insureds if the insurer’s interests and the insured’s interests are "congruent," but not otherwise.  In Unauthorized Practice of Law Committee v. Am. Home Assurance Co., Inc., No. 04-0138 (Tex. March 20, 2008), the high court addressed whether a liability insurer that uses staff attorneys to defend claims against its insureds is representing its own interests in handing the defense (which is permitted), or whether it is engaging in the unauthorized practice of law (which is obviously not permitted).  Finding the practice to involve the protection of the insurer's own interests, it permitted the practice of using staff counsel to defend liability claims if the interests of the insurer and insured were "congruent."

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The U.S. Supreme Court heard oral argument on February 28, 2008 in Exxon Shipping Co. v. Baker, No. 07-219. At issue is whether Exxon, having already paid $400 million in compensatory damages to Alaska citizens who were injured by the Exxon Valdez oil spill, must pay an additional $2.5 billion in punitive damages.

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Sara Thorpe is the chair and speaker, and Mike Aylward, a speaker, at the DRI's Insurance Coverage and Claims Institute in Chicago in April 2008.  The topics to be covered include conflicts of interest, drafting effective reservation of rights letters, independent counsel, settlements, litigation management, e-discovery, emerging insurance coverage issues for commercial and personal lines carriers, and "bad faith."  This seminar is perfect for insurance professionals and lawyers who represent them, both the novice and the experienced.  More information available at: www.dri.org/open/CLE.aspx?sem20080155 or www.dri.org

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On remand from the U.S. Supreme Court, the Oregon Supreme Court has reinstated the $79.5 million punitive award in Williams concluding that the trial court did not err in refusing to give a proposed jury instruction concerning whether the jury could use punitive damage to punish Philip Morris for the impact of its misconduct on other persons, for independent state law grounds unrelated to the issues addressed by the US Supreme Court in its 2007 decision. Williams involved a claim by the widow of a longtime smoker that died of lung cancer against Philip Morris for fraud and negligence. At trial, Williams presented evidence that Philip Morris and other tobacco companies knew of the health dangers of smoking since the 1950s but nevertheless carried out an extensive campaign to convince the public that doubts remained about whether smoking actually was harmful to health. Near the end of trial, Philip Morris offered a proposed jury instruction that would have told the jury that it could not use punitive damages to punish Philip Morris for the alleged impact of its misconduct on other persons that could bring lawsuits of their own where a jury may award punitive damages. The trial court refused to give the instruction. The jury ultimately returned a verdict awarding Williams, among other things, $79.5 million in punitive damages.

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We’re pleased to announce that the editors of Matthew Bender and LexisNexis Mealey’s Insurance publications have selected our site for inclusion in the “Top Blogs” section of LexisNexis' Insurance Law Center. The center is an excellent source of real-time news and commentary, which can be accessed by RSS feeds, pod casts and e-mail alerts. This week, the center is featuring one of my favorite commentators, Randy Maniloff, with an article about and link to Randy’s 7th annual look at the top ten insurance law cases of the year: Randy Maniloff's Insurance-Palooza: An Impressive All-Day Sucker, for links to the articles.

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As 2007 draws to a close, we take this opportunity to look back at some highlights of the year past and to peek over the horizon towards 2008...

Most Important Coverage Developments of 2007

--Fifth Circuit largely curtails first party coverage for Katrina claims.
--Courts finding coverage for construction defect breach of contract claims.
--Illinois Supreme Court rules in targeted tenders in Kajima
--Second Circuit adopts broad causation theory for 9/11 claims in Parks Realty
--Illinois and Massachusetts courts find CGL coverage for junk faxes
--Indiana Supreme Court refuses to require coverage for preventing pollution.

Most Worrisome Trends of 2007: 

1.   Legislative involvement in coverage issues.  More and more policyholders are going to the statehouse to get relief that they can't get in court.  Maryland (bad faith), Washington (bad faith) and New York (late notice-almost) are only the latest examples.

2.   News from the Big House:  Scruggs indicted for bribery...Hartford claims people charged with fixing silica settlements...Do you know the way to Corpus Christi?

3.   Excess Exposures:  More and more courts are finding ways to spike claims into excess layers, even where primary limits aren't exhausted.

Issues That Seem So 2006:  Clergy abuse, mold, Eliot Spitzer.

Watch Out for 2008:  Sub-prime mortgages, tainted toys, climate change, privacy claims.

Best '90s Moment of 2007:  Montana Supreme Court rules that first party insurers don't owe coverage for Y2K claims.   Ah, nostalgia.

Most Memorable Quote of 2007:  "We, uh, like I say, it ain’t but three people in the world that know anything about this … and two of them are sitting here and the other one … the other one, uh, being Scruggs … he and I, um, how shall I say, for over the last five or six years there, there are bodies buried that, that you know, that he and I know where … where are, and, and, my, my trust in his, mine in him and his in mine, in me, I am sure are the same.” 

Court Most Determined to Embarass Itself:  Washington Supreme Court.   The court reached a new low with Woo.  Plainly the toothsome dentist didn't have an auto policy or the court would have found coverage under that one too.

Court Most Determined to Disagree With Itself:  Washington Supreme Court.  Every third case prompted one or more dissenting opinions in 2007

Best Christmas Present:   Connecticut Supreme Court rules that Hartford may be able to aggregate Western McArthur asbestos settlement payments for reinsurance purposes.

The Wheels of Justice Grind Slowly in Texas:  Is there another court in the country with more old coverage cases waiting for action?  Trigger, duty to defend, late notice.  And did we mention UPL?

 On the Horizon: 

--California:  Supreme Court is now considering scope of the "genuine dispute" doctrine as a defense to bad faith claims (Delgado) and the application of concurrent causation to pollution liability claims (State v. Llloyds).

--New York:  The late notice wars continue, in and out of court.

--Pennsylvania:  Supreme Court will decide in Baumhammer's how many "occurrence" limits are shooting spree can trigger.

That's all for now.  See you in 2008.

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The First Circuit heard oral argument on Wednesday in the matter of Boston Gas v. Century Indemnity, a case that presents the first opportunity for this Circuit to weigh in on issues of allocation in long-tail coverage disputes.

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The U.S. Supreme Court announced earlier today that it has agreed to accept Exxon’s petition for certiorari from a ruling of the Ninth Circuit holding it liable for $2.5 billion in punitive damages for its claimed misconduct in connection with the Exxon Valdez oil spill.  

It appears from the court’s October 29 cert order, which accepted briefing on issues raised by Exxon's petition concerning the propriety of such an award under federal maritime law but not on grounds of constitutional due process, that any resulting ruling will have narrower application to bad faith claims and other punitive damage suits than the Court’s recent rulings in State Farm v. Campbell and Williams v. Philip Morris.

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Todd Hoeffner, the Texas plaintiffs’ lawyer who was indicted last June by a federal grand jury in Houston for paying over $3 million in kickbacks to two Hartford claims handlers to orchestrate $34 million in silicosis settlements, has filed a cross-claim against Harford in the malpractice suit that his former clients have since brought against him, claiming that he was a victim of extortion. In papers filed in the U.S. District Court in Corpus Christi last week, Hoeffner seeks $3 million in  damages from Hartford that he is seeking to treble pursuant to a RICO claim, contending that Rachel Rossow and John Prestage threatened to scuttle legitimate settlements unless he agreed to pay them bribes. Hoeffner claims that “employees of The Hartford held hostage the legal rights of Hoeffner and his clients in a plan calculated to enrich themselves.”

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