The Second District Court of Appeal has issued an important new opinion that adds to this year’s series of California appellate decisions on when an insurer owes its policyholder a duty to pay for independent defense counsel, in Swanson v. State Farm General Ins. Co., ___ Cal. App.4th ___ (2013). In Swanson, the Court of Appeal found that an insurer that had issued to its policyholder a reservation of the right to deny coverage that gave rise to the type of conflict that creates a right to independent counsel under California Civil Code section 2860 (“Cumis counsel”) could end that duty by withdrawing that portion of the reservation of rights that created the right to have the insurer pay for such counsel. Continue reading “Controlling Cumis – California Court Confirms that Right to Independent Counsel Can be Terminated by Withdrawing ROR”
NY Court of Appeals Revisits Controversial K2 Decision
The New York State Court of Appeals (New York’s highest court) has agreed to hear re-argument on K2 Investment Group LLC v. American Guarantee & Liability Insurance Company, 2013 N.Y. LEXIS 1461 (N.Y. June 11, 2013). In K2, the Court held that a liability insurer that declined to provide a defense to its insured on the basis that the liability alleged was not covered might waive all policy defenses if it was later held that a defense should have been supplied.
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In Pair of Cases, 5th Circuit Enforces 30-Day Notice Requirement in Pollution Exclusion Buy-Back Clauses; No Prejudice Need be Shown
In two separate cases – one under Texas law and one under Louisiana law – the Fifth Circuit has reinforced the principle that a 30-day notice provision in a pollution exclusion buy-back clause is strictly enforceable, and an insurer does not need to demonstrate prejudice to deny coverage. In these cases, the Court found that this outcome was consistent with the Court’s prior decision in Matador Petroleum Corp. v. St. Paul Surplus Lines Ins. Co., 174 F.3d 653 (5th Cir. 1999), and the Court found that this principle of enforceability was not changed by subsequent notice-prejudice cases.
Claims Made & Reported Policies: Continuous Coverage Does Not Trump the Requirement that Claims Be Made and Reported in the Same Policy Period
In a ruling upholding the concept that “words have meaning”, a United States District Court interpreting South Carolina law denied coverage to an insured which had a claim made against it in one policy period but did not report the claim to its insurer until the next policy period even though the insured was continually insured by the same insurer. Rather, the Court held in essence that a requirement that claims be “made-and-reported in the policy period” actually means that claims that claims must be made and reported in the same policy period and coverage will not be extended merely because the insured renews its policy.
K2 Investment: The New York Court of Appeals’ Recent Ruling Has Significant Impact on an Insurer’s Assessment of its Duty to Defend a Claim Under a Liability Policy
The New York Court of Appeals rendered a decision June 11, 2013 holding “when a liability insurer has breached its duty to defend its insured, the insurer may not later rely on Policy exclusions” to avoid indemnification.
The ruling in K2 Investment Group, LLC, et al v. American Guarantee & Liability Insurance Company, 2013 NY Slip op. 4270 (N.Y., June 11, 2013) will significantly affect an insurer’s assessment of its duty to defend a claim tendered under a liability policy. The court held an insurer may be deprived of the ability to contest coverage for the indemnity of a claim when it determines not to afford a defense to the insured.
The Devil Is in the Details: Director Minutes and Liability
What should director minutes say and how detailed should they be? It likely depends on the maturity of the company, the personality of its management and the input of its lawyers. Partner Stephen Honig reviews the considerations in conjunction with the ground rules set forth in the NACD “Directors’ Guide” in this column for Carrier Management.
7th Circuit Upholds Prior Knowledge Provision in Claims-Made Policy
The Seventh Circuit Court of Appeals decided on April 2, 2013 that an Indiana law firm was not entitled to coverage for a claim made and reported in a second policy period where the insured reasonably had knowledge that a claim might be made during the first policy period. Koransky, Bouwer & Poracky v. The Bar Plan Mutual Insurance Co., No. 12-1579, 2013 U.S. App. LEXIS 6558 (7th Cir. Apr. 2, 2013). As the Court noted (in affirming a District Court decision to the same effect), “a reasonable attorney would have recognized that his failure [to deliver a contract during the first policy period] . . .was an omission that could reasonably be expected to be the basis of a malpractice claim.” Continue reading “7th Circuit Upholds Prior Knowledge Provision in Claims-Made Policy”
Exhausting Policy Limits When Settling Less than All Lawsuits
In his latest article, Thomas R. Newman explains his thoughts on handling multiple claims with insufficient limits to cover an insured’s total potential exposure, when not all of the claims are settled.
Mr. Newman practices in the areas of insurance and reinsurance law, including coverage, claims handling, contract drafting and arbitration and litigation. He has served as lead counsel in more than 55 reinsurance arbitrations, representing both cedents and reinsurers. He is often called upon to act as an expert witness in insurance cases in the United States and in London.
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San Francisco Trial Court Is First California Court To Adopt The Wallace & Gale Approach To Asbestos Operations Claims
In what is the first trial court ruling in California on the issue, to our knowledge, the San Francisco Superior Court on January 31, 2013 issued a ruling adopting the Wallace & Gale approach to the completed operations issue for asbestos claims. The decision was issued by San Francisco Superior Court Judge John E. Munter in Phase III of Plant Insulation Co. v. Fireman’s Fund Insurance Co., et al., a multi-phase declaratory relief action pending in San Francisco.
The California Supreme Court Will Take Another Look At Henkel
On December 12, 2012, the California Supreme Court granted review in Fluor Corporation v. Superior Court (2012) 208 Cal.App.4th 1506, previously commented upon in this blog. The issue on review, as stated on the Supreme Court’s website, is: “Are the limitations on assignment of third party liability insurance policy benefits recognized in Henkel Corp. v. Hartford Accident & Indemnity Co. (2003) 29 Cal.4th 934 inconsistent with the provisions of Insurance Code section 520?”
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