1 HAPPY NEW YEAR! The most closely watched insurance case in this issue is Montrose Chemical Corp. v. Superior Court of California , which is a must-read for insurance practitioners involved with long tail asbestos and environmental claims. This case discusses the concepts of “elective stacking” and discusses the circumstances under which horizontal exhaustion is required, including the role of “other insurance” clauses in the analysis. Stay tuned—on November 29, 2017, the Califor- nia Supreme agreed to review this decision. Notice Cases Late notice continues to be low-hanging fruit for insurers seeking a sound basis to deny cov- erage. Hoel v. Old American County Mutual Fire Insurance Co. and Nautilus Insurance Co. v. Miranda-Mondragon address when an in- sured’s late notice of a lawsuit supports a cov- erage denial, and Thompson v. GEICO Insur- ance Agency, Inc. , discusses a requirement in a personal auto policy requiring the insured to notify its insurer whenever the insured pro- cured a replacement vehicle. Suit Limitation An insured’s noncompliance with suit limita- tion clauses also continues to be a sound basis for insurers seeking a basis to deny coverage. The court in A+ Restorations, Inc. v. Liberty Mutual Fire Insurance Co. considered whether a suit limitation clause applies to an assignee of an insurance claim. UM/UIM This issue contains several interesting uninsured/underinsured motorist (UM/UIM) insurance cases, including Indiana Insurance Guarantee Association v. Smith , in which the court addressed whether a party is con- sidered an uninsured motorist when its insur- er denies coverage because the party failed to comply with the policy’s cooperation clause. Another interesting UIM case is Easterling v. Progressive Specialty Insurance Co. , in which the court considered whether a driver’s bankruptcy meant that the underly- ing claimant was not “legally entitled to recover damages” from the other driver for purposes of triggering UIM coverage. And, in Raymond v. Taylor , the Oklahoma Supreme Court considered whether a UM insurer may subrogate against a tortfeasor’s excess or umbrella insurers or whether the UM insur- er’s subrogation rights are limited to the tort- feasor’s primary insurers. Occurrences Courts continue to wrestle with whether faulty workmanship constitutes an occur- rence under a commercial general liability (CGL) policy, with the majority of courts holding that inadvertent faulty workmanship can constitute an occurrence if it causes inju- ries to third-party property. The court in Owners Insurance Co. v. Tibke Construc- tion, Inc. , evaluated whether a subcontrac- tor’s failure to test soil was an occurrence when it resulted in damage to a home con- structed by an insured general contractor. Disputes regarding what constitutes an oc- currence are not limited to construction claims. Cases in this issue discuss whether an intentional shooting on a freeway is a cov- ered accident (Allocca v. York Insurance Co. ) and whether an insured’s intentional adulteration of a food product is an occur- rence (Ratajczak v. Beazley Solutions, Ltd. ). January 2018
Transcript
January 2018
HAPPY NEW YEAR!
The most closely watched insurance case inthis issue is Montrose Chemical Corp. v. SuperiorCourt of California, which is a must-read forinsurance practitioners involved with long tailasbestos and environmental claims. This casediscusses the concepts of “elective stacking”and discusses the circumstances under whichhorizontal exhaustion is required, including therole of “other insurance” clauses in the analysis.Stay tuned—on November 29, 2017, the Califor-nia Supreme agreed to review this decision.
Notice Cases
Late notice continues to be low-hanging fruitfor insurers seeking a sound basis to deny cov-erage. Hoel v. Old American County MutualFire Insurance Co. and Nautilus Insurance Co.v. Miranda-Mondragon address when an in-sured’s late notice of a lawsuit supports a cov-erage denial, and Thompson v. GEICO Insur-ance Agency, Inc., discusses a requirement ina personal auto policy requiring the insured tonotify its insurer whenever the insured pro-cured a replacement vehicle.
Suit Limitation
An insured’s noncompliance with suit limita-tion clauses also continues to be a sound basisfor insurers seeking a basis to deny coverage.The court in A+ Restorations, Inc. v. LibertyMutual Fire Insurance Co. considered whethera suit limitation clause applies to an assignee ofan insurance claim.
UM/UIM
This issue contains several interestinguninsured/underinsured motorist (UM/UIM)
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insurance cases, including Indiana InsuranceGuarantee Association v. Smith, in whichthe court addressed whether a party is con-sidered an uninsured motorist when its insur-er denies coverage because the party failedto comply with the policy’s cooperationclause. Another interesting UIM case isEasterling v. Progressive Specialty InsuranceCo., in which the court considered whether adriver’s bankruptcy meant that the underly-ing claimant was not “legally entitled torecover damages” from the other driver forpurposes of triggering UIM coverage. And, inRaymond v. Taylor, the Oklahoma SupremeCourt considered whether a UM insurer maysubrogate against a tortfeasor’s excess orumbrella insurers or whether the UM insur-er’s subrogation rights are limited to the tort-feasor’s primary insurers.
Occurrences
Courts continue to wrestle with whetherfaulty workmanship constitutes an occur-rence under a commercial general liability(CGL) policy, with the majority of courtsholding that inadvertent faulty workmanshipcan constitute an occurrence if it causes inju-ries to third-party property. The court inOwners Insurance Co. v. Tibke Construc-tion, Inc., evaluated whether a subcontrac-tor’s failure to test soil was an occurrencewhen it resulted in damage to a home con-structed by an insured general contractor.Disputes regarding what constitutes an oc-currence are not limited to constructionclaims. Cases in this issue discuss whether anintentional shooting on a freeway is a cov-ered accident (Allocca v. York InsuranceCo.) and whether an insured’s intentionaladulteration of a food product is an occur-rence (Ratajczak v. Beazley Solutions, Ltd.).
Last year, there were several cases interpret-ing whether the term “collapse” in a propertypolicy means an actual collapse or merely animminent collapse. Courts are split on the issue.The most recent decision to discuss this issue isTustin Field Gas and Food v. Mid-CenturyInsurance Co.
Insured versus Insured Exclusion
The Second Circuit Court of Appealsweighed in on whether an insured versus in-sured exclusion applied to a claim brought by adirector not acting in his capacity as a directorin Intelligent Digital Systems LLC v. BeazleyInsurance Co.
Punitive Damages
The court in Farmers Texas County Mutual In-surance Co. v. Zuniga addressed the interesting
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issue of whether a policy that covered “dam-ages for bodily injury” also covers punitivedamages or whether it only covers compensa-tory damages. This decision is noteworthy inthat many punitive damages coverage casesare decided based on public policy ratherthan policy language.
Duty To Defend
In the past several years, Illinois courts haveissued numerous decisions evaluating when aparty qualifies as an additional insured in con-nection with construction site bodily injuries.The most recent Illinois appellate decision toconsider the issue is Crum & Forster Special-ty Insurance Co. v. Imperial Crane Services,in which the court considered the insured’sargument that a party is not entitled to a de-fense as an additional insured if the underly-ing lawsuit does not mention the named in-sured’s work at the construction site at whichthe injury occurred.
In many jurisdictions, a conflict between aCGL insurer and its insured entitles the insuredto select its own defense counsel. The relatedissue of whether an insured was entitled to re-ject the insurer’s choice of defense counsel inthe absence of a conflict of interest was consid-ered in OneBeacon America Insurance Co. v.Celanese Corp.
Personal Profit Exclusion
There is not much case law interpreting “per-sonal profit” exclusions in directors and officersand errors and omissions policies. The court inEmployers Mutual Casualty Co. v. HeliconAssociates and Estate of Michael J. Wituckiprovides an interesting discussion of the majori-ty rule regarding how this exclusion applies inthe context of a charter school’s bond financingscheme.
Assignment of Claims
The decision in Erie Insurance Co. v.McKinley Chiropractic Center, P.C., provides
a cautionary tale for a claimant pursuing aninsurance claim as a tortfeasor’s assignee,with the court holding that an assignmentmade before the underlying action was re-duced to a judgment was not effective.
Trigger of Coverage
Most courts to consider progressive injurycases apply a continuous, injury-in-fact, or ex-posure trigger theory. Courts occasionally willapply a “manifestation” theory, holding that thepolicy in effect when the property damage orbodily injury first appears is triggered. Thecourt in Air Master & Cooling v. SelectiveInsurance Co. of America rejected the mani-festation trigger theory in a progressive dam-age construction defect suit in favor of a con-tinuous trigger.
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Bad Faith
A few courts have held that an insurer maybe liable for insurance bad faith even if there isno coverage or the insurer eventually fulfilledits obligations under the policy. In State AutoProperty Insurance Co. v. Stucky, the West Vir-ginia Supreme Court considered whether an in-surer that fully defended and indemnified its in-sured was liable for bad faith.
Notice of Cancellation
Insurance underwriters must be aware of thenotice of cancellation and nonrenewal statutesin every state in which they issue policies. Oth-erwise, they may end up unwittingly providingcoverage under policies they intended to cancelor nonrenew. Such was the case in O.P.H. ofLas Vegas, Inc. v. Oregon Mutual Insurance Co.
Written by ABA Members of the ICLC
This supplement was written by the following members of the Insurance Coverage LitigationCommittee (ICLC) of the Tort Trial and Insurance Practice Section (TIPS) of the American BarAssociation, under the direction of Executive Editor Seth Lamden. TIPS uses royalties fromsubscriptions sales to seed a scholarship fund to increase diversity among participants in TIPSprograms. Learn more.
Brian R. AdeJacqueline BeattyMark M. BellBenjamin A. BlumeEric CaughW. Gray Dunlap Jr.Alan K. GoldsteinStephen P. Groves Sr.
Nicholas M. InsuaMarci Goldstein KokalasNancy KornegayAmanda LefflerJay LevinBrian MargoliesJ. David MooreNicholas N. Nierengarten
Harvey NosowitzKatie C. PfeiferCarl A. SalisburyNicholas C. Snow Kara ThorvaldsenMargaret Van ValkenburgGordon K. WaltonBeth E. Yoffie
