Category: Blog

District Court Sends Valentine to Washington State Policyholders Finds that PRP “Scarlet Letters” Trigger Duty to Defend

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David A. O’Neill, JD

PolicyFind

 

On February 10, 2017, the U.S. District Court for the Western District of Washington issued its opinion in King County v. Travelers Indemnity Co. et al.  The District Court held in that case that letters from state and federal regulatory authorities designating the County as a PRP at a property damage site were the “functional equivalent of a suit,” triggering its insurers’ duty to defend under its historical general liability insurance policies.

Although its insurers argued that mere PRP notice letters were not “adversarial and coercive” enough to trigger a duty under their policies, the District Court found that the USEPA and Washington State Department of Ecology had “assumed an adversarial posture by exercising their statutory authority to designate King County as a strictly-liable PRP.” In its opinion, the court reasoned: “Once a party bears the scarlet letters ‘PRP,’ it may be called upon at any time to assume responsibility for the cleanup effort.”

Noting that both CERCLA and the Washington state MTCA are “strict-liability schemes that require responsible parties, once notified, to participate in and fund all remedial action,” the District Court found that once notified,  “It makes no difference whether an insured voluntarily cleans up contamination or waits until government intervention—it is liable either way.”

The King County decision relied on the Washington Court of Appeals 2014 ruling in Gull Industries v. State Farm. In that case, the court had found that the term “suit” in general liability policies was ambiguous and may encompass claims for administrative enforcement actions if they are “adversarial and coercive” in nature.  Noting that the Gull Industries decision had gone for the insurer, Travelers argued that the PRP notices in the King County case were “exactly the type of letter that the Gull court expressly found did not trigger a duty to defend.” The District Court however distinguished between the letters in Gull and those in King County, noting that the agency letters to Gull Industries stated that it had not yet determined that it was a PRP, while in the King County case the PRP designation was clear. The DOE’s letter in Gull had been a “passive acknowledgement” that voluntary remediation was underway. The Kings County letters clearly identified it as a PRP.

Defense Lawyers Risk Federal Court Sanctions for Failure To Investigate and Present Applicable Insurance Evidence

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Increasingly, America’s civil courts are demanding that insurance defense attorneys be duly diligent in the handling of their client’s evidence of applicable insurance. Where attorneys fail to investigate and present what coverage may be available in their client’s insurance portfolio, they risk court sanction.

Tenth Circuit Upholds Counsel’s Duty to Investigate Coverage

Federal Rule of Civil Procedure 26(a)(1)(A)(iv) requires that parties to civil litigation in possession of insurance policies that may provide coverage be forthcoming even before discovery requests for insurance policies are made. It reads:

“[A] party must, without awaiting a discovery request, provide to the other parties… any insurance agreement under which an insurance business may be liable to satisfy all or part of a possible judgment in the action or to indemnify or reimburse for payments made to satisfy the judgment.” Fed. R. Civ. P. 26(a)(1)(A)(iv).”

So when Sun River Energy’s trial counsel argued before the District Court that it had born no duty to examine his client’s Director’s & Officer’s Liability insurance policy to see whether it provided coverage for securities violations and present it to opposing counsel, the 10th Circuit Court of Appeals found his argument wanting. In the case styled Sun River Energy v. Nelson decided in September, 2015, the appellate court determined that the District Court had not abused its discretion in sanctioning trial counsel for not disclosing its client’s policy until coverage had lapsed. It ruled that the attorney’s obligation “inherently includes an exercise of legal judgment regarding the possible availability of coverage under the specific terms of any insurance policies held by a party.” Where Sun River’s trial counsel “never took a serious look at whether there was applicable insurance,” the appellate court found that sanctions were in order even without a finding of intentional misrepresentation.

North Carolina Attorney Sanctioned for Failing to Disclose Umbrella Coverage

Not only is it necessary to investigate insurance coverage and present it to opposing counsel in discovery but it is necessary to present all the evidence of insurance in the client’s possession in addition to that policy under which you are providing a defense. In the recent case styled, Inc. Palacino v. Beech Mountain Resort, the U.S. District Court for the Western District of North Carolina found it necessary to sanction an insurance defense attorney for failing to properly discuss and review applicable insurance in her client’s insurance program. There, the attorney had revealed the first $1 million layer of commercial general liability insurance coverage but had failed to make additional inquiry that would have revealed a $10 million umbrella policy above the underlying coverage.

Insurance Archeology a Necessary Part of Defense

Given the growing insurance expertise demanded of insurance defense counsel, the hiring of an insurance archeologist to assist in the preparation of insurance evidence during discovery makes increasing good sense. Defense attorneys can likely protect against sanctions by showing that they were duly diligent in the accumulation and evaluation of applicable insurance documents at trial.

INSURANCE ARCHEOLOGY & DOCUMENT RETENTION IN THE DIGITAL-ERA

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By Kristen Drake

It’s 2016 and technology is everywhere.  I have a chip in my debit card, a watch that makes phone calls and I watch television through a device called “Roku”.  But, as an Insurance Archeologist, my work life is spent looking for a paper trail.

I spend hours searching for insurance policies.  Specifically, I look for policies that can cover environmental contamination costs.

As you will read in other blogs on this site, if you are a business owner who purchased Commercial General Liability insurance for your business before policies contained absolute pollution exclusion language, you are likely to have insurance coverage that can address environmental contamination.

Continue reading “INSURANCE ARCHEOLOGY & DOCUMENT RETENTION IN THE DIGITAL-ERA”

U.S. District Court Denies Insurer Right to Control Defense and Remediation: Insurer Hired Defense Counsel Cannot Serve Two Masters in Indiana

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Written by David O’Neill, JD, Director of Investigations, PolicyFind

Valley Forge Insurance Company sued scrap yard operator, Hartford Iron & Metal in the U.S. District Court for the Northern District of Indiana, seeking a declaration that it had both the right to control the defense and remediation of the Hartford environmental contamination site.  A settlement agreement entered into by the parties, a U.S. District Court ruled, did not override Indiana case law that defines a “conflict of interest” in the environmental coverage context.

Continue reading “U.S. District Court Denies Insurer Right to Control Defense and Remediation: Insurer Hired Defense Counsel Cannot Serve Two Masters in Indiana”

How to Find Your Company’s Old Insurance to Defend Against Environmental Property Damage Claims

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Written by David O’Neill, JD, Director of Investigations, PolicyFind

Yours is a middle-sized manufacturing company headquartered in the Midwest. Last year, the bank handling your company’s refinancing required that you conduct a Phase One environmental assessment. The Phase One report showed that past use of degreasers had contaminated the soil and possibly the groundwater beneath your plant. As required by law, you reported the findings to your state’s environmental authority. The state then sent a letter requiring that your company take action to determine the extent to which groundwater or adjoining land may have been polluted. Your attorney explained that your company’s general liability insurance policies from years past could provide coverage for the cost of responding to the state’s directives. So he asked you to provide him with copies of any and all general liability insurance policies in your company’s possession.

Continue reading “How to Find Your Company’s Old Insurance to Defend Against Environmental Property Damage Claims”

Proposed Amendments to the Federal Rules of Evidence May Complicate Policyholder’s Burden in Proving CGL Coverage

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Written by David O’Neill, JD, Director of Investigations, PolicyFind

As an insurance archeologist, the location and retrieval of historical insurance policies has long been my business. Policyholders with long-tail claims often rely on liability insurance policies issued decades ago to provide coverage. These policies provide the evidence of insurance necessary to tender environmental property damage claims, toxic tort claims, as well as sexual battery claims to insurance carriers.  Where an actual insurance policy cannot be found, an endorsement, a premium notice, or broker correspondence may serve as the document to be authenticated and form the basis of the policyholder’s claim for coverage. These documents dating to the mid and late 20th century are typically found boxed in off-site storage facilities, in insurance broker archives, in government-retained microfilm collections, etc.

Policyholder’s counsel proffering decades-old documentary evidence in declaratory judgment actions to prove the existence, terms and conditions of liability insurance coverage have long done so with confidence, knowing that these types of documents were “self-authenticating.”  Federal Rule of Evidence 901(b)(8) allows that such an “Ancient Document” can be relied upon as authentic if (a) it is “in a condition that creates no suspicion about its authenticity”; (b) was found “in a place where, if authentic, it would likely be” and (c) “is at least 20 years old when offered.”  Federal Rule 803(16) provides a hearsay exception for these Ancient Documents. Therefore, news this summer that the United States Judicial Conference’s Committee on Rules of Practice and Procedure had issued a report proposing changes to the Federal Rules of Evidence that would repeal the hearsay exception for Ancient Documents is being met with some concern by policyholder’s counsel.

Continue reading “Proposed Amendments to the Federal Rules of Evidence May Complicate Policyholder’s Burden in Proving CGL Coverage”

Two Recent Indiana Court of Appeals “Known Loss” Decisions Focus on Policyholder Awareness of Property Damage Liability

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Written by David O’Neill, JD, Director of Investigations, PolicyFind

The Indiana Court of Appeals opinion in General Housewares Corp. v. National Sur. Corp. 741 N.E.2d 408, 413 (Ind. Ct. App. 2000) established the adoption of the common law known loss doctrine under Indiana insurance law. In that opinion, the Court stated that:

“Simply put, “the known loss doctrine” states that one may not obtain insurance for a loss that has already taken place.”

In General Housewares Corp., the Court of Appeals declared that the doctrine applied where an insured had “actual knowledge that a loss has occurred, is occurring, or is substantially certain to occur on or before the effective date of the policy.” Since that decision, the Court has taken cases on appeal that require it to further define what the term “loss” actually means in the context of what needs to be known to preclude insurance coverage under this doctrine. Its rulings in two of these cases appear at odds and call for some clarification regarding the application of the doctrine to environmental claims in Indiana. Continue reading “Two Recent Indiana Court of Appeals “Known Loss” Decisions Focus on Policyholder Awareness of Property Damage Liability”

Does Buss Stop Here? California’s Insurer Right to Recoup Rejected by Other State Courts

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Written by David O’Neill, JD

Director of Investigations, PolicyFind

 

The California Supreme Court recognized an insurer’s right to recoup defense costs for claims proven to be non-covered in its 1997 holding in Buss v. Superior Court.1  Finding precedent in state law for the rule that an insurer’s duty to defend in a commercial general liability (“CGL”) insurance policy is indeed broader than its duty to indemnify, the Supreme Court singled out an issue before it as one of first impression. The issue to be determined was whether the insurer’s costs in exercising its duty to defend could be passed to the policyholder should claims defended later be determined to include those for which coverage did not apply.

Basing its decision on contractual principles, the Buss court opined that because the insurer had defended potentially uncovered claims, the policyholder had received a benefit for which it had not bargained.  It found that the insurer’s right to recoup these defense dollars was implied in law even if not expressly stated in the insurance contract.   Continue reading “Does Buss Stop Here? California’s Insurer Right to Recoup Rejected by Other State Courts”

Mesothelioma Victims Resurrect Bankrupt Employer’s Policies Can File as Direct Claimants Against Insurers

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Written by David O’Neill, JD, Director of Investigations, PolicyFind

 

EnviroForensics and PolicyFind typically work on behalf of businesses required to respond to demands made by governmental entities, or property owners claiming damage to the environment occasioned by their business practices. We assist these businesses by locating historical insurance policies purchased by the companies identified or named as responsible parties.

This June, a Louisiana law firm representing mesothelioma victim employees of a bankrupt company sought PolicyFind’s help in locating their employer’s historical insurance coverage. If the insurers and their policies could be identified, the employees wished to make bodily injury claims against their former employer’s insurers under Louisiana’s direct action statute. To do so they needed to find the policies and prove the terms, conditions and exclusions of these policies Continue reading “Mesothelioma Victims Resurrect Bankrupt Employer’s Policies Can File as Direct Claimants Against Insurers”