Tag: insurance

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.

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”

First N.Y. Ruling on Horizontal Exhaustion of Excess Policies Allows Policyholder to Vertically Exhaust Second Tier Coverage

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

 

The Delaware Superior Court for Newcastle County recently addressed the issue of whether horizontal exhaustion should apply in determining when successive excess liability insurance policies may be triggered.  Attempting to apply New York law in Viking Pump, Inc. v. Century Indemnity, the Delaware court found that New York courts had yet to decide the issue. It found that New York policy considerations and California case law were compatible in making its ruling.

The Delaware court was presented with this issue following its employment of horizontal exhaustion to determine when the New York manufacturer’s primary and umbrella policies would respond to asbestos related personal injury claims.  While the insurers urged that horizontal exhaustion should apply to the second layer of coverage, the policyholder sought a ruling that vertical exhaustion would be the correct decision. Continue reading “First N.Y. Ruling on Horizontal Exhaustion of Excess Policies Allows Policyholder to Vertically Exhaust Second Tier Coverage”

Indiana House Examines Insurance – Lobby Backed Bill to Exclude Pollution Coverage

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Written by Justin Gifford, General Counsel, PolicyFind

 

Out of the blue on January 16, 2014, Representative Martin Carbaugh (R – Ft. Wayne) introduced a bill sponsored by the Indiana Insurance Institute that attempts to do what a decade and a half of insurance company litigation couldn’t accomplish in Indiana courts: give the word ‘pollutant’ an unambiguous definition in Commercial General Liability (CGL) policies. In other words, allow insurers to unilaterally disclaim one of the biggest risks many businesses seek insurance for.

Every other year (including 2014) in Indiana is a short session, meaning that the House and Senate have a short window to get legislation through, which also means that bills like HB 1241 can rocket through the Statehouse without much discussion. In this case, serious discussion is what’s needed, particularly considering the impressive financial impact this bill would have on Indiana’s residents and businesses.

Continue reading “Indiana House Examines Insurance – Lobby Backed Bill to Exclude Pollution Coverage”