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Emerging Issues

April 2015 Monthly Review

            “Thought” of the Month: “There can’t be a crisis next week….My schedule is already full!” Henry Kissinger

OREGON CLEANUP STATUTE BENEFITS DEFENDING INSURER

In Century Indemnity Co. v. The Marine Group LLC, et al., No. 08-1375, D. Ore., Federal Magistrate rules that the defending insurer may rely upon OR. REV. STAT. [Oregon Revised Statutes] 465.480(7)(a) that once the defending insurer establishes the existence and amount of defense costs, the non-defending insurers must prove the requested costs are unreasonable or unnecessary.  Practice Pointer – Given the difficulty in proving that incurred defense costs were unreasonable, the better course of action may be to participate in the defense as soon as possible allowing for control of the defense costs. 

CALIFORNIA COURT UPHOLDS REQUIREMENT THAT INSURER DEFEND CROSS-CLAIMS

            In Richard E. Haskins, et al. v. Employers Insurance of Wausau, et al., No 14-1671, N.D. Calif.; 2015 U.S. Dist. LEXIS 21480, a Federal Court Judge rules consistent with California law that the Insurer must defend a cross-claim.  Insurer’s argument that a cross-claim is not a “suit” was rejected.   Practice Pointer – Be careful when arguing Foster-Gardner…which was a very close decision that we won before the California Supreme Court.  Here, the fact that the cross-claim was not itself a separate suit but a cross action in a current suit did not preclude the insurer from defending.  Foster-Gardner does not require a separate suit for each affirmative action within a suit.

TEXAS FEDERAL JUDGE PRECLUDES COVERAGE UNDER THE POLLUTION EXCLUSION IN A CONSTRUCTION CASE

            In Evanston Ins. Co. v. Lapolla Industries Inc., No. 13-3157, S.D. Texas; 2015 U.S. Dist. LEXIS 21381 a Federal Judge held that the insurer properly denied coverage under an APE for a 3rd-party fume claim arising out of spray insulation.  The insured’s argument that there was no property damage under the policy thereby precluding application of the pollution exclusion was rejected by the Court.  

NEW ORLEANS 5TH CIR. COURT OF APPEALS AFFIRMS NO BAD FAITH FOR DENIAL OF WHERE INSURED WAS DEFENDED BY OTHER INSURERS

            In Anco Insulations Inc. v. AIG Premier Insurance Co., et al., No. 13-31313, 5th Cir.; 2015 U.S. App. LEXIS 2973, the 5th Cir. affirmed a ruling that the insured had no duty to defend cases that were being defended by other insurers, and therefore no bad faith, up until the time the defending insurers exhausted.  Further, the Court held that the insurer was not obligated to defend or reimburse the defending insurer for pre-tender costs.

PENNSYLVANIA FEDERAL JUDGE FINDS INSURER’S ASBESTOS EXCLUSION IS AMBIGUOUS

In General Refractories Company v. First State Insurance Co., et al., No. 2:04-cv-3509, E.D. Pa., A Federal Judge finds the Asbestos Exclusion ambiguous holding that the insurer must not only prove that its interpretation is reasonable but that the insured’s interpretation is unreasonable.  Faced with two “reasonable” interpretations, the Court held that the insured’s interpretation must prevail.

WISCONSIN / MISSOURI BOTH FIND THE TOTAL POLLUTION EXCLUSION UNAMBIGUOUS

In Advanced Waste Services, Inc. v. United Milwaukee Scrap LLC, No. 2014AP1169, Wis. App., Dist. I, The Wisconsin Court of Appeals precludes coverage for damages arising out of the transport and disposal of the insured’s contaminated waste water based upon the total pollution exclusion find the exclusion “Unambiguous.”

In Barbara Williams v. Employers Mutual Casualty Co., No. 13-2393, E.D. Mo., a Federal Judge precludes coverage for an $82 million judgment based upon the pollution exclusion.

NEW YORK FEDERAL JUDGE ORDER PRODUCTION OF DRAFT COVERAGE LETTERS

In Broadrock Gas Services LLC, et al. v. AIG Specialty Insurance Co., No. 14-3927, S.D. N.Y., the Court ruled that while communications concerning coverage and draft response letters drafted by the counsel were protected from disclosure, subsequent changes and drafts within the insurance company were not so protected and ordered produced.  Practice Pointer – Keep your counsel involved in the edit process to protect attorney-client and attorney work product content.

NEW YORK FIND THAT FLORIDA LAW HAS CONSISTENTLY PRECLUDED COVERAGE FOR CHINESE DRYWALL CLAIMS

            In Bayswater Development LLC, et al. v. Admiral Insurance Co., et al., No. 105001/10, N.Y. Sup., App. Div., 1st Dept., a New York Supreme Court of Appeals precludes coverage under Florida law for damages caused by defective Chinese drywall. 

VIRGINIA 4TH CIR. HOLDS THAT NEGLIGENCE ACTS SUFFICIENT TO TRIGGER DEFENSE

            In Liberty Mutual Fire Insurance Co. v. JM Smith Corp., et al., No. 13-2451, 4th Cir., the 4th Cir affirmed lower court’s ruling that negligence acts alleged in the complaint were sufficient to trigger a defense notwithstanding the pleading of intentional violations.  Practice Pointer – Artful and/or in-artful pleadings in a complaint are often not held to be a basis for a coverage determination.  Where allowed, defend subject to reimbursement of uncovered defense amounts.

WISCONSIN SUPREME COURT FINDS COVERAGE FOR AN EXPLOSION UNDER A POLLUTION POLICY

            In Acuity, A Mutual Insurance Co. v. Chartis Specialty Insurance Co., No. 2013AP1303, Wis. Sup., the Wisconsin Supreme Court found a duty to defend and indemnify existed for damages caused by an explosion that resulted from the escape of natural gas.  Specifically, in reversing the Appellate Court, the Supreme Court found the natural gas leak to be a “pollution condition” and the natural gas to be a “contaminant” under the policy.  Practice Pointer – this ruling resulted in the context of an insurer contribution action and in my opinion may have made bad law.  While a natural gas leak may be a “pollution condition” due to “contamination,” however, the intervening explosion and fire caused the damage rather than a typically contemplated pollution damage due to a “pollution condition.” This may be an instance where a case involving the destruction of homes and injury of people may have been better resolved out-of-court.

MAINE COURT FINDS CLAIMS HANDLING MANUAL, UNDERWRITING GUIDELINES AND REINSURANCE COMMUNICATIONS DISCOVERABLE

            In, Irving Oil Limited v. ACE INA Insurance, No. 09-35, Maine Bus., Cumberland Co., a Maine Justice determining the phrase “underlying insurance” to be ambiguous in an MTBE claim, allows discovery of the insurer’s claims manuals, underwriting guidelines and reinsurer communications.  Query… if any of those documents discuss the meaning of “underlying insurance” …. (i.e., are they even “responsive” documents?)

CALIFORNIA FEDERAL COURT UPHOLDS NO ASSIGNMENT CLAUSE

            In Nordby Construction Inc. v. American Safety Indemnity Co., et al., No. 14-04074, N.D. Calif., a Federal Judge follows controlling California law upholding the validity of “No Assignment” clauses.  This case was handled by our office and additional comment can be provided upon request.


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