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Emerging Issues

June 2015 Monthly Review

 “Thought” of the Month:  “If you can’t explain it simply, you don’t understand it well enough.”  Albert Einstein



GEORGIA - Appellate Court Gives Narrow Reading To Find Coverage For Lead Paint Bodily Injury Claim

            In Amy Smith v. Georgia Farm Bureau Mutual Insurance Co. No. A14A1824 and Bobby Chupp v. Georgia Farm Bureau Mutual Insurance Co., No. A14A1825, Ga. App., 1st Div.; 2015 Ga. App. LEXIS 247, the Georgia Court of Appeals held the Absolute Pollution Exclusion ambiguous because it did not specifically include “lead paint” in its definition of “pollution.” Interestingly, no other product is listed in the definition either.  Why the overly-narrow reading?  Bad facts make bad law.  Plaintiffs’ three-year-old daughter suffered permanent brain damage as a result of exposure to lead paint.  Although the dissent got it right … isn’t this a case to settle?         



NEVADA – Federal Judge Determines Absolute Pollution Exclusion Ambiguous But Holds On Single Occurrence

            In Century Surety Company v. Casino West, Inc., No. 07-636, D. Nev.; 2015 U.S. Dist. LEXIS 39482, following Nevada Supreme Court law, the federal court finds the absolute pollution (indoor air quality) exclusion ambiguous as applied to carbon monoxide.  The Court did, however, find that the four plaintiffs/victims constituted a single occurrence as the carbon monoxide was the one common cause of the deaths.  Again, I am not sure this is the best case to test the limits of the pollution exclusion.



MINNESOTA – Federal Judge Finds 2 “Occurrences” For Construction Property Damage Case

            In National Union Fire Insurance Company of Pittsburgh, PA and American Home Assurance Co. v. Donaldson Company Inc. and Federal Insurance Co., No. 10-4948, D. Minn.; 2015 U.S. Dist. LEXIS 35499, a Federal Judge agrees with insured based upon “undisputed facts” that two numbered lots of defective air-intake ducts constitutes two occurrences.   Interestingly, the two insurers argued alternatives of 1lot and 22 lots which were rejected by the Court.



NEW YORK - New York Federal Judge Enters $82 Million Judgment In Favor Of Insurance For Environmental Costs

            In Olin Corp. v. Insurance Company of North America, et al., No. 84-1968, S.D. N.Y., the jury rejects an “expected and intended” defense by the insurer and allocates $39+ million in remediation costs to the excess insurer.  To add insult to injury, because the parties stipulated to those damages, the Court awards prejudgment interest of almost $43 million.  Practice Pointer:  Expected/Intended is always risky as it always involves a jury, especially so here where damages were stipulated, opening prejudgment interest.           



VERMONT - Vermont Supreme Court Finds Policy’s Pollution Exclusion Unambiguous

            In Cincinnati Specialty Underwriters Insurance Co. v. Energy Wise Homes Inc., et al., No. 14-165, Vt. Sup.; 2015 Vt. LEXIS 33, the Vermont Supreme Court found the absolute pollution exclusion unambiguously applied to preclude coverage for “airborne chemicals and residue” resulting from spray-foam insulation.  In its analysis, the Court specifically declined to follow the “minority” position as articulated in the California MacKinnon case that the exclusion “is not intended to encompass ordinary acts of negligence involving harmful substances.” This decision emphasizes the limited ruling in MacKinnon … a case that again presented bad facts resulting in bad law.           



ILLINOIS - Illinois Appellate Court Holds Umbrella Insurer Did Not Breach Duty To Defend Insured Absent Actual Notice of Exhaustion

            In Sinclair Oil Corp. v. Allianz Underwriters Insurance Co. f/k/a Allianz Underwriters Inc., No. 5-14-0069, Ill. App. 5th Dist.; 2015 Ill. App. LEXIS 250, the Illinois Court of Appeal, after a thorough discussion of Illinois law on “drop down,” found that the umbrella insurer must have “actual notice” from either the primary insurer or the insured in order to trigger a duty to defend and/or a finding of breach of contract.



CALIFORNIA – Federal Magistrate Upholds Attorney Work Product For Investigation Reports Prepared In “Anticipation Of Litigation”

            In Carolina Casualty Insurance Co. v. Oahu Air Conditioning Service Inc., et al., No. 2:13-cv-01378, E.D. Calif.; 2015 U.S. Dist. LEXIS 40786, a Federal Magistrate precludes production of investor’s reports and other portions of the claims file under the “Work Product” doctrine as created in “anticipation of litigation.”  Interestingly, an issue arose as to whether the investigator was hired by the attorney or the company.  Also, the Magistrate declined to apply the “joint defense privilege” among parties that did not expressly agree to keep the documents confidential per the privilege.  Practice Pointer – Have the attorneys retain investigators and communicate findings to the insurer and put all joint defense agreements in writing before exchanging information.



NEW YORK – Federal Judge Finds $9M In Attorney Fees “Reasonable”

            In Danaher Corp. v. Travelers Indemnity Co., et al., No. 10-0121, S.D. N.Y.; 2015 U.S. Dist. LEXIS 48769, a Federal Judge adopts the Magistrate’s ruling that insured’s defense fees incurred in an unsuccessful declaratory relief action brought by the insurer are “reasonable.”  The Court was unsympathetic to arguments based upon “reduced rate,” “multiple attorneys/firms” or “block billing.”  Practice Pointer – Bill review criteria rarely, if ever, win the day in a fee dispute with the insured based upon a “reasonableness” standard.      



CALIFORNIA – Federal Judge Upholds Deductible Finding Judgment Does Not Trigger Excess Insurer’s Duty to Defend

            In Nordby Construction Inc. v. American Safety Indemnity Co., et al., No. 14-04074, N.D. Calif.; 2015 U.S. Dist. LEXIS 49048, a Federal Judge upholds the excess insurer’s deductible and the plain language of the policy that the insurer has no obligation to defend where the insured cannot state a claim in excess of the deductible.

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