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  • Monthly Review: Important Case

    MONTHLY REVIEW
    IMPORTANT CASE
    Kirk C. Chamberlin, Esq.
    Chamberlin & Keaster LLP
    16000 Ventura Boulevard, Suite 700
    Encino, CA 91436-2758
    D/L (818) 385-1303
    C – (818) 430-2234
    F – (818) 385-1802
    Email:  kchamberlin@ckllplaw.com
    www.ckllplaw.com


               
    ANOTHER CALIFORNIA APPELLATE COURT HOLDS A GENERAL RESERVATION OF RIGHTS DOES NOT TRIGGER RIGHT TO INDEPENDENT COUNSEL  
                Attached please find a copy of the decision in Centex Homes v. St. Paul Fire and Marine.  In this case Division Two of the Fourth Appellate District followed the ruling in Federal v. MBL Inc., 219 Cal.App.4th 29 in which we represented Federal.  In that case, we prevailed in the California Court of Appeal and obtained a published decision changing the law in California that a general reservation of right does not create a conflict necessitating the appointment of independent (Cumis) counsel.  This was a big win for the insurance industry in that it dramatically reduces the obligation to provide independent counsel while at the same time preserving the insurer’s rights.  The attached Centex decision follows the MBL decision for the proposition that “Nor is a general reservation of rights sufficient to trigger the right to independent counsel.” Again, this provides a valuable means by which insurers may reduce defense costs by avoiding the appointment of independent counsel and, at the same time, reserving their rights.  The following is a brief primer on the issue.  Please contact me with any other questions, comments or analysis.
    Independent Counsel
     
    I.             “Independent” Counsel Issue
     
                    An insured’s right to independent counsel arises when an insurance carrier’s reservation of rights creates a conflict of interest for carrier-provided counsel.  An overly broad reservation of rights may trigger the “right” to independent counsel based on an issue that is irrelevant to the case.  On the other hand, a narrowly tailored reservation of rights letter may avoid the unnecessary appointment of independent counsel.
     
                    A.            What Constitutes a “Conflict of Interest”  
                   
                    The jurisprudence addressing what constitutes a “conflict of interest” requiring the appointment of independent counsel has evolved significantly over the last thirty years.  At first, there was a great deal of uncertainty regarding what circumstances trigger the right to independent counsel.  Some jurisdictions have attempted to clarify the doctrine by enacting statutes specifically identifying the type of situations in which an insured is entitled to independent counsel.  Courts have also addressed the doctrine of an insured’s right to independent counsel.
     
                    Any Reservation of Rights
     
                    Early on in the evolution of the law regarding this topic, a conflict of interest was broadly defined as arising once the insurer takes the position that a coverage issue is present.  In some jurisdictions, this still holds true and any reservation of rights by an insurer will trigger the appointment of independent counsel.  Under this view, a problem arises when policyholders’ attorneys begin demanding that insurers hire them as independent counsel any time the insurer issues a reservation of rights, even in the absence of an actual conflict of interest.  The insurer is faced with the dilemma of either hiring the policyholder’s attorney as independent counsel and foregoing much of the control of the litigation that they would otherwise have with appointed panel counsel or withdrawing their reservation of rights and waiving coverage defenses in order to avoid a conflict of interest.  
     
                    A Reservation of Rights Where Defense Counsel Can Control Facts
     
                    In order to narrow the scope of conflicts triggering independent counsel, some jurisdictions have limited the requirement to those situations when an insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by defense counsel retained by the insurer.  A reservation of rights standing alone does not trigger the insurer’s requirement to provide independent counsel.  Rather, independent counsel will be required when some issue in the lawsuit between the insured and the third party will bear directly on the coverage dispute between the insurer and the insured and that issue can be controlled by defense counsel.  The key consideration is whether the manner in which the case is defended can affect the outcome of any subsequent coverage determination.  For instance, a complaint may contain allegations of “intentional” conduct which, if proven, may exclude coverage.  The concern is that the insurer-appointed defense counsel may be tempted to steer the facts to show that the insured acted intentionally while the insured would desire to establish just the opposite.  In such cases a conflict of interest exists necessitating the appointment of independent counsel.
     
                    An Actual (Not Merely Potential or Theoretical) Conflict
     
                    As the doctrine continued to develop, some jurisdictions required an actual conflict, not merely a potential or theoretical conflict, before requiring the insurer to provide independent counsel.  Not every conflict of interest would require independent counsel under this view.  For instance, the insurer’s reservation of the right to seek reimbursement of defense costs allocable to non-covered claims, standing alone, would not involve an issue that would be litigated in the underlying action.  As such, it does not create an actual conflict and the reservation of rights by itself would not trigger the requirement to provide independent counsel.                  
     
                    General Reservation of Rights Does Not Create Conflict
     
                    At least one jurisdiction (California) has just held that a general reservation of rights does not create a conflict of interest, further narrowing the situations in which an insured is entitled to independent counsel.  At most, a general reservation of rights creates only a potential, theoretical conflict rather than an actual conflict.  As such, it is not enough to create a conflict requiring the insurer to provide independent counsel.  Under this rubric, courts will look for specific evidence of an actual conflict of interest before determining that independent counsel is required.
     
                    No Right to Independent Counsel
     
                    At least on jurisdiction (Hawaii) holds that there is no right to independent counsel but rather that the insurer appointed attorney is governed by it professional obligations to its one and only client, the insured.
                                   
                    B.            How to Avoid Conflicts
     
                    There are several important ways in which an insurer may be able to avoid conflicts of interest altogether and thereby avoid the requirement to provide independent counsel.  Experience shows that some independent counsel may often attempt to “over-litigate” cases and incur defense expenditures that are not commensurate with the actual value of the case.  Even forthright independent counsel (and thereby the insurers) are faced with the issue of “protecting” and “managing” a client where the client has no stake in the defense costs incurred.  Insurers can avoid the unnecessary burdens and expense of independent counsel by taking steps to avoid conflicts of interest.  
                   
                    No Reservation of Rights
     
                    Given the concerns often associated with the hiring of independent counsel, insurers must consider the benefits of issuing a reservation of rights.  Moreover, since over 95(+)% of all civil litigation cases settle and insurers, when implicated, typically participate in the settlement, insurers need to evaluate whether it makes economic sense to issue a reservation of rights in every case.  This consideration is especially pertinent in jurisdictions where any reservation of rights triggers independent counsel.  In some jurisdictions, a defense without a reservation of rights may preclude the insurer from later asserting policy defenses where it was aware of grounds to deny coverage but failed to do so.  After a careful evaluation, insurers may prefer to forego a reservation of rights and waive coverage defenses that are not likely to be relevant anyway in order to maintain control of the defense and avoid triggering a requirement to provide independent counsel.
     
                    A Limited Reservation of Rights
     
                    A limited, narrowly tailored reservation of rights may avoid triggering independent counsel where the facts at issue in the underlying action cannot be controlled by defense counsel to determine the outcome of a coverage issue.  In latent injury/property damage matters for example, a reservation based upon “owned property,” “no harm during the policy period” and/or “punitive damages” are issues that are commonly raised but do not involve facts that can be controlled by defense counsel.  However, a reservation based on an “accidental” based exclusion or an “expected or intended” injury exclusion may raise factual issues regarding the insured’s “intent” which may be controlled by defense counsel triggering independent counsel.  Careful consideration must be given as to the necessity of a reservation of rights that triggers independent counsel and whether the issue is of sufficient importance to forego control of the defense.   In California, however, that problem can be addressed by use of a general reservation of rights.
     
    I look forward to discussing this issue with you.

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  • 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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  • May 2015 Monthly Review

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

    GEORGIA – Pollution Exclusion Does Not Bar Coverage For Lead Claims, Panel Majority Says

                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

               

    NEVADA – Release of Carbon Monoxide Was The Only Cause Of Death, Federal Judge Determines

                Century Surety Company v. Casino West, Inc., No. 07-636, D. Nev.; 2015 U.S. Dist. LEXIS 39482

               

    MINNESOTA – Judge:  2 “Occurrences” For Coverage Under CGL Insurance Policies

                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

    NEW YORK – New York Federal Judge Enters Judgment In Favor Of Insurance For Environmental Costs

                Olin Corp. v. Insurance Company of North America, et al., No. 84-1968, S.D. N.Y.

               

    VERMONT – Vermont High Court Majority Says Policy’s Pollution Exclusion Is Not Ambiguous

                Cincinnati Specialty Underwriters Insurance Co. v. Energy Wise Homes Inc., et al., No. 14-165, Vt. Sup.; 2015 Vt. LEXIS 33

               

    NEVADA – Insurer Has Duty To Defend Construction Defects Case, Judge Says

                Gemini Insurance Co. v. North American Capacity Insurance Co., No. 14-00121, D. Nev.; 2015 U.S. Dist. LEXIS 44234

               

    ILLINOIS – Insurer Did Not Breach Duty To Defend Insured For Bodily Injury Claims, Panel Says

                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

               

    CALIFORNIA – Parties’ Motions To Compel Mostly Denied In Dispute Over Hazardous Waste Fire

                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

               

    ILLINOIS – Judge:  Insurer Has No Duty to Defend, Indemnify Costs From Faulty Work

                AMCO Insurance Co. v. Northern Heritage Builders LLC and American Family Insurance Co., No. 12-09071, N.D. Ill.; 2015 U.S. Dist. LEXIS 41341

               

    NEW YORK – Federal Judge Orders Insurer To Pay Almost $9M In Attorney Fees

                Danaher Corp. v. Travelers Indemnity Co., et al., No. 10-0121, S.D. N.Y.; 2015 U.S. Dist. LEXIS 48769

               

    CALIFORNIA – Judgement Does Not Trigger Excess Insurer’s Duty to Defend, Judge Concludes

                Nordby Construction Inc. v. American Safety Indemnity Co., et al., No. 14-04074, N.D. Calif.; 2015 U.S. Dist. LEXIS 49048

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  • 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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  • March 2015 Monthly Review

                “Thought” of the Month:  Seen—Sign in store window:  “Any faulty merchandise will be cheerfully replaced with merchandise of equal quality.”

     

                TEXAS GETS IT RIGHT

     

                In Re Deepwater Horizon, No. 13-0670, Texas Sup.  The Texas Supreme Court finds BP Exploration and Production covered as an additional insured.  In doing so, the Texas Supreme Court applies reason to the “8-Corners” Rule allowing the Court to consider the related underlying contract.  Further, the Court upholds the idea that a party named as an additional insured in connection with performance of a contract is insured only to liability arising out of the insured contract.  We believe this is an important decision because in “8-Corners” jurisdiction, insureds often argue that no other information may be considered.  The counter to that argument is that the Court (and we believe the insurer) can consider “what” is being insured.  Further, the insurer should not be hamstrung by “artful” and/or “over-inclusive” drafting. 

     

                TENNESSEE COMPLAINT SEEKS TO APPLY ABSOLUTE POLLUTION EXCLUSION

     

                Great Lakes Reinsurance the MP & T Hotels, LLC, et al., Case No. 3-14-cv-2018.  This is a case to watch and may fall under the adage, “be careful what you wish for . . .”  In its Complaint, Great Lakes apparently seeks to exclude coverage for injury arising out of a hotel patron that was allegedly injured to noxious fumes in connection with pest extermination.  While at first blush the verbiage in the exclusion “release or escape of soot of smoke, vapors, soot, fumes . . .” may seem to apply,  many Courts have refused to apply the absolute pollution exclusion when those “fumes” are in connection with the spraying of pesticides finding that the vapors do not constitute a pollutant but are integral with pesticides.  See MacKinnon v. Truck Ins. Exchange, 31 Cal. 4th 635.

     

                RHODE ISLAND CASE TO WATCH

     

                Seaton Insurance Company v. Yosemite Insurance Company, No. 15-cv-00040, D. R.I.  In this case Seaton Insurance Company is suing Yosemite Insurance Company for failure to pay under a reinsurance agreement.  As most everyone in the industry knows, reinsurance recoveries can be difficult.  Our experience shows that the best “practice pointer” is to involve the reinsurance company as early as possible in the claims, billing, settlement and/or resolution process. 

     

                MICHIGAN LAW “INITIAL DISCHARGE” RULE NOT APPLY TO LANDFILLS

     

                Decker Manufacturing Corp. v. The Travelers Indemnity Company, Case No. 1:13-cv-820.  In finding coverage not precluded by the Sudden &Accidental Pollution Exclusion, the Federal Judge provides good explanation of Michigan law which holds that the “initial discharge” rule does not apply to landfills.  Rather, in Michigan, the focus is on the discharge from the landfill (which, in our view , has nothing to do with the insured).  We feel Michigan law on this subject appears to be result driven and has not been followed by many other jurisdictions.

     

                NEW MEXICO FEDERAL COURT SAYS NO TO STACKING

     

                Mid-Continent Casualty Company v. I & W, et al., No. CIV-11-0329.  With no clear applicable law in New Mexica, the Federal Court, looking to other jurisdictions, found property damage occurring from 2000-2009 to be a single occurrence.  Further, occurrence is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions” precludes stacking of occurrence limits. 

     

                NEW JERSEY COURT FINDS NO BAD FAITH AS A MATTER OF LAW

     

                Joseph Dooley and Elizabeth Dooley v. Scottsdale Insurance Company, No. 12-1838, D.  N.J.  Applying New Jersey law, stating that “[t]o show a claim for bad faith, a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and the defendants knowledge or reckless disregard of the lack of a reasonable basis for denying the claim,” the Court found no bad faith as a matter of law.  Practice Pointer – disputed question of law rarely result in a bad faith finding; disputes over facts run a greater risk of a bad faith finding.

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  • New California Supreme Court Stacking Case
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  • Emerging Issues in Environmental Claims

    CERCLA Liability for Government Entities Based on Activities as Regulator; Illinois Court of Appeal Finds Coverage Was Validly Assigned from Named Insured to Successor Entity; California Appellate Court Finds No Coverage for Civil Penalties for Alleged Statutory Violations in Insured’s Sale of Products; Virginia Supreme Court Affirms Trial Court’s Dismissal of Climate Change Insurance Coverage Claims

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