Seventh Circuit Seeks Guidance for Interpreting “Pollution” Exclusion
In previous blogs, we have written about the unfortunate trend of federal judges ruling against policyholders based on rationale that conflicts with state court decisions. Ideally, federal courts should adopt the policyholder-friendly stance of the state courts, but a recent decision by the Seventh Circuit highlights an acceptable alternative: certification to the state’s highest court.
Independent Counsel Triggers and Requirements
When an insurer’s duty to defend is triggered by a lawsuit against the insured, the “normal” outcome is that the insurer will assume complete control of the defense by selecting counsel and paying any fees incurred. In ideal circumstances, this can work out as the insured, insurer, and appointed counsel are all theoretically aligned in their goals. In reality, complications often arise. Recognizing this, most states have articulated standards for determining when an insured is entitled to independent counsel and what an insurer must do to discharge its defense duty in those circumstances.
Worrying Trend: Ninth Circuit Expansively Interpreting Exclusions
In previous blogs, we have discussed several rulings by federal courts in New York that improperly deviated from standards of coverage law established by state decisions. In recent years, several Ninth Circuit panels have fallen victim to this same poor practice. Three decisions in the span of just over a year evidence a pattern of flawed analysis that is depriving California policyholders of the full protection that should be afforded under the terms of their insurance agreements.
Second Circuit Errs in Disparagement Analysis
In a pair of recent decisions, two Second Circuit panels affirmed district court rulings concluding there was no potential coverage under offense “d” of standard Commercial General Liability (“CGL”) policies. Both panels erred by failing to understand that the “potential coverage” standard that triggers an insurer’s duty to defend does not require perfect pleading and overlooked the significance of explicit statutory claims in the underlying complaints.
Businesses Operating out of Homes: Insurance Coverage Challenges and Opportunities
With the vastly increased popularity of work-from-home arrangements following the COVID-19 pandemic, more businesses than ever have elected to forego the expense of a dedicated office. Many such businesses still require a legal address, and the business owner’s residence can be a convenient solution. In addition to the basic Commercial General Liability (“CGL”) policy that all business owner’s should maintain, a Homeowner’s policy and an Errors and Omissions (“E&O”) policy should be considered for additional protection.
Lessons to Learn from Recent Lloyd’s Coverage Settlement
Since 2018, Monster Energy Company (“Monster”) has been embroiled in litigation with Vital Pharmaceuticals, Inc. (“Vital”). The dispute has generated over two dozen judicial decisions with more still to come. The related coverage action between Vital and Certain Underwriters at Lloyd’s London (“Lloyd’s”) was recently resolved via settlement. Although the settlement avoids creation of new coverage case law, helpful inferences can be made based upon Lloyd’s decision to settle. This saga also highlights an important lesson for policyholders about the importance of notifying all insurers of litigation as soon as possible.
Wrongful Denial of Coverage from Wildfire Revenue Loss
In the recent Los Angeles wildfires, many businesses suffered direct fire damage, up to and including being entirely burned to the ground. For those so impacted, coverage should be a straightforward issue under any standard Business Owner’s Policy (“BOP”). It is critical, however, for such policyholders to seek all benefits to which they are entitled. While many rightfully expect coverage for the actual damage to the business property, standard policies also include coverage for business interruptions. These “Business Income” provisions can expand coverage to those suffering a sort of “secondary” impact from the fires (i.e., businesses that did not suffer fire damage but have experienced decreased revenue due to loss of access and other circumstances).
Confusing and Deceitful Insurer Exclusions Invite Challenge
A recurring theme in Commercial General Liability (“CGL”) policy forms is that there has been an ongoing narrowing of “personal injury”/ “advertising injury” coverage provisions. The 1976 ISO CGL form broadly defined “advertising injury” as “any injury arising out of an offense committed during the policy period occurring in the course of the named policyholder’s advertising activities, if such injury arises out of such libel, slander, defamation, violation of right of privacy, piracy, unfair competition or infringement of copyright title or slogan.” Updates to the ICO forms in 1986 and 1998 resulted in the modern offenses that remain in policies to this day.
Confidentiality in the Tripartite Relationship
The protections offered by attorney-client privilege are, in most areas of law, rather straightforward. In the context of insurance coverage, the concept can quickly grow complicated. Full disclosure is essential to obtaining quality legal counsel, and frank discussion of a case’s merits is necessary for an insurer to analyze settlement options. But what happens when an insurer uses information gathered during these necessary discussions as the basis to deny a claim? This blog examines cases addressing the nuances of insurer-insured communications and the privilege that may attach.
New Case Continues Trend Determining D&O Policies Offer Broad Coverage
Most policyholders, and even general counsel, underestimate the scope of coverage available under a Directors & Officers (“D&O”) policy. This blog examines the latest case expansively interpreting the coverage available under such policies and addresses some of the many others claims that such policies can cover. Recognizing this trend, insurers have recently begun trying to reduce coverage when policyholders renew, but there are ways experienced coverage counsel can guide companies through the renewal process to avoid or at least mitigate those reductions.
Arbitration Clauses Adverse to Public Policy? Louisiana Supreme Court Says “Yes”
In Police Jury of Calcasieu Par. v. Indian Harbor Ins. Co., the Louisiana Supreme Court recently answered three certified questions addressing a group of insurers’ attempts to enforce an arbitration clause. The court’s answers all favored the policyholders and maintained Louisiana’s stance that arbitration clauses in insurance policies ran counter to public policy in the state. This safeguarding of policyholders’ rights should make Louisiana law attractive for application to insurance disputes.
Best Billing Practices to Minimize Fee Disputes
You did everything right. You gave prompt notice of a claim and secured a defense from your insurer. No need to worry about the expensive legal bills anymore, right? Not so fast. Even if an insurer acknowledges its duty to defend (either willingly or following a declaratory judgment action), the carrier will carefully review every legal invoice line by line and search for expenses that are either uncovered or (in the carrier’s opinion) unreasonable.
Insured vs. Insured: An Exclusion Often Conspicuous by Its Absence
An Insured vs. Insured Exclusion is, as the name suggests, a policy provision that precludes coverage for lawsuits where people or organizations insured by the policy appear on both sides. They are virtually omnipresent in Directors & Officers (“D&O”) and Errors & Omissions (“E&O”) policies, but they are far less common in other policies that can potentially cover business litigation. Knowing all the coverage options under your own policies is obviously important as a defendant, but defendants are also advised to consider the plaintiffs policies.
Fifth Circuit Reverses District Court’s Broad Reading of Contract Exclusion
After years of litigation, the dispute between SXSW and its insurer has been resolved via settlement. The parties reach an agreement following a reversal by the Fifth Circuit that adopted a narrow reading of the policy’s Contract Exclusion. The court concluded that a defense was owed in the underlying class action lawsuit against SXSW following cancellation of the 2020 South by Southwest Festival due to COVID restrictions implemented by the city of Austin, Texas where the event is held each year.
Reimbursement Is Improper Where Appointed Counsel Is Conflicted
When policyholders submit a claim requesting defense of a lawsuit, insurers often agree to defend under a Reservation of Rights (“ROR”). In many states, the ROR allows an insurer to retain the right to seek reimbursement of defense expenses should it later be determined that no defense was actually due under the policy. But what if the counsel appointed by the insurer faced a conflict of interest throughout the defense? Cases examining this issue are sparse, but authority suggests that no reimbursement is proper under such circumstances.
Trademark Dilution “Tarnishment” Claims Implicate Offense “d” Coverage
Following our previous blog addressing trademark dilution based on “blurring,” we now turn to dilution based on “tarnishment.” The Lanham Act defines trademark dilution based on “tarnishment” as “association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.” Like “blurring,” this form of dilution also commonly implicates one of the “personal and advertising injury offenses found in Commercial General Liability (“CGL”) policies
Trademark Dilution “Blurring” Claims Fall Outside Standard Exclusions
A typical trademark suit will assert various causes of action with names familiar to the average person, including the well-known trademark “infringement.” Unfortunately for policyholders, these claims are typically excluded by a policy’s IP exclusion. Though less known, trademark “dilution” is also common and can often be leveraged to attain coverage for the entire suit. This path to coverage is rarely recognized by insurance claims handlers, leading to a quick denial. Luckily, experienced coverage counsel can explain that mistake and secure coverage despite an initial denial.
“Pollution” Exclusion Interpretation Highlights Need for Appropriate Coverage
In St. Paul Fire & Marine Ins. Co. v. Getty Properties Corp., 213 N.Y.S.3d 185 (2024), the New York Appellate Division determined that insurers had no duty to defend or indemnify a policyholder due to the “Pollution” exclusions in the policies. The case illustrates the perils of businesses that fail to obtain insurance coverage suited to their needs.
Fourth Circuit Improperly Rejected Reasonable Construction of Exclusion
In a saga of litigation stretching back to 2021, Towers Watson continues to seek insurance coverage under its Directors & Officers (“D&O”) policy for a settlement agreement with shareholders who allegedly received below-market consideration for their shares following Towers Watson’s merger with Willis Group Holdings. The insurer, National Union Fire Insurance, argues that coverage is excluded by the policy’s “bump-up” exclusion. After initially winning in the district court, Towers Watson’s victory was reversed by the Fourth Circuit. On remand, the district court granted National Union’s Motion for Summary Judgment. Towers Watson now must take on the role of Appellant before the Fourth Circuit.
Opportunities and Pitfalls in Securing Coverage for Arbitration
Arbitration, along with mediation and other forms of alternative dispute resolution, are increasingly preferred over the traditional courthouse approach to litigation. Indeed, their use may be mandated in some circumstances. Quicker results, which in turn means reduced attorneys’ fees, are obviously desirable, but arbitration does have some complications to be wary of from an insurance coverage perspective.