Category: Environmental Liabilities

Top 10 Tips for Insurance Policyholders (Fall 2020)

John A. Gibbons

1. Assess the policies you have and reassess the policies you should buy in the future.

2020 has brought a host of unwelcome events: pandemics, fires, floods, cyberattacks, financial failures, etc. An insurance program tailored to the risks and business opportunities of your specific company can provide for recovery during dark times, and specialized insurance products can help you safely expand your business. It is time to consider how tailored your current program is, and how you can better align insurance assets to your business in the future.

2. Use indemnities and additional insured status to expand your insurance assets.

Everyday business for many companies involves the use of terms and conditions; sales or services orders; and leases that address indemnification, minimum insurance requirements, and additional insured status. A well-thought-out use of additional insured status can allow you to leverage the insurance assets and insurance premiums of counterparties.

3. Ensure that you get the full benefits of your liability and property insurances.

Insurance policies provide many coverages, policy limits, and extensions that may not be readily apparent, and all of which may provide substantial financial assistance in the event of a loss. In addition, specialized forms of insurance, additional riders, or policy wording upgrades can better tailor policies to your specific business attributes. Use the renewal season to explore your options.

4. Avoid “conventional wisdom” about what is or is not covered.

With insurance, words matter! In fact, the wording determines the outcome. Do not accept statements about what others think a policy does or should cover. For example, claims for intentional wrongdoing and punitive damages often are covered by liability policies. Likewise, losses from your supply chain may be covered under your property policies. Non-payments of debts and breaches of contractual promises are covered under various forms of policies. Let the words lead you to coverage.

5. Give notice once you know of a loss or claim.

Typically, notice should be given soon after a loss, claim, or lawsuit, but remember that a delay in giving notice will not necessarily result in the loss of coverage. Consider the potentially applicable insurance assets that may apply and give notice.

6. Insist your insurers fully investigate claims.

Insurers have a duty to investigate claims thoroughly and must look for facts that support coverage.

7. Watch what you say.

Communications with an insurer or an insurance broker regarding a lawsuit against you or a loss are not necessarily privileged.

8. Don’t take “no” for an answer.

A reservation of rights is almost always the start of the insurance claim process, and a denial should not dissuade you from pursuing your rights. Even if coverage is not obvious at first, it may be there, if you look in the right places.

9. Document, document, document your claim.

Whether it is a first-party loss or a liability suit against you, write to your insurer and document your submission of information and materials. Require your insurer to respond in writing and to explain its position. A well-documented chain of correspondence narrows disputes, helps to limit shifting of insurer positions, or helps to make such shifting very apparent if your claim proceeds to formal enforcement measures.

10. Insist that your insurers honor their duties.

In the liability context insurers frequently owe broad duties to defend with independent, conflict-free counsel, even if uncovered claims dominate the lawsuit against you. In property insurance contexts, insurers have duties to help you on an expedited emergency basis to protect your interests immediately after a loss. It is important to hold insurers to their duties to protect you immediately upon assertion of liability or after a loss—delay only benefits insurers.

 

Appellate Division Finds Coverage for EPA Claim through Company’s Historic Mergers and Acquisitions, Even Though the Bill of Sale Did Not Specifically Reference the Transfer of Insurance Rights

Kevin R. Doherty

Earlier this month, the New Jersey Appellate Division upheld a decision allowing Cooper Industries LLC (“Cooper”) access to insurance policies received through a series of mergers and acquisitions (“M&As”), even though the transfer of assets language in the relevant bill of sale did not specifically reference the transfer of insurance rights. Cooper was thus afforded liability coverage for a U.S. Environmental Protection Agency (“EPA”) action seeking substantial cleanup costs.

Cooper’s predecessor, McGraw-Edison Co. (“McGraw”), previously obtained a variety of liability insurance policies from various insurers throughout the 1970s and ‘80s. At issue in the case was whether McGraw’s right to these policies was properly transferred, through a series of corporate transactions, such that Cooper could now access them for the EPA claim. The lower court found the relevant bill of sale language to be ambiguous and relied on deposition testimony from employees to find, among other things, that all assets and liabilities were meant to be transferred, including insurance rights. Insurers appealed. Continue reading “Appellate Division Finds Coverage for EPA Claim through Company’s Historic Mergers and Acquisitions, Even Though the Bill of Sale Did Not Specifically Reference the Transfer of Insurance Rights”

Insurance Recovery for Losses Related to Hurricane Harvey

Jared Zola, John D. Heintz, and Justin F. Lavella

 

 

 

Insurance for Property Damage and Business Interruption Losses

Businesses and communities throughout Texas and the Gulf Coast are bracing for the impact of Hurricane Harvey that is expected to wreak havoc this weekend. Harvey is unique because it quickly and unexpectedly transformed from what was predicted to be a smaller-scale storm to a Category 2 hurricane—and may be upgraded to Category 3 before it makes landfall. This transformation has left many major businesses and facilities in the storm’s expected path with significantly less time to prepare, and in some cases shutdown operation, than would ordinarily be expected. Continue reading “Insurance Recovery for Losses Related to Hurricane Harvey”

Delaware Supreme Court Sends Allocation Question to New York Court of Appeals

Edward Tessler

The Delaware Supreme Court certified an allocation question to the New York Court of Appeals that could have a major impact on policyholders’ recoveries for multi-year claims. A multi-year claim is one where the damages extend over a number of policy years, such as environmental claims or asbestos claims.

The certified question is:

Under New York law, is the proper method of allocation to be used all sums or pro rata when there are non-cumulation and prior insurance provisions?

Policyholders whose policies are governed by New York law should closely follow this case because it could drastically impact the amount they can recover. Continue reading “Delaware Supreme Court Sends Allocation Question to New York Court of Appeals”

Disposal Site for Spent Nuclear Fuel Could Change the Insurance Picture for Nuclear Plant Owners

Erin L. Webb

A federal court of appeals and the Nuclear Regulatory Commission (NRC) recently made advances toward a national disposal site for spent nuclear fuel. My recent Law360 column analyzes the potential impact of an eventual spent nuclear fuel disposal site on insurance coverage for nuclear plant owners. Shipping spent nuclear fuel offsite for disposal presents very different risks from those associated with storing the spent fuel onsite, which is the situation at many nuclear power plants today.

The D.C. Circuit recently held that the U.S. government may not collect any more fees from nuclear plant owners under the Nuclear Waste Policy Act until it finalizes a disposal solution for spent fuel. Nat’l Ass’n of Regulatory Util. Comm’rs v. U.S. Dep’t of Energy, Nos. 11-1066, 11-1068, 2013 WL 6064021 (D.C. Cir. Nov. 19, 2013). Additionally, the NRC directed its staff last month to “complete and issue the Safety Evaluation Report” on the U.S. Department of Energy’s (DOE) application for consideration of the Yucca Mountain site as a disposal facility. In the Matter of U.S. Dep’t of Energy (High-Level Waste Repository), No. 63-001, __ N.R.C.___, slip op. at 23 (Nov. 18, 2013). Continue reading “Disposal Site for Spent Nuclear Fuel Could Change the Insurance Picture for Nuclear Plant Owners”

N.J. Supremes: Insureds Are Not Obligated to Pay an Insolvent Insurer’s Carter-Wallace Allocated Payment Obligation Before Accessing NJPLIGA’s Statutory Benefits

Jared Zola

Zola, JaredIn a September 24, 2013 ruling, the New Jersey Supreme Court addressed whether liability insurers covering a long-tail environmental contamination loss may seek contribution from the New Jersey Property-Liability Insurance Guaranty Association (“NJPLIGA”) for the Carter-Wallace shares of insolvent insurers. Perhaps most important to insureds, the court rejected the position that the insured bears the burden of the insolvent insurer’s Carter-Wallace allocated payment obligation to the extent NJPLIGA was not required to pay. Instead, the payment burden rests solely with solvent insurers on the risk.

Farmers Mutual Fire Insurance Co. v. New Jersey Property-Liability Insurance Guaranty Assoc. involved two insurers (Farmers Mutual and Newark Insurance Co.) that insured properties that suffered soil and groundwater contamination caused by underground storage tank leaks. Farmers Mutual paid all of the remediation costs and, after Newark was deemed insolvent in 2007, sued NJPLIGA for contribution seeking to recover Newark’s Carter-Wallace share of the remediation costs. Continue reading “N.J. Supremes: Insureds Are Not Obligated to Pay an Insolvent Insurer’s Carter-Wallace Allocated Payment Obligation Before Accessing NJPLIGA’s Statutory Benefits”

The Second Circuit’s Ali Decision Supports Zeig on Exhaustion of Insurance

John A. Gibbons

John A. GibbonsThe Second Circuit’s June 4, 2013 decision in Ali v. Federal Insurance Co. addresses when and how a policyholder may recover from excess liability insurance policies for future liabilities when underlying insurers are insolvent. (Opinion linked here). A number of insurer-leaning commentators have cast the case as a rethinking of Zeig v. Massachusetts Bonding & Insurance Co., 23 F.2d 665 (2d Cir. 1928), the seminal Second Circuit decision authored by Judge Augustus Hand, which first established the principle that policyholders could recover against excess insurance policies even if the policyholder did not collect the full limits of underlying insurance policies.  In Zeig, the Second Circuit rejected an excess insurer’s attempt to walk away from its insurance obligations simply because Mr. Zeig settled his claim against a separate insurance company. Zeig established the principle, recognized by numerous courts since, that a policyholder’s settlement with one insurer does not forfeit the policyholder’s rights against other insurers.

The characterization that the Second Circuit has now called Zeig’s common-sense, and widely recognized principle into question, however, seriously misreads the decision in Ali. To understand Ali—what it does and does not hold—requires an understanding of the issues that were actually ruled on by the district court and affirmed by the Second Circuit. Continue reading “The Second Circuit’s Ali Decision Supports Zeig on Exhaustion of Insurance”

Insurance Coverage for Fracking Claims

Jared Zola

Zola, JaredI presented at the @SeminarGroup conference in Santa Barbara, California on February 8, 2013 about insuring hydraulic fracturing (“fracking”) projects.

The natural gas and oil extraction and production technique known as fracking is a hot-button issue in today’s political landscape and in the media. Estimates suggest that more than a quarter of the United States’ natural gas supply is derived from shale bed fracking. As evidenced by the recent Presidential campaigns, many Americans view fracking as an economic catalyst that may create jobs domestically and help reduce the country’s reliance on foreign energy supplies. While this extraction and production technique has been utilized in the United States since the 1940s, it has recently gained additional attention from environmental groups claiming environmental harm as the extraction moves into the more densely populated areas surrounding the natural-gas rich Marcellus Shale in the northeast and the huge Monterey shale that lies under California’s Central Valley at San Benito and Monterey counties. Continue reading “Insurance Coverage for Fracking Claims”

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