Colleges and universities are frequently subject to claims from spectators who are injured while watching sporting events. These suits may lead to significant settlements or judgments against the college or university. At a minimum, the school can incur litigation costs in defending itself. Schools should keep in mind that their comprehensive general liability insurance (CGL) policies may pay some or all of those costs. The coverage provided by CGL policies is broad enough that it should trigger the CGL insurers’ obligations under the policies. These obligations may include paying for any settlements or judgments up to the policies’ limits, as well as paying for defense costs. Continue reading “Spectator Injuries and CGL Insurance Policies for Colleges and Universities”
James S. Carter
The “advertising injury” coverage in commercial liability insurance policies typically extends to lawsuits alleging product disparagement. But is there coverage if your company’s advertisement does not specifically mention a competitor’s product by name? A recent judicial decision suggests that the answer is yes.
JAR Laboratories LLC v. Great American E&S Insurance Co., 2013 U.S. Dist. LEXIS 67516 (N.D. Ill. May 10, 2013), addressed whether an insurance company had a duty to defend its policyholder, the manufacturer of an over-the-counter pain relief patch, against a lawsuit brought by a distributor of a prescription pain relief patch. The issue turned on whether the allegations in the distributor’s complaint fell within the scope of the policy’s coverage for “personal and advertising injuries” resulting from the publication of material that “disparages a person’s or organization’s goods, products, or services.” Id. at *12 (quotation marks omitted). Continue reading “Seeking Insurance Coverage for a Product Disparagement Claim”
On Tuesday, in deciding J.P. Morgan Securities, Inc., et al. v. Vigilant Insurance Company, et al., the New York Court of Appeals handed down a victory for policyholders seeking insurance coverage for liabilities arising from Securities & Exchange Commission (SEC) claims, particularly broker-dealers and clearing firms. Frequently, the SEC resolves such claims by way of a consent order (e.g., an “Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions”), which requires a policyholder to pay certain amounts as “disgorgement.” Insurers typically refuse to cover disgorgement remedies, contending that public policy prohibits insurance recovery for the return of so-called “ill-gotten gains.”
But not all “disgorgement” is created equal. In J.P. Morgan, the Court of Appeals clarified that mere labels used in an SEC consent order will not determine a policyholder’s rights under an insurance policy. Using the court’s analysis, the insurer must examine the nature of the disgorgement payment to determine whether it represents revenue that the policyholder pocketed or improper profits acquired by third parties. If the disgorged monies are not the policyholder’s own revenue, then the company will not be unjustly enriched by recouping insurance proceeds and may obtain coverage for its loss. This is particularly good news for financial companies with potential liability to the SEC for allegedly ill-gotten profits that ultimately end up in third parties’ pockets, such as hedge fund customers. Continue reading “New York’s Highest Court Clarifies That “Disgorgement” Losses May Be Insurable”
John A. Gibbons
The 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”
Justin F. Lavella
“The duty to defend is broader than the duty to indemnify.” For many policyholders, this oft-repeated maxim of insurance law embodies a variety of different expectations. The first and foremost expectation is that policyholders are entitled to a defense from their insurer even if coverage for future liability may be in doubt. A second common expectation is that a policyholder’s defense costs will be paid by its insurers as those costs are incurred. A third expectation is that a judicial decision obligating a primary carrier to pay defense costs will ensure that excess insurers also are obligated to pay any unreimbursed defense costs once the primary policy is exhausted.
Unfortunately, as many policyholders’ mass tort liabilities—such as asbestos and environmental claims—have begun to implicate higher-level excess policies, many of the above expectations have not only gone unsatisfied but have come under attack by increasingly obstructionist excess insurers. For some policyholders, this has resulted in a second generation of coverage litigation over liabilities and coverage issues long thought to have been resolved. Continue reading ““Common Sense” Prevails: Court Rejects Excess Insurer’s Position that Defense Costs Coverage Is Dependent on Payment of Damages”
An important issue that frequently arises in connection with devastating storms and other natural disasters is determining whether peril-specific exclusions, deductibles, or sub-limits found in commercial property insurance policies apply to claims for losses that have more than one contributing cause of loss. For example, Superstorm Sandy damaged many businesses and homes with a combination of high winds, severe rain, and flooding. Some property insurance policies may exclude coverage for flood losses and cover wind losses. Substantial debate has arisen over the years about the appropriate causation test and application of that test to multi-peril losses. Continue reading “Bills Propose to Prohibit Insurers from Using Anti-Concurrent Causation Clauses in New York”
The wheels of justice can turn slowly. This is especially true in litigation about insurance coverage. For large insurance coverage actions such as those seeking insurance for asbestos claims or environmental claims, the case can very well go on for years and years. There is no incentive for an insurance company to shorten that time period because it is holding onto the money while the litigation continues. A cash flow analysis generally shows that it is in the insurance companies’ interest to have the case continue because the amount insurance companies are making on the money they are holding is greater than the cost of their continuing the litigation. We often see insurance companies’ answers to the policyholder’s complaint asserting anywhere from 30 to 50 affirmative defenses. Many of these defenses have little or no basis, but they serve to complicate the action and make it last longer.
The policyholders’ goal should be to get the case to trial. Too often it seems that insurance companies have little interest in settling, except at a deep discount, until the case is close to trial. This is consistent with the insurance companies wanting to hold the money for a longer amount of time. By pushing the case to trial, the policyholder is encouraging the insurance company to settle at a reasonable amount. If the insurance company does not settle, then the policyholder will still have its claim resolved at trial. Continue reading “Keep Your Insurer’s Feet to the Fire to Get Paid”