Defense Costs

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In what is an unfortunate sign of the times, Springpoint Senior Living, Inc. recently sued its insurers in New Jersey federal court claiming they abruptly stopped covering Springpoint’s defense costs after doing so for nearly a decade.  A copy of the complaint can be found here. Springpoint’s allegations are emblematic of a growing trend among insurers taking drastic measures to avoid coverage, which is no doubt in response to the tightening economic conditions and looming recession around the globe. …
Continue Reading A Sign of the Times: Policyholder Forced to Sue Insurers to Resume Payment of Defense Costs

One of the most valuable aspects of liability insurance is defense coverage, which protects policyholders from significant costs to defend against and litigate claims that may never result in a judgment or settlement. Companies and their directors and officers can incur thousands or even millions of dollars in defending against claims that are resolved long before trial. Even after purchasing robust defense coverage and getting an insurer to defend a claim, however, companies may be surprised when months or even years later the insurer reverses its position and not only withdraws from the defense but also demands repayment of all defense costs paid to date. A recent case, Evanston Insurance Co. v. Winstar Properties, Inc. No. 218CV07740RGKKES, 2022 WL 1309843 (C.D. Cal. Apr. 14, 2022), shows the perils of insurer “recoupment” and underscores the importance of assessing insurer recoupment rights, if any, throughout the claims process.
Continue Reading It’s Payback Time: California Ruling Highlights Recoupment Risks in Liability Claims

In 1938, a DuPont chemist’s experiment yielded not—as he first thought—a lumpen, waxy mistake, but a new chemical with remarkable properties: heat-resistance, chemical stability, and low surface friction. Decades of continuing experimentation yielded a class of chemicals with the capacity to make non-stick, water-resistant coatings. In time, these chemicals, per- and polyfluoroalkyl substances (PFASs), would become a major component in thousands of consumer goods: food packaging, non-stick cookware, waterproof clothing, paint, stain-resistant carpets and furniture, and firefighting foams. The discovery of the toxicity of these remarkable chemicals lagged behind the widespread adoption, but eventually yielded a moniker that reflected PFAS’s stability and longevity: “Forever Chemicals.”…
Continue Reading PFAS: From Happy Mistake to Ubiquity to Toxic Liability (But is there coverage?)

The Central District of California recently rejected an attempt by Federal Insurance Company, a Chubb company, to avoid its duty to defend its insureds in an $8.5 million lawsuit with a former employee.

TriPacific Capital Advisors, LLC acquired Directors and Officers (D&O) coverage from Federal and Employment Practices Liability (EPL) coverage from Travelers Insurance Company. While those policies were in effect, a former TriPacific employee sued the company and its president, Geoffrey Fearns, for a variety of employment-related causes of action concerning his termination and compensation. TriPacific and Fearns tendered notice to both insurers, seeking indemnification and defense costs. Both policies contained a duty to defend.  While Travelers agreed to defend under a reservation of rights, Federal denied coverage based on multiple grounds, including its policy’s “other insurance” provision, contending that the provision rendered its policy “excess” to the Travelers policy.  Federal also argued that TriPacific had not satisfied the D&O policy’s $150,000 self-insured retention and, thus, coverage had not been implicated, in any event. TriPacific maintained that neither the SIR nor the “other insurance” provision pertained to Federal’s duty to defend and brought suit to enforce the duty to defend.
Continue Reading Potential Coverage Garners Total Defense: “Other Insurance” Provision Does Not Relieve Insurer’s Duty to Defend

Last month, the US District Court for the District of Connecticut granted an insurer’s motion for summary judgment in the case of Connecticut Municipal Electric Energy Cooperative v. National Union Fire Insurance Company of Pittsburgh, PA, No. 3:19cv839 (JBA), finding that there was no coverage under a directors & officers policy for defense costs associated with responding to a government subpoena. Last week, in line with our commentary, which highlighted several critical flaws in the court’s initial ruling, the court reversed itself and granted reconsideration, finding that there actually is coverage.
Continue Reading Court Corrects its Own Error in Win for D&O Policyholders

A D.C. federal judge recently held that an insurer could be responsible to a TV station for more than $25 million in an underlying malpractice suit where the insurer failed to send timely notice preserving its rights under the policy in violation of a Virginia statute.
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Continue Reading Insurer Can’t Mute TV Station’s Recovery for $25 Million Malpractice Claim

Deciding that certain damages claimed by the underlying case plaintiff were covered “Loss” under a professional services policy, the Eleventh Circuit determined that AEGIS must pay to defend a Georgia landlord in a class action for wrongful failure to return tenants’ security deposits under O.C.G.A. § 44-7-35(c).  The policy defined “Loss” as “a compensatory monetary amount for which the Insured may be held legally liable, including judgments . . . awards, or settlements,” but specifically excluded:
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Continue Reading Eleventh Circuit Determines AEGIS Must Defend Landlord in Security Deposit Class Action

The Ohio Court of Appeals on June 24 enforced liability insurance for a company that had distributed opiates, finding that the insured had a duty to defend the insured in lawsuits filed by government agencies and pending in the Opioid Multidistrict Litigation.  Acuity v. Masters Pharm., No. C-190176 (Ohio Ct. App. June 24, 2020).  A unanimous three-judge panel overturned a trial court decision that had accepted arguments of insurers that, because the underlying suits were brought by government entities seeking to recover for “their own economic loss,” the damages sought did not qualify as “damages because of or for a ‘bodily injury.’” Relying on the Seventh Circuit’s decision in Cincinnati Ins. Co. v. H.D. Smith, L.L.C., 829 F.3d 771 (7th Cir. 2016), the Court of Appeals acknowledged that “[t]he governmental entities are seeking their own economic losses,” but concluded that some losses at issue “(such as medical expenses and treatment costs) are arguably ‘because of’ bodily injury,” bringing policyholder claims “potentially within the policies’ coverage.”  Slip op. ¶ 30.  The trial court thus had erred in finding that the insurer had no duty to defend in the underlying opioid cases.
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Continue Reading Insurers Have Duty to Defend Opioid Cases According to Ohio Appellate Court

The Fourth Circuit recently held that an insurance company was obligated to cover millions in legal fees incurred in defending an employment suit against the owners of DARCARS, a DC-area based car dealership. The court ruled that the relevant policy exclusion was ambiguous and, as a result, construed the exclusion narrowly against the insurer and in favor of coverage.
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Continue Reading Fourth Circuit Affirms Ruling That Insurer Must Pay Millions For Breaching Duty to Defend

In responding to a certified question from the Fifth Circuit in Richards v. State Farm Lloyds, the Texas Supreme Court held that the “policy-language exception” to the eight-corners rule articulated by the federal district court is not a permissible exception under Texas law.  See Richards v. State Farm Lloyds, 19-0802, 2020 WL 1313782, at *1 (Tex. Mar. 20, 2020).  The eight-corners rule generally provides that Texas courts may only consider the four corners of the petition and the four corners of the applicable insurance policy when determining whether a duty to defend exists.  State Farm argued that a “policy-language exception” prevents application of the eight-corners rule unless the insurance policy explicitly requires the insurer to defend “all actions against its insured no matter if the allegations of the suit are groundless, false or fraudulent,” relying on B. Hall Contracting Inc. v. Evanston Ins. Co., 447 F. Supp. 2d 634, 645 (N.D. Tex. 2006).  The Texas Supreme Court rejected the insurer’s argument, citing Texas’ long history of applying the eight-corners rule without regard for the presence or absence of a “groundless-claims” clause.
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Continue Reading Staying the Course, Texas Supreme Court Rejects Insurer’s Argument for Exception to Eight-Corners Rule in Determining Duty to Defend