The Supreme Court of California has ruled that a general liability insurer must defend an employer against allegations of employee misconduct, reinforcing the breadth of (1) what constitutes an “occurrence” under an employer’s commercial general liability (CGL) policy and (2) the duty to defend regarding claims for negligent hiring, retention and supervision. The opinion in Liberty Surplus Ins. Corp. v. Ledesma & Meyer Constr. Co., Inc. can be found here.

Continue Reading California Supreme Court Rules That General Liability Insurer Must Defend Employer Against Employee Misconduct Allegations

There was nothing ambiguous in former U.S. Supreme Court Justice David Souter’s ruling in AIG Property Cas. Co. v. Cosby, No. 17-1505 (1st Cir. June 7, 2018), where, sitting by designation, Justice Souter ruled that AIG Property and Casualty Co. (“AIG”) must defend Bill Cosby in suits brought by eight women alleging that Cosby defamed them after they accused him of sexual misconduct.  Cosby held two insurance policies issued by AIG:  a homeowner’s policy and a personal excess liability policy (the “umbrella policy””).  Under each policy, AIG has a duty to “pay damages [Cosby] is legally obligated to pay [due to] personal injury or property damage caused by an occurrence covered[] by this policy anywhere in the world . . . .”  Both policies define “personal injury” to include “[d]efamation” and require AIG to pay the cost of defending against suits seeking covered damages.  Both policies also contain so-called “sexual misconduct” exclusions.  The homeowner’s policy’s exclusion bars coverage for liability or defense costs “arising out of any actual, alleged[,] or threatened . . . [s]exual molestation, misconduct or harassment[,] . . . or . . . [s]exual, physical or mental abuse.”  The umbrella policy contained similar wording.  However, that policy also contained another “sexual misconduct” exclusion under the “Limited Charitable Board Directors and Trustees Liability” coverage part.  That exclusion applied more broadly to claims for damages “[a]rising out of, or in any way involving, directly or indirectly, any alleged sexual misconduct” (emphasis added).

Continue Reading 1st Cir. and Former SCOTUS Justice Find Ambiguous “Arising Out Of” Requires Cosby Defense

Two recent decisions addressing allocation of long-tail liabilities demonstrate that resolution of the issue under New York law depends upon the policy language at issue. Judge-made rules on “equity” and “fairness” do not control.  As the New York Court of Appeals held on March 27, 2018, in Keyspan Gas East Corp. v. Munich Reinsurance America, Inc., 2018 WL 1472635 (2018), under New York law, “the method of allocation is covered for most by the particular language of the relevant insurance policy.” Both Keyspan and the April 2, 2018 decision in Hopeman Brothers, Inc. v. Continental Casualty Co., No. 16-cv-00187 (E.D. Va. Apr. 2, 2018), by the United States District Court for the Eastern District of Virginia, illustrate the importance of reviewing insurance policies – both before purchase, to ensure that they contain optimal language for coverage; and after claims arise, to ensure that the policyholder receives the benefit of insurance coverage under “legacy” and all other potentially applicable policies.

Continue Reading Allocation Under New York Law: The Contract Language and the Facts Rule

A New York appellate court ruled recently in Hanover Insurance Co. v. Philadelphia Indemnity Insurance Co., 2018 NY Slip Op 02121 (1st Dep’t March 27, 2018), that an insurance policy did not cover an additional named insured over a personal-injury lawsuit arising from its alleged negligence because coverage was limited only to injuries caused by the named insured.  This decision again underscores, as we advised in a recent Blog Post addressing JP Energy Marketing LLC v. Commerce and Industry Insurance Co. (which can be found here), the importance of carefully evaluating the wording of “additional insured” provisions, which can vary widely in scope and effect.

Continue Reading Wording of Additional-Insured Provisions Makes All The Difference

In a ruling earlier this month, an Eleventh Circuit Court of Appeals judge ruled in Scott, Blane, and Darren Recovery L.L.C., Anova Foods Inc. v. Auto-Owners Insurance Co., No. 17-12945-E, 2018 WL 1611256 (11th Cir. 2018), that an insurer did not have a duty to defend and indemnify its insured in a false marketing suit. Anova Food Inc. was sued by its competitor, King Tuna, for allegedly falsely asserting in its advertising that it treated tuna meat with a smoking process using filtered wood chips. King Tuna claimed that, in reality, Anova treated its tuna with synthetic carbon monoxide. In finding that King Tuna’s lawsuit did not trigger Auto-Owner’s duty to defend, the court held (1) that the lawsuit did allege a covered “advertising injury”; (2) that coverage was excluded under the policy’s “failure to conform” exclusion; and (3) coverage was barred by Anova’s untimely notice of the lawsuit.

Continue Reading Eleventh Circuit Decision Highlights Importance Of Giving Notice To Insurers

A federal court in New Jersey recently held that the construction of an ambiguous policy term is not a matter suitable for judgment on the pleadings, thus denying AIG from avoiding coverage for a $67 million antitrust settlement. Rather, the only way to establish the meaning of an ambiguous term, the court explained, is to ascertain the intent of the parties, which requires “meaningful discovery.”

Continue Reading No Easy Out For AIG in $67 Million Antitrust Coverage Suit

The Eleventh Circuit, in Mid-Continent Casualty Co. v. Adams Homes of Northwest Florida, Inc., No. 17-12660, 2018 WL 834896, at * 3-4 (11th Cir. Feb. 13, 2018) (per curiam), recently held under Florida law that a homebuilder’s alleged failure to implement a proper drainage system that allowed for neighborhood flooding triggered a general liability insurer’s duty to defend because the allegations involved a potentially covered loss of use of covered property.

Continue Reading Loss of Use From Allegedly Improper Drainage System Triggers Defense Under CGL Policy

A recent ruling by U.S. District Judge Paul Byron of the Middle District of Florida has made clear that the actual words used in an insurance contract matter. The court, in Mt. Hawley Insurance Co. v. Tactic Security Enforcement, Inc., No. 6:16-cv-01425 (M.D. FL. 2018), denied an insurance company’s motion for summary judgment attempting to rely on an exclusion to deny coverage to its policyholder.  The policyholder, Que Rico La Casa Del Mofongo, operated a restaurant establishment in Orlando, Florida, and sought coverage for two negligence lawsuits filed against it for allegedly failing to prevent a shooting and another violent incident on its premises.

Continue Reading Florida Federal Court Reinforces Principle That Precise Policy Language Is Required Before An Insurer Can Deny Coverage Based On An Exclusion

An Iowa federal court recently ruled that an insurer must pay its policyholder’s defense costs from the date of installation of the allegedly faulty product, even though the underlying suits failed to allege when damage purportedly occurred. The ruling opens the door under each of the policyholder’s successive liability policies from 2000 to 2008, allowing the policyholder to recover millions of dollars in defense costs.

Continue Reading Insurer Must Pay To Defend Product Defect Claims From Date Of Product Installation

On January 9, 2018, the Northern District of California held that the Nonprofits Insurance Alliance of California owed defense coverage to a pair of Scientology-based drug and alcohol rehabilitation centers for two lawsuits filed in Georgia and Oklahoma alleging that staff members had provided drugs and alcohol to patients, which resulted in injury and death. In Western World Ins. Co. v. Nonprofits Ins. Alliance of California, No. 14-cv-04466-EJD (N.D. Cal. Jan. 9, 2018), the court confirmed the broad scope of an insurer’s duty to defend under California law and rejected the insurer’s attempt to unreasonably expand the application of a “professional services” exclusion to avoid coverage.

Continue Reading California Court Holds that Drug- and Alcohol-related Injuries Are Not Barred by Professional Services Exclusion