In First Mercury Insurance Co. v. First Florida Building Corp., et al.[AY1] , a federal district court ordered that an insurer had a duty to defend its insured against an underlying personal injury lawsuit. 2023 WL 23116, at *1 (M.D. Fla. Jan. 3, 2023). First Mercury is a cautionary tale about how insurers may try to circumvent their obligations by improperly considering extrinsic evidence when determining whether they have a duty to defend their insureds.
Continue Reading Insurer Could Not Rely on Extrinsic Evidence to Circumvent Its Duty to Defend  

A golf cart, at least according to a recent Eleventh Circuit ruling about insurance coverage for a minor driving a golf cart. GEICO Gen. Ins. Co. v. Gonalez, No. 21-13304.

The policy covered bodily injury arising from the use of a “private passenger, farm, or utility auto.” It defined “private passenger auto” as “a four-wheel private passenger, station wagon or jeep-type auto, including a farm or utility auto as defined.”
Continue Reading What Has Four Wheels And Is An “Auto” But Not A “Car”?

In Sherwin-Williams Co. v. Certain Underwriters at Lloyd’s London, et al., the Court of Appeals for Ohio’s Eighth District, reversed the lower court, finding that money paid by the insured into an abatement fund was “damages” as that undefined term was used in the policyholder’s insurance policies. 2022-Ohio-3031, ¶ 1. Sherwin-Williams is a cautionary tale about how insurers may try to narrow the meaning of undefined terms in their insurance policies.
Continue Reading Court Finds That $400 Million Paid Into Abatement Fund Qualifies as “Damages” Under the Insured’s Policies  

In T.D. Williamson, Inc. v. Federal Ins. Co., the Tenth Circuit recently affirmed a lower court’s decision that an insurer did not have a duty to defend or indemnify its insured, a pipeline company, against a former director’s lawsuit. 21-5043, 2022 WL 1112530, at *1 (10th Cir. Apr. 14, 2022). According to the appellate court, the policy’s “insured vs. insured” exclusion barred coverage. This exclusion is common in D&O policies. The exclusion generally eliminates coverage for claims by or on behalf of one insured against another insured. For instance, the exclusion may bar coverage for claims by a company against one of its executives or by former or current executives against other executives of the same company. There are various versions of the exclusion, but they usually contain exceptions, which provide for coverage in specific situations. These exceptions are frequently the subject of coverage disputes.
Continue Reading Executive Protection Under D&O Policies and the Insured vs. Insured Exclusion

As the use of captive insurance companies continues to grow, one issue businesses may face is whether to incorporate cells within a captive cell program. In a recent article in Business Law Today, Hunton attorneys Lorie Masters, Patrick McDermott, and Latosha Ellis address some of the relevant considerations.
Continue Reading To Incorporate or Not to Incorporate? That is the Captive Cell Question

With the circumstances in Ukraine intensifying and companies either shutting down or suspending operations in the region, the sparingly used war exclusion will become more relevant as policyholders seek to recover losses. The economic effects will be broadly felt. Some companies may have to close operations entirely, some partially, and others may have their supply chains severely disrupted. This is compounded by the worldwide risk of cyber-incidents. The US government has been adamantly warning companies to protect themselves against cyberattacks. The impact on policyholders, however, may take different forms, potentially implicating their business interruption, contingent business interruption, cyber, shipping and cargo, and political risk insurance coverages. These are only a few examples. Other coverages could be implicated.
Continue Reading The War Exclusion Will Be a Leading Issue in the Months and Years Ahead

Liability insurance typically affords broad defense coverage.  But insurers sometimes reserve their right to challenge the insured’s right to a defense, or even outright terminate the defense.  When this occurs after the insurer has been in exclusive control of the defense, some courts recognize that the consequences can be catastrophic for the insured defendant.  Insurers, therefore, may be estopped from denying coverage where doing so will prejudice the insured.  This is exactly what transpired in RLI Ins. Co. v. AST Engineering Corp., No. 20-214 (2d Cir. Jan. 12, 2022), where the Second Circuit affirmed the district court’s decision that an insurer’s attempt to withdraw the defense it had provided to its insured for three years would prejudice the insured.
Continue Reading Defenses Raised Three-Years Too Late Estop Insurer’s Coverage Denial

Priority of coverage disputes can arise where different insurers for different insureds cover the same claim. Generally, competing insurers will compare the “Other Insurance” clauses of their policies to decide who should cover the claim first. But where one of the insureds owes contractual indemnity to the other, the indemnity obligation may govern. Thus, the insurer for the insured who owes indemnity may cover the claim first, even if it would have been excess per the “Other Insurance” clauses. Such was the case in Cent. Sur. Co. v. Metro. Transit Auth., et al., No. 20-1474-CV, 2021 WL 4538633, at *1 (2d Cir. Oct. 5, 2021).
Continue Reading Indemnity is King: Indemnity Provision in Commercial Contract Trumps Other Insurance Clause in Insurance Policy

It happens every year. A clearly covered loss occurs and for one reason or another, the policyholder delays in notifying its insurer of the loss. Usually, the cause for the delay is innocent. It may even appear to be justified, such as where the insured prioritizes steps to save its property, inventory or assist dependent customers. But no matter the reason, insurers can be hard-lined in their refusal to accept an untimely claim. This is especially true in states that presume prejudice to the insurer, or where the insurer need not show prejudice at all.
Continue Reading Two Years, Too Late: Time-Barred Hurricane Loss is Timely Reminder to Insureds