In 2015 and 2016, we discussed certain provisions of the then drafts of the Restatement of the Law, Liability insurance, including the Duty to Cooperate, here, and Duty to Defend, here and here. In late May 2017, the American Law Institute met to approve the Proposed Final Draft—the culmination of over seven years of work on this project. Not surprisingly, many of the issues discussed in the Restatement have been hotly contested by insurers. While in many instances, the reporters simply opted for the majority rule, in a few instances, the Restatement may seek to move the law on key issues to align the law and the incentives underlying insurance and claims-handling. In a recent article for Risk Management Magazine, Lorie Masters, Syed Ahmad, and I address some of the most hotly debated sections of the proposed Restatement, including: policy interpretation principles, such as when a term is deemed ambiguous; the standard for determining the insurer’s duty to defend; the insurer’s duty to make reasonable settlement decisions; and the allocation of liability in long-tail environmental claims. The article can be found here. We will also be speaking at the upcoming Florida RIMS Conference in Naples, Florida on this subject on July 28th. Please see the Florida RIMS website for more information on that conference.

The vote on the final draft has been pushed to the American Law Institute’s next annual meeting in May 2018. In the meantime, policyholders may consider submitting comments on sections of interest and can look to the current Proposed Final Draft as guidance on what the law may be should they encounter a coverage dispute with their liability insurer.


A US District Court has ruled that a Professional Services Exclusion in a D&O policy does not bar coverage for suits alleging that a network of for-profit career colleges engaged in false marketing regarding the quality of education and job prospects that enrollees would receive. The decision in Education Affiliates Inc., et al. v. Federal Insurance Company, et al., stems from a series of lawsuits filed against the owner of the career colleges by former students and a subpoena and draft complaint served by the Florida Attorney General alleging that the colleges were deceptive in marketing their services to prospective students.

Continue Reading Professional Services Exclusion Limited To The Actual Rendering Of Professional Services; Other Aspects Of Business Not Barred

A federal appeals court ruled on Wednesday that the absence of a duty to defend does not foreclose the potential for indemnity coverage under primary and umbrella liability policies. The decision in Hartford Casualty Insurance Co. et al. v. DP Engineering LLC, stems from a March 31, 2013, incident where an industrial crane collapsed at a nuclear generating facility near Russellville, Arkansas, causing significant damage and injuries, including one death.

Continue Reading Fifth Circuit: Indemnity Possible Even Where No Defense Owed

In a June 1, 2016 decision, the Second Circuit Court of Appeals in National Fire Insurance Co. of Hartford et al. v. E. Mishan & Sons Inc. required CNA Financial Corporation to defend E. Mishan & Sons, Inc.(“Emson”) – best known for its “As Seen on TV” products –in two class actions alleging a conspiracy to trap customers into recurring credit card charges and that Emson sold private consumer information that it obtained through its product sales.

Continue Reading “As Seen on TV” — Insurer Must Defend Well Known Television Marketer in Data Privacy Suit

Hunton & Williams’ insurance practice head, Walter Andrews, was quoted in a Law360 article yesterday regarding the confusion that is likely to result from a federal bankruptcy judge’s decision in Rapid-American Corp. v. Travelers Casualty and Surety Co., where the court concluded that a majority of excess insurers owe no coverage to Rapid-American Corp. for underlying asbestos claims until the company exhausts the limits of its underlying primary and excess coverage through actual payment, not just accrued liability. According the Andrews, “the public policy clearly cries out against this ruling because you want to encourage settlement and have certainty in terms of a policyholder knowing what it can do with the coverage it has.”  However, “[t]his case throws that into confusion and uncertainty,” Andrews added.

Two of three of Rapid-American Corp.’s excess liability insurers do not have to respond to underlying asbestos claims unless and until all underlying coverage is exhausted by the payment of claims, says Judge Bernstein of the United States Bankruptcy Court for the Southern District of New York in a June 7, 2016 decision. Rapid-American has been involved in asbestos litigation since 1974 and settled disputes with many of its underlying insurers, but an amount sufficient to reach its excess coverage policies has not yet been paid. Rapid-American argued that it was not necessary for the primary policies’ underlying limits to be exhausted by actual payment before insurers’ excess liability coverage attaches.

Continue Reading Federal Bankruptcy Judge Says No Excess Coverage in New York Until Underlying Limits Exhausted Through Payment of Claims

As a follow-up to my post yesterday concerning the New York Court of Appeals’ decision in In the Matter of Viking Pump, Inc. and Warren Pumps, LLC, Insurance Appeals, where the New York high court confirmed that policyholders may allocate all amounts of loss to a single policy and a single policy year, Syed Ahmad, a partner in our Insurance Coverage Counseling and Litigation team, was interviewed by Law360 about the decision’s broad-ranging implications. As Mr. Ahmad explained in an article appearing today in Law360, titled NY Allocation Ruling Speeds Policyholders’ Road To Recovery, “[u]nder all-sums, policyholders can seek to recover all amounts owed from one insurer, which will make things much easier for them to recover for a particular loss.” This, plus the decision’s directive that all insurers in a given policy year must pay without the need for horizontal exhaustion of coverage in subsequent policy years, paves the way for policyholders to obtain full indemnification from a single “tower” of coverage.

On Tuesday, May 3, 2016, the New York Court of Appeals held that each of several excess liability insurers can be wholly responsible for the entire extent of their policyholders’ asbestos liabilities.  The Court further held that “vertical” exhaustion would apply; rejecting the insurers’ attempt to apply “horizontal” exhaustion before upper-layer policies must respond.  The decision, in In the Matter of Viking Pump, Inc. and Warren Pumps, LLC, Insurance Appeals, comes in response to two questions certified from the Delaware Supreme Court:

Continue Reading NY High Court Says “All Sums” and “Vertical” Exhaustion Apply to Excess Coverage for Asbestos Liabilities

The Eleventh Circuit confirmed in First Mercury Insurance Company v. Excellent Computing Distributors, Inc., No. 15-10120 (11th Cir. Apr. 20, 2016), that policyholders need not await adjudication of underlying liability litigation before obtaining a confirmation of coverage. The decision arose from a declaratory judgment action concerning the availability of insurance coverage for an underlying negligence suit against the policyholder. The district court dismissed the declaratory judgment action, finding it “inappropriate to exercise jurisdiction over an action seeking a declaration of the plaintiff’s indemnity obligations absent a determination of the insureds’ liability.” The court also noted that “significant factual questions necessary for a resolution of [the] declaratory judgment action are at issue in the state [court] action, and have yet to be resolved.” But the court did not identify the factual questions.

Continue Reading Policyholders Can Confirm Coverage Before Underlying Adjudication, Says Eleventh Circuit