Recent Cases Discussing The Advice Of Counsel Defense: The Good, The Bad, And The Discovery

By David A. Mercer Introduction The gravamen of a third-party claim of bad faith is that the insurer failed to settle a claim against an insured when it had the opportunity to do so.1 The essence of the claim is that the insurer acted solely on the basis of its own interests, failed to properly...

New York Appeals Court Reverses Itself in K2 Investment Group Decision; Reaffirms Earlier Ruling in Servidone

In a decision notable for several reasons [ enhanced version available to lexis.com subscribers ], the New York State Court of Appeals—the state's highest court—reversed itself in K2 Investment Group, LLC v. American Guarantee & Liability Insurance Co. [21 NY3d 384 (2014)] [ enhanced...

Insurer Has No Duty to Pay for Independent Counsel and May Reassert Its Right to Control the Defense When the Insurer Withdraws the Reservation of Rights Triggering the Insured’s Right to Independent Counsel

Swanson v. State Farm General Insurance Co., 2013 Cal. App. LEXIS 759 [ enhanced version available to lexis.com subscribers ], presented an issue of first impression regarding whether an insurer has a duty to provide an insured with independent counsel, pursuant to California Civil Code section 2860...

Insured May Settle Claim Before Suit if Insurer Wrongfully Denies Coverage

By Jill Berkeley , Partner, Neal, Gerber & Eisenberg LLP In Selective Ins. Co. v. Cherrytree Cos. , 2013 IL App (3) 120959 [ enhanced version available to lexis.com subscribers ], the Illinois Appellate Court for the Third District drove the final nail in the insurer’s “if there...

Can a Suit Seeking Only Injunctive Relief and Prevailing Party Attorney Fees Trigger a CGL Insurer’s Duty to Defend?

By Seth Lamden According to the court in Episcopal Church in South Carolina v. Church Insurance Company of Vermont , No. 2:13-cv-02475 (D.S.C. Jan. 6, 2014), the answer is “yes.” The court in that case [ enhanced version available to lexis.com subscribers ], held that an...

New York’s Highest Court Vacates Its Decision in K2

In its February 18, 2014 decision in K2 Investment Group, LLP v. American Guarantee & Liability Ins. Co ., [ enhanced version available to lexis.com subscribers ], New York’s Court of Appeals – New York’s highest court – had occasion to revisit its prior ruling concerning...

Policy Requiring a Carrier to Investigate and Defend “Suits” Does Not Require It to Investigate and Defend Claims That Have Not Ripened Into Litigation

Great Am. E&S Ins. Co. v. Kouw Pinnq Enter. Co. , 2013 U.S. Dist. LEXIS 146247 (C.D. Cal. Sept. 20, 2013) [ enhanced version available to lexis.com subscribers ] In Great American , the district court held that a general liability insurer did not have an obligation to investigate, defend, or indemnify...

The “True Facts” Exception To The Four Corners-Duty To Defend Rule

By my count, about 35 or so states, give or take, allow for the consideration of extrinsic evidence, in one form or another, to determine an insurer’s duty to defend. In other words, they allow for the consideration of information, beyond what’s contained in the complaint itself, to determine...

New York Court Holds Claimants Had No Standing to Sue Professional Liability Insurer

In its recent decision in Commonwealth Land Title Ins Co. v. American Signature Services, Inc ., 2014 U.S. Dist. LEXIS 22172 (E.D.N.Y. Feb. 20, 2014), [ enhanced version available to lexis.com subscribers ], the United States District Court for the Eastern District of New York had occasion to consider...

No Reasonable Person Would Believe Contract Exclusion Applies to Wrongful Eviction

By Jill Berkeley , Partner, Neal, Gerber & Eisenberg LLP In John Doyle Trust, et al. v. Country Mutual Insurance Co ., 2014 IL App (2d) 121238, [ enhanced version available to lexis.com subscribers ], the Illinois appellate court affirmed summary judgment entered against Country Mutual, finding...

Ninth Circuit Holds Extrinsic Facts Triggered Duty to Defend

In its decision in Burlington Ins. Co. v. CHWC, Inc ., 2014 U.S. App. LEXIS 3941 (9 th Cir. Mar. 3, 2014), [ enhanced version available to lexis.com subscribers ], the United States Court of Appeals for the Ninth Circuit, applying California law, had occasion to consider an insured’s obligation...

CGL Carrier’s Duty To Defend Was Triggered Where Non-Professional Work Was Alleged and, Therefore, the Professional Services Exclusion Did Not Apply to Remove All Possibility of Coverage

North Counties Engineering, Inc. v. State Farm General Ins. Co. , 224 Cal. App. 4th 902 (2014), [ enhanced version available to lexis.com subscribers ]. In North Counties Engineering , the California Court of Appeal held that an insurer’s duty to defend its insured under a comprehensive business...

Newly-Published Regional Steel Case Raises More Questions Than It Answers

California’s Second Appellate District has affirmed a summary ruling that a Commercial General Liability insurer did not have a duty to defend a subcontractor who supplied faulty “seismic tie hooks” that were encased in concrete shear walls. The case is Regional Steel Corporation v...

Federal Court Lists 10 Requirements For A Reservation Of Rights Letter

“What’s in a name? That which we call a rose by any other name would smell as sweet.” William Shakespeare, “Romeo and Juliet,” Act II, Scene 2. [Well, actually, Wikipedia.] But the same cannot be said of reservation of rights letters. In fact, just the opposite. A letter...

A Dog Bite Coverage Case Gets To A Supreme Court

I love dogs. I love coverage cases. So do the math -- I love dog bite coverage cases. On one hand, I’m glad that there are so many of them. On the other hand, a lot of dog bite coverage cases can mean only one thing -- there are a lot of dog bites. And that’s not a good thing. So it’s...

"Non-Trivial Probability" of Excess Judgment Obligates Insurer to Pay for Independent Defense Counsel

The court in Perma-Pipe, Inc. v. Liberty Surplus Insurance Corporation , Case No. 13 C 2989, 2014 U.S. Dist. LEXIS 54867 (N.D. Ill. April 21, 2014), [ enhanced version available to lexis.com subscribers ], held that a CGL insurer breached its duty to defend by refusing to pay for independent defense...

When The Duty To Indemnify Is Broader Than The Duty To Defend

When it comes to coverage principles this one is as black as coal: the duty to defend is broader than the duty to indemnify and if an insurer does not have a duty to defend, it does not have a duty to indemnify. But in Texas it can be a different story. A determination that an insurer has no duty...

Southern District of California Holds that Professional Liability Carrier Breached Its Duty to Defend Because the Underlying Action Alleged Both Non-Covered Professional Services and Potentially Covered Professional Services

Isaacs v. Chartis Specialty Ins. Co. , 2014 U.S. Dist. LEXIS 44053 (S.D. Cal. Mar. 31, 2014), [ enhanced enhanced version available to lexis.com subscribers ]. In Isaacs , the district court held that the insurer breached its duty to defend an underlying action alleging that the insureds were negligent...

Dentons on Taylor v. Allstate Insurance Co.: When Is a Texas Liability Insurer Liable for Inadequate Defense of a Case?

In Taylor v. Allstate Insurance Co.,[1] a Texas court of appeals held that the only common-law tort causes of action available against a liability insurer for allegedly inadequate defense of its insured are breach of contract and a Stowers[2] (failure to settle) claim, but that a contract claim might...

Notable Insurance Coverage Rulings in the First Half of 2014

By Jonathan Hardin and Feola Odeyemi 2014 is shaping up to be a momentous year in insurance coverage law. State and federal courts have already issued several important coverage decisions this year that nevertheless may have slipped "under the radar." This commentary examines such key rulings...

Oops, Insurer’s Poorly Drafted Language Applied As Written; Double Oops, Insured Can’t Complain When New York Law is Applied After It Chose to Reject Missouri Tax

By Jill Berkeley , Partner, Neal, Gerber & Eisenberg LLP An insured under an errors and omissions policy gives timely notice of circumstances during the policy period in effect when it first became aware of its potential civil liability. The E&O insurer acknowledges notice. Many years later...

Supreme Court Awards The Kitchen Sink For Insurer’s Breach Of The Duty To Defend

If an insurer is determined to have breached the duty to defend, consequences will attach. It may be that the insurer must pay for the defense costs that it otherwise owed. Or the consequences may be much harsher – the insurer may lose the right to assert otherwise applicable defenses to indemnity...

Insurer Had No Duty to Defend or Indemnify Trademark Infringement Claim Because It Fell Within the Scope of an Intellectual Property Exclusion

North Coast Med., Inc. v. Hartford Fire Ins. Co. , 2014 U.S. Dist. LEXIS 20701 (N.D. Cal. Feb. 17, 2014), [ enhanced version available to lexis.com subscribers ]. In North Coast Medical , the district court held that the insurer had no duty to defend or indemnify its insured in connection with an...

No Coverage — No Duty to Defend: Personal Injury Offenses Must Be Alleged

Business relationships are often contentious. When a contract to sell a product devolves into a dispute by selling the product under a slightly different name, suits are filed. Insurance is designed to protect the party insured against certain enumerated causes or risks of loss. However, no policy provides...

A-L-Hi To Coverage For Pre-Tender Defense Costs: ALI Principles Looking To Shift The Law

If you’ve been reading Coverage Opinions of late you’ve seen me take issue with certain aspects of the American Law Institute’s “Principles of the Law of Liability Insurance” Project. In general, my beef has been with certain proposed Principles that open the door to insureds...