By Joann M. Lytle, Nicholas M. Insua, and Anne E. Matthews, McCarter & English, LLP In American and Foreign Insurance Co. v. Jerry’s Sport Center, Inc. , No. 88 MAP 2008, 2010 Pa. LEXIS 1803 (Pa. Aug. 17, 2010), the Supreme Court of Pennsylvania refuted the reasoning under which some courts have allowed insurers to seek reimbursement of defense costs pursuant to a reservation of rights and instead joined...

By Daniel E. Feinberg, Counsel, SNR Denton In Nieto v. Blue Shield of California Life & Health Insurance Co. , the California Court of Appeal held that a health insurer did not engage in unlawful “post-claim underwriting” when it issued a policy in reliance on the insured’s policy application, without investigating the accuracy of the insured’s representations. Accordingly, the insurer...

By Kyle N. Roehler, Attorney, Foland Wickens Eisfelder Roper & Hofer, P.C. In his article appearing in the July/August 2010 issue of Coverage , Mr. Roehler warns of the coming wave of insurance claims and ensuing coverage litigation over sulfur emissions from defective Chinese drywall. The article first reports on the extent to which Chinese drywall was installed in American homes and the potential harm it can...

By John H. Podesta and Nicholas P. Honkamp, Attorneys, Branson, Brinkop, Griffith & Strong In their article appearing in the July/August 2010 issue of Coverage , the authors discuss issues that arise when corporations do not pay their state taxes in California and are subsequently suspended pursuant to California Revenue and Taxation Code Section 23301. Once suspended, a corporation cannot exercise corporate powers...

By Louis A. Chiafullo, Partner, McCarter & English, LLP In a recent decision from the United States District Court for the District of South Carolina, the “absolute pollution exclusion” upon which insurers often rely to deny coverage was dealt another blow when the court held that it was unclear whether the exclusion unambiguously applied to paint fumes generated as a result of the insured’s...

By John Berringer and Jill Averett, Reed Smith, LLP On March 15, 2010, the Fifth Circuit affirmed the decision of the U.S. District Court for the Southern District of Texas, PENDERGEST-HOLT V. CERTAIN UNDERWRITERS’ AT LLOYD’S OF LONDON , 2010 U.S. App. LEXIS 5384 (5 th Cir. Tex. Mar. 15, 2010), at the preliminary injunction stage ordering Lloyd’s of London underwriters to immediately commence the...

By Paul R. Walker-Bright, Partner, Reed Smith LLP In his commentary, “Reed Smith LLP on the Dodd-Frank Wall Street Reform and Consumer Protection Act’s Affect on the Insurance Industry” Paul Walker-Bright states that on July 15, 2010 the United States Senate passed the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the “Dodd-Frank Act”), the most comprehensive...

By William T. Barker, Partner, SNR Denton In New York Marine & General Insurance Co. v. Lafarge North America, Inc. (“NYMAGIC”) 593 F.3d 102 (2nd Cir. 2010), the Second Circuit pointed out limits to an insured’s right to be defended by independent counsel, rather than counsel appointed and directed by the insurer. Some New York cases have overlooked those limits, and the Second Circuit’s...

By Louis A. Chiafullo and David A. Thomas, Attorneys, McCarter & English, LLP The United States Court for the Southern District of New York in a discovery ruling recently carved out some middle ground in a landscape that too often is heavily skewed in favor of insurers in coverage actions. In Pentair Water Treatment (OH) Co., et al. v. The Continental Ins. Co ., et al. , Dkt No. 08 Civ. 3604, 2009 U.S. Dist...

By Brian J. Osias and David C. Kane, Attorneys, McCarter & English, LLP The recent oil spill in the Gulf of Mexico has become arguably the worst in United States history. Spewing up to 30,000 barrels a day, it has surpassed even the Exxon Valdez disaster. Third parties will invariably suffer damage from the oil onslaught and will seek reimbursement from their insurance carriers. As the oil spill spreads...

By Charles H. Mullin, Karl N. Snow, and Noah B. Wallace, Principals, Bates White, LLC In their article appearing in the May/June 2010 issue of Coverage, “Proper Settlement Credits in All Sums Jurisdictions,” Charles H. Mullin, Karl N. Snow and Noah B. Wallace explore the question of whether a settlement credit in all sums jurisdictions should be equal to the policy limits of the settled policies (“policy...

By Nancy I. Stein-McCarthy, Associate, Powers, McNalis, Torres & Teebagy In her article appearing in the May/June 2010 issue of Coverage, “Prejudgment Interest after Appraisal, a Modern Quandary on an Old Concept,” Nancy I. Stein-McCarthy presents a case law survey of when and if prejudgment interest should be awarded in the first-party property insurance context subsequent to entry of an appraisal...

By Wystan M. Ackerman and Seth A. Schmeeckle In their article, “Handling the Flood of Coverage Litigation: Lessons Learned from Katrina,” Wystan M. Ackerman and Seth A. Schmeeckle examine a number of insurance coverage cases that arose in the wake of Hurricane Katrina and note that insurers achieved considerable success on key issues, including: (1) the robust applicability of the flood exclusion in...

By Richard P. Lewis and Michael N. DiCanio, Attorneys, Reed Smith LLP In their article, “Cleaning Up the Mess: Business Income Coverage in the Wake of Hurricane Katrina” appearing in the May/June 2010 issue of Coverage, Richard P. Lewis and Michael N. DiCanio examine cases addressing a host of issues concerning Business Income (or “Business Interruption”) insurance coverage in the aftermath...

By David S. Evinger and Gerardo Alcazar of Robins, Kaplan, Miller & Ciresi In their article appearing in the March/April 2010 issue of Coverage , “How Fast Can a Fire or Explosion Case Be Extinguished?: Recent Developments Involving NFPA 921: Guide for Fire and Explosion Investigations,” David S. Evinger and Gerardo Alcazar warn that a fire or explosion case can be ruined if the utmost care is taken...

By William T. Barker, Kirk R. Ruthenberg and Kenneth J. Pfaehler Maryland common law never recognized a cause of action for first-party insurance bad faith. Johnson v. Federal Kemper Ins. Co., 74 Md. App. 243 (1988). But Maryland created private statutory rights, effective October 1, 2007. A federal district court has decided the first significant case under the statute. Ceclila Schwaber Trust Two v. Hartford Acc....

Much has been written on the issue of allocating an insured's liability across policy limits under general liability insurance policies. The article "Is 'Fair' Fair?: 'All Sums' and the Allocation of Deductibles," by Lorelie S. Masters and Jerold Oshinsky, appearing in the March/April 2010 issue of Coverage, addresses the less often discussed issue of allocation of the policyholder's...

In their article appearing in the March/April 2010 issue of Coverage, "Time-Sensitive Demands," James M. Hofert and Jennifer K. Gust initially describe the debate as to the legitimacy of time-sensitive demands. Such a demand is a settlement offer made by an underlying plaintiff that the defendant's insurer must accept by the deadline set forth in the demand. If the insurer does not accept the settlement...

In their article appearing in the March/April 2010 issue of Coverage , "The Perils of E-Discovery-Landmines for the Client and the Counsel," Barry J. Fleishman and Erica J. Dominitz warn, "E-discovery case law makes clear that lawyers today must possess a fair amount of technological proficiency-or ... the good judgment to hire people who do-and the management skills to oversee their work." It is not...

By Lilit Asadourian, Reed Smith LLP In United Guaranty Mortgage Ins. Co. v. Countrywide Financial Corp., et al . , 2009 U.S. Dist. Lexis 96283 (C.D. Cal. 2009), the United States District Court for the Central District of California dismissed with prejudice United Guaranty Insurance Co.'s ("United Guaranty") tort and statutory claims against Countrywide, holding that United Guaranty could not seek "poolwide"...

By John B. Berringer and Jill N. Averett, Reed Smith LLP Officers, directors and their corporations routinely are denied the full benefits of the D&O Insurance Policies they purchased at great cost when lawsuits naming them as defendants include allegations of intentional wrongdoing which arguably trigger policy exclusions. Even though such exclusions routinely provide that coverage will not be forfeited until...

By William T. Barker and Ronald D. Kent In Allstate Insurance Co. v. Miller, the Nevada Supreme Court held that the jury could properly have found Allstate liable for an excess judgment as a result of its failure to adequately inform its insured of a settlement opportunity. This commentary examines the law in Nevada and elsewhere on an insurer's duty to inform the insured of settlement opportunities and the circumstances...

By Louis A. Chiafullo & David C. Kane, McCarter & English, LLP The scope of pollution exclusions has been in dispute for decades, centering first on the "sudden and accidental" pollution exclusion that appeared in the 1970s, and next on the so-called "absolute" pollution exclusions that became relatively standard in liability policies in the mid-1980s. The latest battles have centered on...

By Brian J. Hickey and Jennifer A. Bollow In this Emerging Issues commentary, Brian J. Hickey and Jennifer A. Bollow, both partners with Cassiday Schade LLP, examine a recent decision by the Illinois Supreme Court. In Lebron v. Gottlieb Memorial Hospital , the court struck down the third attempt by Illinois lawmakers to impose caps on noneconomic damages. Since the law only applied to medical malpractice actions...

In Martco Ltd. Partnership v. Wellons, Inc. , No. 08-31247 & No. 08-31248, 2009 U.S. App. LEXIS 25428 (5th Cir. Nov. 19, 2009), the United States Court of Appeals for the Fifth Circuit rejected an insurance carrier’s argument that a commercial general liability (“CGL) policy allegedly did not provide coverage for a breach of contract claims. A growing jurisprudence has developed supporting the notion that...