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Insurance Law

CaseWatch: Insurance - Decisions from The Insurance and Reinsurance Report - April 21, 2011 subscribers may access the enhanced versions of the cases above. Non-subscribers may access the free, unenhanced versions on lexisONE, if available.


Additional Insured

Boatwright v. Penn-Ohio Logistics  
2011 Ohio 1006
[ /LexisONE ] (Ohio Ct. of App. February 25, 2011)
Putative Additional Insured Denied Coverage for Independent Negligence
The plaintiff was injured when the floor in a warehouse in which he was working collapsed. The plaintiff filed suit against the owner of the warehouse, which then sought additional insured coverage from the plaintiff's employer's insurer. The lower court held that the owner was not entitled to additional insured coverage because the complaint alleged that the warehouse owner was independently negligent, not vicariously liable for the employer's negligence.

Westfield Ins. Co. v. FCL Bldrs., Inc.  
2011 Ill. App. LEXIS 186 [ / LexisONE ] (Ill. Ct. of App. March 8, 2011)
Certificate of Insurance Does Not Establish Additional Insured Coverage Where it Refers to Policy
The plaintiff insurer filed suit against the defendant general contractor seeking a declaration that it was not obligated to defend or indemnify it in an underlying lawsuit. The policy contained an endorsement that amended the definition of "insured." The court awarded summary judgment to the insurer insofar as there was no evidence that the insured had agreed in writing to provide additional insured coverage for the contractor. The court also found that the contractor could not rely on a certificate of insurance to establish additional insured coverage under the policy where the certificate of insurance refers to the policy and expressly disclaims any coverage other than that contained in the policy itself.


Bad Faith

Gillard v. AIG Insurance Company
15 A.3d 44 [ /LexisONE] (Pa. February 23, 2011)
Attorney-Client Privilege In Bad Faith Action
A policyholder filed a bad faith uninsured motorist claim against various insurers. During discovery he sought production of all documents from the file of the law firm that represented the insurers. The documents were withheld and redacted based on attorney client privilege (ACP). The policyholder sought to compel production of the documents. The Supreme Court of Pennsylvania concluded that the ACP operated in a two-way fashion to protect confidential client to attorney or attorney to client communication made for the purpose of obtaining or providing professional legal advice.

Kartman v. State Farm Mutual Automobile Insurance Company
634 F.3d 883; 2011 U.S. App. LEXIS 2830 [ /LexisONE] (7th Cir. Ind. February 14, 2011)
Class Certification Inappropriate
Insureds who are dissatisfied with the payment for hail damage to the roofs sued for damages and for an injunction requiring the insurer to reinspect the roofs pursuant to a uniform, reasonable, and objective standard for evaluating hail damage. The district court declined to certify a damages claim under Rule 23(b)(3) because each insured's underpayment claim required an individualized factual inquiry. The district court certified a class claim for injunctive relief to determine if the insured should be required to reinspect the insureds' roofs pursuant to a uniformed and objective standard. On appeal, the court found that the Rule 23(b)(2) certification was inappropriate. The court found that the insureds essentially alleged breach of contract and bad faith denial of insurance benefits would be remedied by damages. The insurer did not have a duty requiring its use a particular standard for assessing hail damages, and thus, there was no independent cognizable wrong to support injunctive relief.


Duty to Defend/Trigger of Coverage

Bausch & Lomb Inc. v. Lexington Ins. Co.
2011 U.S. App. LEXIS 4991 [ / LexisONE](2nd Cir.(N.Y.), March 11, 2011)
Duty to Defend Triggered Only After Exhaustion of Retained Limit
The policyholder manufactured saline solution and was subsequently sued by multiple individuals claiming to have been injured by the saline solution. The policyholder sought coverage under a commercial umbrella liability policy with a typical definition of "occurrence." The insurer denied a duty to defend/indemnify until the insured met its retained limit for each alleged injury, asserting that each injury was a separate occurrence, with a separate retained limit. Applying NY law, the Second Circuit used the "unfortunate events test" to rule that this case involving multiple injuries occurring under unique circumstances, involved multiple occurrences. The umbrella insurer owed no duty to defend until the retained limit was exhausted for each occurrence

Haines v. State Auto Property and Casualty Ins. Co.
2011 U.S. App. LEXIS 4684 [ /LexisONE] (3rd Cir.(Pa.), March 9, 2011)
Homeowners' Insurer Not Required to Defend Golf Cart Injuries
A policyholder homeowner was sued for injuries arising when, while driving a golf cart, he struck a person. The homeowners insurer, relying upon a Motor Vehicle Liability exclusion, refused to defend. The exclusion excluded liability caused by any "recreational motor vehicles" which included golf carts unless the golf cart is used "solely to service the residence premises." The court, applying Pennsylvania law, agreed, finding no duty to defend because the complaint fell squarely within the exclusion.

Golf Cart

Murphy v. Acceptance Indemnity Ins. Co.
2011 U.S. Dist. LEXIS 26602 [ ](D.Vt. March 15, 2011)
No Duty to Defend Bar Where Alleged Injuries Caused by Intentional Acts of Bouncers
A patron sued a bar alleging that the bar's bouncers forcibly removed the patron from his chair and threw or pushed him down a set of stairs, causing severe injuries. The bar's insurer refused to defend, relying upon an "expected or intended injury" exclusion. The court held there was no duty to defend even though one theory of recovery against the bar was negligence. The complaint alleged that the bouncers' conduct included forcible expulsion from the bar, including pushing or throwing him down the stairs. The court noted that the complaint did not alternatively allege that the bouncers negligently expelled him from the bar or were otherwise negligent in their conduct. Thus, the complaint as drafted, alleging only forcible expulsion and not accidental or negligent conduct, did not trigger a duty to defend.



Acstar Ins. Co. v. Clean Harbors Inc.
2011 U.S. Dist. LEXIS 20364 [ ] (D.Conn. March 2, 2011)
Reinsurer Is Not Entitled to a Declaratory Judgment
The defendant performed environmental testing and subcontracted a portion of it. The subcontractor struck an underground tank, causing a fuel leak. Plaintiff reinsurer lacked subrogation rights under the defendant's policy and was not prejudiced by defendant's release of the subcontractor from liability. The defendant did not breach the policy's subrogation clause and the plaintiff is not entitled to a declaratory judgment relieving it of its duty to defendant and indemnify defendant.

Allstate Ins. Co. v. VonMetzger
2011 U.S. Dist. LEXIS 19741 [](D.Col. February 28, 2011)
District Court Grants Summary Judgment To Insurer On Applicability Of Pollution Exclusion In the Policy
This environmental coverage dispute arises from claims that defendant policyholders developed a subdivision and sold lots without disclosing that the land was contaminated by waste oil and other unknown toxins. The insurer sought a declaration that it had no obligation to defend defendant policyholders in the state court action.

American Commercial Lines LLC v. Water Quality Ins. Syndicate
2011 U.S. App. LEXIS 5090 [ / LexisONE] (2d Cir. (N.Y.) March 14, 2011)
Appeal from Coverage Ruling Dismissed
The defendant appealed from a determination that it was liable for the plaintiff's defense costs stemming from an oil spill resulting from a July 2008 barge accident along the Mississippi River. The appeal was dismissed because the lower court ruling did not conclusively determine the parties' rights and obligations, and thus, the appellate court lacked jurisdiction.

Dallas Nat. Ins. Co. v. Sabic Americas, Inc.
2011 Texas App. LEXIS 1741 [ / LexisONE] (Tex. Ct. of App. March 10, 2011)
Texas Court Of Appeals Affirmed Summary Judgment To Policyholder On Insurer's Obligation To Defend Underlying MTBE Contamination Claims
This environmental coverage dispute arose from eight lawsuits against the policyholder in New York and Florida stemming from claims that the policyholder contaminated the water supplies of numerous municipal corporations by the addition of methyl tertiary butyl ether (MTBE) to defendant's petroleum products. The underlying plaintiffs alleged that the policyholder knew or should have known the unique dangers that the addition of MTBE to gasoline and other petroleum products posed to groundwater supplies. As to the pollution exclusion, the policyholder noted that the exclusion only applied to clean-up costs and not claims for compensatory damages. Also, the plaintiffs in the underlying suits are quasi-municipal water sellers not "governmental authorities" with the authority to impose penalties. The court agreed with the policyholder concluding that its interpretation of the exclusion was reasonable and therefore the exclusion was ambiguous, especially as to the term "governmental authority," which was not defined in the policy.

Emerson Enterprises, LLC. v. Kenneth Crosby New York, LLC
2011 U.S. Dist. LEXIS 24782 [] (W.D.N.Y. March 1, 2011)
Insurer Has No Duty to Defend Claim for Cleanup Costs
The New York State Department of Environmental Conservation sought to recover the cost of investigation and remediation of its contaminated property from plaintiff real estate company. The court held that the policy unambiguously excluded coverage for pollution expected or intended by the policyholder, and found the dumping of contaminants into the dry well intentional, not accidental.

Industrial Enterprises Inc. v. Penn America Ins. Co.

2011 U.S. App. LEXIS 5363 [ / LexisONE] (4th Cir. (Md.) March 18, 2011)
Appellate Court Reversed Finding of CERCLA Coverage
Plaintiff sought coverage from defendant when the EPA designated an area as a Superfund site. The lower court ruled that defendant owed plaintiff a duty to defend it in the case. The appellate court reversed, holding that the comprehensive general liability policy defendant issued, covering property damage, does not cover Superfund liability.

Plaquemine Towing Corp. v. Great Amer. Ins. Co. of New York
2011 U.S. Dist. LEXIS 20429 [] (E.D.La. March 1, 2011)
Salvaging Vessel Falls Within Policy's Pollution Coverage
A sunken vessel needed to be salvaged to prevent the discharge of any oil or chemical products that remained on the ship. Plaintiff sought pollution remediation expenses from

defendant. The court denied defendant's motion for summary judgment, finding that the expenses fall within the policy's pollution coverage.

United Nuclear Corp. v. Allstate Ins. Co.
2011 N.M. App. LEXIS 10 [ /LexisONE] (N.M. Ct. of App. March 9, 2011)
New Mexico Court Of Appeal Affirmed Summary Judgment To Insurer On Applicability Of Qualified Pollution Exclusion
This environmental coverage dispute arose from claims that plaintiff policyholder discharged contaminants in the course of its mining operations during the 1970's and 1980's.

The court of appeals noted that, under the policies, property damage or personal injury caused by pollution was excluded from coverage, unless such pollution was "sudden and accidental." The court held that discharge from mining operations was neither "sudden" nor "accidental."


General Liability Policy Exclusions

Badger Mut. Ins. Co. v. Ross Enters.
2011 Mich. App. LEXIS 436 [ / LexisONE] (Mich. App. March 3, 2011)
Concurrent Causes Exclusion Precludes Coverage Where Excluded Event Applies to the Loss Even If Other Events Contribute to or Aggravate the Loss
The estate of driver who died in a car accident when he was struck by a drunk driver sued the gentlemen's club where the driver was sold liquor before the accident. In addition to the dramshop action, the estate filed a claim for the club's negligence based upon its actions in initially arranging for a taxicab, but then furnishing the drunk driver with his car and car keys and allowing him to drive away. The club sought coverage under its CGL policy, claiming that the negligence claim requires the insurer to provide a defense even if though the dramshop action is excluded under the policy. The Michigan appellate court held that the policy's concurrent causes exclusion operates whenever the excluded event applies to the loss even if other events contribute to or aggravate the loss. Since the club's liability is claimed to result from the its sale of alcoholic beverages, an excluded event, combined with the club's actions in furnishing a drunk driver with a vehicle, the court held that the concurrent causes exclusion precludes coverage.


Other Insurance

Deutsche Bank Trust Co. v. Royal Surplus Lines Ins. Co.
2011 Del. Super. LEXIS 89 [ / LexisONE] (Del. App. February 25, 2011)
Court holds that Time-On-The-Risk Approach Provided Fair Allocation for Defense Costs Where Claimant's Had Multiple Coverage
Commercial property owners sought coverage for claims of workers who sustained injuries during the post-9/11 clean-up under several insurance policies issued to the property owners. Issues arose as to how the court would divide defense costs when there was multiple coverage. The Delaware appellate court held that the time-on-the-risk approach provided an easily applied and fair method for a pro rata allocation of defense costs.

Fieldston Prop. Owners Ass'n, Inc. v. Hermitage Ins. Co.
16 N.Y. 3d 257 [ / LexisONE] (N.Y. February 24, 2011)
CGL Policy Primary Over D&O Policy Per "Other Insurance" Clauses
Two insurers-one a CGL and one a D&O-disagreed about which one was obligated to defend and indemnify their mutual insured in two underlying lawsuits wherein the plaintiffs asserted claims for injurious falsehood. The insurers agreed that both policies covered the injurious falsehood claims but disagreed as to the priority of coverage. The Court of Appeals held that the CGL insurer was obligated to defend the insured until such time as the injurious falsehood claim was dismissed, even though none of the other claims were covered by the policy. The court also held that pursuant to the policies' "other insurance" clauses, the CGL insurer was obligated to provide primary coverage without contribution from the D&O insurer.

Professional Liability

Cohen-Esrey Real Estate Services v. Twin City Fire Insurance Co.
2011 U.S. App. LEXIS 3793  [ /LexisONE] (10th Cir.(Kan.), February 28, 2011)
Prior Knowledge Provision Precludes Coverage For Embezzlement Scheme
The plaintiff managed an apartment building for the building's owner. An employee of the plaintiff conducted a fraudulent scheme to embezzle money. The plaintiff knew that its employee had defrauded HUD and the building owner and that she had previously been caught engaging in theft and had not been fired, or subject to stricter oversight. The court concluded that any reasonable insured would know that a claim of negligence was more than colorable. Certainly an insured could reasonably have foreseen, based on these facts, that a claim might result under the policy.

Westport Insurance Company v. The Hamilton Wharton Group
2011 U.S. Dist. LEXIS 20535 [] (S.D. N.Y. February 23, 2011)
Court Holds Duty to Defend Triggered, Insured Entitled to Attorney's Fees
An insurer filed suit seeking a declaration that it was not required to provide coverage to the defendants as a result of an underlying claim. The court noted New York State's often cited principle that the duty to defend is exceedingly broad. While the insurer argued that there was no duty to defend because the policyholder's activities with respect to the trust did not constitute professional services, the court disagreed. The court held that the duty to defend was triggered as one, if not more, of the claims alleged in the underlying action concerned negligence in the performance of professional services or breach of contract.

W3i Mobile LLC v. Westchester Fire Ins. Co.
632 F.3d 432 [] (8th Cir. (Minn.) February 15, 2011)
Eighth Circuit Affirms Denial of Coverage Under D&O Policy
The plaintiff provides "mobile content" which ranges from customized ring tones for cell phones to weather alerts and interactive radio. Plaintiff was named as defendant in a number of actions alleging that plaintiff regularly charged customers for unauthorized mobile content. The carrier denied coverage for the claim based on Products Exclusion. The Eighth Circuit affirmed the decision of the trial court stating that the underlying claims alleged that customers were erroneously billed for products. Accordingly, the claims arise out of, or at a minimum, "involve" W3i's mobile content which is excluded from coverage under the policy.

This edition of CaseWatch: Insurance was originally published in the The Insurance and Reinsurance Report blog.


CaseWatch: Insurance provides timely summaries of and access to insurance law decisions and legislation. It is distributed bi-weekly. For ease of reference, the cases are organized by topic. CaseWatch is the collaborative effort of Goldberg Segalla LLP's Global Insurance Services Practice Group, as is its blog The Insurance and Reinsurance Report. Goldberg Segalla's Global Insurance Service Group is comprised of over 25 attorneys throughout 10 offices in the firm's four states (New York, New Jersey, Connecticut, and Pennsylvania). The Global Insurance Services Group routinely handles matter of national and international importance for both domestic and foreign insurers, cedents and reinsurers. This includes: comprehensive audits, policy reviews, regulatory advice,  positioning dispute for resolution at the business level (either through interim funding or non-waiver agreements), negotiations among counsel, mediation or fully-involved arbitration or litigation.


   The editors, Daniel W. Gerber and Sarah J. Delaney appreciate your interest and welcome your feedback.