Pollution Insurance Coverage: What Did the Insured Know and When Did It Know It?

A new environmental insurance case makes an important fix to pollution legal liability policies.

A new Appeals Court decision (litigated on behalf of the insureds by Anderson & Kreiger) has restored the usefulness of pollution legal liability (PLL) policies, overturning a Superior Court decision and holding that an insurer cannot exclude coverage under a “known conditions exclusion” without proving that newly discovered contamination is connected to the contamination that the insured knew about. Market Forge Industries, Inc. v. Indian Harbor Insurance Co. (August 29, 2014).

Because insurers have succeeded in excluding most pollution claims from coverage under traditional liability policies with broad pollution exclusions, insureds are turning to newer types of policies intended to cover pollution, such as PLL policies. Under these policies, it is important to identify contamination that the insureds know about at the policy inception; the policies, though very expensive, are not intended to cover known contamination. Because these policies are often purchased for old commercial or industrial sites, the insureds may suspect contamination or even know of some. With this decision, insureds can take some comfort that their knowledge of contamination on one part of a property won’t foreclose coverage for contamination found elsewhere. Continue reading

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Contribution No More: New Case Calls Equitable Contribution Among Insurers Into Doubt

contribution federal insurance case

Not cooperating anymore

In a federal district court decision that could have far-reaching implications, Judge Denise Casper found the “selective tender” rule trumped the doctrine of “equitable subrogation” – a surprising holding. In Massachusetts, an insurer that undertook the complete defense or indemnification of an insured generally felt safe in the knowledge that it was entitled to seek contribution from co-insurers. See, e.g., Rubensten v. Royal Ins. Co., 44 Mass. App. 842, 852 (1998). Perhaps not any more.

The decision will significantly change the landscape for cooperation among co-insurers.  And, it may also add a significant weapon to an insured’s arsenal. Continue reading

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Uber, Distracted Driving and Insurance Gaps

Insurance coverage gaps for ride sharing

It’s hard to figure out insurance coverage
when you’re busy disrupting.

A simmering debate over insurance coverage for ride-sharing exploded when a driver, allegedly distracted by searching for a fare on the Uber app, hit and killed a six-year-old in a San Francisco cross-walk on New Year’s Eve. The tragedy exposed a complex battle between popular new ride-sharing startups, drivers and insurance carriers about how to insure drivers who use their personal cars in a taxi-like fashion.

Most personal auto policies don’t cover the use of your car as a “public or livery conveyance.” Ride-sharing services may provide commercial auto coverage for drivers from the time they have a fare (California already requires this). But personal auto carriers argue that their exclusion applies while the driver has the ride-sharing app on and is looking for a fare. As a result, there may be a gap in coverage from the time the driver turns on the ride-sharing app to the time he finds a fare. Continue reading

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If It Is a “Knowing and Willful” Violation of c. 93A, It Is Not Covered

Covering damages when there was intent.

That is not a surprising holding, but the decision by federal district court Judge Stearns in American Guarantee & Liability Ins. Co. v. Lamond is one of the few to address coverage when there has been an underlying judgment under c. 93A, Massachusetts’ consumer protection act. Going forward, insurers are likely to widely cite the case’s two key holdings. First, where a jury has found “knowing and/or willful” conduct, an “intentional acts” exclusion will bar coverage for actual (single) damages. Second, attorneys fees awarded to a plaintiff under c.93A is not covered where the policy excludes “penalties” and “punitive damages.” Continue reading

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No Tender? No Problem, Says Massachusetts Trial Court, in a Case That May Help Insurers Decide What to Do When They Are Notified of a Default Against a Policyholder

Insurers may prefer proper notice of suit, but they face tough choices when it is lacking.

Superior Court finds no prejudice from policyholder’s failure to give insurer notice of suit, and rejects argument that policyholder was required to tender the suit for a defense.  

Insurer avoids bad faith damages, but is held liable for excess default judgment.

Insurers who learn of a default against a policyholder face a challenge.  It is often difficult to assess the issue of late notice, and in particular the question whether the insurer has been prejudiced, before the claim against the insured has played itself out, and other coverage defenses may also require further investigation. In these circumstances, an insurer may want to seek to remove the default, either through counsel retained for the insured under a reservation of rights, or through a motion to intervene. This case is unusual in that the window of opportunity to defend or settle the case closed without any consideration of these options, because the clerk who filed the plaintiffs’ notices of the default did not understand their significance. Continue reading

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Declaratory Judgments: A Useful Work-Around for Insurers Unfairly Paying to Defend Insureds

It’s not always easy to find a way to ask for fair payment that works.

A recent Connecticut Supreme Court decision illustrates a useful work-around for insurers wrongly stuck with the full tab for defending an insured in pending litigation.

Two more direct methods may not work in such cases. First, because the usual rule is that only a person who signs a contract, or whom the contract is directly intended to benefit, can sue for breach of that contract, insurers can’t sue other insurers who don’t pick up their share of the defense costs for breach of contract. Second, equitable contribution claims can require disclosure of legal bills that could prejudice the defense of the underlying suit, and may thus be too risky.

Filing for a declaratory judgment, however, can bypass these problems. In the Connecticut case, the insurer won a determination that another insurance company should have defended the insured alongside it, as well as a percentage of defense costs. Continue reading

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If a Tree Falls in a Forest, Is It an Occurrence?

Not If You Cut More Trees Than Called For in Your Contract. That’s Faulty Workmanship, Not an Accident, Massachusetts Appeals Court Rules; Business Risk Exclusions Also Bar Coverage.

Tricky questions come up when the subcontractor was only supposed
to cut down one tree, but comes back like this.

In light of a recent Appeals Court case, parties disputing construction defects coverage in Massachusetts, where such disputes have typically focused on the business risk exclusions, now need to pay more attention to the more fundamental question whether there was a covered occurrence. Whether the damage was caused by an accident, or by faulty workmanship, is a factual determination for which the case law does not provide clear guidance. Continue reading

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Discovery Shootout at the Sirloin Saloon: Insurers Need to Show That They Investigated to Defend the Insured – Not to Evaluate Coverage – to Get Work Product Protection, at Least in the 2d Circuit

You’re gonna have to prove that was for defense.

Insurer’s Investigation in Anticipation of Dram Shop Action Is Not Protected Work Product Because Insured Did Not Meet Its Burden to Show That Independent Adjuster’s Report Would Not Have Been Prepared in Essentially Similar Form Irrespective of the Anticipated Litigation, Says Vermont District Court.

This unpublished Vermont federal District Court decision highlights a recent wrinkle in the application of the work product doctrine to documents generated during a liability insurer’s investigation.  The court reasoned that because evaluating of coverage is an ordinary part of an insurer’s business, the work product doctrine does not protect insurers’ investigations performed to evaluate coverage.  And the burden is on the insurer to prove that an investigation is not to evaluate coverage, but to defend the insured.  Even though there was no suggestion that the insurer investigated for any other purpose than the insured’s defense in this case, the court held that the insurer did not meet that burden. Continue reading

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The Insurer’s Right to Select Counsel – Even After it Reserves Rights

A 5th Circuit case highlights regional differences in handling Conflict of Interest and Choice of Counsel issues.

Although we tend to limit our coverage to New England decisions, every once in a while a decision comes down that could have significant implications for corporate insureds.  The 5th  Circuit decision Graper v. Mid-Continent Casualty Co., which holds that a reservation of rights does not automatically create a disqualifying conflict of interest such that the insured may reject the insurer’s choice of counsel, is one such case.

In Graper, the insureds were sued for copyright infringement that apparently implicated their advertising injury coverage.  The insurer reserved rights, including based upon alleged intentional conduct and that the injury may not have occurred during the policy period.  Because of the reservation, the insured rejected the insurer’s choice of counsel.  The insurer insisted upon its right to choice of counsel notwithstanding the reservation of rights, and the 5th Circuit agreed.

In this case, the court held that the insured can only successfully object to the insurer’s chosen counsel if the facts that the underlying case will decide are the same facts that determine coverage.  The court, surprisingly, concluded that the facts determinative of the case would not be dispositive of the coverage issue and thus there was no conflict of interest.

Under current Massachusetts practice, the result would like be different, but  . . .  Given that almost all business litigation cases are (i) very expensive to litigate; (ii) invoke a reservation of rights, this decision, if it signals a trend, could affect corporate insureds.

The case is Graper v. Mid-Continent Casualty Co., 2014 WL 2870553 (C.A. 5 (Tex.)).

Steve SchreckingerAbout Steve: I specialize in Insurance Law and Litigation at Anderson & Kreiger.  

I love to hear from readers. Please call me at (617) 621-6537, or email me at sschreckinger@andersonkreiger.com with any questions or comments. 


Image Credit: Bruna Ferrara

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BAD FAITH CASE GOES FROM BAD TO WORSE: Multiple Damage Awards in 93A Cases Based on Unfair Settlement Practices Should NOT Subtract the Underlying Tort Judgment

Massachusetts Superior Court Increases Earlier Punitive Damage Award and Adds $1.2 Million in Attorney Fees.

In the typical (non-insurance) Chapter 93A case, the facts that give rise to the underlying tort or breach of contract judgment are the same as the facts giving rise to the Chapter  93A claim for unfair business practices. Thus, judges subtract the tort judgment, deemed duplicative, from the Chapter 93A multiple damages award. But a trial judge has ruled that a different calculus applies when the Chapter 93A case is based on unfair settlement practices that violate Chapter 176D. Continue reading

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