Chapter 93A leaves over-aggressive insurers feeling run over by a bus.
Massachusetts Superior Court Judge Awards Treble Damages for Insurer’s Failure to Settle When Liability Was Reasonably Clear, Despite 47% Contributory Negligence Finding By Underlying Jury
Once an insurer concludes that its insured has legitimate defenses to a liability claim, the insurer is entitled to vigorously defend its insured. However, an insurer that determines early on that the liability of its insured is reasonably clear, but then adopts a strategy of aggressively defending through trial and appeal, is courting disaster.
In Odin Anderson v. American International Group, Inc., Middlesex Superior Court Civil Action No. 2003-01212-B (April 8, 2014), a trial court judge found that an insurer had done just that, and awarded the underlying plaintiff punitive damages in excess of $7.3 million under the Massachusetts unfair claims settlement statute, General Laws Chapter 176D, and consumer protection statute, Chapter 93A.
The decision sends a warning to insurers: if defense counsel’s transformation of a case of clear liability into a seemingly triable dispute seems too good to be true, take a closer look. Continue reading
The FDIC might stand in a failed bank’s shoes, but that doesn’t quite make it the bank,
at least not in the insurance world.
First Circuit Discerns Likelihood of Success That “Insured v. Insured” Exclusion Will Not Apply
Appointed as the receiver of a failed bank, the FDIC asserted breach of fiduciary duty claims against the bank’s officers and directors. They in turn sought coverage from the bank’s directors and officers liability insurer.
The insurer argued that FDIC stood in the shoes of the bank, an insured, so the policy’s “insured v. insured” exclusion barred coverage. A Puerto Rico District Court judge disagreed, finding that the FDIC was asserting claims on behalf of accountholders and depositors and its own insurance fund, in addition to claims on behalf of the failed bank. The Court ordered the insurer to advance the officers’ and directors’ defense costs, without prejudice to seeking repayment, and also awarded the insureds’ costs in the coverage action as a sanction for the insurer’s obstinate position. The insurer appealed. Continue reading
Defense-Only Coverage May Be Available.
Want Indemnification Too? The First Five Million’s On You.
Lawsuits alleging violation of statutes regulating overtime wages, tips and other employee compensation, commonly referred to as wage and hour claims, continue to be a significant risk for employers. Employers’ efforts to find coverage for these claims under Employment Practices Liability (EPL) policies have met with little success. In 2012, I wrote here, and here, and here about a trio of cases finding no coverage for claims alleging violation of the Massachusetts statute regulating the distribution of tips.
Since then some coverage has become available for these claims. Very recently, stand-alone policies for wage and hour liability have become available for big employers. How big? These policies typically have self-insured retentions in the $5 million range, and offer limits up to $100,000,000.
Not that big? Smaller employers now may be able to purchase wage and hour coverage for defense costs only, usually with a sublimit, as an endorsement to their EPL policies. Although this will not pay a damage award or settlement, the cost of defending such claims, which are often brought as class actions, can be significant.
Photo credit: Denise Mattox
The race to interpret Boston Gas on defense cost allocation: Still too close to call, despite a tie-breaking decision
Narragansett Electric Decision Breaks a Tie Between Massachusetts District Court Decisions
The Boston Gas Defense Cost Allocation Split
Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 352 (2009) held that where a loss triggers multiple consecutive policies (such as when continuing environmental harm occurs over several years), each insurer is responsible only for a pro-rata share of the damages determined by its proportionate time on the risk, unless it can be determined what loss occurred during a specific policy period. Continue reading
If your business involves obtaining, storing and using personally identifiable information from customers, you are at risk for claims alleging that you did not adequately protect that information.
News of large-scale hacking of electronic credit card records appear with alarming regularity, but a data breach could also involve something as simple as leaving a smart phone, or a briefcase full of paper records, in a cab. Continue reading
NY Insurance Law Reverts to Its Pre-2013 Ways
The New York Court of Appeals Decides That Servidone Is Good Law, or at Least Good Enough Law, Declines to Change Rule That Insurers May Assert Indemnification Coverage Defenses Even if It Breached Duty to Defend
The New York Court of Appeals has issued its opinion on re-argument in the case that sent shock waves through the New York coverage bar last year, K2 Investment Group, LLC v. American Guarantee and Liability Ins. Co. K2 appeared to overrule the well-established rule that a breach of the duty to defend does not bar an insurer from contesting coverage for indemnification. Continue reading
A recent Connecticut case gives companies yet another reason to purchase cyber liability coverage. On January 14, 2014, the Connecticut Appellate Court issued a decision in Recall Total Information Management, Inc., et al. v Federal Insurance Company, et al. addressing coverage under a general liability policy for data privacy breach response costs. Continue reading
Who contributes to the pot?
Despite a recent case to the contrary, the answer in future will likely be “yes.”
Graphics Arts Mutual Ins. Co. v. D.N. Lukens, Inc. – which Harvey Nosowitz discussed here, focusing on how it conflicts with another federal District Court case on the question of allocation of defense costs – ruled that insureds did not have to contribute to a settlement over which the insurer had full control and to which the insureds did not give written consent. Continue reading
What rights remain to a breacher of the duty to defend?
At the K2 Re-Argument, the Court Asks: Which Rule Is Better Public Policy?
K2 Investment Group, LLC v. American Guarantee and Liability Ins. Co. shocked the coverage bar last year. On January 7, 2014, the New York Court of Appeals heard re-arguments in the case. At the rehearing, the Court implicitly acknowledged that its 2013 decision in K2 would change New York from a jurisdiction where an insurer’s breach of the duty to defend does not bar the insurer from raising coverage defenses to the duty to indemnify (the rule in the majority of jurisdictions), to one where the insurer is barred from contesting coverage. The Court’s questions to the attorneys on both sides focused to a great extent on which rule was preferable as a matter of public policy. Continue reading
Putting Product Liability into the Right Category
Product liability law lies at the intersection of tort and contract law. In some jurisdictions (my home state of Massachusetts is one) a product liability claim is pled as a breach of warranty. This can lead to disputes concerning the duty to defend under a liability insurance policy, because the general rule is that negligence claims are covered, but claims for breach of contract are not.
In recent years, courts have frequently revisited the issue of whether allegations of breach of warranty defeat a duty to defend, in an effort to reconcile commercial general liability policy language with the many variants of pleadings in both product liability and construction defect claims. Continue reading