a survey of recent developments in coverage and bad...

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ASurveyofRecentDevelopmentsinCoverageand

BadFaithLi=ga=on

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The evolution in Extra-Contractual & Bad Faith Liability continues and now, more than ever, there is no room for error in managing and defending claims. This NY installment is on pace to be our largest yet and the attendee list already reads like a who's who of industry leaders - make sure that you do not miss out!

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This is the only conference of its kind that brings you the trifecta for a summit on Extra-Contractual & Bad Faith Liability: 1.) The top defense and plaintiff firms VIEW THEM HERE 2.) An unparalleled in-house insurer presence; VIEW THEM HERE; and 3.) Unique insights on:

• Hotbed states including Missouri, Washington, Florida, South Carolina, Georgia • The ever changing duty to defend • Carriers failing to properly investigate claims involving requests for additional insurance coverage • Creative bad faith set ups • Open limits, policy limit demands, and time limit demand letters • Consent judgments: • “Cunningham” agreement nuances • Carrier’s duty to initiate settlement negotiations in the absence of demand • Bad faith discovery given 2015 FRCP amendments • The “claim file” in the digital universe • Increased requests for corporate witness depositions and preparing company witnesses for testimony • Overcoming latest challenges with institutional bad faith claims • Excess coverage/excess policy claims and inter-company bad faith claims • Resolving thorny issues with regard to independent Cumis counsel • Recoupment/reimbursement

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RECENTMISSOURIBADFAITHCASES

ColumbiaCasualtyCompanyv.HIARHoldings

MissouriSupremeCourtAugust13,2013

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ColumbiaCasualtyCompanyv.HIARHoldings

•  ColumbiaCasualtyrefusedtodefendHIAR(itsinsured)inTCPAclassac=on

•  HIARsuedforsending12,500blastfaxesinSt.Louis•  HIARtwicetenderedtoColumbia•  Columbiadenieddefensebecauseno“adver=singinjury”or“property

damage”•  Classmadepolicylimits($1,000,000/$2,000,000)demanduponHIAR

forwardedpolicylimitsdemandtoColumbia•  ColumbiarefusedtoseTle•  HIARseTleswithclassfor$5,000,000•  HIARassignsitsclaimsagainstColumbiatoclass•  ClassgarnishesagainstColumbia

ColumbiaCasualtyCompanyv.HIARHoldings

•  Columbiafilesdeclaratoryjudgmentac=on–  Garnishmentstayed

•  DJ1.  ColumbiabreacheddutytodefendHIAR

Classclaimscoveredunder“adver=singinjury”and “propertydamage”

2. Columbiabreacheddutytoindemnify3. Columbiaactedin“badfaith”4. $5,000,000seTlement“reasonable”

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HIARRULING:•  Plain=ff’sInterpreta=on:

–  AninsurerthatwrongfullyrefusestodefendaninsuredisliableforjudgmentorseTlement“TheInsurerthatwrongfullyrefusestodefendisliablefortheunderlyingjudgmentasdamagesflowingfromitsbreachofitsdutytodefend.”

•  Defendant’sInterpreta=on:–  BreachofthedutytodefendresultsinliabilityforthecostoftheseTlementor

judgment,uptothepolicylimits.Exposurebeyondpolicylimitsrequiresashowingofbadfaith.“BecauseColumbiawrongfullydeniedcoverageorevenadefenseunderaReserva=onofRights,andalsorefusedtoengageinseTlementnego=a=ons,ColumbiashouldnotavoidliabilityfortheseTlementjudgmententeredinthiscase.”

UNRESOLVEDQUESTION:•  DoesHIARmeaninsurerswhowrongfullydeniedadefensetoinsuredare

liableforen=reamountofseTlementorjudgmentabsentafindingofbadfaith?

ColumbiaCasualtyCompanyv.HIARHoldings

EXCESSCANSUEPRIMARYFORBADFAITHFAILURETOSETTLE

Sco9sdaleInsurancev.AddisonInsurance,SC93792(MO2014)

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ScoTsdaleInsurancev.AddisonInsurance,SC93792(MO2014)

•  Facts–  Primaryv.Excesscarriercasewhichrecognizedexcesscarrier’srightto

pursueprimarycarrierforbadfaithfailuretoseTle–  Thefamilyofamotoristkilledina2007accidentwithatruckoperatedby

WellsTruckingstatedaclaimagainstWellsTrucking–  Thestatepoliceinves=ga=ondeterminedthattheWellsTruckingdriver

wasatfault–  WellsTrucking’sprimarycarrier($1millionpolicy)wasUnitedFire

(AddisonIns.Co.)–  WellsTruckingformallydemandedthatUnitedFireseTlethecasewithin

thelimits–  TherewasevidencethatthesuitcouldhavebeenseTledwithinthe

primarylimits–  UnitedFiremadeseveraloffersthatWellsTruckingwouldlater

characterizeas“lowandunreasonable”

ScoTsdaleInsurancev.AddisonInsurance,SC93792(MO2014)

•  Facts–  Thefamilygrewfrustratedandfiledawrongfuldeathsuit–  Theexcesscarrier,ScoTsdale,wasputonno=ce–  ScoTsdaledemandedthatUnitedFireaTempttoseTlewithinthe

primarylimits“whileits=llhadtheopportunitytodoso”–  Shortlytherealer,thefamilymadeanotherdemandof$1million–  UnitedFirerejectedthatdemandandthefamilyraisedtheirdemand

to$3million–  Thecaseresolvedatmedia=onfor$2million;$1millionfromUnited

Fire,and$1millionfromScoTsdale

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ScoTsdaleInsurancev.AddisonInsurance,SC93792(MO2014)

•  Facts–  WellsTruckingassigneditsrightstoScoTsdale,andScoTsdalefileda

badfaithac=onagainstUnitedFire–  ThetrialcourtgrantedUnitedFire’smo=onforsummaryjudgment:

“anexcessinsurercannotrecoverfromaprimaryinsurerunderaclaimofbadfaithrefusaltoseTleandthatbadfaithrefusaltoseTlecouldnotbeprovenbecauseUnitedFireseTledtheclaimagainstWellsTruckingand paid its policy limits andWells Trucking did not suffer an excessjudgment.”

ScoTsdaleInsurancev.AddisonInsurance,SC93792(MO2014)

•  Holding–  Onappeal,theSupremeCourtofMissourireversedholdingthat“an

insurer’sul=mateseTlementforitspolicylimitsdoesnotnegatetheinsurer’searlierbadfaithrefusaltoseTleandthatanexcessjudgmentisnotessen=altoabadfaithrefusaltoseTleac=on.”

–  Theexcesscarriercanestablishabadfaithclaimwheretheprimary(1)  ReservestheexclusiverighttocontestorseTleanyclaim;(2)  Prohibitstheinsuredfromvoluntarilyassuminganyliabilityor

seTlinganyclaimswithoutconsent;and(3)  IsguiltyoffraudorbadfaithinrefusingtoseTleaclaimwithin

thelimitsofthepolicy

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AmericanFamilyv.Parnell

MissouriCourtofAppeals,WesternDistrictOctober27,2015

AmericanFamilyv.ParnellMissouriCourtofAppeals,WesternDistrict

October27,2015

•  Parnell’soperatedadaycarebusiness•  Parnell’s11-year-oldsonhadsexualcontactwith7-year-oldatdaycare•  Vic=m’sfamilysuesParnell’sfornegligentsupervisionofvic=m•  Parnell’stendertoAmericanfamilyfordefenseandindemnity•  Americanfamilyfilesdeclaratoryjudgmentac=on

–  Abuseexclusion–wedon’tcoverforinjuryordamageresul=ngfromsexualabuse–  Inten=onalinjury–wedon’tcoverforinjuryordamageexpectedorintendedbyany

insured–  11-year-oldsonan“insured”bydefini=on

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AmericanFamilyv.Parnell

•  Holding:–  Parnell’snegligentsupervisionofvic=mwasa“concurrentproximatecause”ofvic=m’s

injuries.So,evenifexclusionsapply,Parnell’snegligentsupervisionwasa“separateanddis=nctcause”ofherinjuriesforwhichcoveragewasprovided.

•  Key–  dothe“coveredcause”and“excludedcause”dependuponeachothertoestablishthe

necessaryelementsofeachclaim?–  If“coveredcause”couldoccurwithoutthe“excludedcause”,thencausesare

independentanddis=nctandconcurrentproximatecauseruleapplies.

AmericanFamilyv.Parnell

•  ConclusionSinceclaimfornegligentsupervisionofaminorisunrelatedtoandcanoccurwithoutintenDonalinjuryorsexualabuse,itisindependentanddisDnct•  QuesDonDoesconcurrentproximatecauseruleeffecDvelyvoidexclusionsinpolicies?

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TRENDSACROSSTHECOUNTRY

BreachofDutytoDefendRevisitedK2InvestmentGroup,LLCv.AmericanGuarantee&Liability,6N.E.3d1117,

983N.Y.S.2d761(Feb.18,2014)

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K2InvestmentGroup,LLCv.AmericanGuarantee&Liability,6N.E.3d1117,983N.Y.S.2d761(Feb.18,2014)

•  Facts–  Insurerallowedtoassertpolicydefensesandsummaryjudgmentagainst

insurerreversedbasedontheexistenceofaques=onoffactastowhetherpolicyexclusionapplied

–  Insurerwrongfullyrefusedtodefendinsured–  Insured’sassigneearguedthatinsurercouldnotrelyonpolicydefensesto

defeatliabilityordefaultjudgmentagainstinsured

•  Holding–  InfirstK2case,weheldthataninsurerwhobreacheddutytodefendmaynot

assertdefensestoimmunity

–  FirstK2caseconflictedwithanotherdecision,ServidoneConstr.Corp.v.SecurityIns.Co.ofHarEord,64N.Y.2d419,488N.Y.S.2d139,477N.E.2d441(1985)

K2InvestmentGroup,LLCv.AmericanGuarantee&Liability,6N.E.3d1117,983N.Y.S.2d761(Feb.18,2014)

•  Holding–  ThecourtfollowedServidone–  Insurerallowedtoassertpolicydefensesandsummaryjudgment

againstinsurerreversedbasedontheexistenceofaques=onoffactastowhetherpolicyexclusionapplied

–  NClaw:Insurerwhobreachesdutytodefendisestoppedtodenycoverage

–  Majorityrule:followsServidone

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PRIORITYOFEXCESS/OCIPCertainUnderwritersv.IllinoisNat.Ins.Co.,No.09Civ.04418

(S.D.N.Y.March13,2015)

CertainUnderwritersv.IllinoisNat.Ins.Co.,No.09Civ.04418(S.D.N.Y.March13,2015)

•  Facts–  Truckingaccidentonconstruc=onsite–  Twocompe=ng,virtuallyiden=cal“otherinsurance”clauses–  PoliciesincorporatedintoanOwnerControlledInsuranceProgram(“OCIP”)

–  OCIPlistedUnderwriters’policyasanexcesspolicyintheprogram–  OCIPdidnotincludecoveragefortruckers,driversandhaulers,

includingCon=nental’sinsured–  Con=nentalandUWpoliciesbothpurportedtobeexcessoverother

insurance

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CertainUnderwritersv.IllinoisNat.Ins.Co.,No.09Civ.04418(S.D.N.Y.March13,2015)

•  Facts–  Con=nental’sargumentthatUWpolicyisexcessoverCon=nental

policybecauseUWpolicywasissuedpertheOCIPwhichwas…•  a“contract”that“specificallyrequiresthat[theUWpolicy]beprimaryandcontributory,”

•  therebymakingtheUWpolicyprimaryunderanexcep=ontotheUW“OtherInsurance”clause

•  Holding–  “BecauseOCIPcons=tutesneitheranexpressnoranimpliedcontract

triggeringthatexcep=on,both‘otherinsurance’clausesremainineffectandaremutuallyrepugnantontheirfaces”

–  Bothpoliciesprovidepro-rataexcesscoverage

“OCCURRENCE”ANDEXCLUSIONS

INASEXUALASSAULTCASEGonzalezv.FireIns.Exch.,etal.,234Cal.App.4th1220(2015)

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Gonzalezv.FireIns.Exch.,etal.,234Cal.App.4th1220(2015)

•  Facts–  GonzalezsuedRebaglia=andnineothermembersoftheDeAnza

Collegebaseballteamalerasexualassault–  Rebaglia=soughtcoverageunderhisparents’homeowner’s(FireIns.

Exch.)andpersonalumbrella(TruckIns.Exch.)policies–  Bothdeniedcoverage–  Rebaglia=seTledandassignedrightstoGonzalez–  Gonzalezallegedbreachofcontractandbadfaith–  Trialcourtgrantedinsurers’mo=onsforsummaryjudgment–  Gonzalezappealed

Gonzalezv.FireIns.Exch.,etal.,234Cal.App.4th1220(2015)

•  Holding–  Affirmedastotheprimarypolicy;nooccurrence–  Reversedastoumbrella;thedefini=onof“personalinjuries”didnot

requirethecoveredeventstobe“accidental”–  Umbrellacarrieralsofailedtomeetburdenofproofforseveral

exclusions–  Sexualmolesta=onexclusion

•  Nocoverageiftheinsuredpar=cipated,butpleadinginthedisjunc=ve(“and/ortheotherdefendants”)lelopenpossibilitythatinsureddidnotpar=cipate

•  Evidencelearnedpost-tenderoftheclaimisirrelevanttodutytodefend;Rebaglia=admiTedtopar=cipa=onalerinsurershadalreadyrejectedtheclaim

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Gonzalezv.FireIns.Exch.,etal.,234Cal.App.4th1220(2015)

•  ExpectedorIntendedexclusion–  Exclusionfordamagesthatare“[e]itherexpectedorintendedfromthe

standpointoftheinsured”–  Rebaglia=haddeniedpar=cipa=onat=meoftendersohecouldhave

beenliablefor“damagesincurredbyGonzalezduetohisnegligenceincrea=ngthecondi=onsthatledtoherfalseimprisonmentintheroom.”

–  “Atortsuchasfalseimprisonmentmayresultfrominten=onalconductandisthereforenonaccidental,butasubjec=veintentorexpecta=onthatharmwouldoccuronthepartoftheinsuredisnotrequiredforliability.”

•  CriminalActsexclusion–  Noevidencethatinsured“consentedtoorra=fiedtheseacts”

WORTHAMENTION

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EXPANDINGTHE“FOURCORNERS”OFTHEPOLICY

Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)

Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)

•  Facts–  ClaimsforenvironmentaldamagearisingoutoftheApril2010

explosionandsinkingoftheDeepwaterHorizonoil-drillingrigintheGulfofMexico

–  BPwastheoilfielddeveloper–  Transoceanwasthedrillingrigown–  DrillingContractbetweenTransoceanandBP–  TransoceanagreedtoindemnifyBPforsurfacepollu=on–  BPagreedtoindemnifyTransoceanforsubsurfacepollu=on

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Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)

•  Facts–  DrillingContractrequiredTransoceantonameBPasaddi=onal

insuredonprimaryGLandfourlayersofexcess($700millionincoverage)

–  Addi=onalinsuredprovisionrequiredAIstatusfor“liabili=esassumedby[Transocean]underthetermsofthiscontract.”

–  I.e.,surfacepollu=onbutnotsubsurfacepollu=on–  Policieshadan“InsuredContract”provision–  Extended“Insured”toincludeanyperson“towhomthe‘Insured’is

obligedbyoralorwriTen‘InsuredContract’…toprovideinsurancesuchasaffordedby[the]Policy.”

–  NodisputethattheDrillingContractwasan“InsuredContract”

Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)

•  Facts–  BPsubmiTedaclaimtoTransocean’scarriers–  Theinsurersfiledadeclaratoryjudgmentac=on:InreDeepwater

Horizon,2011WL5547259(E.D.La.Nov.15,2011)–  TheinsurersarguedthatBPwasnoten=tledtocoverageforthe

subsurfaceclaimsbecauseoftheDrillingContract–  BParguedthatthepoliciesthemselvesdidnotcontainthislimita=on–  Thedistrictcourtruledinfavoroftheinsurers–thetermsofthe

DrillingContractlimitedthecoverageaffordedbythepolicies–  TheFilhCircuitreversed:coveragedefinedbythe“fourcorners”of

thepolicies–  Theques=onwascer=fiedtotheTexasSupremeCourt

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Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)

•  Holding–  Twoapproaches:–  1.Apolicymayincorporateanexternallimitonaddi=onalinsured

coverage(ci=ngUrruJav.Decker,992S.W.2d440(Tex.1999))–  2.“Anamedinsuredmaygratuitouslychoosetosecuremorecoverage

foranaddi=onalinsuredthanitiscontractuallyrequiredtoprovide.”(ci=ngEvanstonIns.Co.v.ATOFINAPetrochemicals,256S.W.3d660(Tex.2008))

–  Underfirstapproach,theinsurerswin–  Undersecondapproach,BPwins.

Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)

•  Dis=nguishedATOFINA:TheexistenceofacerIficateofinsurancenamingATOFINAasanaddi=onalinsuredmeantthat…therewasnoneedtolooktotheunderlyingservicecontracttoascertainATOFINA’sstatusas[anaddi=onalinsured.]Moreover,sec=onIII.B.6ofthepolicyinATOFINAmadenoreferencetotheservicecontractindeterminingthescopeofaddiIonal-insuredcoverage,whiletheTransoceanpoliciesrefertoan“InsuredContract”thatrequiresTransoceantoprovidetheinsuranceasapredicatetostatusasan“Insured.”

•  Inotherwords,hadtherebeenacer=ficateofinsurancesayingBPwasanAIand/ortherewasno“InsuredContract”provision,therewouldhavebeennoneedtolookattheDrillingContract

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Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)

•  “Thelanguageintheinsurancepoliciesprovidingaddi=onal-insuredcoverage‘whererequired’andas‘obliged’requiresustoconsulttheDrillingContract’saddi=onal-insuredclausetodeterminewhetherthestatedcondi=onsexist.…[W]henwedoso,itbecomesapparentthattheonlyreasonableinterpreta=onofthatclauseisthatthepar=esdidnotintendforBPtobenamedasanaddi=onalinsuredforthesubsurfacepollu=onliabili=esBPexpresslyassumedintheDrillingContract.”

•  Howisthisunusual?WhywasATOFINAsodifferent?

INSURERCANBELIABLEFOR

NEGLIGENCEINCLAIMHANDLINGBrunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)

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Brunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)

•  Facts–  TheBrunosboughtahomein2007andobtainedahomeowners’

policyfromErie–  Thepolicycoveredphysicallosstothepropertycausedby“fungi,”

includedinaseparateendorsement–  Pursuanttotheendorsement,Eriewouldberequiredtopaythe

Brunosupto$5,000foradirectphysicallosscausedbymold–  WhentheBrunosfoundblackmoldintheirbasement,theycontacted

Erie–  EriesentRudickForensicEngineeringtoinves=gatethemoldproblem–  Rudicksaidthemoldwasharmless–  Theclaimwasnotpaid

Brunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)

•  Facts–  TheBrunosstayedinthehouseandfoundmoremoldgrowingon

leakingpipes–  TheytoldErie,whotestedit,butdidnotdisclosetheresultsofthe

tests–  TheBrunofamilysufferedsevererespiratoryailments–  ByJanuary2008,theBrunosdecidedtohavethemoldtestedontheir

own–  Theydiscoveredthatthemoldwastoxicandhazardoustotheirhealth–  TheyagainaskedErieforthefullmoldbenefit,andEriemadethe

$5,000paymenttotheBrunos

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Brunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)

•  Facts–  TheBrunoswereforcedtodemolishtheirhouse–  Thewife,AngelaBruno,developedesophagealcancerasaresultof

exposuretothetoxicmold–  TheBrunosfiledabreachofcontractandbadfaithac=onthatalso

includedanegligenceclaimagainstErieforitsac=onsduringtheclaimhandlingprocess,andtheac=onsofitsagent,Rudick

–  Eriefiledpreliminaryobjec=onsastothenegligenceclaimbasedonthegistoftheac=ondoctrine

–  Thetrialcourtsustainedthepreliminaryobjec=ons,andtheintermediateappellatecourtaffirmed

Brunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)

•  Holding–  Reversed–  “Ifthefactsofapar=cularclaimestablishthatthedutybreachedis

onecreatedbythepar=esbythetermsofthecontract(i.e.,aspecificpromisetodosomethingthatapartywouldnotordinarilyhavebeenobligatedtodo,butfortheexistenceofthecontract),thentheclaimistobeviewedasoneforbreachofcontract”

•  gistoftheac=onapplies•  “if,however,thefactsestablishthattheclaiminvolvesthedefendant’s

viola=onofabroadersocialdutyowedtoallindividualswhichisimposedbythelawoftortsand,hence,existsregardlessofthecontract,thenitmustberegardedasatort”

•  gistoftheac=ondoesnotapply

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Brunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)

•  Holding–  Aninsurercanbeliablefornegligentactsundertakenduringthe

claimshandlingprocess:“Anegligenceclaimbasedontheac=onsofthecontrac=ngpartyinperformingcontractualobliga=onsisnotviewedasanac=onontheunderlyingcontractitself,sinceitisnotfoundonthebreachofanyspecificexecutorypromisesthatcomprisethecontractInstead,thecontractisregardedmerelyasthevehicleormechanismwhichestablishedtherela=onshipbetweenthepar=esduringwhichthetortofnegligencewascommiTed.”

–  So,whileEriehadcontractualobliga=onsunderitspolicytoinves=gatewhethermoldwaspresentandalsopayforallpropertydamagecausedbythemold,thesubstanceoftheclaimisthatErie’sagentswerenegligent“duringthecourseoffulfillingtheseobligaIons”

DEFENSETRENDSINBADFAITHLITIGATION

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Reserva=onofRightsErieIns.Ex.v.Lobenthal,2015WL1668183(Pa.Super.2015)

ErieIns.Ex.v.Lobenthal,2015WL1668183(Pa.Super.2015)

•  Facts–  Plain=ffsinjuredinacaraccident–  Allegedthattheaddi=onalinsured—Ms.Lobenthal—wasliablefor

theaccidentbecausesheprovideddrugsandalcoholtothedriverofthecar

–  Eriesentareserva=onofrightsleTer,andthenasecond9monthslater,toMs.Lobenthal’sparentsandheraTorney

–  BothleTersonlyreservedtherighttodisclaimcoverageagainsttheparents,andmadenomen=onofMs.Lobenthal

–  Indeclaratoryjudgmentac=onthetrialcourtgrantedsummaryjudgmenttoErierulingthatEriehadnodutytodefendorindemnifyLobenthal

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ErieIns.Ex.v.Lobenthal,2015WL1668183(Pa.Super.2015)

•  Holding–  TheCourtfoundnono=cetoMs.Lobenthal–  Eriefirstreferencedthecontrolledsubstancesexclusioninthepolicy

initssecondleTer,sentmorethansevenmonthsalerthecomplaintwasfiled

–  Giventheinforma=onavailabletoErie,theleTerwasun=melyandthecourtorderedErietodefendandindemnifyMs.Lobenthal

–  Erie’sreserva=onofrightsleTertoanaddi=onalinsuredwasineffec=vewheretheleTerwasun=melyandwasnotaddressedtotheaddi=onalinsuredherself,butrathertoherparents(thenamedinsureds)andheraTorney

–  Eriewasrequiredtodefendandindemnifytheaddi=onalinsured

Reserva=onofRightsLeTer

•  MoststatesdonotrequireinsuredtoacceptdefenseunderROR

•  IfinsuredrejectsROR,insurer’snextdecisioncanhavesignificantconsequences.– Withdrawreserva=onanddefendoutright– Withdrawdefense– Fileadeclaratoryjudgmentac=on

•  Construedasdenialofcoverage

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Problemw/Reserva=onofRights

•  Dutytodefendisbroaderthandutytoindemnify

•  Du=estodefendandindemnifyaretwoseparateanddis=nctdu=esunderthepolicy– Courtsarefindingthatbreachofdutytodefendcreatesliabilityforunderlyingjudgmentasdamagesflowingfromthefailuretodefend

– TheNETeffectisthatdutytoindemnifyisjustasbroadasthedutytodefend

WhatistheSolu=on?•  Pickthelesseroftwoevils:

– Weaktortliability,defendandindemnify– Strongcoveragedefenses,fightthegoodfight

•  Uncondi=onaldefense– LeTerrecognizestwodu=es:defense&indemnity– Defenseduty:determinedbyallega=onsinsuit–  Indemnity:determinedbasedoncaseresolu=on– Concerns:

•  SameasROR?•  StrictRORrequirement

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WhatistheSolu=on?

•  Uncondi=onaldefensewithCumisCounsel– Cumiscounselgivesinsuredrighttocontrolli=ga=on

– Allowspoten=altocreatecoverageatexpenseofinsurer

•  Sugges=ons?

BadFaithSetUpDefense

•  MissedopportunitytoseTlewithinpolicylimits– Arbitrary=meconstraints

•  Suddendeath=metable•  SeTlementcondi=onedonpayment

– Ambiguousdemands– Prematuredemand– SeTlementswithunworkablecondi=ons

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BadFaithSetUpDefense

•  Recognizesetupearly•  Avoiddelay,proceedquicklywithrequestsforinforma=on

•  Respond,butbereasonable– YourresponseisExhibitA

•  KeepinsuredinformedANDinvolved

ReverseBadFaithClaims

•  Contractvs.Tortclaim–  Impliedcovenantofgoodfaithandfairdealing– Dutytoactingoodfaithimposedbycommonlaw

•  Generallyrequiresspecialrela=onship

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ReverseBadFaithClaim

•  FraudorCollusion– Heightenedburden:ClearandConvincing– Agreementbetweentorzeasorandinsuredshouldrequireheightenedscru=ng

– Offsetthestandardstorequireordinaryproof

ReverseBadFaithClaim•  Unreasonableness•  Misrepresenta=on•  Concealment•  Secre=veness•  Lackofseriousnego=a=onsondamages•  ATemptstoaffectinsurancecoverage•  Profittotheinsured•  ATemptstoharmtheinterestsofinsurer

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Ques=ons?