When a policyholder, particularly a commercial policyholder, applies for insurance coverage, a key part of the application process is the disclosure of the policyholder’s relevant loss history. When an insurance company receives an application for insurance, that loss history is a critical part of the insurer’s underwriting process to determine whether it is willing to write an insurance policy, the terms and conditions of that insurance policy, and the premium it will charge for that insurance policy. The insurer relies on the insured and its broker to provide complete and accurate loss information. The failure to do so may result in a complete loss of coverage should a loss occur after a policy is issued based on incomplete loss information.
Many liability insurance policies exclude coverage for bodily injury or property damage arising out of structural alterations that involve changing the size of or moving buildings or other structures, new construction or demolition operations performed by or on behalf of the named insured. Construction insurance policies typically cover these risks, not general liability policies. A question that arose in a recent coverage dispute concerned whether replacing the roof of a structure during renovations of a building fell within the exclusion for injuries arising out of demolition operations. Continue Reading
Nearly every insurance policy has a clause that requires the insured to cooperate with the insurer in the investigation of the claim. Most insurance policies also provide that the insured should do everything necessary to secure, and do nothing to impair, the insurer’s subrogation rights. This is especially important when property damage is alleged. These policy provisions appear straightforward. Compliance should not be that difficult. That is until the insured is made an offer the insured can’t refuse.
Case law in nearly every state provides that the duty to defend is broader than the duty to indemnify. Typically courts look to the allegations in the complaint and compare those allegations to the coverage grants in the policy to determine if the allegations are sufficient to bring the claim within the possibility of coverage under the insurance policy. But what if no complaint is filed and the parties negotiate a settlement in advance of any lawsuit? Does the insurance carrier have to “defend” the insured and pay the costs associated with negotiating the settlement?
When an insurance company pays a loss on a claim, the insurance company often exercises its equitable right of subrogation to stand in the shoes of the insured and seek compensation from a third-party alleged to have caused the loss. In the property context, there may be an underlying contract that requires arbitration between the insured and its counterparty, which may provide the vehicle for the subrogation claim.
In a recent case, a New York federal court addressed a petition by an insurer to compel arbitration against a third-party under a transportation service agreement between the insured and that third party relevant to goods that were destroyed by a fire. Complicating the case was the insolvency of one of the third-party’s insurance carriers and state insurance law that precludes recovery from the insured of an insolvent insurer.
Exculpatory clauses appear in many contracts. They are often used to protect a contracting party from damages caused by its actions or the actions of others. For example, a hold harmless clause may protect one party from third-party suits caused by the alleged negligence of the other party.
Exculpatory clauses, like hold harmless or indemnification clauses, are somewhat unusual in a traditional reinsurance contract. But where the reinsurance contract is between a fronting company and a 100% reinsurer that is the real party in interest, the fronting cedent may want to insulate itself from any responsibility for the underlying claims by using an exculpatory clause. Continue Reading
Insurance and reinsurance arbitrations outside the United States sometimes require the taking of evidence in the United States. Under federal law, “[t]he district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation.” 28 U.S.C. § 1782. Whether a private, commercial arbitration proceeding is considered a “foreign tribunal” for purposes of 1782 has been a controversial issue. Recently, in a non-insurance case, a New York federal court held that an arbitration before the London Maritime Arbitration Association is a “foreign tribunal.”
In a highly anticipated decision, the United States Court of Appeals for the Second Circuit has certified an important question of reinsurance law to the New York Court of Appeals. The appeal had amicus briefs from reinsurance intermediaries supporting the cedent’s argument that the so-called “Bellefonte” rule should not apply. We discussed this in an earlier blog post.
In the latest of a string of recent decisions adverse to insurers, the Florida Supreme Court held that, where a residential property incurs damage due to the cumulative or combined effects of multiple “concurrent” causes, any of which a homeowners policy covers, the insurer must pay the entire loss even if its policy expressly excludes the other causes. Sebo v. Amer. Home Assurance Co., No. SC14-897 (Dec. 1, 2016). The same rule will presumably be applied to other property lines and by analogy to liability policies also.
Long-tail coverage disputes often involve multiple policies issued over multiple policy periods over multiple layers of insurance. Sometimes the potential relevant policies go back decades or more. Locating these ancient policies is an enormous task. Locating the placing, underwriting and claims files that go along with these policies is even more difficult. Compound all of this difficulty with insurance placed in the London Market prior to 1992.
To many, the workings of the London Insurance Market is a mystery, especially when discussing the marketplace known as Lloyd’s of London. Unlike the manner in which insurance was produced and underwritten in the US by domestic insurers, the London Market, and especially Lloyd’s, had its own, unique, way of doing business. In a recent discovery dispute, a US Magistrate Judge, on a motion to compel discovery, had to address many of these issues.