No Coverage When Claims Relate Back to Notices Prior to Policy Inception

Stop Hand

It is pretty common for D&O and E&O and other professional liability claims-made policies to have exclusions that preclude coverage for incidents that took place and were noticed prior to the inception of the policy.  Unless the policyholder has purchased “nose” coverage or has a retroactive date that goes back far enough, a prior noticed claim will not be covered by a current policy.  Additionally, these same policies typically have related claim provisions that tie a subsequent, related claim back to the earliest notice of claim and treat them as one claim.  In a recent case, the New York Appellate Division, First Department affirmed a grant of summary judgment to the carriers using these provisions.

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Valued Policy Law and Total Loss

Fire Sprinklers Spraying

Typically, a fire insurance policy pays a policyholder for the actual cash value or the replacement value of the property destroyed.  But in 20 states, if there is a total loss, the amount the insurer must pay is equal to the value of the property at the time the insurance policy was issued.  What happens if the policy covers a multi-building complex and one of the buildings is destroyed?  The Eighth Circuit Court of Appeals recently addressed this issue.

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Superstorm Sandy Relaxed Rules Did Not Waive Proof of Loss Requirement Under NFIP

Superstorm Sandy was devastating to many people.  Those who had flood insurance through the National Flood Insurance Program (“NFIP”) obtained some additional relief.  But the NFIP, through the Standard Flood Insurance Policy (“SFIP”), has limits and requirements that cannot be ignored.  And apparently, the relaxation of some of those requirements for the purpose of expediting claims after Superstorm Sandy was not a waiver of one of the more important requirements:  the Proof of Loss.

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When a Loss Falls Within Policy Exclusions as a Matter of Law the Complaint Cannot Survive

Collapsed House

The policyholder bears the burden of demonstrating that a loss suffered falls within the terms of the insurance policy.  In other words, the existence of coverage is an essential part of a policyholder’s claim.  Where the insurance company raises an exclusion, the initial burden is on the insurer to show that all the allegations within the complaint fall completely within the exclusion.  Many homeowner’s and other property policies have exclusions for losses caused by water and for wear and tear.  The Second Circuit recently upheld those exclusions in a coverage dispute over water damage to a home and affirmed dismissal of the complaint.

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Proving Sudden and Accidental Discharge Requires an Expert With a Reliable Methodology

Polluted Water Analysis

Environmental damage claims are often very technical.  Those technical aspects tend to permeate insurance coverage disputes.  This is especially true where the policyholder seeks coverage in the face of a pollution exclusion.  As we know, the pollution exclusion has evolved over the years.  Some pollution exclusions are not absolute and provide coverage for discharges that are “sudden and accidental.”  Proving that contamination found at an industrial site resulted from sudden and accidental discharges of chemicals into the groundwater requires an expert.  But the expert has to meet the criteria necessary for the expert testimony to be admitted.

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Widow Can’t Recover Under AD&D Riders After Husband Dies From Autoerotic Asphyxiation

Young Woman Gesturing for Quiet or Shushing

In Tran v. Minnesota Life Ins. Co., No. 18-1723, 2019 U.S. App. LEXIS 12895, ___ F.3d ___ (7th Cir. Apr. 29, 2019), the Seventh Circuit Court of Appeals reversed a district court’s judgment, which had allowed a policy beneficiary to recover under two Accidental Death & Dismemberment (“AD&D”) riders for an insured’s death caused by autoerotic asphyxiation.  The riders provided that “[i]n no event will [the insurer] pay the [AD&D] benefit where it results from or is caused directly by any of the following: . . . intentionally self-inflicted injury or any attempt at self-inflicted injury . . . .”

The district court found that the parties had agreed that the insured’s death was accidental and saw the only issue:  whether the injury was intentionally self-inflicted.  Because, according to the lower court, reasonable minds could disagree, the policy language had to be construed in favor of coverage.

The Court of Appeals disagreed.  Central to the Court of Appeals’ analysis was whether the insured’s death was an “injury” that was “intentionally self-inflicted.”  It was, said the court. It reasoned that strangulation—even if partial—is an injury.  Here, the insured had intentionally strangled himself to experience hypoxia-induced euphoria and thus his injury was self-induced.  It didn’t matter that his act may have been done with the intent to survive.  The court was clear, however, that it was not creating a per se rule with respect to AD&D coverage, but rather was relying on the plain language of the riders and the circumstances of the case.

In a Battle of Conformity and Preemption, Arbitration Prevails

The Supremacy Clause of the U.S. Constitution nullifies state laws that conflict with federal law and treaties of the U.S.  But, under the McCarran-Ferguson Act, state insurance law reverse preempts federal law that interferes with the business of insurance as regulated by the states.  This issue comes up in conflicts between anti-arbitration provisions in certain state’s insurance laws and the Federal Arbitration Act (the “FAA”).  But what happens if it is not the FAA, but a treaty, like the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”)?  And what happens if the insurance policy contains a provision that requires the policy to conform to state law where a provision of the policy–the arbitration clause for example–is in conflict with state law?

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Late-Notice Defense for Insurance Coverage Is Still a Thing

Polluted Water Analysis

Notice provisions in insurance policies are there to inform an insurer of a claim in a timely manner so that the insurance company can properly investigate and address the claim.  Most notice provisions are conditions precedent to an insurer’s liability. While there has been some erosion to the defense of late-notice to coverage, a recent case shows that late notice is still a viable defense if you have the right facts. Continue Reading

How Does the Latest US Supreme Court Ruling on Class Arbitration Affect Reinsurance Arbitration?

US Supreme Court Building Detail Close-up

The US Supreme Court’s pronouncements on class arbitration have little to do with reinsurance arbitrations.  But, when the Supreme Court speaks on arbitrations and construes the Federal Arbitration Act (“FAA”), there may be statements or even holdings by the court that could affect aspects of reinsurance arbitrations, so we pay attention.  In the most recent class arbitration decision, the Supreme Court provided some useful tidbits.

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How Courts Select Umpires Where The Reinsurance Contract Gives Courts the Power

Some reinsurance contracts have a provision in the arbitration clause that allow the parties to ask a court to appoint the umpire if the parties cannot agree on the selection of one.  A court’s analysis of the candidates and whether they are qualified or should be disqualified from consideration as an umpire is always interesting for those who know the candidates and their backgrounds.  It is a bit like vetting umpire questionnaires and ranking candidates, except that the court actually picks one.

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