Articles Posted in Litigation

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GettyImages-1150199388-movie-scaled-e1601649667239-300x226His daughter missing and a secret government program uncovered

Ben Affleck’s detective thriller Hypnotic was next in line to be on the actor’s list of blockbuster films. That is, until the COVID-19 pandemic halted the film while it was still in pre-production. To insure against such business interruption risks and delay, Hypnotic’s production company, Hoosegow (Hypnotic) Productions Inc., had purchased a Film Producer’s policy from Chubb National Insurance Company.

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With hundreds of cases now pending nationwide involving insurance coverage claims for business interruptions stemming from the COVID-19 pandemic, a federal panel has been considering the prospect of consolidating the litigation into one multidistrict litigation (MDL) to promote their efficient resolution. On August 12, 2020, the panel issued a decision ruling out a single nationwide MDL, but leaving open the possibility of smaller, insurer-specific MDLs.

In “COVID-19 Business Interruption Litigation May Be Consolidated for a Select Few,” Sandra Kaczmarczyk and David F. Klein examine this decision and its implications more closely.

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GettyImages-470318916-liu-disgorgement-300x200Late in June, the U.S. Supreme Court issued a decision in Liu v. SEC, a closely watched case in which the Court in an 8-1 opinion curtailed the authority of the Securities and Exchange Commission (SEC) to seek disgorgement of profits from private parties in judicial enforcement proceedings. The Court articulated restrictions on the SEC’s disgorgement power, including (1) limiting disgorgement amounts to the net profits from wrongdoing, (2) limiting the SEC’s ability to seek disgorgement of profits on a joint and several basis, and (3) directing the SEC to return disgorged monies to aggrieved investors rather than depositing them in the U.S. Treasury. Although it does not address insurance issues directly, the Court’s analysis of the disgorgement remedy is bound to revive discussion of the issue of insurability of losses suffered as a result of settlements or judgments characterized as disgorgement.

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GettyImages-471597853-polcy-time-bombs-300x216Insurance policies are legal documents. In the event of a dispute, their scope and meaning will be submitted to a court or arbitrator for interpretation. Most brokers are not attorneys. Most risk managers are not attorneys. And few companies seek counsel to review policies before a claim arises. But underwriters, assisted by their counsel, increasingly are including litigation-focused provisions in their policies. Although these provisions often appear innocuous to readers unfamiliar with insurance litigation issues, they are like time bombs designed to explode in the event of a contested, litigated claim.

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iStock_86660363_MEDIUM-gavel-money-300x200As coverage counsel, we witness firsthand the precarious positions policyholders are often left in due to the actions (or inactions) of their insurance carriers. A prime example of such a catch-22 scenario is when an insurer refuses to consent to a settlement offer while defending under a reservation of rights.

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Seal_of_the_Supreme_Court_of_Texas-300x300In the uncertain times ushered in by the COVID-19 pandemic, observers of the insurance law landscape can find footing in an old, familiar story: a single insured left deeply dissatisfied by her insurance provider’s coverage for an accident lawsuit against her. But in In re: Farmers Texas County Mutual Insurance Co., a novel question of settlement authority offers the chance to make new law.

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iStock-1023398462-wisconsin-300x256When an insurer pursues a judicial determination on its duty to defend and agrees to defend its insured retroactively only five months after its insured initially requested a defense, has it breached its duty to defend? In most jurisdictions, the answer would be “yes.” In California, for example, an insurer must afford an immediate and entire defense in response to a tendered claim that is potentially covered under the Buss doctrine; belated, after-the-fact payments cannot cure that breach. But under the rule of a new Wisconsin decision, however, the same insurer would not have breached its duty to defend.

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In November 2018, we noted that the California Supreme Court had agreed to resolve Pitzer College v. Indian Harbor Insurance Company, a case that hinged on the importance and application of California’s notice-prejudice rule. On August 29, 2019, the court issued its decision: a policyholder-friendly ruling that opposes technical forfeitures of insurance coverage. Although further proceedings are needed to determine whether Pitzer will ultimately benefit from this victory, the principles it articulates are of immediate interest to policyholders in California and across the country.

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iStock-508789795-minnesota-300x205Since 2008, Minnesota has had a bad-faith statute that penalizes an insurance company for its unreasonable denial of a first-party insurance claim. But it was only earlier this month that a Minnesota appellate court interpreted the statute to require insurance companies to conduct a reasonable investigation and fairly evaluate its results to establish a reasonable basis for denying the claim. In so doing, the court rejected the interpretation offered by the insurance company: that the policyholder must prove there are no facts or evidence upon which the insurance company could rely to deny coverage. That interpretation would have allowed insurers to rely on post hoc justifications for denying coverage. The court’s rejection of that argument is an important development in bad-faith law that will likely affect both suits brought in Minnesota and those in other jurisdictions where courts might look to this decision for guidance in connection with many types of insurance claims. Continue reading →

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iStock-1026097380-covenant-rails-300x200As coverage counsel, we see the situation arise time and again: facing down substantial potential liability in a pending lawsuit, a policyholder engages in good-faith settlement discussions with the plaintiff. After animated negotiations between the parties, the plaintiff finally makes a reasonable offer, only for the policyholder’s insurance carrier to throw up a roadblock by refusing to fund or consent to the settlement. But policyholders need not always resign themselves to continuing costly and time-consuming litigation—a “covenant not to execute” may be the switch to put the settlement back on track.

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