Questions of “other insurance” arise whenever two or more insurers could provide coverage for a claim against a common insured. If one insurer is put in the position of settling a claim when other insurers who may also owe coverage do not contribute, reserving and pursing rights against other insurers should never be an afterthought. An insurer recently learned this lesson when it failed to assert rights against another insurer before agreeing to provide coverage for the settlement of a defamation lawsuit against well-known attorney …Continue Reading
Category: Reservation of Rights
Catch-All RORs? South Carolina Again Says No
The South Carolina Supreme Court reaffirmed that when an insurer reserves rights to deny coverage, the specific grounds stated in the insurer’s reservation of rights letter are critical. In reaffirming a much-discussed decision from earlier this year, the court refused to consider policy defenses asserted by an insurer because the insurer failed to properly reserve its rights to contest coverage. According to the opinion, the insurer’s letter (1) failed to notify the policyholders of the particular grounds upon which it might dispute coverage; (2) did …Continue Reading
Five Yards for Encroachment: Prematurity Doctrines Found to Preclude Insurer’s Use of Extrinsic Evidence to Evade Coverage
In Pekin Insurance Co. v. St. Paul Lutheran Church, 2016 IL App (4th) 150966, the Illinois Appellate Court refused, based on the Prematurity Doctrine, to consider extrinsic evidence in an insurer’s declaratory judgment action in connection with an underlying wrongful death suit.
As background, Hope Farney, as administrator of the estate of Kitty Mullins, sued St. Paul Lutheran Church (Church) for wrongful death. She alleged that a Church employee, Matthew Geerdes, used his personal vehicle for Church business and negligently crashed into a vehicle …Continue Reading
No Prejudice Needed When an Insured Settles Without the Insurer’s Consent
In Travelers Prop. Cas. Co. of Am. v. Stresscon Corp., 2016 Colo. LEXIS 419 (Colo. April 25, 2016), Colorado was faced with a choice: enforce the plain and unambiguous terms of an insurance policy or extend the requirement that an insurer prove it was prejudiced by its insured’s breach of the policy’s conditions before denying coverage. The Colorado Supreme Court choose the former and held that an insurer seeking to deny coverage for a breach of the no-voluntary-payments provision does not need to prove …Continue Reading
Keeping Up with the Times: Nevada Supreme Court Declares Under What Circumstances Insurers Must Provide Independent Counsel
In an opinion issued on September 24, 2015, the Nevada Supreme Court addressed the issue of under what circumstances an insurer is obligated to provide its insured with independent counsel.
The case, State Farm Mut. Auto. Ins. Co. v. Hansen, arises out of injuries sustained by Hansen while attempting to leave a house party. A number of guests at the party were crowding around and sitting on Hansen and his companions’ vehicle in an attempt to prevent them from leaving. Eventually, amidst a hail …Continue Reading
Pennsylvania Supreme Court Holds that an Insurer’s Consent to Settle is Not Required if Insurer Is Defending Under Reservation of Rights
The Pennsylvania appellate courts have kept insurance coverage lawyers on their toes this summer. Weeks after the Pennsylvania Superior Court’s decision in Selective Way Insurance Co. v. Hospitality Group Services, Inc. provided guidance on when the statute of limitations for an insurance coverage declaratory judgment action accrues, on July 21, 2015, the state’s Supreme Court issued its much anticipated decision in Babcock & Wilcox Company v. American Nuclear Insurers.
In Babcock & Wilcox, the Supreme Court held that when an insurer is defending …Continue Reading
In Pennsylvania, a Cause of Action for Declaratory Judgment Accrues When an Insurer has Sufficient Facts to Believe that its Policy Does Not Provide Coverage
When an insurer is asked to cover a liability claim for which coverage is in doubt, the prudent course of action is to provide a defense subject to a reservation of rights. The reservation of rights preserves the insurer’s ability to deny coverage, for either defense and indemnity, if it is determined that the claim is not covered under the policy. In many instances, a reservation of rights is accompanied with the filing of a declaratory judgment action in which the insurer asks the court …Continue Reading
Insurers Beware: District Court Finds Lack of Specificity in Reservation of Rights Letter Plus Citation of Definition of “Occurrence” Created Conflict of Interest
In Select Comfort Corp. v. Arrowood Indemnity Co. (D. Minn. No. 12-2975 (JNE/FLN), Aug. 26, 2014), a Minnesota federal district court ruled that there existed a conflict of interest between Arrowood Indemnity and its insured, Select Comfort Retail, requiring Arrowood to reimburse Select Comfort for its reasonable attorney fees incurred in the defense of a class action suit. The underlying class complaint alleged that certain Select Comfort Retail mattresses “had a propensity to develop and incubate mold.”
Arrowood agreed to defend Select Comfort Retail pursuant …Continue Reading