On July 15, 2014, the Sixth Circuit Court of Appeals tagged an excess insurer with responsibility for paying $8 million in underlying defense costs after the primary insurer was determined to have wrongfully refused to take on the duty to defend. IMG Worldwide, Inc., et al. v. Westchester Fire Ins. Co., Nos. 13-3832, 13-3837, 2014 WL 3409044 (6th Cir. Jul. 15, 2014). The ruling serves as a cautionary warning to excess insurers that they may not sit idly by, comforted by the notion that they are insulated under a follow-form policy from owing a defense obligation merely because the underlying primary insurer has denied coverage.

Congratulations to Adam H. Fleischer who collaborated with the Swiss Re expert network to create and present an international webinar on June 25, 2014, titled "Crossroads: Where Med Mal Meets Products Liability." The seminar used three types of claims as examples: Pharmacy compounding; hip implants and; vaginal mesh. Each type of claim was discussed in the context of how it may present both professional negligence E&O liability, as well as product-type general liability allegations against the same defendants, or against co-defendants who may both be insured under the same policy. This gave rise to a discussion of challenging coverage issues, including the simultaneous existence of different triggers, conflicts of interest between co-insurers, disputes over which defendant or which claimant should have access to policy limits, medical monitoring coverage, and wording issues that may help limit an insurer's exposure. The seminar was attended by over 300 industry professionals from across the globe.

John A. Husmann will be presenting a training course through the Claims and Litigation Management Alliance, entitled, "Evaluating Additional Insured Coverage and Contractual Indemnity Issues." The presentation will take place on Wednesday, June 25, 2014, beginning at 9:00 am at the offices of Swiss Re in Overland Park, Kansas. This course will teach methods for evaluating additional insured status under CGL policies and the distinction and interplay between additional insured status and carrier coverage obligations to insureds for contractual indemnity. Participants will also learn about various forms of additional insured endorsements and indemnity agreements, as well as practical tips for negotiating and compromising shares in various contexts, including construction defect. The session will conclude with an interactive discussion and analysis for problem solving involving hypothetical claims. For more information, please click here.

On May 28, 2014, the Delaware Supreme Court held that a "demand letter" could not be the basis of a D&O insurance claim because it was unripe. XL Specialty Ins. Co. v. WMI Liquidating Trust, Case No. N12C-10-087 (Del. S. Ct May 28, 2014). By way of background, Washington Mutual, Inc.'s ("WMI") Liquidating Trust sent a demand letter to WMI's former directors and officers (D&Os) seeking damages from them for downstreaming $500 million from WMI to its banking subsidiary Washington Mutual Bank, even though, according to the Trust, WMI was insolvent at the time of the downstream. WMI purchased two consecutive D&O insurance policy towers covering the D&Os. The insurers in the first tower accepted coverage for the downstreaming claim and are advancing defense costs. The insurers in the second tower (including AXIS) assert coverage is unavailable because, among other things, the downstreaming claim relates back to claims made in the first tower. The Trust wants the insurers in the second tower to cover the downstreaming claim because the first tower is almost exhausted. The Trust has not yet sued the D&Os. Instead, the Trust sued the second tower insurers so that it can determine whether suing the D&Os would be a worthwhile endeavor. The Trust filed its first lawsuit against the second tower insurers in March 2012 in Delaware bankruptcy court. The bankruptcy court dismissed the Trust's complaint on jurisdictional grounds in October 2012. The Trust then re-filed its complaint in Delaware state court a few days later, asserting causes of action against the second tower insurers for breach of contract, bad faith, and declaratory judgment. The second tower insurers moved to dismiss the Trust's complaint, arguing that the Trust did not have standing to sue the insurers and that the Trust's lawsuit against the insurers was not ripe. The trial court denied the motion to dismiss but certified the ruling for interlocutory appeal to the Delaware Supreme Court, which accepted the appeal.

John A. Husmann published an analysis of noteworthy decisions concerning insurance coverage for construction defect claims handed down in the first quarter of 2014. These cases have dealt with, among other things, the "occurrence" requirement, contractual liability exclusion and "other insurance" clauses. A copy of the article can be found here.

Adam H. Fleischer published an article in the London publication, Insurance Day, entitled, "US brain injury litigation threatens future of American football." In the article, Mr. Fleischer analyzes the recent spate of litigation arising from chronic traumatic encephalpathy (CTE) experienced in athletes suffering blows to the head - an issue front and center in the NCAA, NFL and high school football programs across the nation. Insurers can expect claims and costs to rise as CTE becomes more easily diagnosable, and the resulting litigation continues to grow. The article is attached here.

On March 6, 2014, David M. Alt spoke at the Claims Litigation Management Conference on "Reservation of Rights and the Insured's Right to Independent Counsel." The conference was part of CLM's ongoing training seminars for insurance professionals. The presentation spanned several topics concerning Independent Counsel, including the proper protocol for acknowledging a claim, assessment of the insurer's duty to defend, the insured's right to independent counsel, state-specific statutory requirements for reservation of rights letters, waiver and estoppel, and bad faith issues. David M. Alt speaks regularly at litigation and insurance conferences, as well as in-house for a number of our insurer clients.

Maria G. Enriquez teaches a section on "Liability Insurance – Defense and Settlement" in a course on Insurance & Regulation at Wake Forest University School of Law. Ms. Enriquez taught for three days concerning defense and settlement issues in connection with insurance issues. She also spoke at a Lunch & Learn at Wake Forest concerning recent developments and topics in insurance law.

Ellen J. Zabinski and Adam H. Fleischer offer insights and analysis of a number of leading insurance coverage decisions in the environmental realm in their article published in Mealy’s Litigation Report, entitled, Environmental Coverage Summary: 2013.  To review a copy of the article, please click here.

ProSelect Insurance Co. v. Springfield Hospital, Docket No. 227-4-12 (Vt. Sup. Ct. Windsor Unit May 16, 2013)

On May 16, 2013, the Vermont Superior Court, Winsor Unit, held that an insurer could introduce extrinsic evidence in a declaratory judgment action to negate the duty to defend its insured.  The court’s well reasoned opinion provides guidance for insurers grappling with the issue of whether an insurer can introduce extrinsic evidence to negate a duty to defend, and, if so, when.