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Texas Federal Court Holds Rock Dust Discharged into Stream is Excluded “Pollutant,” so Insurer Owed No Duty to Defend or Indemnify, and Committed No Bad Faith

On July 10, 2018, Judge John H. McBryde of the United States District Court for the Northern District of Texas, Fort Worth Division, held an insurer owed no coverage to a New Jersey rock quarry owner for the accidental pumping of crushed rock particles into a stream. The policy’s pollution exclusion precluded coverage, regardless of whether the rocks were “wanted or useful.” Great Am. Ins. Co. v. ACE Am. Ins. Co., No. 4:18-CV-114-A, 2018 WL 3370620, at *5 (N.D. Tex. July 10, 2018). Absent coverage or any injury independent of the claim for policy benefits, the court also rejected the insured’s bad faith claim. Background Eastern Concrete Materials, Inc. operates a New Jersey rock quarry, where it crushes rock into

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Posted in Bad Faith

Illinois Appellate Court Holds Insurer Owed Coverage in Fatal Chicago Gang Shooting Lawsuit, but Insurer Did Not Commit Bad Faith in Denying Claim

On March 1, 2018, an Illinois appellate court held an insurer breached its duties to defend and indemnify a grocer after gang members shot and killed a young woman and injured another outside of the Chicago grocer. The court interpreted “liability arising out of . . . premises” language in an additional insured endorsement, broadly holding that if the basis for imposing liability arises out of the premises, the party qualifies as an insured regardless of how the injury occurs. Dominick’s Finer Foods v. Indiana Ins. Co., 2018 IL App (1st) 161864, ¶ 66. Thus, a premises defect, such as an icy sidewalk or poor lighting, was not required. However, the court refused to find the insurer committed statutory bad

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West Virginia Supreme Court: Bad Faith Claims Are Premature when the Insurer Is Providing a Defense

The West Virginia Supreme Court recently granted an insurer the extraordinary legal remedy of a writ of prohibition, awarding it an immediate dismissal of the insureds’ bad faith claims. State ex rel. Universal Underwriters Insurance Company v. Wilson, ___ S.E.2d ___, 2017 WL 2415343 (W. Va. Jun. 1, 2017). The court reasoned that because the insurer is defending the insureds in the underlying tort action, the insureds have not yet suffered any recoverable item of damages as necessary to make their bad faith claims ripe for adjudication. The defendants in the underlying tort lawsuit include Salvatore Cava, Salvatore’s father, Daniel Cava, and Daniel Cava’s business, Dan’s Car World, LLC d/b/a Dan Cava’s Toyota World (“Dan’s Car World”). The insurer’s policy

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Pennsylvania Federal District Court: Insurer’s Reliance on “Reasonable” Interpretation of Law Does Not Automatically Bar Bad Faith

On March 13, 2017, the United States District Court, Eastern District of Pennsylvania, rejected the argument that an insurer does not act in bad faith if it relies on a reasonable interpretation of unsettled case law.  The court explained that while supporting case law is highly relevant to the bad faith determination, it does not automatically defeat a bad faith claim.  Allstate Ins. Co. v. Lagreca, 2017 WL 959543, at *2 (E.D. Pa. Mar. 13, 2017).  Nevertheless, the district court ultimately found the insurer’s initial decision to deny liability coverage was reasonable, and granted summary judgment on the bad faith claim, as the insurer “engaged in a reasoned process” prior to denying coverage. Background In the underlying lawsuit, the plaintiff

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Posted in Bad Faith

South Carolina Federal District Court: Insurer May Act in Bad Faith by Considering Extrinsic Evidence to Deny Duty to Defend

On February 6, 2017, the United States District Court, District of South Carolina, found a genuine dispute of material fact existed as to whether a Roofing Limitation Endorsement in a liability policy barred the insurer’s duty to defend. Williford Roofing, Inc. v. Endurance Am. Specialty Ins. Co., 2017 WL 479507, at *3-4 (D.S.C. Feb. 6, 2017). Moreover, while an insurer’s defense obligations are “not strictly controlled by the complaint” under South Carolina law, evaluating the complaint is the insurer’s “first step.” Id. at *4. Here, the district court found the insurer skipped the first step and instead looked first to extrinsic evidence to “deny coverage altogether.” Id. As such, the court concluded the trier of fact could find the insurer

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Avoiding Insurance Bad Faith
Cozen O’Connor represents insurance clients in jurisdictions throughout the U.S. against statutory and common law first- and third-party extracontractual claims for actual and consequential damages, penalties, punitive and exemplary damages, attorneys’ fees and costs, and coverage payments. Whether bad faith claims are addenda to a broader coverage matter or are central to the complaint, Cozen O’Connor attorneys know how to efficiently respond to extracontractual causes of action. More
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