Yearly Archives: 2016

Don’t Let a Little Concealer Ruin Your Coverage Defenses

May an insurer in New York delay asserting (or conceal, according to Estee Lauder) a late notice defense without waiving it? According to the New York Court of Appeals a jury should decide whether the insurer manifested a clear intent to abandon the defense. Estee Lauder, Inc. v. OneBeacon Insurance Group, LLC, 2016 WL 4792170 (N.Y. Ct. App. Sept. 15, 2016).[1] Estee Lauder initiated this coverage action in 2005, claiming that OneBeacon was obligated to defend and indemnify Estee Lauder for environmental claims relating to Estee Lauder’s alleged dumping of hazardous waste.[2] From 1999 to 2002, OneBeacon sent various reservation of rights and declination letters to Estee Lauder. In the 1999 and 2000 letters, OneBeacon generally reserved all rights to

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Texas Supreme Court to Decide Whether a Policyholder Can Recover Damages When The Carrier Does Not Breach the Policy

According to both the appellant and the appellee, the Texas Supreme Court already decided this issue. Each, of course, finds a different answer. Cause No., 14-0721, USAA Texas Lloyds Co. v. Gail Menchaca, in the Texas Supreme Court, arises from an unusual fact pattern and some unusual jury findings. Trial plaintiff Gail Menchaca suffered damage to her home as a result of Hurricane Ike. USAA investigated the loss and found some covered damage, but concluded that the repair costs fell below the applicable deductible and therefore issued no payment. Menchaca then sued USAA, asserting claims for breach of contract and several extra-contractual claims, including a failure to adequately investigate her loss. However, Menchaca alleged no damage from those extra-contractual claims,

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Missouri Federal Court Identifies Roadblocks For An Excess Carriers’ Claim For Attorney Fees Against Primary Carrier

The court’s decision in Axis Specialty Insurance Company v. New Hampshire Insurance Company highlights the scope of recovery available for an excess carrier seeking to recover against a primary carrier. Emboldened by the recent Missouri Supreme Court decision recognizing the right of an excess carrier to sue a primary carrier for failure to reasonably settle an underlying claim in Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818 (Mo. Banc 2014),  Axis Specialty sought to recoup not only its excess indemnity payment but also its attorney fees incurred in monitoring and eventually settling the underlying lawsuit as well as its attorney fees in pursuing its equitable subrogation and the assigned claims for bad faith and vexatious litigation.    In Scottsdale, the

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California Supreme Court Invites Suits against Defendants Doing Any Business in California

In a hotly contested 4-3 decision, the California Supreme Court in Bristol-Myers Squibb Company v. The Superior Court of San Francisco County, 2016 WL 4506107 greatly expanded the concept of specific jurisdiction to allow a non-resident plaintiff to file suit in California courts against any defendant who conducts or transacts any business in California, even though the plaintiff purchased that defendant’s product in another state.   The Court broadened the scope of specific jurisdiction to overcome the requirements of International Shoe Co. v. Washington, 326 U.S. 310 (1945), finding that a tangential use of the forum constitutes a “substantial” connection between plaintiff’s claim and the defendant’s forum activities. The product in question was Plavix, developed and manufactured by Bristol-Myers Squibb outside

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Expanding When Liability is “Reasonably Clear”: Massachusetts Court Chips Away at Bad Faith Counterarguments

Earlier this month, a Massachusetts Appellate Court affirmed a trial court’s award of bad faith damages in a case where it found the insurer’s approach to a claim to be “at best inattentive, if not incompetent.”  Although the state appellate court in McLaughlin et al. v. American States Insurance Co. ultimately denied an award of multiple damages, its award of attorneys’ fees and costs, along with loss of use of funds damages, shows the limits of arguing no bad faith because the insured’s liability was not “reasonably clear” under Massachusetts’s bad faith statutes.  The Court’s decision, even though unpublished, serves as yet another reminder of the importance for insurers to properly investigate claims and objectively analyze whether an insured’s liability is

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“Low-Ball” Settlement Offer On Its Own Is Insufficient To Support A Claim for Bad Faith Under Pennsylvania Law

A low-ball settlement offer on its own is not enough to state a claim for a bad faith according to a federal district court for the Eastern District of Pennsylvania which granted the insurer’s motion to dismiss the insured’s claim for alleged violation of Pennsylvania’s bad faith insurance statute, 42 Pa.C.S. §8371. See West v. State Farm Insurance Company, 2016 U.S. Dist. LEXIS 106783 (E.D.Pa. Aug. 11, 2016). The statute provides that in an action on an insurance policy, if the court finds that the insurer acted in bad faith toward its insured, the insured may be awarded interest on the amount of the claim from the date the claim was first made by the insured, punitive damages, court costs

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POLICY LIMIT DEMANDS + QUIRKY LEGAL ISSUES = CALL LAWYER

The recent California decision Barickman v. Mercury Casualty Company, 2016 WL 3975279, (Calif. App. – July 25, 2016), previously reported in Cozen’s bad faith blog on July 28, 2016, is worth revisiting on a bigger picture issue.  Low policy limit demands are often more dangerous than high policy demands.  This is because often times less experienced adjusters are assigned to lower policy limit cases and may not have recognized some of the red flags presented in Barickman and more importantly may not have recognized the need for legal advice.  In Barickman, those red flags were as follows:  (1) serious injuries; (2) clear liability; (3) low policy limits; (4) policy limits demand made with short time fuse to respond; (5) numerous

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Insurers’ Beware: Defending Bad Faith Claim May Lead to Waiver of Privileged Communications

On July 27, 2016, the United States District Court for South Carolina ordered an insurer to turn over its privileged communications. The Court explained that the insurer waived the protections afforded under the attorney-client privilege and work product doctrine by asserting it acted in good faith in the defense of its insured. See State Farm Fire & Casualty Co., et al. v. Admiral Ins. Co., 2016 WL 4051271 (D. S.C. July 25, 2016). While this is a district court opinion and may be subject to appeal, insurers should still be cognizant of the issue. James McElveen filed suit after he was seriously injured during a fraternity hazing event hosted by Maurice Robinson and Phi Beta Sigma Fraternity. Robinson tendered the

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When a Policy Limits Offer is Not Enough: A Cautionary Tale of a Failure to Settle Case

In a recent unpublished decision, the California Court of Appeals upheld a $3 million judgment against an auto liability insurer that rejected proposed language in a settlement agreement, notwithstanding the insurer’s policy limits offer. Barickman v. Mercury Opinion, 2016 WL 3975279 (Cal. Ct. App. 2016) (unpublished). Although unpublished and not binding precedent, Barickman raises several claim handling issues which may be useful for carriers to consider. Barickman arises from a personal injury claim in which the insured, Timory McDaniel struck two pedestrians while driving under the influence. McDaniel fled the scene but was later apprehended. She reported the claim the following day to her insurer Mercury Casualty Company as an accident without further detail. Within eight weeks of receiving notice

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Don’t Mess with the Texas Prompt Payment of Claims Act: One Court’s Appraisal Result

Virtually all property insurance policies contain an appraisal clause, which outlines the appraisal procedure in broad terms. Those broad terms sometimes do not provide much guidance about the process, or about the effect which an appraisal award may have. A case in point is Graber v. State Farm Lloyds, 2015 WL 11120532 (N.D. Tex. 8/6/15). In Graber, plaintiff purchased a homeowner’s policy from State Farm Lloyds. Plaintiff claimed that the home suffered covered damage as a result of a hailstorm. State Farm Lloyds inspected the home and concluded covered hail damage was present in certain areas of the home. On this basis, State Farm Lloyds issued a payment to plaintiff for damage to those itemized areas. Plaintiff was unsatisfied with

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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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