Hunton Insurance Recovery Blog

This summer, in Yacullo v. AIG Property Casualty Company, the United States District Court for the Southern District of California held that an insurer’s violations of the state’s insurance regulations “is a factor that may be considered by a jury” in determining whether the insurer acted in bad faith. The case should serve as an important reminder to policyholders to carefully consider state-specific insurance regulations when asserting a bad faith insurance coverage claim against their insurers.

The Georgia legislature recently amended O.C.G.A. § 9-11-67.1, the statute that sets forth requirements for pre-answer settlement demands in motor vehicle personal injury cases, to temper use of such pre-answer settlement demands to set up bad faith failure-to-settle claims against insurers. These pre-answer demands are known as Holt demands based on the Georgia Supreme Court case of S. Gen. Ins. Co. v. Holt, 262 Ga. 267, 416 S.E.2d 274 (1992), which established that an insurer which fails to settle a claim for its insured—and is found to have done so negligently, fraudulently, or in bad faith—may be liable for damages in excess of the insurance policy limits.

The Northern District of New York recently denied an insurer’s motion to dismiss a bad faith claim, finding that the complaint alleged that the insurer violated New York’s law against deceptive acts and practices. The statute provides key protections to policyholders and is an important tool that policyholders can leverage against insurers who wrongfully deny coverage.

In HDI Global Specialty SE v. PF Holdings LLC, the Eleventh Circuit recently affirmed a district court ruling that the insurers of two apartment management companies did not have to cover a $54 million arbitration award against the companies for their alleged mismanagement of government-subsidized apartments. The Eleventh Circuit held that management companies’ failure to cooperate breached general liability insurance policies issued by the insurers.

As discussed in a recent client alert, on March 24, 2023, Florida Governor Ron DeSantis signed House Bill (HB) 837 into law, making it more difficult and costly for insurance policyholders of all sizes to sue insurers for bad faith by eliminating fee-shifting for most policyholders and requiring something “more than” negligence for bad faith claims.

On Monday, March 6, the US Supreme Court agreed to hear an insurance coverage dispute, Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC.  Insurance cases are few and far between in the high court, so both policyholders and their insurers will be watching the Great Lakes case with great interest.  Notably, while the case involves the specialized area of maritime law, how the Supreme Court chooses to address the choice-of-law issue it presents could have much broader implications.

If your company has an emergency response plan—and it likely does—filing an insurance claim needs to be included in that plan. But what if your insurer stretches out the consideration process by making continuous, costly information requests without making a coverage determination? Or decides to deny coverage under one clause of the policy, but accept coverage under another? Or outright denies coverage? Policyholders should be prepared to comply with policy obligations (which may vary depending on the controlling state law), such as the sharing of relevant information and documentation or participating in arbitration or a mediation prior to suing the insurer, but also understand the responsibilities insurers have to policyholders when a claim is tendered. 

Hunton Andrews Kurth LLP recently wrote about the Eleventh Circuit decision in McNamara v. Gov’t Employees Ins. Co., 30 F.4^th 1055 (11th Cir. 2022) (“McNamara”), where the court held that a consensual settlement (such as a consent judgment) serves as an excess judgment for the purposes of a bad faith claim.  In a follow up decision, the Eleventh Circuit extended its McNamara reasoning to a case involving an accepted proposal for settlement.  In Potter v. Progressive American Insurance Company, No. 21-11134 (11th Cir. 2022), Daniel Lee and Jolene Potter brought a third-party bad faith action against the insurer, Progressive.  The Potters were involved in an automobile accident with Progressive’s insured, under an automotive liability policy with bodily injury limits of $10,000 per person.  The Potters sued Progressive’s insured and ultimately served a proposal for settlement, pursuant to Fla. Stat. § 768.79, totaling $125,000.  The insured accepted the proposal, a final judgment was entered, and the Potters sued Progressive for bad faith.

In what is an unfortunate sign of the times, Springpoint Senior Living, Inc. recently sued its insurers in New Jersey federal court claiming they abruptly stopped covering Springpoint’s defense costs after doing so for nearly a decade.  A copy of the complaint can be found here. Springpoint’s allegations are emblematic of a growing trend among insurers taking drastic measures to avoid coverage, which is no doubt in response to the tightening economic conditions and looming recession around the globe. 

On Wednesday, a federal judge in New York denied FM’s Rule 12(c) motion for judgment on the pleadings after finding the Contamination Exclusion in the Factory Mutual policy to be ambiguous as to whether it bars coverage for business interruption losses resulting from communicable disease.  The case is Thor Equities, LLC v. Factory Mutual Ins. Co., No. 20 Civ. 3380 (AT) (SDNY).  This is a critical decision under the Factory Mutual policy form, which is substantively the same as policies issued by Factory Mutual’s sister company, Affiliated FM Insurance Company.  Factory Mutual and Affiliated FM have maintained that the contamination coverages are “exceptions” to this exclusion, with the exclusion precluding coverage for communicable disease loss under other policy coverages.  But the ruling validates what policyholders have been arguing – that communicable disease “loss” is covered throughout the Factory Mutual policy, in addition to under the sublimited communicable disease emergency response coverages.

Navigating discovery in coverage and bad faith suits can often feel daunting to young associates. This is especially true given that the discoverability of common insurance materials, such as claim files, underwriting files, and reserve information, often varies by jurisdiction. Hunton Andrews Kurth attorneys Andrea DeField and Adriana Perez authored an article, published in the American Bar Association Insurance Coverage Journal, discussing some of the most common discovery issues that arise in insurance coverage and bad faith actions. The full article is available here

Last week, a Georgia federal jury popped a motor carrier liability insurer and its insured with a $21 million verdict in a wrongful death suit. According to the Complaint, the insured driver lost control of his tractor-trailer while driving on Georgia Highway 369. As a result, the trailer disconnected and overturned, injuring a pedestrian walking along the highway’s shoulder. The pedestrian eventually succumbed to his injuries, and his estate filed suit against the driver and the driver’s insurer under Georgia’s Direct Action Statute, which allows plaintiffs to name motor carrier insurers as defendants along with their insureds.

On Friday, August 9^th, an Indiana Court of Appeals reversed a trial court’s ruling and allowed an insureds’ claim for bad faith based on misrepresentations in the insurer’s quote for coverage to proceed to trial.

Following a six-day trial, a Texas jury found that Great American Insurance Company breached its policy with a hydraulic fracturing company and engaged in unfair settlement practices when it refused to pay for loss the company sustained in a well accident. The decision highlights the need to vigorously pursue coverage using all information available and the benefits of leveraging state statutory protections governing unfair claims settlement practices to ensure that insurers handle claims in a prompt, fair, and reasonable manner.

The Georgia Court of Appeals recently affirmed a grant of summary judgment in favor of Mountain Express Oil Company on its breach of contract claim against liability insurer, Southern Trust Insurance Company.  Empire Petroleum brought claims against Mountain Express for breach of contract, injunctive relief, and libel or slander, among others.  Mountain Express sought a defense to that lawsuit under its insurance policy with Southern Trust.  Southern Trust contended that the insurance policy did not cover Empire’s non-libel/slander claims, and therefore reimbursed Mountain Express for only a portion of its attorneys’ fees. After the Empire lawsuit settled, Mountain Express sued Southern Trust for breach of contract and bad faith for failing to pay the remaining defense costs, contending that Southern Trust had a duty to defend the entire lawsuit.

In a significant win for policyholders, the Ninth Circuit rejected an insurer’s argument that the common meaning of “war” applied when interpreting a war exclusion, instead of the customary usage of the term, pursuant to Cal.  Civ. Code 1644, and revived NBC Universal’s attempt to recover at least $6.9 million in costs incurred to relocate the production of a television show from Jerusalem during the 2014 Israeli-Palestinian conflict. Universal Cable Prods., et al., LLC v. Atl. Specialty Ins. Co., 2019 WL 3049034, at *10 (9th Cir. July 12, 2019).

In the first part of a 3-part series, the Hunton insurance team discusses how policyholders can plan for this year’s hurricane season. Part 2 will address how to prepare a claim after a loss in order to maximize the potential recovery, including by taking photographs of any damage and tracking curfews that affect your operations.  Part 3 will discuss how to prevent denials of pending claims based on suit limitations periods.  The team’s goal is to provide a comprehensive outline that will guide policyholders before and after a loss.

The Southern District of Georgia recently ruled that Evanston Insurance Company is not entitled to summary judgment on whether its policies’ pollution exclusion bars coverage for the release of nitrogen into a warehouse. The case stems from an incident at Xytex Tissue Services, LLC’s warehouse, where Xytex stored biological material at low temperatures. Xytex used an on-site “liquid nitrogen delivery system” to keep the material properly cooled. This system releases liquid nitrogen, which would vaporize into nitrogen gas and cool the biological material. On February 5, 2017, a Xytex employee, Deputy Greg Meagher, entered the warehouse to investigate activated motion detectors and burglar alarms. Deputy Meagher was overcome by nitrogen gas and died as a result. Following Deputy Meagher’s death, his heirs filed suit against Xytex and other defendants. Evanston denied coverage based on the pollution exclusion in its policy. Evanston then brought a declaratory judgment action to confirm its coverage position.

The Georgia Supreme Court ruled this week that First Acceptance Insurance Co. need not pay a $5.3 million excess judgment against its insured, Ronald Jackson.  First Acceptance Ins. Co. of Georgia, Inc. v. Hughes, No. S18G0517, 2019 WL 1103831 (Ga. Mar. 11, 2019), even though Jackson’s insurer could have settled the claim for Jackson’s $50,000 policy limits.

In a March 13, 2019 article appearing in Law360, Hunton Insurance team head, Walter Andrews, explains the adverse impact of a Georgia Supreme Court ruling that attempts to clarify the rules governing settlement of insured liability claims under Georgia law.  As Walter explains, however, the decision stands to hinder settlements and potentially subject innocent insureds to staggering liability beyond that covered by their insurance.  In First Acceptance Ins. Co. of Georgia, Inc. v. Hughes, the Georgia Supreme Court ruled that policyholders must make a “valid offer” – that is, one that contains definite time limits and other terms - before an insurance company is required to settle.  As Walter told Law360, the court took “an overly narrow approach” that is “disturbing and is likely to act as a deterrent to settlements in the future.” He goes on to explain that insurance companies will actually have less incentive to settle, “which means that fewer cases will settle and cases will linger longer in court, which is not in the interests of either the injured parties or the insured defendants.”

In a huge win for policyholders, a New York appellate court, in D.K. Property, Inc. v National Union Fire Insurance Company of Pittsburgh, Pa., held that an insured need not provide a detailed factual description or explanation for why consequential damages are recoverable at the pleading stage.  Rather, an insured’s complaint must only (i) specify the types of consequential damages claimed; and (ii) allege that those damages reasonably were contemplated by the parties prior to contracting.

As the new year gets under way, cases that will shape the insurance landscape in 2019 continue to proceed.  Among them are First Acceptance Ins. Co. v. Hughes, in which the Georgia Supreme Court will address the prerequisites for a policyholder to sue its insurance carrier for bad faith based on the insurer’s failure to settle the underlying dispute for an amount within the available policy limits.  Hunton Andrews Kurth’s insurance practice head, Walter Andrews, was asked by Insurance Law360 to comment on the significance of that case.  As Andrews explained, the insurer’s position is inconsistent with Georgia law.  "Georgia law does not require some particular form of settlement offer — or even an offer at all — to create an insurer's duty to settle claims against their insureds." Rather, as Andrews explained, “that duty arises when the insurer knows or reasonably should know that not settling will create an 'unreasonable risk' of the insured suffering a judgment in excess of his or her policy limits, regardless of whether a third-party claimant has first presented a settlement offer. Most often, that should be a jury question and not something that is susceptible to summary judgment."

Puerto Rico’s dire insurance situation more than a year after Hurricane Maria remains a constant reminder of why policyholders must diligently pursue their property and business interruption claims in the immediate aftermath of a storm.  The numbers are staggering.  On an island the approximate size of Connecticut, Hurricane Maria caused an estimated $100 billion in damage.  According to the Office of the Insurance Commissioner of Puerto Rico, the hurricane resulted in more than 287,000 insurance claims.  Roughly 11,000 of those claims, representing an estimated $2 billion in losses, remain unresolved.

In what appears to be a case of first impression, an Ohio trial court ruled in Kimmelman v. Wayne Insurance Group, that the crypto-currency, Bitcoin, constitutes personal property in the context of a first-party homeowners’ insurance policy and, therefore, its theft would not be subject to the policy’s $200 sublimit for loss of “money.”

A California federal court found coverage under AIG’s general liability policy for the defense and indemnity of email scanning suits against Yahoo!. Those suits generally alleged that Yahoo! profited off of scanning its users’ emails. Because the allegations gave rise to the possibility that Yahoo! disclosed private content to a third party, the court found that the suit potentially fell within the coverage for “oral or written publication, in any manner, of material that violates a person’s right of privacy.” Thus, AIG’s duty to defend was triggered.

The court also ...

Whether an insurance bad faith claim, joined by amendment to an underlying insurance coverage action, may be removed more than a year after the original action was begun has divided federal judges in the state of Florida but has not yet been considered by the Eleventh Circuit. Now, a new opinion out of the Middle District of Florida (Jacksonville Division) has added to the debate.

Kanye West’s touring company, Very Good Touring, Inc. (Very Good), and its insurer, Lloyd’s of London (Lloyd’s), have resolved their dispute over event cancellation coverage for West’s “Life of Pablo” Tour, which experienced canceled shows due to West’s health condition. The settlement resolved all claims and counterclaims.

In a recent insurer’s failure-to-settle case, Hughes v. First Acceptance Ins. Co. of Ga., the Georgia Court of Appeals reaffirmed that there is no hard-set rule conducive to summary judgment; rather, the court ruled that a jury should determine whether the insurer’s actions had been “reasonably prudent.”  Plaintiff Robert Jackson allegedly caused a five-vehicle collision that resulted in his death and the serious injuries of others, including Julie An and her minor child, Jina Hong.  An and Hong, through their counsel, communicated with Jackson’s insurance company, First Acceptance, stating that they were “interested” in settling their claims within Jackson’s policy limit of $25,000.  Counsel also requested that the insurer send him policy information within 30 days.  An later claimed that this communication represented an offer of settlement, when, 41 days later, they sent First Acceptance a letter withdrawing their “offer” and stating their intent to file suit due to the insurer’s failure to respond.  An and Hong then filed suit and were ultimately awarded $5,334,220 in damages.  First Acceptance paid $25,000 towards the award, leaving Jackson’s estate exposed to over five million dollars in damages.

An eye-popping settlement in Georgia serves as a cautionary tale for insurers who refuse to provide a straight answer when responding to a demand for policy limits and as a lesson for insureds dealing with recalcitrant insurers: Don’t just take “no” for an answer.

In a prior blog post, we discussed Kanye West's touring company's, Very Good Touring, Inc. ("Very Good"), lawsuit against its insurer, Lloyd's of London ("Lloyd's"), for withholding almost $10 million in coverage after the cancellation of shows on West's "Life of Pablo" Tour. On Tuesday, August 29, 2017, Lloyd's responded by counterclaiming against Very Good and West, alleging that the loss was due to their failure to abide by policy conditions.

Hollywood is not off to a great start for the month of August. Kanye West's touring company, Very Good Touring, Inc. ("Very Good"), sued insurance company Lloyd's of London ("Lloyd's") on Tuesday in California federal court for withholding almost $10 million in coverage for the shows on West's "Life of Pablo" Tour that were canceled due to West's health condition. In Very Good Touring, Inc. v. Cathedral Syndicate, et al., No. 2:17-cv-05693 (C.D. Cal. filed Aug. 1, 2017), the touring company characterized Lloyd's delay in providing a coverage opinion as "emblematic of a broader modus operandi of the insurers of never-ending post-claim underwriting where the insurers hunt for some contrived excuse not to pay."

In recent months, insurers have increasingly used New York rescission law as a means to not only deny coverage for specific claims, but also to void any protection an insurance policy may provide for other losses down the road. For example, H.J. Heinz Company recently found itself without coverage for a $30 million recall after its insurer rescinded its policy based on a misrepresentation in Heinz’s insurance application. In an article for FC&S Legal, Syed S. Ahmad, Tae Andrews, and Kelly Oeltjenbruns analyze recent rescission claims and illustrate the dangerous exposure—and ...

In the linked Client Alert, my colleague, Geoff Fehling, discusses the recent federal appellate decision in Camacho v. Nationwide Mutual Insurance Co., No. 16-14225, 2017 WL 2889470 (11th Cir. July 7, 2017), where the Eleventh Circuit affirmed a Georgia district court’s refusal to disturb a jury award for the policyholder arising from the insurer’s failure to accept a time-limited settlement demand, holding that the lower court’s order was “thorough and well-reasoned.”

Last week, my partner, Syed Ahmad, commented on some of the biggest insurance rulings of the year in a Law360 feature article that can be found here.  Among those decisions is USAA Texas Lloyd’s Co. v. Menchaca, where the Texas Supreme Court ruled that that policyholders may recover for bad faith in the absence of coverage under their policy.  Ahmad also discussed the Connecticut appeals court decision in R.T. Vanderbilt Co., Inc. v. Hartford Acc. And Indem. Co., and its ruling that insurers may not force policyholders to act as an insurer during policy periods in which insurance was not ...

A California appellate court has affirmed a finding that a property insurer acted in bad faith when it searched for a reason to deny coverage for a fire loss and conducted an incomplete and non-objective investigation, even though the carrier subsequently paid the claim. The decision in Saddleback Inn, LLC v. Certain Underwriters at Lloyd’s London, No. G051121 (Cal. App. 4^th, Mar. 30, 2017, which can be found here, illustrates the principle that an insurer’s conduct should be determined based on what the carrier knows when it refuses to pay the claim, and that subsequent developments cannot be used to salvage prior bad faith conduct.

The Ninth Circuit in Teleflex Medical Incorporated v. National Union Fire Insurance Company of Pittsburgh PA, No. 14-56366 (9th Cir. Mar. 21, 2017) affirmed a jury verdict finding that AIG must pay $3.75 million in damages plus attorneys' fees to cover LMA North America, Inc.'s ("LMA's") settlement with its competitor over allegedly disparaging advertisements that characterized a competitor's products as unsafe.

Last week, nearly 200,000 people were evacuated from areas downstream of the Oroville Dam in Northern California. Today, separate recommended and mandatory evacuation orders continue for roughly 50,000 San Jose residents due to rising flood waters along Coyote Creek. Between the Oroville Dam crisis and the torrential storms battering Northern California, California businesses face significant loss arising from the flooding, the threat of flooding, landslides and the like. Fortunately, some of the damage to property and businesses can be mitigated by insurance.

The recovery of attorneys' fees is an important issue in almost every lawsuit, and especially for policyholders in litigation against their insurer.  In almost every case, the policyholder and its insurer will dispute whether the policyholder's attorneys' fees are reasonable and necessary, with insurer arguing that they are not.  On Tuesday, February 7, 2016, the Texas Supreme Court heard oral argument in In re National Lloyds Insurance Company, Wardlaw Claims Service, Inc., and Ideal Adjusting, Inc., Case No. 15-0591, regarding whether a policyholder seeking recovery of its attorneys' fees should be permitted to discover its insurance company's attorneys' fee information—such as hourly rates and time spent on the matter.

On February 22^nd, Hunton insurance team partner Syed Ahmad and Mary Borja of Wiley Rein LLP will be speaking at the DC Bar’s CLE program “What Every Litigator Should Know About Insurance and How It May Impact Your Case Strategy.” The two hour class will discuss what steps an insured should take to protect claims, the role of insurance in defending and settling claims, and how to preserve attorney-client privileges. To learn more about the event, please visit: http://bit.ly/2k8SCQT.

Date and Time:
Wednesday, February 22, 2017 from 6 pm to 8:15 pm

Location:
D.C. Bar Conference ...

On November 2, 2016, a federal judge in California ruled that a Real Estate Property Managed endorsement in policies issued to a real estate manager negated a standard policy exclusion, but also rendered the policies excess to other available insurance. The case involved a dispute over coverage for a bodily injury claim involving “Pigeon Breeders Disease,” allegedly contracted due to the insured’s failure to keep pigeons away from a condo complex’s rooftop HVAC units. The plaintiff sued the property owners, Jerry and Betty Lee, and the property manager, Sierra Pacific Management Co. Inc. (Sierra Pacific).

With hurricane season in full swing, policyholders should keep an eye on the Texas Supreme Court for a decision that may impact future recovery efforts. On Tuesday, October 11, 2016, the Texas Supreme Court heard oral argument in USAA Texas Lloyds Co. v. Gail Menchaca, Case No. 14-0721, regarding whether a jury’s award of damages for the insurer’s failure to conduct a reasonable investigation (in violation of the Texas Insurance Code) could stand despite the jury’s finding that the insurer did not breach the insurance policy.

In a July 5, 2016 opinion in Home Loan Inv. Co. v. St. Paul Mercury Ins. Co., the United States Court of Appeals for the Tenth Circuit addressed claims for bad faith delay or denial of coverage under Colorado law in connection with a fire loss under a foreclosed property protection policy. After a jury verdict in favor of the Insured on its breach of contract and statutory bad faith claims, the Insurer moved for judgment as a matter of law (JMOL) regarding the statutory bad faith claim. When its motion was denied, the Insurer appealed.

The Insurer argued in its JMOL and on appeal that because its ...

A federal judge in Colorado recently ruled that a commercial property and general liability policy issued to a medical marijuana dispensary and its cultivation facility can provide coverage for harvested marijuana that is damaged or destroyed.  In the case of The Green Earth Wellness Center, LLC v. Atain Specialty Insurance Company, smoke and ash from a wildfire entered the facility’s ventilation system and damaged Green Earth’s potted pot plants to the tune of $200,000, with an additional $40,000 in damage to plants that had already been harvested and were being prepared for ...

On Thursday, Florida’s highest court held that prior to litigating a first-party bad faith action arising from an uninsured/underinsured motorist (“UM”) case, an insured is entitled to a jury determination of liability and the full extent of potentially recoverable damages, even if in excess of policy limits.  Fridman v. Safeco Ins. Co. of Illinois, No. SC13-1607 (Fla. Feb. 25, 2016).  And, such a determination is binding on the insurer in the subsequent bad faith action so long as the parties had an opportunity for appellate review of any trial errors.

The ruling is premised on ...

Hunton & Williams LLP attorneys Mike Levine and Matt McLellan, along with Tim Monahan of Lockton Companies, LLC., presented to a group of risk managers and insurance professionals on Wednesday evening, February 17^th, about strategies and pitfalls in the claim presentation process. The event was well-attended and the audience was lively with questions for the presenters. A copy of the PowerPoint can be downloaded here. Key points discussed with the group include:

Florida’s Third District Court of Appeals held on Wednesday that a general liability policy’s absolute employer’s liability provision did not preclude coverage for injuries sustained by an employee at a work event located on the property of an additional insured because of the policy’s separation of insureds provision. In Taylor v. Admiral Insurance Co., No. 3D14-720 (Fla. 3d DCA Feb. 10, 2016), Taylor, as assignee of Vizcaya Museum & Gardens, Villa Vizcaya and Miami-Dade County (collectively “Assignors”), appealed an award of summary judgment in favor of Admiral Insurance Co. (“Admiral”) on her claims of breach of contract and common law and statutory bad faith. Admiral cross-appealed the trial court’s finding that the Assignors are additional insureds under the policy.

On January 12, 2016, a federal court in Utah refused to dismiss a bad faith claim brought by Federal Recovery Services against Travelers Property Casualty Company of America, despite finding that there was no duty to defend FRS under Travelers’ “CyberFirst Policy.” Travelers Property Casualty Company of America et al. v. Federal Recovery Services et al., Case No. 2:14-cv-00170. FRS sought a defense and indemnity for a lawsuit filed against it by Global Fitness Holdings, LLC, a fitness center operator. Global Fitness had alleged that FRS intentionally misused the credit card and bank account information of Global Fitness’ customers, which consequently interfered with FRS’s business dealings.

On December 14, 2015, a federal court in California denied Evanston Insurance Company’s motion to dismiss Uber’s breach of contract and breach of the implied covenant of good faith and fair dealing claims. Evanston Insurance Company v. Uber Technologies, No. 15-cv-03988-WHA (Dec. 14, 2015). The case concerns Evanston’s duty to indemnify Uber for claims arising from two car accidents during which drivers were allegedly logged on to the Uber App.

Judges – Not Juries – Award Attorney’s Fees In Virginia Bad Faith Cases, FC&S Legal
November 10, 2015

In REVI, LLC v. Chicago Title Insurance Company, the Virginia Supreme Court held that a trial judge, rather than a jury, should determine whether an insured is entitled to attorney’s fees as a result of the insurer’s bad faith.