Hunton Insurance Recovery Blog

The Ninth Circuit has affirmed victory for New York Marine and General Insurance Co. in its legal battle with Amber Heard over the cost of defending defamation claims brought against the actress by ex-husband, Johnny Depp. New York Marine and Gen. Ins. Co. v. Heard, No. 23-3399 (9th Cir. Nov. 25, 2024). The decision, premised on Virginia law, rather than the policyholder’s favored California law, underscores the potential for choice of law to have case-dispositive implications.

A federal court recently denied an insurer’s motion to dismiss an insured’s claim for declaratory relief. The insurer argued that the policyholder’s declaratory judgment claim was redundant of its breach of contract claim. The Court ruled that “redundancy is not grounds for dismissal under Rule 12(b)(6).”

A New York appellate court recently held that renewable bio-diesel fuel manufacturer BioEnergy Development Group LLC may pursue tens of millions of dollars in damages from its insurers under two all-risk insurance policies, including amounts in excess of the policy limits, where the insurers refused to pay claims in a timely manner.

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.

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 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."

Attorneys Syed Ahmad and Jennifer White contributed to the Hunton Retail Law Resource’s “Recall Roundup” for the month of March with a discussion a new cases in the world of recall-related insurance coverage litigation, including a new case filed by a policyholder against its insurance broker alleging that the broker was liable for misrepresentations in the electronic application that led the insurer to rescind coverage.  Check out the blog post here.

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.

Andrea DeField’s update, and her original post discuss portions of the proposed Restatement of the Law on Liability Insurance and how they may alter the consequences for breaching the duty to defend. The proposed Restatement contains many other provisions that may prove relevant to future coverage disputes, particularly ones governed by state law that is less developed than in states like New York, California, and Florida.

After our December 15, 2015 post about the Discussion Draft of the Restatement of the Law on Liability Insurance, the American Law Institute released Council Draft No. 2 on December 28, 2015. Relevant to my last post, Council Draft No. 2 contains revisions to §19 of Chapter 2, addressing the duty to defend. While the Reporters’ Memorandum notes that no substantive changes have been made to the black letter law of this section, the comments section has been revised to reflect a proposed intermediate approach. ALI Restatement of the Law: Liability Insurance, Council Draft No. 2 (not approved), Dec. 20, 2105 p. xiv. These revisions reflect a more moderate position than that taken in the previous Discussion Draft.

At present, the general rule is that an insurer that breaches its duty to defend still may contest coverage. Signature Dev. Companies, Inc. v. Royal Ins. Co. of Am., 230 F.3d 1215, 1222 (10th Cir. 2000). However, the tides may soon change. The Discussion Draft of the Restatement of the Law on Liability Insurance proposes that “[a]n insurer that breaches the duty to defend a claim loses the right to assert any control over the defense or settlement of the claim and the right to contest coverage for the claim.” See § 19, “Consequences of Breach of the Duty to Defend, ALI Restatement of the Law: Liability Insurance, Discussion Draft (April 30, 2015), p. 147. The proposed Restatement explains, “[t]he forfeiture-of-coverage-defense rule discourages insurers from attempting to convert a duty-to-defend policy into an after-the-fact defense-cost-reimbursement policy.” Id. at 148. The Restatement further explains that insurers should be wary to outright deny a defense. Rather, it suggests that “[t]he proper procedure is to provide a defense subject to a reservation of rights and then, if appropriate, institute a declaratory-judgment action to terminate the duty to defend…If the insurer cannot, or does not choose to, file a declaratory-judgment action, it can preserve its coverage defenses by refusing to settle the claim while continuing to provide a defense (subject to the risks attendant to breach of the duty to make reasonable settlement decisions).” Id. at 149.¹