Hunton Insurance Recovery Blog

Last week, in Golden Bear Insurance Company v. 34th S&S, LLC, a Texas federal court held that an insurer had no duty to cover a personal injury judgment in excess of the $1 million policy limit. The holding reminds parties in Texas to carefully consider the most basic—and sometimes very particular—requirements surrounding Stowers demands.

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.

In a recent Client Alert, Hunton insurance partner Geoffrey Fehling discusses the impact of the California appellate court decision Practice Fusion, Inc. v. Freedom Specialty Insurance Co., where the court denied coverage under a directors and officers liability policy for a software developer’s $118 million settlement with the US Department of Justice to resolve allegations that the company violated anti-kickback laws in designing and implementing sponsored alerts in electronic health records software. 

A company faces two class action lawsuits—filed by different plaintiffs, complaining of different allegedly wrongful conduct, asserting different causes of action subject to different burdens of proof, and seeking different relief based on different time periods for the alleged harm. Those facts suggest the suits are not “fundamentally identical,” but that is what a Delaware Superior Court recently concluded in barring coverage for a policyholder seeking to recover for a suit the court deemed “related” to an earlier lawsuit first made outside the policy’s coverage period. First Solar Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., No. N20C-10-156 MMJ CCLD (Del. Super. Ct. June 23, 2021). The decision, which is not on all fours with some of the authority upon which it relies, underscores the inherent unpredictability of “related” claim disputes and need for careful analysis of the policy language against the factual and legal bases of the underlying claims.

The Fifth Circuit recently rebuffed an attempt by Chubb subsidiary Ace American Insurance Co. (“Ace”) to evade liability from its excess insurer, Zurich North America subsidiary American Guarantee & Liability Insurance Co. (“AGLIC”), after Ace unreasonably rejected a settlement offer within its policy limits in violation of its Stowers duty. See Am. Guarantee & Liab. Ins. Co. v. ACE Am. Ins. Co., 19-20779, 2020 WL 7487067 (5th Cir. Dec. 21, 2020). As a result, Ace must now pay approximately $7.27 million in damages to AGLIC to cover its costs to settle the underlying lawsuit plus prejudgment interest and court costs.

Hunton Insurance attorneys Syed Ahmad and Geoffrey Fehling provided several updates on recent recall insurance disputes in the most recent edition of the Recall Roundup, posted on the Hunton Retail Law Resource Blog.

Real estate investment trust VERIET, Inc. (formerly known as American Realty Capital Properties) announced this week that it agreed to a $765.5 million settlement to resolve shareholder class action and related lawsuits arising from a host of alleged securities violations and accounting fraud at ARCP since the company went public in 2011. Defendants in the class action settlement have agreed to pay more than $1 billion in compensation, including millions from ARCP’s former manager and principals, chief financial officer, and former auditor.

Last week the Northern District of Illinois held in Magnetek, Inc. v. Travelers Indem. Co., 2019 WL 3037080 (N.D. Ill. July 11, 2019), that Travelers had a duty to defend Magnetek, Inc. under insurance policies issued to Magnetek’s predecessor, Fruit of the Loom (“FOTL”). A copy of the Magnetek decision can be found here.

A federal court has ruled in Catlin Specialty Ins. Co. v. J.J. White, Inc., that settlement of an underlying third-party lawsuit involving covered and uncovered claims requires consideration of two principles of proof. First, the factfinder must assume that the insured was actually liable in the underlying case. Second, the factfinder must resolve all factual issues necessary to deciding coverage. A copy of the decision can be found here; and a copy of a related summary-judgment opinion can be found here.

The Delaware Superior Court ruled that insurers could not rely on Written Consent and Cooperation clauses in directors and officers liability insurance policies to avoid coverage for settlements by Dole Food Company, Inc. (“Dole”) in shareholder disputes involving fraud in a go-private transaction.

In an article appearing in Electric Light & Power, Hunton insurance recovery lawyers, Lawrence Bracken, Sergio Oehninger and Alexander Russo discuss the insurability of losses resulting from the recent wildfires in California.  Many affected by the tragedy have tried to shift responsibility to utility and power companies, which also may face subrogation claims from insurers that paid property and business owners for first-party losses.  In addition, liability insurance programs may help defray costs imposed upon those believed to be at fault, including costs resulting from ...

A federal court in New Jersey recently held that the construction of an ambiguous policy term is not a matter suitable for judgment on the pleadings, thus denying AIG from avoiding coverage for a $67 million antitrust settlement. Rather, the only way to establish the meaning of an ambiguous term, the court explained, is to ascertain the intent of the parties, which requires “meaningful discovery.”

In MF Global Holdings Ltd. et al. v. Allied World Assurance Co. Ltd. et al., No. 1:16-ap-01251 (Bankr. S.D.N.Y. Aug. 24, 2017), the United States Bankruptcy Court for the Southern District of New York ordered MF Global Holdings Ltd. and Allied World Assurance Co. Ltd. to arbitrate their $15 million errors-and-omissions coverage dispute in Hamilton, Bermuda. MF Global initiated an adversary proceeding against Allied World in the bankruptcy court after Allied World had refused to pay MF Global for amounts that MF Global returned to its customers' accounts as part of a settlement of claims against MF Global's former managers and directors. Allied World denied coverage under its "Bermuda Form" errors-and-omissions policy, claiming that this procedure was tantamount to deposit insurance, and not professional liability insurance, which is what errors-and-omissions coverage typically provides.

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.”

The interplay between primary and excess insurance is often litigated, especially in the context of settlements. On April 26, 2017, the First Circuit in Salvati v. Am. Ins. Co., 16-1403, 2017 WL 1488238, at *1 (1st Cir. Apr. 26, 2017) considered whether the settlement agreement entered into between plaintiff and the insureds/primary insurer was sufficient to trigger excess insurance coverage under the insured’s policy with American Insurance Company.

On December 2, 2016, a Texas federal court ruled that the insurer for the predecessor of CVS Caremark Corp., Revco D.S. Inc. (Revco), must pay $15 million toward a $100 million settlement of a class action lawsuit for the injuries and deaths allegedly caused by a toxic vitamin solution, E-Ferol. Pursuant to the settlement, the plaintiffs received an assignment of Revco’s rights to pursue indemnity insurance coverage from the company’s excess insurer, Federal Insurance Co. (Federal). The Court granted, in part, the plaintiffs’ motion for summary judgment seeking indemnity, by declaring that Revco’s excess insurance policy covered the negligence claims based on its manufacturing and distributing of E-Ferol.