A federal district court applying Alabama law has held that an insurer owed no defense or indemnification obligations because the employment practices at issue in an underlying discrimination action against the insured occurred prior to the policy’s retroactive date. Elite Refreshment Servs. LLC v. Liberty Mut. Grp., Inc., 2020 WL 470289 (N.D. Ala. Jan. 29, 2020).
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In a matter of first impression, the Delaware Superior Court has adopted the “larger settlement rule” to govern allocation of settlement amounts where (i) a settlement resolves, at least in part, insured claims; (ii) the parties cannot agree as to the allocation of amounts attributable to covered versus non-covered claims; and (iii) the policy’s allocation provision does not prescribe a specific allocation method. Arch Ins. Co. v. Murdock, No. N16C-01-104 (Del. Super. Ct. Jan. 17, 2020).
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Applying Maryland law, the Court of Special Appeals of Maryland has held that an insurer had no right to allocate a global settlement of two underlying lawsuits between covered and non-covered claims, where the damages sought in each action were identical and based on the same misconduct. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. The Fund for Animals, Inc., 2019 WL 7369221 (Md. Ct. Spec. App. Dec. 30, 2019).
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A Maryland federal district court has ruled that a ransomware event involved “direct physical loss of or damage to” software, data, and computer systems, thus triggering coverage under a businessowner’s insurance policy. National Ink & Stitch, LLC v. State Auto Prop. & Cas. Ins. Co., No. SAG-18-2138 (D. Md. Jan. 23, 2020).
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The United States District Court for the Southern District of New York, applying New Jersey law, has held that an insurer was estopped from denying coverage under a retroactivity provision in an engineering firm’s professional liability policy because the insurer’s reservation of rights, which was issued three years after accepting control of the insured’s defense, was untimely and defective. RLI Ins. Co. v. AST Eng’g Corp., 2019 WL 7114986 (S.D.N.Y. Dec. 20, 2019).
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In a win for Wiley Rein’s client, the U.S. Court of Appeals for the Second Circuit, applying Connecticut law, has held that no coverage is available for a lawsuit seeking recovery of disputed legal fees because the relief sought does not constitute covered “damages” and because the insured was not performing “legal services.” Continental Cas. Co. v. Parnoff, 2019 WL 6999867 (2d Cir. Dec. 20, 2019).
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The U.S. Court of Appeals for the Ninth Circuit, applying California law, has held that an insurer is not required to show prejudice to deny coverage under a claims-made-and-reported policy based on an insured’s late notice. Euraupair Int’l, Inc. v. Ironshore Spec. Ins. Co., 2019 WL 6817593 (9th Cir. Dec. 13, 2019).
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Applying California Law, the United States District Court for the Southern District of California has held that an insurer must pay defense costs contemporaneously, even where the policy’s advancement provision merely requires payment “prior to final disposition of a claim,” because the insured became legally liable for defense costs as they were incurred. Renovate Am., Inc. v. Lloyd’s Syndicate 1458, 2019 WL 6716735 (S.D. Cal. Dec. 10, 2019). The court further held that the insured was excused from obtaining the insurer’s prior written consent regarding defense arrangements given the insurer’s seven-month delay in responding to the insured’s initial notice.
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In a win for Wiley Rein’s client, the United States District Court for the Southern District of Florida, applying Florida law, held that, as a matter of law, a lawsuit against an engineer arising out of three alleged errors in connection with a construction project constituted a single “claim” under the engineer’s claims-made-and-reported architects and engineers policies. Nova Southeastern Univ., Inc. v. Continental Cas. Co., No. 18-CIV-61842-RAR (S.D. Fla. Dec. 27, 2019). Furthermore, the court held that the policies’ prior knowledge and prior notice provisions separately and independently barred coverage for the lawsuit.
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Applying Ohio law, a federal district court has held that misrepresentations in an application warranty statement regarding three unreported lawsuits filed against the insured during the initial policy period rendered a renewed claims-made and reported policy void ab initio. Certain Underwriters at Lloyds London Subscribing to Policy No. HMPL 18-0164 & HMPL 17-0158 v. KG Admin. Servs., Inc., 2019 WL 6770061 (N.D. Ohio Dec. 12, 2019). The court also held that, because the claims were not reported during the initial policy period, the insurer did not have any coverage obligations under the initial policy.
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