Steven Plitt, Expert Witness Steven Plitt, Expert Witness
Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

July 2016 Archives

Bad Faith Claim Accrual

The Delaware Supreme Court weighs in on when a bad faith claim accrues in a bad faith refusal to settle case. In Connelly v. State Farm Mut. Auto. Ins. Co., 2016 WL 836983 (Del. March 4, 2016), the Intermediate Appellate Court found that the bad faith claim accrued when the insurer refused plaintiff's offer to settle for 35% of the policy limits. The Supreme Court reversed holding that the cause of action accrued when the excess judgment became final. This approach reduced the possibility of a conflict of interest between the insurance company and its insured, protected insurers from bad faith claims for failing to settle even the most frivolous claims and would have the beneficial effect of saving the insured litigation costs that might turn out to be unnecessary if the trial court did not order an excess judgment.

Requirement for pro rata allocation of defense costs among successive insurers

The California Third District Court of Appeals recently required pro rata allocation of defense costs among successive insurers. In Certain Underwriters at Lloyds, London v. Arch Specialty Ins. Co., 246 Cal.App.4th 418, 200 Cal.Rptr.3d 786 2016 WL 1436362 (3rd Dist. 2016), the Court reaffirmed California public policy as prohibiting enforcement of "escape" other insurance clauses inequitable contribution actions between successive primary insurers seeking to allocate the cost of defending construction defect litigation. Under existing law, each insurer was responsible for a pro rata share of defense costs notwithstanding the fact that one insurer's policy contained language in both the insuring agreement and the conditions section both stating that the insurer had a duty to defend only if no other insurance afforded a defense. The Court found that the placement of the escape language in the insuring agreement was not sufficient to differentiate the case from prior California precedent prohibiting the enforcement of escape other insurance clauses which appeared elsewhere in the insurance policy.

Orphans in the Time on Risk Allocation

Who pays for the orphan? The Federal District Court in New York recently held that when an insurance company becomes insolvent the insured becomes responsible for the orphan's share created by the insolvency under a pro rata method of allocation involving successive insurers indemnity obligations for asbestos claims involving progressive injuries. See Liberty Mut. Ins. Co. v. The Fairbanks Company, 2016 WL 1169511 (S.D.N.Y. March 22, 2016).

Putting a subcontractor's insurer on notice

Putting a subcontractor's insurer on notice. An interesting case recently came out of New York. In Spoleta Constr., LLC v. Aspen Ins. UK Ltd., 27 N.Y.3d 933, 50 N.E.3d 322 (N.Y. 2016), the Court held that a general contractor's insurance company's letter to a subcontractor requesting that the subcontractor provide a defense and indemnity under the subcontract agreement was adequate notice to the subcontractors insurer of the occurrence taking place.

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