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Louisiana Supreme Court Adopts Pro Rata Allocation Of Defense Costs Approach On Long Latency Disease Cases

In Daniel Arceneaux, et al. v. Amstar Corp., et al., 2015-0588 (La. 9/7/16), 2016 WL 4699163 (La. 9/7/16), the Louisiana Supreme Court held that in long latency disease cases the cost of the duty to defend should be prorated between the insurers and the insured when occurrence-based policies provide coverage for only a portion of the time during which the exposure occurred. The weight of authority in the country supports the conclusion that in situations where the insured is self-insured for part of the coverage periods involved that the insured must bear a pro rata share of the defense costs. See Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes, ยง 6.02(a)(2) (17th ed. 2014). The Court noted that the joint and several approach was not reasonable because it would treat an insured who had uninterrupted policies for 20 years the same as an insured who had a triggered policy for one year. Under the joint and several approach, the insured would be entitled to receive coverage for a period in which it did not pay a premium. Additionally, the joint and several allocation approach provided disincentives to insureds to purchase uninterrupted insurance coverage and would provide a windfall to companies that failed to obtain continuous coverage. The pro rata allocation method, by contrast, promoted risk spreading.

The Wyoming Supreme Court Recently Adopted The Notice-Prejudice Rule In A Historic Jurisprudential Review Of Why The Notice-Prejudice Rule Is A Better Approach Than The Traditional Rule Which Does Not Require Prejudice

The Wyoming Supreme Court in Century Surety Co. v. Jim Hipner, LLC, 2016 WY 81, 377 P.3d 784 (2016), engaged in a jurisprudential review of the enforceability of non-prejudicial notice requirements in insurance policies and why courts have moved away from the traditional rule by adopting the modern view which is commonly called the notice-prejudice rule. The case provides an excellent expose of the rationales supporting the notice-prejudice rule and is a must read.

Colorado Supreme Court Rejects The Use Of Extrinsic Evidence To Create Ambiguity In An Insurance Contract

In American Family Mut. Ins. Co. v. Hansen, 2016 CO 46, 275 P.3d 115 (Colo. 2016), the Colorado Supreme Court found that when a discrepancy exists between the policy declarations page and an extrinsic lienholder statement regarding who was an insured, the discrepancy did not create an ambiguity because the ambiguity can only be used under Colorado law to determine whether an ambiguity exists within the four-corners of the insurance contract itself and ambiguity could not be created by an extrinsic document which was not part of the insurance contract. For ambiguity to exist, it must appear in the four-corners of the document before extrinsic evidence could be considered. Extrinsic evidence could only be used as an aide in ascertaining the intent of the parties once an ambiguity was found.

Wisconsin Supreme Court Eliminates Any Doubt That There Is No Exception To The Four-Corners Rule In Duty To Defend Cases In Wisconsin

In a split decision, the Wisconsin Supreme Court in Water Well Solutions Service Group, Inc. v. Consolidated Ins. Co., 2015 WI 54, 369 Wis.2d 607, 881 N.W.2d 285 (2016), reaffirmed the "four-corners" rule governing a liability insurer's duty to defend in Wisconsin. The Court unambiguously reaffirmed the rule and confirmed in the majority opinion that there were no exceptions to the rule that would permit extrinsic evidence to create a duty to defend where no duty to defend otherwise existed. According to the majority's view, the four-corners rule promoted certainty and avoided speculation over the underlying plaintiff's true allegation. A vigorous dissent by two Justices challenged the majority opinion both in principle and application. The dissent noted that Wisconsin was in a shrinking minority of jurisdictions clinging to a strict application of the four-corners rule and that Wisconsinites would be better served by a rule that recognized substance over form in allowing extrinsic evidence to inform the duty to defend decision.

In A Surprising Decision, A Federal District Court, Applying Florida Law, Granted Summary Judgment To An Insurance Company On A "Failure To Settle" Claim Because The Insured's Liability Was Not Clear

Florida is a testing ground for creative lawyering designed to set up insurance companies on failure to settle claims. However, in Welford v. Liberty Ins. Corp., 2016 WL 3360431 (N.D. Fla., 6/2/16), at least one Federal District Court refused to countenance yet another attorney's attempt to create a failure to settle claim against an insurance company under Florida law. In this case, the insurance company tendered its limits within two days after receiving the lawsuit. Nevertheless, the claimant argued that the insurance company had failed to promptly tender the limits earlier in the matter when it was first notified of the accident. The District Court found that no reasonable trier of fact could have determined that the insured's liability was "clear" when the claim was first reported. The facts before the Court were complicated and disputed.

In A Self-Evident Decision, The Eighth Circuit Court of Appeals Recently Held That An Insurance Company's Failure To Re-Evaluate A Case Value After The Trial Court Eliminated A Key Affirmative Defense Justified A Bad Faith Failure To Settle Verdict

The Eighth Circuit Court of Appeals in Bamford, Inc. v. Regent Ins. Co., 822 F.3d 403 (8th Cir. 2016), held that the District Court had properly denied an insurance company's post-verdict motions challenging the jury's verdict in a bad faith failure to settle case and the evidence demonstrated that the insurer had failed to re-evaluate its settlement position after a trial court ruling in the underlying case eliminated a key affirmative defense. The Eighth Circuit Court noted that the insurance company's evidence that it had made multiple efforts to settle the case based on its evaluation of the case, continuously increased its reserves and offers in the settlement process, had followed the advice and valuations of the case of outside counsel as well as two mediators, and had discussed the claim value in multiple roundtable meetings with senior management was nevertheless insufficient to establish that the insurance company acted in good faith as a matter of law because the insurance company did not factor into its evaluation the trial court's elimination of a key affirmative defense.

Montana Courts Finds That Falling Boulders Constitute "Earth Movement" For Purposes Of Policy's "Earth Movement" Exclusion

The Montana Supreme Court in Parker v. Safeco Ins. Co. of America, 384 Mont. 125, 2016 MT 173, 376 P.3d 114 (2016), held that an earth movement exclusion was not limited solely to damages caused by soil movement. The Court found that earth movement included damage caused by a falling boulder. The Court noted that the insurance policy in question included as examples of earth movement both landslides and lava flows but did not mention soil; the policy did not provide a basis for separating rock and soil when construing the exclusion. The Court found that nothing in the language of the earth movement exclusion indicated that there was any basis for separating rock from soil when considering earth movement. A common understanding of the term landslide in the context of the exclusion could include a large boulder that came down the hill and crashed into the insured's cabin. Because a common understanding of the term landslide in the context of the exclusion would include the large boulder that came down the hill and crashed into the insured's cabin, the policy excluded coverage for the loss.

Does a Parent Corporation Have Standing to Bring a Declaratory Judgment Action Against One of Its Subsidiaries Insurers? This question was recently answered by the California Court of Appeals.

The California Court of Appeals recently held in D.Cummins Corp. v. U.S. Fidelity & Guar. Co., 246 Cal.App.4th, 201 Cal.Rptr.3d 585 (1st Dist., 2016), that a parent corporation lacked standing to sue one of its subsidiary's insurers for declaratory relief. In this case, the parent corporation did not qualify as an insured under the subsidiary's liability policies. Therefore, the Court held that the parent company lacked standing to seek a declaratory judgment establishing the duties of the subsidiary's liability insurers to defend and indemnify for asbestos claims. The Court found that a mere practical interest in the outcome of a contractual dispute was not sufficient to establish standing. Under the Declaratory Judgment Act the plaintiff must show the existence of an "actual controversy" which required the court to evaluate the rights and duties that the plaintiff was asserting in making a standing determination. The Court found that the parent corporation's responsibility for the subsidiary's litigation strategy, which included making decisions about when to settle the personal injury actions, did not give the parent corporation sufficient direct in the subsidiary's liability policy to support jurisdiction. The California Declaratory Judgment Act gave discretion to the trial court in which the court could refuse to exercise the power granted by the Act in any case where the declaration or determination was not necessary or proper at the time under all of the circumstances presented. When the trial court declined jurisdiction under the Act, the trial court's decision would be viewed on an abuse of discretion standard.

In a Split Decision, the Colorado Supreme Court Recently Rejected an Actual Prejudice Standard in Determining Whether an Insured Violated the Policy's Consent No-Voluntary-Payments Clause When it Settled a Claim Without the Insurance Company's Permission

In Travelers' Property Cas. Co. of America v. Stresscon Corp., 370 P.3d 140 (Colo. 2016), the Colorado Supreme Court held that an insured contractor's settlement for a bodily injury claim that arose on a construction site where the subcontractor was working, without the insurance company's consent, violated the insurance policy's no-voluntary-payments clause and forfeited coverage as a matter of law irrespective of whether the insurer was able to prove that it was actually prejudiced by the settlement.

The Montana Supreme Court Brings Clarity to the Meaning of "Accident" in a CGL Policy's Occurrence Definition

In Employers Mutual Cas. Co. v. Fisher Builders, Inc., 383 Mont. 187, 371 P.3d 375 (2016), the Montana Supreme Court was called upon to interpret the term "accident" in a CGL policy's "occurrence" definition. The Court found that the term "accident" could include intentional acts if the damages "were not objectively intended or expected by the insured." Therefore, triable issues of fact existed regarding whether the insured, a construction contractor, had objectively intended or expected to violate a construction permit during a remodeling project.

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