The Policyholder Report

The Policyholder Report

Advising Insureds. Litigating Coverage Disputes Against Insurers.

Insurer learns hard lesson in failing to settle

Posted in auto insurance, bad faith, duty to settle, settlement

Insurers control the defense of claims against their insureds, but this control comes with the risk that failing to settle a case could result in a verdict much greater than the available limits under the policy. And if it was reasonable and possible to settle before this calamitous end, the insurer could be on the hook for the entire judgment, which is just what happened to an auto insurer in a recent case. Continue Reading

In Washington, late notice may not preclude coverage, but it could cost you your fee claim

Posted in attorney fees, excess policies, late reporting claims, notice-prejudice rule, Washington Court of Appeals

The Washington Court of Appeals recently issued an unpublished opinion that should serve as a warning to policyholders pursuing coverage in Washington. On its surface, The Port of Longview v. Arrowood Indemnity Co. (Aug. 2, 2016) was a significant win for the insured. The appellate court upheld the trial court’s ruling that the insured’s primary insurers had a duty to defend and indemnify, and its excess carriers had a duty to indemnify, the Port against all claims arising from two contaminated sites. In affirming the trial court’s declaratory judgment rulings, the Court of Appeals rejected the insurers’ arguments that they had been prejudiced by the insured’s late notice, that the contamination at issue was “expected or intended” by the insured, and that the policies’ “qualified pollution exclusions” precluded coverage. Continue Reading

Oregon federal court endorses broad definition of “property damage”

Posted in Ambiguity in policies, business interruption, policy interpretation, property damage, property policy
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Photo by JOH_4595 is licensed under CC BY 2.0.

In a recent case, Oregon Shakespeare Festival Ass’n v. Great American Ins. Co., the federal District Court for the District of Oregon adopted a liberal interpretation of “property damage.” The Oregon Shakespeare Festival Association (OSF) suffered a loss during its season: nearby wildfires caused smoke to infiltrate a partially outdoor theater where performances were being held, necessitating cancellations.

OSF’s insurance policy covered “direct physical loss or damage” to its property and the “actual loss of Business Income” caused by such loss or damage. To get coverage for the business losses it sustained by cancelling performances, OSF had to show that the smoke infiltration, the undisputed reason for the cancellations, was “direct physical loss or damage” to property. Continue Reading

Oregon Court of Appeals rejects bullying by auto insurer

Posted in Adjustment, auto insurance, Duty to cooperate, Oregon Court of Appeals

Insureds who have suffered a loss face the certain consequences of physical and financial healing, but they may also have to contend with a little salt poured into the wound by their own insurer. A frequent source of irritation for insureds can be zealous adjusters asking for information that seems irrelevant and needlessly burdensome. Some of these requests are necessary to ensure that the insurer is paying only for what it promised. But some seem designed to kill an insured’s claim by a thousand cuts. Kachan v. Country Preferred Ins. Co. (July 7, 2016) looks very much like the latter. Continue Reading

Update: Insurer asks for reconsideration of opinion affirming insured’s attorney-fee award

Posted in attorney fees, Ninth Circuit

Last week, I posted this article about the Ninth Circuit’s recent opinion affirming a $3.5 million attorney-fee award in favor of Schnitzer Steel against its insurer, Continental Casualty Co. Continental is unsatisfied with how it lost this battle, arguing in this petition for rehearing that the Ninth Circuit failed to adequately address Continental’s argument that Oregon’s fee-shifting statute in coverage cases doesn’t apply to losing insurers merely because the coverage lawsuit was filed in federal court.

It is Continental’s right to give this argument a shot. But what Oregon insureds should find troubling is Continental’s risibly misleading attempt to minimize what’s at stake here for insureds forced to spend many thousands (or even millions) of dollars forcing their insurers to pay what they promised. Continue Reading

Insureds cannot let sleeping dogs lie during policy periods

Posted in policy exclusions, property policy, vacancy, Washington Supreme Court

A recent opinion by the Washington Supreme Court serves as an important reminder to insureds that changes during a policy’s coverage ought to be carefully minded to avoid gaps in insurance coverage. As I’ve written about before here, one of these changes that insureds often miss is when an insured building becomes vacant — even for a short while. Continue Reading

Ninth Circuit rejects insurer’s attempt to avoid paying its insured’s attorneys’ fees

Posted in attorney fees, Ninth Circuit

As my colleague, Kevin Mapes, wrote in an article last year, an insurer had raised the hackles of policyholder-side lawyers in Oregon in arguing that insureds successfully suing their insurers for coverage could not recover their attorneys’ fees if the insurer had lost its fight in federal court in Oregon, rather than one of Oregon’s state courts. This argument was especially troubling in light of the tactical choice of many insurers to “jump” an insured by rushing into federal court for a declaration about coverage rather than waiting for the insured to sue the insurer for coverage in state court.

This malicious trap, however, will not be available for insurers under the Ninth Circuit’s recent holding in Schnitzer Steel Indus., Inc. v. Continental Casualty Co. Continue Reading

Courts continue to struggle with specialty cyber-insurance products

Posted in CGL insurance, cyber security, policy exclusions

Following a significant victory for policyholders earlier this year for cyber security losses under CGL (Commercial General Liability) policies, in PF Chang’s China Bistro, Inv. v. Federal Ins. Co. a federal judge in Arizona recently found no coverage for PF Chang’s credit card fraud assessments under a specialty cyber insurance policy. After a 2014 breach, hackers posted PF Chang’s customers’ credit card numbers online. It then incurred almost $1.7 million in claims from its customers and associated mitigation and other expenses. Federal Insurance Company reimbursed PF Chang’s for those expenses. But what it failed to do—and which was the subject of coverage litigation—was pay for the additional $1.9 million in fraud recovery charges from various credit card companies. Continue Reading

Florida Court of Appeals again holds that insureds may assign rights under a policy after a loss occurs.

Posted in Adjustment, assignment, Florida, Homeowner's policy

Last year, I wrote about a decision by Florida’s Fourth District Court of Appeal (link here) holding that an insured, post-loss, could assign its claim against its homeowner’s insurance policy. Recently, the same issue was before the Second District. Continue Reading

Oregon Supreme Court eases the path to hold insurers accountable for bad-faith practices

Posted in assignment, bad faith, Duty to defend, Oregon Supreme Court, settlement

Yesterday the Supreme Court of Oregon overruled Stubblefield v. St. Paul Fire & Marine (1973) and paved the way for a more commonsense approach to negotiating stipulated judgments. Stipulated judgments have been a well-worn, though somewhat perilous, mechanism for insureds to resolve liability claims against them when their insurers defend in bad faith. In doing so, however, the parties to the stipulated judgment were tasked with navigating needlessly technical steps along the way. In Brownstone Homes Condo. Ass’n. v. Capital Specialty Ins. Co., the court removed one of the insurer’s “gotcha” defenses to an otherwise valid stipulated judgment. Continue Reading