Most professional-liability policies are written on a “claims-made” basis, which provides coverage for lawsuits filed against the insured during the policy period — even for damages caused by some professional negligence that occurred long before the policy was issued (and, perhaps, for some mistake at a time when the insured had no insurance coverage at all).

But as the insured recently learned in Sunshine v. General Star Nat’l Insurance Co., yawning gaps can open up in insurance coverage that was otherwise dutifully purchased year after year through the often-misunderstood, and often-overlooked, mischief wrought by the policies’ “retroactive date.” Continue Reading Retroactive dates punch gaps into insured’s coverage

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 Insureds cannot let sleeping dogs lie during policy periods

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 Courts continue to struggle with specialty cyber-insurance products

A recent opinion out of the Fourth District Court of Appeal in Florida highlights the importance of properly pleading claims so that insurance coverage is triggered.

In Mid-Continent Cas. Co. v. Royal Crane, LLC, Cloutier Brothers, Inc. leased a crane and crane operator from Royal Crane, LLC. During construction, a truss fell from the crane and injured a construction worker. The worker sued Royal Crane, asserting claims for negligence, strict liability, and gross negligence. Royal Crane tendered its defense of the lawsuit to Cloutier under an indemnity clause in the parties’ rental agreement. Cloutier declined the tender “at the behest” of its insurer, Mid-Continent.

So Royal Crane sued, bringing a third-party action against Cloutier for contractual indemnification and breach of the rental agreement. Cloutier tendered the defense of these claims to Mid-Continent, which denied the duty to defend under the exclusion for Cloutier’s potential obligation to pay “by reason of the assumption of liability in a contract or agreement.” The poison pill for coverage turned on Royal Crane’s failure to plead around this exclusion. Continue Reading Florida Court of Appeal case serves as a reminder to be mindful of how claims are pleaded

Intention can be a tricky concept in many areas of the law, from criminal prosecutions to insurance-coverage cases, as illustrated in a recent California case, Hung Van Ong v. Fire Ins. Exchange (Apr. 3, 2015). The Ong court had to choose between two views of what “vandalism” means in an insurance policy — one from a “legal” point of view that would destroy coverage, and one from an “ordinary” point of view that would create it. Honoring the keystone principle in these kinds of cases that a tie in a close case goes to the insured, the coverage-friendly interpretation won the day. Continue Reading Interpreting “vandalism” shows how ambiguity works in insurance-coverage disputes

Last week, the Sixth Circuit Court of Appeals affirmed a ruling denying insurance coverage to a homeowner for damages resulting from a fire when a medical-marijuana operation inside the home caught fire.  The case, Nationwide Mut. Fire Ins. Co. v. McDermott (Feb. 24, 2015), revolved around whether coverage for property damage under a homeowner’s policy was properly denied because of the owner’s failure to inform the insurer of her husband’s operation of a medical-marijuana grow and distribution facility inside her home.  The Court answered that question in the affirmative, finding that the policy required the homeowner “to notify [Nationwide] as soon as possible of any change which may affect the premium risk under th[e] policy,” including, but not limited to, “changes … in the occupancy or use of the residence premises.” (emphasis in the original).

According to the homeowner, the policy language was never intended to require her to inform her insurance company of every possible change in the use or occupancy of her home.  The insured argued that, under the insurer’s interpretation, homeowners would be required to notify the insurer anytime they invited guests over to stay at the home, or introduced a new house plant.  The Sixth Circuit didn’t buy this hypothetical: Continue Reading Up in Smoke: Insured Cannot Recover Damages Caused by Fire from Home Medical-Marijuana Operation

The Ninth Circuit, applying Arizona law, recently held that an insurer may avoid the duty to defend innocent insureds based on somewhat unique terms in a liability policy. In IFC v. Roman Catholic Church, (9th. Cir July 30, 2014), the Court began with a simple question: “Does ‘any’ mean ‘any,’ or does ‘any’ mean ‘any one?’” Given this question, the answer appears to be easy, but this question may not have been the right one, at least according to a dissenting opinion. Continue Reading Ninth Circuit hands out tough decision for innocent insureds seeking a defense from the insurer

Oregon Court of Appeals Decision Handed Down Today in FountainCourt Homeowners Ass’n v. FountainCourt Development, LLC

The Oregon Court of Appeals handed down a lengthy opinion upholding a money judgment awarded in favor of a judgment creditor in its garnishment action against American Family Insurance Company. FountainCourt Homeowners Ass’n v. FountainCourt Development, LLC, Or App (August 6, 2014), initially arose out of a homeowner association’s claim against the original sider (and others) for construction defects associated with the FountainCourt Townhomes and Condominiums. In 2010, the Association’s case went to trial. The jury returned a verdict against the sider in the amount of $485,877.84. (Note:  Ball Janik LLP did not represent any parties in this case.)

Continue Reading Oregon Policyholders and Judgment Creditors Get Big Win on Insurance Coverage Issues

A Meritorious Claim Can Sting When It Becomes the Basis for Coverage

A recent ruling from the federal court in Oregon highlights the changing world of insurance-policy language and provides a cautionary tale to insureds. In Bennett v. Unites States Liability Ins. Group, (D. Oregon April 25, 2014), the court analyzed several insurance-policy provisions to determine whether an underlying legal claim triggered the insurer’s duty to defend. Janet Bennett, the insured, was sued by her ex-husband for mishandling money that she earned through her business. Bennett reported the claim to her business’s liability insurer to pick up her defense, which was denied. In upholding this denial, Judge Michael Simon found that Bennett’s mishandling of the money (that is, inappropriate billing and mischaracterization of that money) was not a “professional service” as defined under the policy because those activities were not part of the services that she rendered. Rather, those activities were simply the collection of fees for the professional services that she rendered. Continue Reading The “Hornet’s Nest” Exclusion: Don’t Get Stung!