In Kaady v. Mid-Continent Casualty Co. (June 25, 2015), the Ninth Circuit recently spurned an insurer’s attempt to conflate two separate losses in an attempt to deny coverage on the grounds that the insured’s pre-policy knowledge of the first loss made the second one a “known loss” that fell outside of coverage.
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Recently, the Illinois Court of Appeals emphasized the importance of careful pleading when it comes to triggering an insurer’s duty to defend. In West Bend Mut. Ins. Co. v. Pulte Home Corp. (May 15, 2015), the court upheld a trial court’s denial of West Bend Mutual Insurance Company’s (“West Bend”) motion for summary judgment, which argued that West Bend had no duty to defend a developer and siding subcontractor in a construction-defect lawsuit filed by a homeowner’s association for alleged property damage resulting from improper installation of siding (among other things).

On appeal, the court analyzed whether the allegations in the complaint contained any claims and/or damages which might have the potential for coverage under West Bend’s policy. After reviewing the key allegations, the court upheld the trial court’s decision that West Bend had a duty to defend the developer and siding subcontractor. This decision to uphold West Bend’s obligation to defend was made despite the fact that Illinois courts had previously ruled that property damage to a building caused by a contractor’s defective construction was not an accident and therefore does not constitute an “occurrence” under traditional commercial general liability coverage forms.
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Recently, the federal court for the Middle District of Florida applied a rule of great interest to insureds who believe that their insurer has wrongly denied coverage: whether the insurer’s “claim file” can be requested in discovery.

In Redfish Key Villas Condominium Assoc., Inc. v. Amerisure Ins. Co. (April 3, 2014), the Redfish Key Villas Condominium Association had sued its contractor for defective work. The contractor failed to appear and defend itself, resulting in a default judgment for Redfish. But the real money in many construction-defect lawsuits, of course, often comes from the contractor’s insurer.
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Insurance policies almost universally require that the insured immediately report any claim made against the insured. In the context of liability policies written on an “occurrence” basis (generally, policies where coverage is triggered at the time of an accident, no matter when the lawsuit is eventually filed by the plaintiff injured in that accident), late notice to the insurer under Oregon law does not destroy the insurer’s duty to defend and cover a loss unless the late notice somehow prejudiced the insurer. See, e.g., Employers Ins. of Wausau v. Tektronix, Inc. (Or. Ct. App. 2007) (refusing to hold that a 12-year delay was prejudicial).

But a recent California case follows a far stricter rule where the policy was issued on a “claims made and reported” basis, which is how most professional-liability (or “errors and omissions”) policies are written. In Alterra Excess & Surplus Ins. Co. v. Gotama Bldg. Engineers, Inc. (C.D. Cal. July 24, 2014), Gotama, an engineering firm,
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Judge King of the federal district court in Oregon recently ruled on two insurers’ dueling arguments about counting the number of “occurrences” based on the same set of facts, a dispute that can have profound consequences for both insurers and their insureds.

Chartis Specialty Ins. Co. v. Am. Contractors Ins. Co. (Aug. 12, 2014) arose from a dispute between two liability insurers who had already paid to settle a construction-defect lawsuit. The first insurer, ACIG, had written a primary-layer liability policy with limits of $2 million per occurrence, and a $4 million aggregate (that is, for a total of two or more occurrences). The second insurer, Chartis, had written an umbrella policy with a “Retained Limit” that triggered coverage beginning at $2 million per occurrence, or $4 million aggregate.
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Property owners want assurances that their contractors have sufficient liability insurance, which often means that contractors must submit certificates of insurance before starting work. But to the dismay of many owners after it’s too late (that is, after the contractor has caused some damage as a result of its work), certificates of insurance may provide only the illusion that an insurer will bring any money to the table.

This rude surprise
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