March 03.2010

New Cases Find Coverage Under D&O Policies For A Company’s Special Investigation Committee Costs

by Dennis Cusack

In the recent spate of backdating lawsuits, and in the current wave of financial institution litigation, Directors & Officers (D&O) liability carriers have almost uniformly taken the position that the costs of a company’s Special Investigation (or Litigation) Committee (SC) are not covered “Loss.” Two cases in 2009 – the first to address this issue – concluded otherwise. A company faced with allegations of wrongdoing by its directors or officers may choose to form a Special Committee of independent directors to investigate the allegations and make a determination of their merits. Many cases involve an SC that is formed in...

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Posted in D & O

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March 01.2010

California Court Of Appeal Decides That Blast Faxing Does Not Violate The Recipient’s Right Of Privacy For Purposes Of Insurance Coverage

by Patrick McKinney

In the age of email, text messaging, and Twitter, litigation focused on the sending of unwanted fax messages sounds old-fashioned. Indeed, it was nearly twenty years ago that Congress passed the Telephone Consumer Protection Act (47 U.S.C. § 227) (“TCPA”), which provides for damages of $500 per violation for sending fax spam to thousands of recipients at once. Citing freedom from nuisance, peace and quiet, and conservation of ink and paper, among other reasons, courts across the country have found liability for violations of the TCPA. Many courts, including the Supreme Courts of Florida, Illinois, and Massachusetts, and courts of...

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Posted in General Liability Policies

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February 23.2010

Insurer Must Notify an Insured of Contractual Limitations Period Even if Represented by Counsel: Lessons Learned Regarding Rescission Claims

by Morgan Jackson

In Superior Dispatch, Inc. v. Ins. Corp. of N.Y., 2010 Cal. App. LEXIS 58, the California Court of Appeals recently established that section 2695.4(a) of the California Code of Regulations, title 10, requires an insurer to notify its insured claimant of contractual limitations provisions that may apply to a claim. And, this remains true even where the insured claimant is represented on the claim by counsel, notwithstanding section 2695.7(f). The decision also provides a cautionary tale for insureds as it held that Superior Dispatch’s policy was void based on a misrepresentation in the policy application. In Superior Dispatch, a trucking...

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Posted in General Liability Policies

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February 18.2010

Business Interuption Coverage

by David Smith

The recent earthquake in Eureka, California (as well as the devastating events in Haiti), reminded me of the financial challenges and complexities faced by businesses large and small following a catastrophe. While the Eureka situation is in no way comparable to the devastation in Haiti, businesses there will be facing challenges and potentially lengthy shut-downs. One tool for dealing with the financial loss of such an involuntary shutdown is business interruption insurance. However, that comes with its own set of challenges. Insureds face difficulties determining limits for both earthquake insurance and business interruption insurance. Generally speaking, limits for both should...

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Posted in General Liability Policies, Property Insurance

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February 16.2010

Insurer Misconduct: Testing the Reach of the UCL

by Amber Chrystal

In Zhang v. The Superior Court of San Bernardino County, E047207 (Super.Ct No. CIVVS707287), the Court of Appeal addressed the issue of whether an insured could bring a claim against an insurer under the Unfair Competition Law (“UCL”), based on an insurer’s violations of California’s Unfair Insurance Practices Act (“UIPA”). Reversing the trial court, the Court of Appeal held that existing precedent did not bar such a claim. In Moradi-Shalal v. Fireman’s Fund Ins. Co., 46 Cal.3d 287 (1998), the California Supreme Court held that there is no private cause of action under Section 790.03 of the California Insurance Code,...

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Posted in Bad Faith, General Liability Policies

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February 05.2010

“Impaired Property Exclusion” Doesn’t Apply Where Repair Requires More Than “Simply” Replacing Insured’s Product or Work

by John Green

A typical CGL policy covers the “loss of use” of property as one form of “property damage.” If a contractor or product manufacturer performs defective work or provides a defective product to a factory, and the factory goes in and out of service, or operates inefficiently or at less than capacity, there is a “loss of use” under the policy. A claim by the factory owner may be covered under the contractor’s or manufacturer’s CGL. The main obstacle to coverage will be whether the “impaired property” exclusion applies. The “impaired property” exclusion is extremely complicated, with specific requirements before it...

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Posted in General Liability Policies

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January 29.2010

Rebutting Insurer Myths About Rescission Under California Law

by John Green

In recent years, asserting a rescission claims has been an increasingly favored defense raised by insurers, often with little or no factual basis. In addition to pursuing rescission claims with no factual support, carriers also try to distort the legal standard, by misstating the “innocent misrepresentation” rule under California law. Under California law, an insurer need not show that the insured specifically intended to induce reliance in order to prevail on a rescission claim. Insurers characterize this as an “innocent misrepresentation” rule; these insurers ignore the narrow scope of the rule, and act as if the insured’s understanding or state...

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Posted in General Liability Policies

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January 14.2010

Recent California Court of Appeal decision suggests insured should consider answering and cross-complaining before moving to stay insurer’s declaratory relief action

by Erica Villanueva

When a liability insurer wishes to avoid all coverage obligations with respect to a claim against its insured, it may seek an adjudication that it has no duty to defend or indemnify the policyholder. If the insurer files for such declaratory relief while the underlying litigation is still pending, California insureds will frequently move to stay the coverage action, pursuant to Montrose Chemical Corp. v. Superior Court, 6 Cal. 4th 287 (1993) (“Montrose I”). The purpose of such a Montrose stay is to avoid the risk of prejudice to the insured in the underlying action, if it is simultaneously forced...

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Posted in General Liability Policies

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January 11.2010

Tyler Gerking Elevated to Partner

by David Bruns

Policyholder Perspective is very pleased to report that Tyler Gerking, one of our frequent contributors and a valued member of Farella Braun + Martel's Insurance Coverage Practice Group was elevated to partner at Farella January 1, 2010. (Click here to see the full announcement.) Tyler has been involved in a number of high profile D&O liability claims including the Broadcom derivative litigation and various other stock option backdating cases, as well as claims under CGL, professional liability, technology E&O and first-party property policies. He has also handled claims and other issues in connection with insurer insolvencies. Tyler will continue to...

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January 05.2010

Farella Named One of Six "Insurance Law Firms of the Year" by Law 360

by David Bruns

Law 360 named Farella Braun + Martel one of six "Insurance Law Firms of the Year," citing the firm's work in connection with the Broadcom backdating derivative litigation. The Broadcom case was an extremely challenging and rewarding case for a number of reasons. The insurance recovery totaled $118 million, including $40 million contributed by Broadcom's "Side A Only" tower, in addition to the funding from the ABC tower underlying it. To the firm's knowledge, this is the first case in which a "Side A Only" tower has made a significant contribution to the settlement of a derivative case where the...

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Posted in General Liability Policies

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