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...

Read the Article
Posted in General Liability Policies

Comments (0) | TrackBack (0) | Share This Post

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...

Read the Article
Posted in General Liability Policies

Comments (0) | TrackBack (0) | Share This Post

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...

Read the Article
Posted in General Liability Policies

Comments (0) | TrackBack (0) | Share This Post

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...

Read the Article

Comments (0) | TrackBack (0) | Share This Post

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...

Read the Article
Posted in General Liability Policies

Comments (0) | TrackBack (0) | Share This Post

September 29.2009

Ninth Circuit Refuses to Overturn Award to Insured, Bad Faith Action Still Pending

by Amanda Hairston

The City of Long Beach got some good news earlier this month when the Ninth Circuit rejected the insurer’s petition for rehearing in its insurance coverage dispute with the Insurance Co. of the State of Pennsylvania. The court’s initial ruling upheld the decision of the district court to award $8 million to the city arising out of a 2004 housing discrimination lawsuit. That suit, which involved allegations that the city tried to prevent a woman and her son from building boarding homes for Alzheimer’s patients in wealthy neighborhoods by issuing numerous building code citations, resulted in a $22.5 million jury...

Read the Article
Posted in General Liability Policies

Comments (0) | TrackBack (0) | Share This Post

September 23.2009

Narrow Victory For Insurers In 21st Century v. Superior Court: “Made-Whole” Rule Does Not Apply To Insured’s Litigation Costs

by Erica Villanueva

A recent California Supreme Court decision, 21st Century Insurance Co. v. Superior Court (Quintana), S154790 (Aug. 24, 2009), clarifies the rules governing an insurer’s right to reimbursement for payments to its insured, after the insured obtains a recovery from the responsible third party. The Court held that while the insured has right to be “made whole” before the insurer can assert its reimbursement rights, the made whole rule only applies to the insured’s non-covered damages, not his attorney’s fees. While the decision is favorable to insurers, it only applies to auto insurers seeking to recover small payments made pursuant to...

Read the Article
Posted in Construction Insurance

Comments (0) | TrackBack (0) | Share This Post

September 18.2009

AIG Policyholders Seek Coverage for Maddoff Losses

by Amber Chrystal

The litigation fallout from the Bernard Madoff investment scandal recently entered the realm of insurance when two individuals brought a class action suit against American International Group Inc. (“AIG”) in US District Court in the Southern District of NY, alleging the wrongful denial of coverage for losses suffered as a result of Madoff’s scheme. The Plaintiffs, Robert and Harlene Horowitz, are Los Angeles residents who held investments with Bernard Madoff Investment Securities L.L.C. (“BMIS”). The complaint alleges that they had a balance of over $8.5 million with BMIS in the fall of 2008. After learning that their investment was lost...

Read the Article
Posted in Financial Crisis, General Liability Policies

Comments (0) | TrackBack (0) | Share This Post

August 11.2009

Global Warming Litigation: New Environmental Policies Lead To New Coverage Issues

by Tyler Gerking

Global warming litigation continues, but President Obama’s new environmental policies likely will change its path. Insureds should consider their risks in light of these new policies to determine whether their present insurance programs provide adequate coverage. We have previously discussed coverage issues arising out of global warming litigation. Click Here; Click Here One of the cases we addressed was California’s lawsuit against GM and Chrysler, which alleged that the cars and trucks the two companies manufactured damaged the state by contributing to global warming and its negative environmental consequences. See California v. General Motors Corp., No. 06-cv-05755 (N.D. Cal.). The...

Read the Article
Posted in General Liability Policies, Pollution Claims

Comments (0) | TrackBack (0) | Share This Post

August 06.2009

Does the insured have a "duty to mitigate" if the insurer breaches its obligations to the insured? Clearly not.

by John Green

The law imposes serious consequences on insurers for breaches of their duties. If a carrier refuses to defend a lawsuit, the insurer can be held liable for any resulting default judgment. If the carrier refuses to accept a reasonable settlement, the carrier can be liable for the resulting judgment in excess of policy limits. We frequently find ourselves urging carriers to perform their duties to their insureds, and having to remind the carriers of of the consequences they will face if they don't perform those duties. Occasionally, a carrier will respond by saying that our client "has money" and is...

Read the Article
Posted in General Liability Policies

Comments (0) | TrackBack (0) | Share This Post