General Liability Policies

I recently participated in a negotiation with an insurer who had denied coverage for an underlying errors and omissions claim in the mid-seven figures. The insurer’s counsel and I exchanged stern letters, each explaining why our respective client’s position was absolutely correct, and the other’s absolutely wrong. The client’s broker arranged a meeting with principals and counsel on both sides. At the meeting, the insurer’s counsel and I debated our respective positions once more. Neither of us conceded any possibility that the other could be right. After 25 minutes, my client put a stop to the debate competition and, aided by the broker, moved into negotiations with the insurer’s principal.

The opening offer and demand were miles apart. But within an hour, the case settled, to the clear satisfaction of both sides. With no mediator. No wrangling about which mediator to select. No waiting three months to get a date on the mediator’s calendar. No mediation briefs or reply briefs. No waste of non-refundable mediator’s fees. No shuttle diplomacy, bracketing or mediator’s proposals. No mediator reserving jurisdiction to hammer out disputed settlement terms. It felt almost too easy.

Are lawyers too dependent on mediators to settle their cases? Whether you answer that question yes or no, there are many situations where a neutral can resolve a case where party negotiations would fail. This is particularly true in a “three-way” mediation, where the defendant’s insurer is participating but is reserving rights, denying coverage, or rejecting defense counsel’s settlement recommendations. These mediations present unique challenges that require a skilled mediator and savvy defense and coverage counsel. Continue Reading A Policyholder Perspective on the Unique Challenges of a Three-Way Mediation

John OrrFarella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry. To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.

Our latest installment is with John M. Orr, Managing Principal – West Region Financial Lines Practice Leader with Integro Insurance Brokers. Continue Reading Insurance Broker Series: John Orr, Integro Insurance Brokers

image: Are you Covered?Insurance recovery partner Tyler Gerking and I have co-authored an article examining two recent cases from separate California state courts that we feel correctly interpret the phrase “that particular part” as it applies to certain CGL policy exclusions, and apply it in its intended narrow sense. The rulings in Pulte Home Corp. v. American Safety Indemn. Co. and Global Modular, Inc. v. Kadena Pacific, Inc. are good news for contractors and are in contrast to some recent decisions by federal courts.

It is encouraging to see California appellate courts studying the meaning of the actual policy language, and not simply accepting insurers’ broad brush straw-man arguments about what CGL policies are, or are not, intended to cover. By comparing the actual language of exclusions against each other and comprehending what each one was intended to exclude, the Pulte Home and Global Modular courts realized that each exclusion had a specific intent, and the terms of one exclusion could not be imparted to another exclusion, nor could they all be “mushed together” to make one large, catch-all type exclusion.

Read the full article discussing the two cases.

people talking in front of a courthouseA recent case we handled highlights the importance of reading a complaint’s allegations very carefully. Competitors in high-stakes litigation may file complaints and cross-complaints against each other alleging a variety of intellectual property violations and business torts. These may include patent or copyright infringement, attempted monopolization, unfair competition and interference with contractual relations. On their face, none of these are likely to be covered by commercial insurance. But competitors often cannot resist alleging every conceivable harm, and this may include asserting that the defendant (or cross-defendant) has disparaged the plaintiff to customers and the public. Most general liability policies cover disparagement as part of the “personal and advertising injury” coverage. In California, the broad duty to defend results in valuable coverage for attorneys’ fees and costs in what would otherwise be uncovered litigation. Continue Reading Disparagement Allegations May Trigger Valuable Coverage

Are you Covered? note pinned to boardThis is part one of a two-part series looking at how court decisions in recent years have thwarted general contractors’ reasonable expectation of coverage under their general liability policies.

In early March, the Ninth Circuit Court of Appeals issued an unpublished opinion in Archer Western Contractors v. National Union, No. 15-55648 (filed Mar. 2 2017). The opinion held that the phrase “that particular part” as used in the “Damage to Property” exclusions in a CGL policy must be interpreted broadly to encompass “the entire project on which a general contractor is performing operations.” This is not the first time the Ninth Circuit has issued an unpublished opinion interpreting “that particular part” to apply to the entirety of a project.

The Ninth Circuit in these cases ignored the plain meaning of words that the insurance industry itself has explained should be construed in the narrowest possible sense. Policyholders, particularly general contractors, should beware this worrisome trend in the courts, as it is creating the potential for a gap in ongoing operations coverage that was not meant to exist. Continue Reading Courts Misunderstand the Meaning of “That Particular Part”

Blog-Image---Are-You-CoveredA recent case in the Northern District of California offers two cautionary tales to policyholders. First, when buying insurance, companies should understand their risks and ensure that the policies they’re buying match those risks as closely as possible. Second, when a claim arises, policyholders must carefully consider all the allegations, not just the formal causes of action, in the complaint to determine whether they might trigger an insurer’s defense obligation. Continue Reading CGL Coverage for False Advertising and Intellectual Property Claims: Sometimes It’s There, but You Need to Know Where to Look for it

Blog-Image---attorney-clientAttorney invoices may be protected in their entirety by the attorney-client privilege during ongoing litigation. After litigation has concluded, however, those same invoices may be discoverable. So concludes the California Supreme Court in a fascinating ending to a case we have been following since last June of last year, County of Los Angeles Board of Supervisors v. Superior Court (opinion). In a 4-3 decision that mirrored the split we observed in oral argument, the Court reversed the decision of the Court of Appeal. Continue Reading California Supreme Court Concludes Attorney Invoices Privileged During Ongoing Litigation

shutterstock_109214660-Cyber-Attack-BlogThe Internet of Things gives rise to many risks and exposures that companies and their insurers were not thinking about as recently as a couple years ago, and probably aren’t fully cognizant of today.

The DDoS attack late last week on internet infrastructure company Dyn should act as a wake-up call.  It shows how large and disruptive a cyber attack can become because of all the seemingly benign “things” connected to the internet.  And it should cause companies to think about what their risks really are and whether their current risk management approaches address them.

Just one example from this latest attack – I’m reading that one or more of the manufacturers of the devices that were used as bots in this attack must recall a very large number of products because the passwords (which were easily cracked) cannot be changed by the user.  The software that runs those products came ready installed on components bought from China, and it is this software that contains the vulnerability.  Now that the passwords are known, the devices can no longer be considered secure.  Maybe the manufacturers have product recall insurance or maybe they don’t.  But they likely never thought they would have to conduct a product recall under these circumstances and whether such a recall might be covered under their current insurance program.

Protect your company by:

  • Understanding your company’s IoT exposures.
  • Using your company’s broker and coverage counsel to review all insurance policies with IoT exposures in mind and negotiate favorable policy terms.
  • Revisiting the policies annually at renewal time because of quickly changing risks and policy terms.

Blog-Image---attorney-clientOn October 6, the California Supreme Court heard oral argument in Los Angeles Board of Supervisors v. Superior Court, a case that we have blogged about twice in the past because of its possible impact on policyholders (see posts Submitting Your Defense Bills to Insurers Could Mean Waiving Privilege and California Supreme Court Will Review Appellate Decision Holding That Attorney Bills Are Privileged). On appeal, the Court will decide whether to affirm the California Court of Appeal’s decision that legal invoices sent to the County of Los Angeles by outside counsel are within the scope of attorney-client privilege and thus exempt from disclosure under the California Public Records Act. As this issue could have a major impact on policyholders’ ability to share defense bills with insurers, we attended the oral argument. Continue Reading California Supreme Court Leans in Favor of Treating Defense Bills as Privileged Communications

workers comp formIn two previous posts, on April 19, 2016 and June 21, 2016, we reported on the EquityComp workers’ compensation program offered by Berkshire Hathaway subsidiaries Applied Underwriters (Applied) and California Insurance Company (CIC). In the wake of the California Insurance Commissioner’s ruling in Shasta Linen that the EquityComp program is invalid and unenforceable, Applied Underwriters and the Commissioner on September 6, 2016 stipulated to a Cease and Desist Order. The Order can be found online here: Stipulated Consent Cease and Desist Order. Insureds under the program should read it carefully, as it presents them with a number of options.  Continue Reading NEW UPDATE: Is Your Workers’ Compensation Program Unlawful?