General Liability Policies

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.
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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

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.
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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In early March, the Ninth Circuit Court of Appeals issued an unpublished opinion in Archer Western Contractors v. National Union, No. 15-55648 (filed Mar. 2 2017).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.
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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.
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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.
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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

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.
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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. 
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Policyholders should always consider the potential for coverage under their CGL policies if they suffer a data security breach. However, as the cases described in my article for Corporate Counsel, coverage is highly fact-dependent and subject to interpretation by the courts even in the absence of a data-related exclusion. The addition of such an