Legal Insights for the Insured

Insurance Coverage in the Post-Weinstein Era

With new headlines involving sexual harassment and other inappropriate sexual conduct continuing to emerge on a daily basis, insurance coverage for claims that might emerge is something every company should consider.

Recently, media reports have discussed settlements of shareholder derivative claims against members of the boards of directors and other senior executives of public companies. These settlements illustrate both the type of corporate liability that can ensue from allegations that a company turned a blind eye to, or otherwise failed to prevent, sexual misconduct allegations, causing financial and reputational harm to the organization, and the critical role insurance can play in protecting companies and their executives against such claims. Continue Reading

Five Ways to Prepare for Business Interruption and Property Damage Insurance Claims in a Natural Disaster

The extraordinary images and reports of the devastation from Hurricane Harvey have filled the news outlets. While the focus remains on the human toll and concern for the well-being of friends, colleagues and business partners who may be personally affected by this disaster, its impact will extend far beyond those whose lives and businesses were immediately disrupted. In the coming days, we will begin to see assessments of the disaster’s impact on businesses from Texas, the Gulf Coast and beyond.

Read the full client alert here.

Another State Court Limits the Enforceability of Anti-Assignment Clauses

We recently wrote about the California Supreme Court’s decision in Fluor Corporation v. Superior Court to limit the enforceability of clauses in third party liability insurance policies that prohibit the policyholder from assigning its interests in the policy without the insurer’s prior consent. The court held that these so-called anti-assignment clauses are not enforceable after a third party has suffered personal injury or property damage covered under the policy and for which the insured may be liable. A New Jersey appellate court has reached the same conclusion in Givaudan Fragrances Corp. v. Aetna Casualty & Surety Co. There, Givaudan Fragrances Corporation sought coverage under a corporate affiliate’s insurance policies for numerous claims brought against Givaudan for environmental contamination. The appellate court concluded that the policies’ anti-assignment clause was no longer enforceable as to the losses that had occurred before the assignment.

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Seventh Circuit Issues Stern Warning For Insurers That Reject Their Duty to Defend

The first line of the Seventh Circuit’s opinion says it all: “This case provides a warning for insurance companies who refuse to defend their insureds.” As the court’s admonishment suggests, insurers that improperly refuse to defend an insured do so at their own risk and – if not done through a reservation of rights or a declaratory judgment action – may waive their coverage defenses in the process.

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California Supreme Court Limits Enforceability of Anti-Assignment Clauses

In a unanimous decision handed down by the California Supreme Court yesterday afternoon in Fluor Corporation v. Superior Court, the court removed a significant obstacle facing companies that want to assign their interests in a third party insurance policy to a successor company as part of a corporate restructuring or sale. It held that an anti-assignment clause in liability policies prohibiting an insured from assigning its interests under the policy without the insurer’s consent is not enforceable after a covered loss, that is, after a third party has suffered personal injury or property damage for which the insured may be liable. The decision overturns the court’s earlier decision in Henkel Corp. v. Hartford Accident & Indemnity Co. (2003) 29 Cal. 4th 934, in which the state high court held that an anti-assignment clause remains enforceable much longer, until the third party’s claim against the insured has been reduced to a sum of money due, or to become due, under the policy, such as an adverse judgment against the insured in the underlying action. In doing so, the court relied on a California statute first enacted in 1872 that received almost no attention before Fluor and was never considered in Henkel.

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Georgia Supreme Court Complicates Policyholders’ Ability to Settle Claims Brought Against Them

As we previously reported here, the U.S. Court of Appeals for the Eleventh Circuit asked the Georgia Supreme Court to weigh in on the coverage dispute in Piedmont Office Realty Trust, Inc. v. XL Specialty Insurance Co. concerning consent-to-settle and no-action provisions in an excess insurance policy. The state high court’s answer was a disappointing one for policyholders. According to the court, if a policyholder settles a claim brought against it without first obtaining the insurer’s consent, the policyholder may effectively forfeit coverage for the settlement and is barred from later suing its insurer, even if the policyholder believes the insurer unreasonably withheld consent. Companies holding policies governed by Georgia law should proceed carefully when settling claims against them where those policies include consent-to-settle and no-action provisions. Going forward, companies might be wise to avoid such policies altogether.

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Texas Says EPA Administrative Actions under CERCLA Trigger Duty to Defend

As any company facing EPA administrative action under CERCLA knows, the financial risk and defense costs associated with those proceedings can be the same as the risk and costs of an EPA lawsuit under CERCLA. But insurers have argued that administrative actions are very different from suits under standard CGL policies. Those policies, insurers argue, provide defense coverage to costs related to “suits,” not administrative actions. Joining a clear majority of state courts, the Texas Supreme Court recently rejected this narrow interpretation of the duty to defend in McGinnes Indus. Maint. Corp. v. The Phoenix Ins. Co., holding that a CGL insurer must provide a defense in CERCLA administrative actions.

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