Timely Notice Is Required Under a Claims-Made Policy in New York

Claims-made policies were created to bring more certainty to the insurance relationship. The policies apply generally to claims that are incurred and reported during the policy period or any extended reporting period. If the claim is not reported on time, there is no coverage.

This contractual result often clashes with statutory provisions, like that in New York, which preclude an insurance company from avoiding its obligations because of late notice of claim unless there is prejudice. See N.Y. Ins. Law § 3420(a)(5). In a recent decision, a New York intermediate appellate court made it clear that a claims-made policy still requires timely notice.

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Primary Insurer Loses Failure-to-Settle Dispute to Excess Insurer

An interesting thing sometimes happens when a policyholder with a tower of insurance is sued and settlement discussions involve members of the insurance tower. The excess insurers may look to the primary insurer to defend the claim and to run point on the settlement. The primary insurer, where it is clear that the settlement will be well above the primary insurance limits may look to the excess insurers to lead the settlement discussions. But what happens if the case is not settled and the verdict impacts the excess layers? Does an excess insurer have any recourse if the primary insurer failed to settle the case?

In a recent case in the Eleventh Circuit Court of Appeals, the court found in favor of an excess insurer and against the primary insurer on a failure-to-settle dispute.

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When Claims-Made Primary and Occurrence Excess Policies Clash

Decades ago, professional liability policies, like most liability policies, were written on an occurrence basis. If a claim was incurred during the insurance policy period, the policy would respond to the claim regardless of when the claim was made against the defendant and noticed to the insurance company. As we know from environmental and asbestos claims, that can take decades.

Then along came claims-made polices. Under a typical claims-made policy, if a claim is made against the defendant and reported to the insurance company during the policy period, that insurance policy will respond to the claim regardless of when the occurrence took place (as long as the claim occurred after the policy’s retroactive date). If the claim was made after the policy period and , that policy would

In New York, legislative and regulatory efforts to keep medical professionals practicing in New York led to a quirky medical malpractice insurance system where most primary medical malpractice policies were claims-made policies, but New York medical professionals were provided with excess policies written on an occurrence basis.

This leads to a recent case that explored the issues that arise when occurrence-based excess policies sit on top of claims-made primary policies.

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Loss of Physical Possession of Aircraft Held the Efficient Physical Cause of Loss

Under New York law, where an insurance policy provides coverage for physical loss or damage of property caused by enumerated causes of loss or perils, the policyholder must establish that the loss was proximately caused by one of the enumerated causes of loss or perils. Often the question is what determines the proximate cause of the loss and how far back should the inquiry into the proximate cause go. In a recent motion court decision, a New York trial-level court discussed the limits of the proximate cause inquiry in a complicated case of confiscation of a leased aircraft by a foreign government.

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Objectively Reasonable Expectations of the Insured Prevails – Improper Erosion Theory Rejected

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Primary and excess insurers periodically clash over whether the underlying claim should have been paid by the primary insurer. But it is pretty unusual for an excess insurer to argue that the underlying claim payment made by other insurers improperly eroded the excess insurer’s attachment point and prematurely triggered the excess coverage for a subsequent claim. The Ninth Circuit Court of Appeals recently addressed the question of whether an excess insurer challenge an underlying insurer’s payment decision.

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The Duty to Defend Is Hard to Avoid

Everyone knows an insurer’s duty to defend is broader than its duty to indemnify. When an insurer disclaims on its duty to defend, the lack of coverage or the applicability of an exclusion has to be crystal clear. In a recent case, the Third Circuit affirmed an order requiring the insurer to defend an underlying case under a professional liability policy. I thought the analysis was interesting.

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When the Court Denies a Motion to Dismiss – COVID-19

As the COVID-19 business interruption cases are decided, many are keeping score. So far, the tally is in favor of the insurance industry, with a number of cases being dismissed for lack of direct physical loss of or damage to covered property by a covered peril.

Most of the cases filed seeking coverage have been met with motions to dismiss by the insurance company. As many of you know, a motion dismiss seeks to throw the case out of court because, on its face, the complaint does not state a cause or action. Basically, the court is saying that the allegations of the complaint, even if true, cannot as a matter of law, lead to coverage. Some courts allow the policyholder to file an amended complaint and some do not. It depends on the specific facts and allegations.

But not all courts have granted the insurance companies’ motions to dismiss. In a recent case, a Missouri federal court denied the motion. In this blog post I examine why.

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Direct Physical Loss of or Damage to Property Under California Law

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Decisions are starting coming down with some frequency in the myriad COVID-19 business interruption coverage cases. This blog post will highlight some aspects of a very recent decision by a California federal court that dismissed the policyholder’s complaint. The court, under California law, addressed the direct physical damage condition of the property policy.

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No Direct Physical Loss, No Coverage

COVID-19 business interruption claims have caused a groundswell of litigation, but courts continue to address business interruption claims in other contexts. The “direct physical loss” requirement remains at the heart of coverage disputes over whether business property policies are required to respond to claims.

Recently, the Eleventh Circuit addressed a business interruption coverage dispute that involved both an alleged downturn in revenue and expenses for cleaning up construction dust and debris.

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A New Argument in a Case Is Not a “Claim” for Insurance Purposes

Claims-made insurance policies, especially in professional liability and financial lines, have been around for decades. Most policyholders and insurers understand the purpose of a claims-made policy compared to an occurrence-based policy. Yet every so often a case comes along that raises a new wrinkle about claims-made coverage. In a recent case before the Seventh Circuit Court of Appeals the court had to determine whether a new argument made in an ongoing lawsuit was an independent “claim” for purposes of a claims-made professional liability policy.

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