Insurance policies usually have cooperation clauses requiring policyholders to work with the insurance company when making a claim. These clauses ensure policyholders actively participate in claims investigations. Failure to cooperate may be a breach of the policy, and the insurer may deny coverage.

Proving non-cooperation, though, is challenging, as seen in a recent Eighth Circuit case, Cardinal Building Materials, Inc. v. Amerisure Insurance Company.[1] Amerisure claimed that its insured, Cardinal, had failed to cooperate in investigating Cardinal’s tornado claim.[2]

Reprinted courtesy of Rachel E. Hudgins, Hunton Andrews Kurth and Adriana A. Perez, Hunton Andrews Kurth

Ms. Hudgins may be contacted at rhudgins@HuntonAK.com
Ms. Perez may be contacted at pereza@HuntonAK.com

A federal court recently ruled that a carrier must defend its policyholder against a claim involving the treasurer’s erroneous payment to a scammer. The ruling shows that a “wrongful act” under a D&O policy need not be an egregious act of wrongdoing, that coverage may hinge on whether extrinsic evidence can establish coverage, and that breach of contract claims are not always uninsurable as a matter of law.

In Bridlewood Estates Property Owners Association v. State Farm General Insurance Co., a California federal district court evaluated whether an insured association may be entitled to coverage for a breach of contract claim under an endorsement to its package liability policy providing directors and officers (D&O) coverage. Because the claims arose from an email spoofing scheme resulting in the association’s treasurer mistakenly issuing payment to a fraudster instead of the contracting party, the court determined that contract claims were based on a “wrongful act” by an officer potentially covered by the policy and that, as a result, the lawsuit triggered the insurer’s defense obligations. The decision shows the potential for D&O coverage for contract claims, as well as highlights the difficulty insurers face to exclude contractual liability on public policy grounds, which vary greatly between states and can be swayed by policy provisions applying one particular state’s laws over another.

Reprinted courtesy of Evan Holober, Hunton Andrews Kurth and Geoffrey B. Fehling, Hunton Andrews Kurth
Mr. Holober may be contacted at eholober@huntonak.com
Mr. Fehling may be contacted at gfehling@HuntonAK.com

Directors and Officers (“D&O”) and cyber-related incidents continued to make headlines while ramped up regulatory enforcement and new legislation significantly altered the insurance landscape for both policyholders and insurers. Other noteworthy decisions reinforced the importance of foundational insurance coverage principals. Now that 2023 has wrapped, we highlight and review some of the most significant decisions and insurance developments that will continue to impact the world of insurance in 2024 and beyond.

Reprinted courtesy of Michael S. Levine, Hunton Andrews Kurth, Latosha M. Ellis, Hunton Andrews Kurth and Olivia G. Bushman, Hunton Andrews Kurth

Mr. Levine may be contacted at mlevine@HuntonAK.com
Ms. Ellis may be contacted at lellis@HuntonAK.com
Ms. Bushman may be contacted at obushman@HuntonAK.com

The court granted, in part, the insured's motion for summary judgment by finding that matching roof tiles were required under the policy. Bertisen v. Travelers Home and Marine Ins. Co., 2024 U.S. Dist. LEXIS 3907 (D. Colo. Jan. 8, 2024).

The insureds sued Travelers for breach of contract, common law bad faith, and unreasonable delay or denial of benefits. They alleged that their residence was damaged by a hailstorm and that Travelers breached their policy and acted in bad faith in the handling of the claim. The insureds demanded an appraisal to determine the "amount of loss" under the policy and an appraisal award was issued. Travelers then denied payment for all roof tiles that were contemplated by the appraisal award.

The court granted the insured's motion to dismiss the insurer's action for a declaratory judgment on the issue of indemnity when the underlying action was still ongoing. Utica Mut. Ins. Co. v. Crystal Curtain Wall Sys. Corp., NYLJ LEXIS 3255 (N.Y. Sup. Ct. Dec. 1, 2023).

Crystal was a subcontractor to design and install window and curtain systems as well as terrace doors and a glass parapet in the construction of two mixed use residential and commercial buildings. After unit owners took possession, a significant rainstorm allowed water infiltration, causing property damage in the building including moldy conditions. The owners sued, asserting claims against Crystal for the cost of repair or replacement of the allegedly defective curtain wall, damage to personal property, diminution in value of the units, and delay damages consisting of increasing interest and carrying costs that allegedly resulted from delays in completion of the construction work.

In National Casualty Company v. Georgia School Board Association – Risk Management Fund1, the Eleventh Circuit recently affirmed a Georgia rule under which irreconcilable “other insurance” clauses will not be enforced. The Eleventh Circuit found that, under Georgia law, when insurance policies’ “other insurance” clauses are “functionally the same” and cover the same risk, they are irreconcilable, requiring the insurers to provide coverage on a pro rata basis. “Other insurance” clauses are generally written with stock language, and this case affirms the principle that insurers may not escape coverage on the basis that competing clauses leave the insured without a primary policy. When an insured has multiple policies covering the same risk, either one insurer must take the position as primary, or all insurers will be forced to share the obligation on a pro rata basis.

The court granted the insurer's motion to dismiss the homeowner's claim against the insurer because the policy insured the mortgagee, not the homeowner. Barbin v. Integon Nat'l Ins. Co., 2023 U.S. Dist. LEXIS 207192 (E.D. La. Nov. 20, 2023).

The home was damaged by Hurricane Ida. The homeowner claims that Integon National Insurance Company breached the policy and acted in bad faith by failing to make the required payments.

The trial court's dismissal of the insured's loss of business income claim due to COVID-19 based upon a traditional pollution exclusions was reversed and remanded as to most of the insurers. JRK Prop. Holdings v. Colony Ins. Co., 2023 Cal. App. LEXIS 760 (Cal. Ct. App. Oct. 2, 2023).

It is well known that insurance policies universally impose a requirement that a “claim” be timely submitted. Unfortunately, this basic coverage condition is so well known that policyholders often overlook what exactly constitutes a “claim” under their insurance policy. A decision rendered by the United States District Court for the Southern District of New York earlier this year is a reminder that policyholders must carefully read their insurance policies to understand exactly what constitutes a “claim” to avoid forfeiting coverage simply because of a misunderstanding of whether a claim as defined by the policy is a “claim.”

In Pine Management, Inc. v. Colony Insurance Company,1 the parties disputed whether a July 17, 2018, letter (the “Letter”) received by the insured, Pine Management, Inc. (“Pine”), constituted a “claim” under a claims-made and reported policy with a policy period of August 1, 2018, to December 1, 2019. The insurer, Colony Insurance Company (“Colony”), argued the Letter was a “claim” first made against Pine before the policy incepted to avoid providing coverage for a related lawsuit filed against Pine on July 26, 2019.

Satisfied that they finally have their arms around cyber-security risks and that construction company defenses are adequate for now, insurance carriers in 2023 ceased brutal cyber insurance price hikes, said brokers at the International Risk Management Institute's recent construction risk conference in Orlando, Fla.

The First Circuit reversed the district court's granting of summary judgment to the insurer based upon a dispute over compliance with attending Examinations Under Oath. Philadelphia Indem. Ins. Co. v. BAS Holding Corp., 2023 U.S. App. LEXIS 21573 (1st Cir. Aug. 17, 2023).

An arsonist destroyed the State Building, a landmark building, owned by BAS Holding Corporation ("BAS"). BAS sought coverage from its insurer, Philadelphia. Philadelphia investigated the loss and became convinced that the State Building may not have been insured under the policy. Philadelphia sought a EUO and asked BAS to designate someone who could answer questions relating to eight enumerated topics. BAS sent Susan Rodrigues to the EUO. She handled all the insurance and oversaw maintenance of the State Building.