CASES OF CONSEQUENCE
CALIFORNIA Excess/Underlying Insurance/Reformation
The California Court of Appeal has ruled in AIG Specialty Ins. Co. v. Interstate Fire & Casualty Company, A148343 (Cal. App. Feb 5 2018) that a trial court did not err in refusing to reform an excess policy to extend coverage to the underlying automobile liability insurance. In an unpublished ruling, the First District ruled that there were insufficient facts to establish a mutual mistake with respect to whether there was any intention to have Interstate's excess policy include all underlying insurance policies in light of the fact that the ACORD application for this coverage only referenced the underlying CGL policy period. AIG had argued that the broker's failure to follow Interstate's internal policy that ACORD applications be reviewed with the renewal applications constituted "inequitable conduct" warranting reformation of the contract.
CONNECTICUT Bad Faith/Sanctions
The Connecticut Supreme Court has ruled in Ridgaway v. Mount Vernon Fire Insurance Company No. SC19728 (Conn. Feb 4 Feb 2 2018) that the Appellate Court was correct in reversing a judgment of non-suit based upon the failure of the insured's attorneys to comply with court orders but that, given the incomplete factual record, the case should be remanded to the trial court for further proceedings to consider a sanction proportionate to the facts.
MASSACHUSETTS Appeals to Watch
On Tuesday, the Supreme Judicial Court heard argument in Holyoke Mut. Ins. Co. v. Vibram, USA, At issue is the insured’s appeal of a lower court’s finding that the insured’s use of a famous runner’s name on a sport shoe did not involve an “advertising idea” or invasion of a right of privacy. The court is also considering a cross-appeal by two CGL insurers who claim that, having obtained a ruling that they never owed a duty to defend, they have an equitable right to be reimbursed for defense costs that they voluntarily paid in the interim.
On Wednesday, the U.S. Court of Appeals for the First Circuit will consider AIG’s appeal of a Massachusetts District Court’s ruling in AIG Property Cas. Co. v. Cosby that suits by women who claimed that they were defamed by Bill Cosby’s denial of their sexual assault claims did not “arise out of…alleged sexual misconduct.” MM partner Michael Aylward will be arguing AIG’s appeal.
NEW YORK Allocation/”Unavailability”
The New York Court of Appeals heard oral argument on February 6 in KeySpan Corp. v. Munich Re, APL-2016-00236. At issue is the 2016 ruling of the Appellate Division rejecting a gas utility’s argument that New York’s prior embrace of pro rata allocation for pollution and other long-tail liability claims should be subject to an exception for years when insurance was “unavailable” due to the widespread inclusion of liability exclusions or other causes.
OTHER DEVELOPMENTS OF NOTE
* * * Inside the Insurance Industry * * *
Caroline Krass, who recently worked as general counsel for the CIA and more recently has been employed by the Gibson, Dunn & Crutcher law firm, will step in as AIG’s Chief Legal Officer next March.
A.M. Best has affirmED its credit ratings for Hartford Steam Boiler and its members.
Pool Re predicts that the United Kingdom will experience an increase in terrorist attacks this year.
* * * New Coverage Litigation * * *
Federal, RSUI Indemnity and the North River Insurance Company have filed suit against Pfizer, alleging in Federal Ins. Co. v. Pfizer, Inc., No. 18-878 (S.D.N.Y.) that their excess policies do not cover the pharmaceutical giant’s $400 million settlement of claims that it engaged in illegal off-label marketing and kickback schemes for certain of its products in violation of federal securities laws.