CASES OF CONSEQUENCE
FIRST CIRCUIT CGL/Coverage B/IP Exclusion (MA)
The First Circuit has affirmed a Massachusetts District Court’s conclusion that a CGL exclusion for personal and advertising injury claims "arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights" precluded any obligation on the part of HDI to defend allegations that the insured had infringed the trademark of a dental product competitor. The First Circuit declared in Sterngold Dental, LLC v. HDI Global Ins. Co., No. 18-2084 (1st Cir. July 2, 2019) that even if the disputed mark constituted an "advertising idea” (as involving a means of soliciting business), any resulting coverage was clearly excluded as arising out of the claimed infringement of the underlying plaintiff's trademark. The court rejected the insured's argument that language in the exclusion the infringement of “other intellectual property rights” in your "advertisement"" applied to a claim of trademark infringement or any of the other specific IP offenses enumerated in the exclusion. The court distinguished between the enumerated offenses such as trademark infringement and the "other intellectual property rights", finding that this exception only applied to the latter. The court also rejected the insured's argument that this trademark could be considered a "slogan."
FIFTH CIRCUIT “Occurrence” (TX)
The Fifth Circuit has ruled that a Texas District Court erred in holding that an insured's decision to drive while drunk was not an "accident." In Frederking v. Cincinnati Ins. Co., No. 18‑50536 (5th Cir. July 2, 2019), the Court of Appeals ruled that this interpretation of "accident" was unprecedented and conflicted with the general principal that intentional acts are still covered unless accompanied by an intent to cause injury. The court declined to find that accidents were substantially certain to occur in cases of this sort and express concern that a contrary finding would be used to restrict coverage for other types of risk behavior, such as texting or eating while driving.
SEVENTH CIRCUIT D&O/Prior Claims Exclusion
The Seventh Circuit has ruled in Emmis Communications Corp. v. Illinois National Ins. Co., No. 18‑3392 (7th Cir. July 2, 2019) that an Illinois District Court erred in holding that language in a 2011 D&O policy issued by Illinois National that excluded coverage for losses in connection with "notices of claim of circumstances as reported" under earlier policies was ambiguous. Whereas the District Court had interpreted "as reported" as only extending to claims reported to the earlier insurer (Chubb) at the time that the Illinois National policy went into effect, the Seventh Circuit held that the plain and ordinary meaning of "as reported" applied to any and all claims ever reported to Chubb under the earlier policy without regard to when the claim was reported.
NINTH CIRCUIT Duty to Defend/Recoupment (NV)
The Ninth Circuit has asked the Nevada Supreme Court to clarify whether state law permits an insurer to recoup sums paid to defend a case that the insurer is later found not have owed a defense for. Whereas the District Court had opined that Nevada does not permit an insurer to recoup defense costs in the absence of express policy language establishing this right, the Ninth Circuit expressed uncertainty in the absence of clear Nevada precedent on this issue and conflicting case law around the country. As a result, in Nautilus Insurance Co. v. Access Medical, LLC, No. 17‑1625 (9th Cir. July 2, 2019), the Ninth Circuit asked the state Supreme Court to answer whether "an insurer entitled to reimbursement of costs already expended in defense of its insureds where a determination has been made that the insurer owed no duty to defend and the insurer expressly reserved its right to seek reimbursement in writing defense has been tendered but where the insurance policy contains no reservation of rights?"
CALIFORNIA Loss Payments
The California Code of Appeal has ruled in Jozefowicz v. Allstate Ins. Co., GO55643 (Cal. App. May 28, 2019) that a trial court did not err in ruling that a homeowner could not sue Allstate for issuing checks directly to a contractor who was performing repairs to the insured's fire-damaged home in light of the fact that the insured had previously given consent to these payments.
OTHER DEVELOPMENTS OF NOTE
* * * Inside the Insurance Industry * * *
W. R. Berkley has named Daniel R. Westcott as the new president of Berkley Re America. Westcott has most recently headed up the reinsurance unit of Navigators, which has recently been acquired by The Hartford.
Last week’s earthquakes in California have revived a public debate over the availability and need for insurance coverage in the Golden State.
* * * IBNR Dept. * * *
A fire at Jim Bean’s distillery in Kentucky has reportedly destroyed 45,000 barrels of aged whiskey (oh, the tragedy) and may have resulted in a release into nearby bodies of water.
* * * Cyber Update * * *
A new Kroll report estimates that business clients are not adequately evaluating the indirect cyber-exposures that they are facing due to inadequate security precaustions by vendors such as outside counsel. As the report observes: risk managers “often lack the risk management components that are typically part of the procurement function, with any cyber risk assessment of outside counsel and other legal vendors often conspicuously missing from the list of (outside counsel management) activities.”
* * * Summer Reading I * * *
The DRI Insurance Law Committee has published its monthly newsletter, Covered Events, with some provocative articles and good case summaries.
* * * Toxic Tort Update * * *
While refusing to dismiss a punitive damage award against Round Up against Monsanto in light of the defendant's "reprehensible conduct", Judge Chhabria has stated that he will be reducing the amount of the $80,000,000.00 punitive damage award. As the amount of damages awarded exceeded constitutional due process standards.
* * * New Coverage Litigation * * *
Rapper Fat Joe has sued the Homeland Insurance Company in federal court in New York, claiming that it has wrongfully refused to defend a copyright infringement claim by rapper Fly Havana (just google this stuff—we’re not making it up).
* * * Summer Reading II * * *
Professor Kenneth Abraham, one of the leading scholars of insurance law in the United States and a leading actor in the 2010-2018 process that resulted in the ALI’s Restatement of Law, Liability Insurance has published a thoughtful and provocative law review article championing the more liberal approach to “plain meaning” and contra proferentem that the Reporters originally proposed but that were removed from the Restatement just prior to its approval in May 2018. In Abraham’s view, the argument that plain meaning always controls, that extrinsic sources of meaning should not be considered and that ambiguity must always result in coverage are simplistic “myths” that need to be reconsidered.