What we have been working on for August 2014

Interisk understands that the insurance environment can change rapidly and that staying abreast of these changes can be difficult. Listed below is a sampling of the types of cases we have been involved with recently.

Umbrella Policies

We addressed questions about annualized limits on a three-year policy when there is only one occurrence: whether occurrence limits are applicable to a claim separately on an annual basis in a three-year policy or only applicable once per occurrence regardless of the policy term. We also addressed the application of a a conditional exclusion endorsement in an umbrella policy which applied only when coverage for the risk was excluded in the underlying policy.

Batch Clause

We provided consultation for a case involving two excess policies and two sets of claims, which were subject to a “batch” clause. The batches of claims were resolved serially, but the excess insurer claimed that the underlying insurer wrongly used the second batch of claims to exhaust the underlying limits. We addressed the question about both policies covering the claims, and whether it really mattered which claim was used to exhaust the underlying limits when the terms of the excess policy also applied to coverage for the claims.

Lost Policies

Due to our extensive research library dating back to the 1800s, Interisk is retained in many cases involving lost policies. We help answer questions about what documentation is required to prove the terms and conditions of coverage when there is no policy, as well as what the policy covers. Many of these cases center on alleged policy periods in the 1950s and 1960s and involve environmental and asbestos claims. We address whether the insurer issued a policy to the plaintiff and if there is sufficient secondary evidence in the absence of a policy to prove the terms and conditions of coverage.

Standard of Care & Underwriting Procedures

A professional services firm and its principal owner were defrauded by the controller over a multi-year period. The firm’s applications for its crime policy were signed by the owner/chairman except for one year when the controller signed them. The insurance carrier denied the claim surrounding the embezzlement because knowledge of the theft by the controller was imputed to the insured(s). We were engaged to offer opinions about standard of care of the broker and the underwriting procedures used by the insurance carrier.

Hurricane Sandy Flood Coverage

A warehouse was flooded during Hurricane Sandy. The insured believed that the policy covered for the full limit of property coverage and would be amended upwards (close to $20 million) based upon monthly reports of value to the broker. The insurance carrier maintained that there was a sub-limit of $5 million on flood coverage. The monthly reports of value were delinquent by several months, and the storm occurred before values were submitted to the carrier.

Completed Operations Tail Coverage

A large construction wrap-up policy included a five-year completed operations tail coverage. A significant bodily injury claim involving completed operations occurred five years after the job was finished. The insurance carrier maintained that the policy was canceled five years before on a date which put the end of the completed operations tail coverage just before accident and therefore the bodily injury claim would not be covered. The insurance carrier provided defense coverage subject to a reservations of rights determination.

Construction Defect Wrap Policy

A construction defect wrap policy covered multiple projects over an eight-year period of home building. The policy carrier employed large self-insurance retentions. The home builder sued the insurance carrier over the way in which the carrier applied the self-insurance retentions to construction defect lawsuits on the builder’s various projects.

Property Damage & Business Interruption

During installation of a new computer system, an alleged power surge caused the servers to malfunction, effectively destroying the system. Based upon contract cancellation clauses, the insured lost 75 percent of its business during the ensuing year. The insured sued its broker, in part over allegations that the previous insurer employed by another broker would have covered the power surge for both property damage and business interruption. The insured sued the broker to recover damages. We were retained to provide opinions regarding a dispute of several million dollars under the boiler and machinery policy.

Asbestos Exclusions Stick

On January 15, 2014, a federal jury rejected a policyholder’s novel efforts to invalidate asbestos exclusions contained in insurance policies issued between February 1, 1979 and August 1, 1985.

In General Refractories Co. v. First State Ins. Co., General Refractories Company contended that asbestos exclusions in insurance policies issued by various insurance companies in the late 1970s and 1980s had not been submitted to the Pennsylvania Department of Insurance for approval prior to use and, therefore, were unenforceable. Holding a failure to obtain approval, by itself, would not be sufficient to render the exclusions unenforceable, the Honorable Edmund Ludwig sent the matter to trial to determine whether the Pennsylvania Insurance Commissioner implemented a policy that was uniformly executed by the Insurance Department to disapprove all asbestos exclusions between February 1, 1979 and August 1, 1985, such that the exclusions violated a “dominant public policy.”

In a multi-day trial, the jury saw Insurance Department and insurance company records and heard testimony by a former Pennsylvania Deputy Insurance Commissioner, a 31-year employee of the Pennsylvania Insurance Department who served as a policy examiner from 1972 to 1986, and the manager of one of the insurance company’s state relations and compliance department. A former Pennsylvania Insurance Commissioner, presented by the insurers as an expert on insurance regulatory practices in Pennsylvania, also testified, explaining to the jury how insurance commissioners could create Insurance Department policy and offering her opinion that no such policy against asbestos exclusions ever existed. After a quick deliberation, the jury returned its verdict in favor of the insurers.