Adam Fleischer and Jason Minkin have published a comprehensive article titled The 2013 Captive Quandary and Duty of Utmost Good Faith.  This article addresses challenges for reinsurers when reinsuring captives, as well as the captive’s obligation to act at arm’s length from its parent.  For a complete copy of the article, please click here.

Rice v. Union Pacific Railroad Co. (E.D. Ark.) (June 2012), aff’d (8th Cir. 2013)

In Rice v. Union Pacific Railroad Co., the U.S. Court of Appeals for the Eighth Circuit affirmed a trial verdict in favor of Gunderson Rail Services, our client. Union Pacific had filed an indemnity action against Gunderson seeking to shift responsibility for the settlement and defense of an incident arising out of a railroad accident. The underlying accident involved a back injury to a Union Pacific employee who slipped in the mud in Gunderson’s yard. Ultimately, the case settled for $1.15M. Union Pacific and Gunderson each paid one half of the settlement and proceeded to trial on Union Pacific’s claim that it was entitled to complete indemnity, making Gunderson pay the entire settlement. After trial, the court held that both Union Pacific and Gunderson shared equally in responsibility for the costs of defense and settlement. Union Pacific appealed, claiming that the trial court erred in ignoring evidence that supported specific sections of the indemnity agreement that would shift all liability to Gunderson. The appellate court disagreed, holding that Union Pacific had failed to prove that those sections applied and affirming the verdict in the trial court. Joe P. Pozen co-chaired the trial and briefed the appeal.

WASCO v. Bituminous (Ill. App. (1st) 2013)

In WASCO v. Bituminous, WASCO sought coverage under Bituminous policies issued to Palm Oil and PORI International, arguing that the policies were transferred to WASCO or “assigned” to WASCO, or that WASCO was the corporate successor of the named insureds, and therefore entitled to the coverage afforded by the policies. When Bituminous declined to defend WASCO for an underlying environmental claim, WASCO sued Bituminous in Illinois state court, alleging breach of the duty to defend and bad faith claims handling practices.

Village of Crestwood v. Hartford Fire Ins. Co. (Ill. Cir. Ct. 2012) (September 2012), aff’d (Ill. App. 1st)) 

A municipality and its former mayors knowingly mixed contaminated well water with clean water resulting in numerous wrongful death and bodily injury lawsuits. The client insurer had issued multiple policies to the municipality. BatesCarey LLP moved for summary judgment, contending that the pollution exclusion in the client's policies precluded any duty to defend or indemnify. The municipality filed a competing motion. After extensive briefing, an Illinois state court agreed with BatesCarey LLP's position and granted summary judgment to BatesCarey LLP's client.

Mt. Hawley Ins. Co. v. Creek Side at Parker Homeowners Ass'n, Inc., 2013 WL 104795 (D. Colo. Jan. 8, 2013)

On January 8, 2013, the U.S. District Court for the District of Colorado held that, when a subcontractor’s faulty workmanship causes damage to other, non-faulty, parts of a construction project, there may be an “occurrence” under a general liability policy. (This case reaches the opposite conclusion of a Sixth Circuit case that came down the day before, which we have summarized here).  In this Colorado decision, the district court found that, although there may have been an “occurrence,” the policy nevertheless excluded coverage for both construction defects that take place during and after a construction project.

McBride v. Acuity, --- F.3d ---, 2013 WL 69358 (6th Cir. Jan. 7, 2013) (applying Kentucky law)

On January 7, 2013, the U.S. Court of Appeals for the 6th Circuit applied Kentucky law to find that faulty workmanship of a subcontractor did not qualify as an “occurrence” even though the subcontractor’s faulty workmanship had caused damage to other, non-faulty, parts of the project.  (This case reaches the opposite conclusion of a Colorado decision that came down the day after, which we have summarized here) The Sixth Circuit refused to follow case law from other jurisdictions holding that an “occurrence” takes place when allegedly defective work on one part of a construction project causes defects to another part of the same project.

Confidential

BatesCarey LLP represented a reinsurer that commutated numerous claims with one of its cedents. Its valuation was based on its assessment of its cedent's reserves. After agreement on a total commutation value, BatesCarey LLP's client allocated its total payment to individual claims based on its reserves for each claim, and in turn billed its reinsurers on that basis. BatesCarey LLP pursued arbitration on behalf of its client and recovered the full amount of its client's billing plus interest.

On September 24, 2012, a California appellate court ruled that a housing discrimination claim was not covered by the personal injury definition of a primary policy, but that it was covered by the personal injury definition of the umbrella policy. Therefore, after the underlying dispute was over, the umbrella insurer was ordered to reimburse the primary for over $5.2 million in defense costs and $1 million in indemnity.

Smith v. Rail Link (District Court of Wyoming 2011) (February 2011), aff’d (10th Cir. 2012)

The plaintiff injured her ankle while on the job and obtained workers' compensation benefits. She attempted to increase her recovery by filing a FELA claim against both her employer, a rail switching company, and a parent company. BatesCarey LLP successfully moved for summary judgment on the grounds that FELA did not apply to the rail switching company and that FELA did not apply to the parent company because it was not the claimant's employer. A Wyoming federal court agreed with BatesCarey LLP's positions and granted summary judgment in favor of BatesCarey LLP's client. The Tenth Circuit affirmed the trial court's decision and issued its first published decision addressing these issues.

In an unusual decision employing contorted contractual construction, an Indiana appellate court on August 28, 2012 explained that an insured that intentionally left 100,000 tons of sand on property it once leased, has caused a “personal injury” to the land and that this “personal injury” is covered by the insured’s general liability insurance. The concurring opinion found coverage was owed because the standard “occurrence” definition in the policy creates an ambiguity as to whether the policy requires the cause of the injuries to be “accidental.” or whether the policy requires that the injuries themselves to be “accidental.” While this decision may encourage policyholder counsel to use the “personal injury” coverage grant as a path to finding coverage for environmental property damage, the reasoning of the decision is likely to hold little precedential value outside the facts of the particular case and little sway for courts outside of Indiana.