Cosgrove Returns: I’ve Never Seen This Before In A Coverage Case
This summer an Arizona federal district court issued Cosgrove v. National Fire & Marine Insurance Company. The court held that insurer-appointed defense counsel, in a reservation of rights-defended case, used the attorney-client relationship to learn that his client did not use subcontractors on a project. When defense counsel did so, he knew, or had reason to know, that his client’s policy contained a Subcontractors Exclusion and that the insurer may attempt to deny coverage based on the exclusion. Thus, the court held that the insurer was estopped from asserting the Subcontractor Exclusion as a coverage defense. The court reached this decision despite the existence, or not, of subcontractors being a pretty routine, and obvious, and not secret, fact in a construction dispute.

Needless to say, this was a very troubling decision for insurers (and appointed defense counsel). Very shortly after the court’s decision the parties settled. As part of the settlement, the court agreed that it would vacate and seal the summary judgment decision. Sure enough, you can’t get the decision on Pacer and the insurer arranged for the decision to be removed from Lexis and Westlaw. I have a copy of the decision, which is now a collector’s item and I keep it with my Joe Montana rookie card.

Get ready – On November 3, United Policyholders filed a Motion to Intervene to unseal and reinstate the decision. UP says in its brief that what the insurer did is an “impermissible tactic” – one “commonly employed by insurers in an attempt to reshape case law in their favor after an adverse ruling.” UP says that the insurer, faced with an adverse decision, is “seek[ing] to hide the court’s opinion.” The insurer filed a response, providing many reasons for denial of intervention – UP has no standing; the case is over; the judge agreed to vacate and seal the decision as a condition of settlement; the various requirements of the Intervention rule have not been satisfied…. Briefing on what is a seemingly unusual issue is ongoing.

Court Provides Primer On The “War Risk” Exclusion
Cases involving the “war risk” exclusion are few and far between. And that’s a good thing. So, on one hand, when one comes along, it’s worth looking at it. It’s like a coverage case eclipse, but no special glasses are needed to read it. On the other hand, since the war risk exclusion arises so infrequently – probably never for almost all coverage lawyers – there is a temptation to brush the decision aside as unimportant.

For those of you in the not brush it aside category I highly recommend that you check out Universal Cable Productions v. Atlantic Specialty Ins. Co., No. 16-4435 (C.D. Cal. Oct. 6, 2017), where the court provided a detailed analysis of the “war risk” exclusion in the context of a claim for losses sustained in 2014, by the producers of the television series Dig, on account of the need to move production of the show out of Israel, following hostilities between Israel and Hamas. [My wife watched Dig and enjoyed it. I watched the first two episodes but couldn’t get into it.]

The opinion is lengthy, addressing the hostilities at issue, the history and nature of Hamas, definitions of war and case law addressing the “war risk” exclusion. The court concluded that the conflict between Israel and Hamas, in 2014, constituted war. Thus, the “war risk” exclusion precluded coverage for the losses sustained by the show’s producers. It is well beyond the scope of a “Tapas” article to address the opinion in detail. In the event of future war risk coverage litigation I would expect to see courts look to Universal Cable Productions for guidance, given how detailed the opinion is.