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Coverage Opinions
Effective Date: November 9, 2016
Vol. 5 - Issue 11
Click The Title Of The Article To Read It.

Declarations: The Coverage Opinions Interview With Marcia Clark
The Most Famous Prosecutor Of All Time Is Now A Criminal Defense Attorney
And Novelist

Marcia Clark was kind enough to speak to me about spending the last decade as a criminal defense attorney, her fiction writing, and, of course, that trial she handled. Ironically, the most serious part of our discussion comes when I ask her what it was like being on the cover of MAD magazine.

O.J. Simpson: Running Back To Court
When Judges Must Address Simpson In Their Own Cases

Webinar: Duty To Defend: Advanced, Challenging And Unique Issues
The Issues That Get Litigated Because They Don’t Have Easy Answers

Coverage Opinions And Randy Spencer Profiled In The Philadelphia Lawyer Magazine

Coverage Opinions Interview With “Tiger Mom” Amy Chu Makes The Wall Street Journal

Randy Spencer’s Open Mic
20 Song Titles That Are Really Coverage Issues

My Hometown: Jim Semple: Practicing Insurance Coverage Law In Delaware

Happy Belated-Halloween: From Boo To Sue – Part 2
Update On Haunted House Liability

General Liability Insurance Coverage: Key Issues In Every State

ISO Listens To Coverage Opinions
Says Alo-HA To A New Designated Premises Endorsement

Supreme Court: Significant Consequences For Duty To Defend Breach

Duty To Defend: “Four Corners” Or “Four Corners, But”?

Additional Insured: Don’t Overlook This Easy To Overlook Issue

Federal Court Provides A Tutorial On “Other Claims” Discovery
Wow That’s A Lot Of Lawyers

Federal Court Says Definition Of “Commenced” Is Ambiguous: Impact On CD Claims

Tapas: Small Dishes Of Insurance Coverage
· ALI Restatement Of Liability Insurance Makes Forbes.com
· Wall Street Journal Addresses Challenges In The Trucking Insurance Market
· Driving While Intexticated (From Gallagher Sharp, LLP)

Back Issues:


Vol. 5, Iss. 11
November 9, 2016

O.J. Simpson: Running Back To Court
When Judges Must Address Simpson In Their Own Cases


On one hand, the impact of the trial in The People v. Orenthal James Simpson was quite narrow -- O.J. Simpson would not spend a lifetime behind bars for committing a double murder. But, of course, the case has been felt well-beyond the L.A. courtroom epicenter. The case raised wider issues concerning cameras in the courtroom, intense media coverage of trials, celebrity defendants, race in the judicial system (and the nation as a whole) and more. It is hard to imagine that the Simpson case has not been discussed in countless college and law school classrooms – and as part of a wide variety of topics.

These overarching impacts of the Simpson drama are well-known. Less-known is that O.J. and Co. have also played a role in other cases. In cases throughout the country, that had nothing whatsoever to do with People v. Simpson, courts have found themselves required to confront it. Consider this sample of cases where O.J. went, er, running back to court.

People v. Neal, 1997 Mich. App. LEXIS 2220 (Mich. Ct. App. Nov. 21, 1997): A prosecutor’s reference to Kato Kaelin, when objecting to a statement made by a witness, did not deny the defendant a fair trial. The comment did not liken the defendant to O.J. Simpson. Moreover, the appellate court pointed out that the trial judge admonished both parties for their conduct and warned them that he would not tolerate such behavior “unlike ‘Judge Ito.’”

LaMar v. Ishee, 2010 U.S. Dist. LEXIS 135506 (S.D. Ohio July 30, 2010): Criminal defendant was not denied adequate voir dire by not being permitted to ask prospective jurors whether they believed O.J. Simpson to be guilty.

People v. Miller, 2007 Cal. App. Unpub. LEXIS 3422 (Cal. Ct. App. Apr. 27, 2007): A prosecutor, in an attempt to discredit a defendant’s expert witness, pointed to Simpson’s expert pathologist, Dr. Michael Baden, as an example of being able to hire an expert who will say anything. The prosecutor listed some of the physical evidence in the Simpson case and pointed out that, despite it being beyond any doubt that Simpson was guilty, Baden was able to damage the State’s case. The court concluded that the reference to the Simpson case had no place in the case. However, the trial court had sustained the defendant’s objection and the defendant did not request that the jury be admonished.

United States v. Lentz, 282 F. Supp. 2d. 399 (E.D. Va. 2002): Statements by a defendant to his wife, that O.J. Simpson had the right idea and O.J. could happen again, were inadmissible in the defendant’s trial for kidnapping resulting in the death of his wife. Among other reasons, any probative value would be outweighed by prejudice to the defendant.

Caan v. United States, 1999 U.S. Dist. LEXIS 6886 (C.D. Cal. Feb. 26, 1999): Taxpayers not entitled to a $400,000 casualty loss tax deduction for loss in value of their Brentwood home that was in close proximity to O.J. Simpson’s. The alleged loss was on account of “buyer resistance” in the neighborhood surrounding Simpson’s home -- and not the requisite physical injury to the taxpayer’s home to warrant a casualty loss deduction.

Smith v. Scottsdale Ins. Co., 2014 U.S. Dist. LEXIS 173514 (N.D.W.Va. Dec. 16, 2014): In a case involving allegations that an insurer did not adequately investigate claims of racial animus against an insured, the court considered the deposition testimony of the claims adjuster and its discussion of the Simpson case.

O.J. Simpson waked out of one courtroom 20 years ago – and, likely unbeknownst to him, has been walking into others ever since.


Vol. 5, Iss. 11
November 9, 2016

Coverage Opinions And Randy Spencer Profiled In The Philadelphia Lawyer Magazine


What a privilege it was to have a profile of Coverage Opinions and Randy Spencer appear in the Fall issue of The Philadelphia Lawyer magazine.

It discusses the history of Coverage Opinions and the interviews that appear in each issue, as well as the comic stylings of Randy Spencer.

I hope you’ll check it out here:





Vol. 5, Iss. 11
November 9, 2016

Coverage Opinions Interview With “Tiger Mom” Amy Chu Makes The Wall Street Journal


It was a lot of fun interviewing Amy Chua for the last issue of Coverage Opinions. Amy is widely known as the “Tiger Mom” -- a title she earned after her strict Chinese parenting methods were described in her New York Times bestseller – Battle Hymn of the Tiger Mother. Amy is also a professor at Yale Law School. She was kind enough to let me ask her if the Tiger Mom is also the “Tiger Law Professor?”

It was very exciting when The Wall Street Journal Law Blog did an article about the interview and linked to it. See it here. http://www.coverageopinions.info/WallStreetJournalAmyChua.pdf




Vol. 5, Iss. 11
November 9, 2016


20 Song Titles That Are Really Coverage Issues



[Randy Spencer is still on vacation. Translation -- I still can’t kick this writer’s block. This column originally appeared in the April 23, 2014 issue of Coverage Opinions. Sure, it’s a repeat column. But don’t you watch Seinfeld reruns and enjoy them just as much the second (and third and fourth) times? And there are a lot of new CO subscribers since April 2014. [And, let’s face it, it’s not like you’re paying for this.]


To most Culture Club fans, the group’s chart-topping hit, “Do You Really Want To Hurt Me?,” is about Boy George’s relationship with band drummer Jon Moss. But insurance coverage folks know what this smash hit is really about -- “Do you really want to hurt me?” is the pivotal question that will determine whether the “expected or intended” exclusion applies to bar coverage.

So that got me to thinking, what other song titles are really coverage issues in disguise? A lot, it turns out. Consider all of these coverage issues that you’ve been signing about over the years.

“Crumblin’ Down,” by John Mellencamp. Coverage Issue: Is faulty workmanship an occurrence?

“Pay It Back,” by Elvis Costello. Coverage Issue: Reimbursement of defense costs

“Stay (Just A Little Bit Longer),” by The Chantels. Coverage Issue: Extended Reporting Period

“Always Crashing The Same Car” by David Bowie. Coverage Issue: It’s time to non-renew this policy

“Same Mistakes,” by One Direction. Coverage Issue: Single occurrence

“Who Are You?,” by The Who. Coverage Issue: You are not an insured

“I Can’t Stop Hurting You,” by Rick Springfield. Coverage Issue: Continuous trigger

“Leave Me Alone,” by Michael Jackson. Coverage Issue: Insured’s right to independent counsel

“Rock ’n Roll Ain’t Noise Pollution,” by AC/DC. Coverage Issue: Pollution exclusion is limited
to traditional environmental pollution

When It’s All Over,” by Alicia Keys. Coverage Issue: Claim first made after the policy expired

“Stand By Me,” by Ben E. King. Coverage Issue: Is there a duty to defend?

“I Don’t Know,” by Ozzy Osbourne. Coverage Issue: Montrose Endorsement does not apply

“Help me, Rhonda,” by the Beach Boys. Coverage Issue: Insured named Rhonda has a duty to cooperate

“Daddy’s Gonna Pay For Your Crashed Car,” by U2. Coverage Issue: There’s been no tender of claim

“Feel No Pain,” by Sade. Coverage Issue: Insurer not prejudiced by late notice

“I Didn’t Mean To Hurt You,” by John Lennon. Coverage Issue: Intentional conduct can still be an accident

“Innocent Man,” by Billy Joel. Coverage Issue: Criminal act exclusion does not apply

“Severe Emotional Distress,” by Into Eternity. Coverage Issue: Emotional injury, without physical manifestation, is not “bodily injury.”

“I Won’t Pay Your Price,” by Motorhead. This mediation is over.

And some recording artists are themselves coverage issues in disguise. Cher is Allocation and INXS was formed by a bunch of guys from an umbrella unit.


That’s my time. I’m Randy Spencer. Contact Randy Spencer at



Vol. 5, Iss. 11
November 9, 2016

Jim Semple:
Practicing Insurance Coverage Law In Delaware

Last issue’s inaugural “My Hometown” column was a big success. Its objective is for a coverage lawyer, practicing in a lesser-populated state, to describe some of his or her state’s key coverage decisions and aspects of practicing there that may differ from other states. The point being that, when it comes to larger states, we often know the key coverage decisions and things about practicing there that make it unique. California has Cumis. New York has §3420(d). New Jersey has Burd. Arizona has Morris. But what about the lesser-populated states? They have their own DNA too. But it is not as well known.

Brenda Wallrichs, of Lederer Weston Craig, in Cedar Rapids, Iowa, took the plunge and got “My Hometown” off the ground. Brenda did a wonderful job of discussing Iowa’s extrinsic evidence duty to defend standard, the Iowa Supreme Court’s recent pronouncement on the definition of “occurrence,” construction of the pollution exclusion and bad faith, which Brenda noted is favorable from the industry standpoint.


I am grateful to Jim Semple, of Cooch and Taylor in Wilmington, for stepping into the box and continuing the “My Hometown” column. Delaware may be small, but there is a lot to say about its coverage rules. As Jim discusses, Delaware is unique because, as the state of incorporation for thousands of companies, it sees more complicated cases than its population would otherwise predict.

Hello from Delaware, where I have practiced for the over 40 years. Delaware insurance law is generally consistent with the majority of jurisdictions. In determining whether an insurer has a duty to defend an action against its insured, Delaware courts apply the following principles: (a) where there exists some doubt as to whether the complaint against the insured alleges a risk insured against, that doubt should be resolved in favor of the insured; (b) any ambiguity in the pleadings should be resolved against the carrier; [and] (c) if even one count or theory of plaintiff's complaint lies within the coverage of the policy, the duty to defend arises. Cont’l Cas. Co. v. Alexis I. DuPont Sch. Dist., 317 A.2d 101, 105 (Del. 1974).

In construing an insurer’s duty to indemnify or defend a claim asserted against its insured, courts typically look to the allegations of the complaint to decide whether the third party’s action against the insured states a claim covered by the policy, thereby triggering the duty to defend. The rationale underlying this principle is that the determination of whether a party has a duty to defend should be made at the outset of the case, both to provide the insured with a defense at the beginning of the litigation and to permit the insurer, as the defraying entity, to control the defense strategy. American Ins. Group v. Risk Enterprise Management, Ltd. , 761 A.2d 826 (Del. 2000). But, where the demand for indemnification occurred after development of a complete discovery record in the underlying lawsuit, the Superior Court should not limit its analysis solely to the allegations of the complaint. Id. At 827; Pike Creek Chiropractic Ctr., P.A. v. Robinson, 637 A.2d 418, 421 (Del. 1994). (“A court construing an indemnification agreement should look to the actual facts developed during discovery, or at trial, to determine if the indemnitee is free from actual wrongdoing and therefore entitled to complete indemnification.”). Once the duty to defend is triggered by at least one count, the duty applies to “the entire suit.” See Consol. Rail Corp. v. Liberty Mut. Ins. Co., 2005 WL 697943, at *3 (Del. Super. 2005) (“[T]he duty to defend extends to all causes of action in a complaint as long as one cause of action is potentially covered.”).

Delaware’s rules of contract interpretation are succinctly stated. Interpreting the language of a contractual provision is a question of law. Pellaton v. Bank of New York, 592 A.2d 473, 478 (Del. 1991). The Court’s analysis must focus on determining the intent of the parties. See E.I. du Pont de Nemours & Co. v. Shell Oil Co., 498 A.2d 1108, 1113 (Del. 1985). The Court must first attempt to ascertain the parties’ intent from the language of the contract. Citadel Holding Corp. v. Roven, 603 A.2d 818, 822 (Del.1992). When the contractual provision is clear and unambiguous, the court will give the provision’s terms their plain meaning. Hallowell v. State Farm Mut. Auto. Ins. Co., 443 A.2d 925, 926 (Del. 1982). The Court should not render policy provisions meaningless, or seek to re write contractual obligations. See Warner Communications, Inc. v. Chris Craft Industries, Inc., 583 A.2d 962 (Del. Ch. 1989), aff’d. 567 A.2d 419 (interpretation of contract that gives effect to each term of the agreement is to be preferred to interpretation that accounts for some terms as redundant); E. I. du Pont de Nemours & Co. v. Shell Oil Co., 498 A.2d 1108 (Del. 1985) (whenever possible, court should give effect to all contract provisions); Ed Fine Oldsmobile, Inc. v. Diamond State Tel. Co., 494 A.2d 636 (Del. 1985) (function of court is not to rewrite plain language of an otherwise valid contractual provision); Emmons v. Hartford Underwriters Ins. Co., 697 A.2d 742 (Del.1997) (contract interpretation that adds limitation not found in plain language of contract is untenable).

Where the language is clear and unambiguous a court may not use “ambiguity” as an excuse to create a more perfect contract never agreed to by the parties. Hallowell v. State Farm Mut. Auto. Ins. Co., 443 A.2d 925, 926 (Del. 1982). The Court will not twist, distort or torture contractual terms to create an ambiguity when the language is clear and unambiguous. Rhone Poulenc Basic Chems. Co. v. American Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992); Aetna Casualty and Sur. Co. v. Kenner, Del. Supr., 570 A.2d 1172, 1174 (Del. 1990). Contractual language is not ambiguous merely because parties in litigation disagree concerning the provision’s proper construction. City Investing Co. Liquidating Trust v. Continental Casualty Co., 624 A.2d 1191, 1198 (Del. 1993); Rhone Poulenc at 1196. The Court may not consider extrinsic evidence in an effort to construe an unambiguous contract. City Investing, 624 A.2d at 1198; Citadel Holding, 603 A.2d at 822; Pellaton, 592 A.2d at 478.

The principal question is whether or not the contractual language is ambiguous. An ambiguity exists when the contractual provisions are “reasonably or fairly susceptible” of different interpretations or two different meanings. Rhone Poulenc at 1196. Both interpretations must be reasonable readings of the provision’s text. Kenner at 1174. As the Delaware Supreme Court stated: “Ambiguity does not exist where the court can determine the meaning of a contract without any other guide than a knowledge of the simple facts on which, from the nature of language in general, its meaning depends.” Rhone Poulenc, 616 A.2d at 1196. The reasonable expectations rule - that an insurance policy should be construed to effectuate the reasonable expectations of the buyer - only applies where ambiguity is found. Hallowell v. State Farm Mutual Automobile Ins. Co., 443 A.2d 925, 927 (Del.1982); O’Donnell v. State Farm Mutual Automobile Ins. Co., 443 A.2d 925, 927 (Del.1982).

The Delaware Supreme Court has upheld the qualified pollution exclusion, and said that it unambiguously limits coverage to discharges of pollutants that are both initially abrupt and unintended. E.I. DuPont v. Allstate Ins. Co., 693 A.2d 1059 (Del. 1997). The court ruled that (1) the insured has the burden of proving the exception to the exclusion; (2) sudden means abrupt; (3) drafting history is not a basis for introducing ambiguity into words whose meaning is otherwise plain; (4) the focus of the exclusion is on the initial release; and (5) regulatory estoppel does not apply in Delaware.

The Delaware law on “bad faith” is grounded in contract, not tort. The implied covenant of good faith and fair dealing inheres in every contract, including insurance contracts. Dunlap v. State Farm Fire and Cas. Co., 878 A.2d 434, 442 (Del.2005). (“[T]he implied covenant requires a ‘party in a contractual relationship to refrain from arbitrary or unreasonable conduct which has the effect of preventing the other party to the contract from receiving the fruits of the bargain.’ Thus, parties are liable for breaching the covenant when their conduct frustrates the ‘overarching purpose’ of the contract by taking advantage of their position to control implementation of the agreement's terms.”). In order to establish “bad-faith” the plaintiff must show that the insurer’s refusal to honor its contractual obligation was clearly without any reasonable justification. Casson v. Nationwide Insurance Co., 455 A.2d 361, 369 (Del Super. 1982); ConAgra Foods, Inc. v. Lexington Ins. Co., 2010 WL 663746 (Del. Super. 2010).

The Delaware Supreme Court has ruled that an insurer may be forced to produce otherwise privileged reports from its lawyers if it placed the documents at issue in a bad faith case. The court declared that “a party cannot force an insurer to waive the protections of the attorney/client privilege merely by bringing a bad faith claim. Where, however, an insurer makes factual assertions in defense of a claim which incorporate, expressly or implicitly, the advice and judgment of counsel, it cannot deny an opposing party “an opportunity to uncover the foundation for those assertions in order to contradict them.” Tackett v. State Farm Fire and Casualty Insurance Company, 653 A.2d 254, 259 (Del. 1995).

Although Delaware insurance law, by and large, is not very different from the majority of jurisdictions, Delaware is unique because it sees more complicated cases than its population would otherwise predict because Delaware is the state of incorporation for thousands of companies. As a result those companies can both sue and be sued here. Moreover, in addition to its highly regarded Supreme Court, Delaware trial courts have an excellent reputation for their handling of such disputes. The Court of Chancery, its equity court, is generally viewed as the top business court in the nation. The Superior Court, its law court, has also been consistently rated as a top jury trial court by the U.S. Chamber of Commerce for its fairness and reasonableness in handling cases. Both have entertained complex insurance disputes. Probably the best thing about practicing in Delaware is its people. We’re not only a small state, but a fairly small legal community. Because we see one another not only in our courts but in our streets, schools, communities, restaurants and clubs, and because we still tend to observe traditional values, our attorneys and judges are generally congenial, collegial and a pleasure to be around.

James W. Semple is a Director at Cooch and Taylor P.A. in Wilmington, and assists his clients in assessing and resolving complex business disputes. An ABA-trained mediator for the Delaware Superior Court, Jim has mediated, arbitrated and advocated in hundreds of legal and alternative dispute resolution proceedings. He drafted the 1994 revision to 18 Del. C. §3902, Delaware’s uninsured motorist statute. He also frequently speaks and writes, locally, nationally, and internationally, on business dispute resolution and professional ethics issues. He is a member of the American and District of Columbia Bar Associations.

As a member of the Delaware Bar Association, he has served on its Executive Committee and was the Founding Chair of its Torts and Insurance Practice Group. He is a past member of both the Board on Professional Responsibility, which hears and decides claims by the Office of Disciplinary Counsel against Delaware lawyers, and the Board of Bar Examiners of the Supreme Court of the State of Delaware. He is a past member of the Inns of Court, a charter member of the Delaware chapter of The American Board of Trial Advocates, and the Founding President of the Defense Counsel of Delaware. He has been a member of the Federation of Defense and Corporate Counsel (FDCC) since 1985, is a Former Practice Group Chair, and was the Program Chair for its 2000 Winter Meeting.

He has twice won the FDCC’s Hecker Award for his legal writing, has been repeatedly named to Delaware SuperLawyers®, to The Best Lawyers In America®, and was recently named to the National Association of Distinguished Counsel. He has authored the Delaware chapters in The Tort Law Desk Reference and Business Torts: A Fifty-State Guide, the Delaware chapter for the DRI Compendium on Trade Secrets, and is now working on the Delaware Chapter for a DRI Compendium on Rescission. He has served many times as a speaker on Recent Cases at Lorman’s Legal Ethics seminars in Delaware, and spoke on Delaware’s Business Courts at the FDCC’s Corporate Counsel Symposium in Philadelphia. In his spare time, he has served on several community boards and enjoys movies, books, and playing not yet ready for prime time golf and hard ball doubles squash.




Vol. 5, Iss. 11
November 9, 2016

Happy Belated-Halloween: From Boo To Sue – Part 2
Update On Haunted House Liability

The October 30, 2013 issue of Coverage Opinions featured “From Boo To Sue: Are Haunted Houses Liable For Scaring Their Visitors?” The article examined whether a visitor to a haunted house can recover for an injury sustained on account of being scared. In all five cases that I located on the subject, the injured patron was not able to recover as the court considered the unique nature of a haunted house. [Here’s the eeriest factor -- all five were from the Court of Appeal of Louisiana.] So the moral of this tale was clear. You go to a haunted house expecting to (and paying to) be surprised, startled and scared by the exhibits. You have the right to complain when the experience is not scary. But there is no complaining when you get what you asked for.

This 2013 article was a fun one and was picked up by The Wall Street Journal Law Blog, Law 360 and the ABA Journal Tort Law Blog.

Cut to three years later and it’s time to see what’s been happening when haunted houses and court houses come together. I was able to locate just one decision, since the time of “From Boo to Sue” (Part 1), that addressed a haunted house’s liability for injury to a patron – on account of the visitor being scared. However, given that, prior to 2013, there had only been five, I was shocked (and thrilled) to find even one.

The facts of Griffin v. The Haunted Hotel, Inc., 242 Cal. App. 4th 490 (2015) are succinctly stated by the court: “In October 2011 appellant Scott Griffin purchased a ticket to experience ‘The Haunted Trail,’ an outdoor haunted house type of attraction where actors jump out of dark spaces, often inches away from patrons, holding prop knives, axes, chainsaws, or severed body parts. After passing what he believed was the exit and ‘giggling and laughing’ with his friends about how much fun they had, Griffin unexpectedly was confronted by a final scare known as the ‘Carrie effect’—so named because, like the horror film Carrie (MGM 1976), patrons are led to believe the attraction is over, only to be met by one more extreme fright. This was delivered by an actor wielding a gas-powered chainsaw (the chain had been removed), who approached Griffin, frightened him, and gave chase when Griffin ran away. Griffin was injured when he fell while fleeing. Griffin sued The Haunted Hotel, Inc., which operates The Haunted Trail, alleging negligence and assault.”

Griffin lost. He assumed the risk. The court explained: “The risk that a patron will be frightened, run, and fall is inherent in the fundamental nature of a haunted house attraction like The Haunted Trail. Moreover, on this record there is no evidence creating a triable issue Haunted Hotel unreasonably increased the risk of injury beyond those inherent risks or acted recklessly.”

The court also denied Griffin’s argument that his injuries were not caused by his reaction to “fun fear,” being “the purpose for why he and others go to such scare events.” Griffin argued instead that he was fearful of the “real, actual danger of physical injury that an irresponsible employee was creating by mishandling a chainsaw.”

The opinion is lengthy, and interesting, and gets into a whole bunch of issues about the risks of The Haunted Trail and theories of liability, etc. But it can be summed up by these two lines: “[T]he point of The Haunted Trail is to scare people, and the risk that someone will become scared and react by running away cannot be eliminated without changing the basic character of the activity. As the trial court aptly noted, ‘[W]ho would want to go to a haunted house that is not scary?’”


Vol. 5, Iss. 11
November 9, 2016

See for yourself why so many find it useful to have, at their fingertips, a nearly 800-page book with just one single objective -- Providing the rule of law, clearly and in detail, in every state (and D.C.), on the liability coverage issues that matter most.







Vol. 5, Iss. 11
November 9, 2016

ISO Listens To Coverage Opinions:
Says Alo-HA To A New Designated Premises Endorsement


Loyal readers of Coverage Opinions know that I have been harping on some recent cases giving very broad interpretations to a “Designated Premises Endorsement.” In general, the courts concluded that, if the insured’s headquarters are a designated premise, a policy provides coverage for injury or damage at a non-designated premise, if the negligent corporate decision, leading to the injury or damage, was made at the corporate headquarters.

The two decisions that I pointed to, giving this overly broad interpretation, were the Hawaii Supreme Court’s in C. Brewer and Co., Ltd. v. Marine Indemnity Ins. Co. (included as a “Top 10” case of 2015) and Western Heritage Ins. Co. v. Cyril Hoover dba Okanogan Valley Transportation (W.D. Wash. Mar. 30, 2016) (which cited to C. Brewer extensively). Then, in the last issue of CO, I discussed Newman v. United Fire & Casualty Company (9th Cir. Sept. 16, 2016), which also applied this overly broad interpretation of the Designated Premises Endorsement.

In addressing these cases I pointed out that I have never been one of those people who believes that, any time an insurer is told by a court that it must provide coverage, that it didn’t believe was owed, the insurer needs to amend its policy language. However, I concluded that insurers were losing too many cases, involving the DPE, to not take action to ensure that the intent of the policy is achieved.

Well whaddya know. Several CO readers wrote to me after the last issue [thank you], and provided a September 26, 2016 ISO Circular addressing the submission of state filings to revise the Limitation of Coverage to Designated Premises or Project endorsements. In support of its decision to seek the revisions ISO cited, well whaddya know again, the Hawaii Supreme Court’s decision in C. Brewer [Alo-HA] and the Washington federal court’s decision in Western Heritage. [How do you like them apples?]

What’s more, the change is being made in the Insuring Agreement. Yes, the Insuring Agreement. The biggest of all stages in a CGL policy.

According to ISO, for purposes of “bodily injury” and “property damage” coverage, an endorsement would be available, that amends the Insuring Agreement, to specify where in the “coverage territory” such injury and damage must occur. The revised language would state that “bodily injury” or “property damage” must occur on the premises shown in the Schedule or the grounds and structures appurtenant to those premises, or must arise out of the project or operation shown in the Schedule.

The endorsement also includes changes to the “personal and advertising injury” Insuring Agreement to specify that the offense must arise out the insured’s business performed on the premises shown in the Schedule or in connection with the project or operation shown in the Schedule. There are also amendments to specifically address where false arrest and wrongful eviction (and related offenses) must have been committed.

The proposed effective date for the endorsements is April 1, 2017.

As for the “impact” of these changes, ISO’s explanation is what you would expect: “In circumstances in which individual insurer claims settlement practices or state law are reflective of the Brewer and Western Heritage decisions, certain revisions, in the context of a schedule premises, may be a reduction in coverage.”

Now, if only I could get the people who live in my house to follow what I say.


Vol. 5, Iss. 11
November 9, 2016

Supreme Court: Significant Consequences For Duty To Defend Breach


The Supreme Judicial Court of Maine just handed down Harlor v. Amica Mutual Ins. Co., No. Kno-15-282 (Nov. 3, 2016), addressing whether Amica was obligated to defend its insured, under a homeowner’s policy, for a dispute over the right to use a dock according to an easement. Amica denied a defense. Its insured settled the action and filed an action seeking a declaratory judgment that a defense was owed.

For various reasons the court concluded that Amica breached its duty to defend. The specific coverage issues, and reasons why a defense was owed, are not the subject here. Rather, the issue here -- the one with the more wide-reaching consequences -- is the damages for which Amica was liable on account of its breach.

Amica acknowledged that it was liable for the attorney’s fees that its insured incurred in the underlying action and the declaratory judgment action. However, it argued that it was not liable for its insured’s payment to the underlying plaintiffs, because that payment did not establish that the plaintiffs actually sustained an injury covered by the policy.

The court concluded that “[a]n award of damages to the insured for breach of an insurer’s duty to defend should . . . place the insured in a position equally as good as the insured would have occupied had the insurance contract been fully and properly performed from the beginning.”

But what does that really mean?

In general, the court determined that the insurer did not lose the right to contest coverage for the settlement. The rationale for this being that there is a distinction between the duty to defend and the narrower duty to indemnify. “To award to the insured the entire settlement as consequential damages after a breach of the duty to defend, when some claims against the insured were for covered damages and others were for uncovered damages, would improperly enlarge the bargained-for coverage.”

However – and the however is often where the real meaning lies – while the breaching insurer does not lose the right to assert non-coverage, it assumes the burden of proving non-coverage. And, as the court observed, “it is not uncommon for a lawsuit against an insured to assert some claims that are covered by the insurance policy and others that are not.”

Therein lies the rub. If the insurer cannot meet its burden to establish a distinction between covered and uncovered claims, then, as a practical matter, it has been subject to estoppel – in whole or in part -- on account of its breach of the duty to defend.

Vol. 5, Iss. 11
November 9, 2016

Duty To Defend: “Four Corners” Or “Four Corners, But”?


The determination whether an insurer has a duty to defend is the most important of all coverage issues. And this shouldn’t be surprising. The question arises in just about every liability claim -- regardless of policy type. No other issue can make that claim. And the consequences for an insurer that breaches its defense obligation are, at best, significant and, at worst, monumental. The underlying plaintiff also has a lot riding on it. If a defense is owed, an insurer, now incurring costs, may be inclined to settle at some point – even if the case is defensible.

Given the importance of the issue, all of the stakeholders in a liability claim are well-served by the tests, for determining if an insurer has a duty to defend, being well-defined. And that is the case–or so it seems. Almost universally a duty to defend is owed if the allegations in the complaint, and nothing else, provide any potential for coverage or such allegations, in conjunction with extrinsic evidence, provide any potential for coverage. It’s one or the other. What’s more, which one of these tests applies was long-ago decided by just about every state in the country. All this said, how a particular state determines if a duty to defend is owed should be as predictable as General Electric paying a dividend.

However, while courts usually have no problem expressing their state’s duty to defend rule, their steadfast adherence to it can be a different matter. This is most surprising in states that have adopted the “four corners” rule for determining if a duty to defend is owed. What could be simpler than that? While an insurer’s obligation to indemnify its insured may require a four week trial to get all the necessary facts, the information for determining an insurer’s duty to defend should be limited to just two documents – the policy and the complaint. The duty to indemnify may require a roomful of documents to figure out; but those needed for determining a duty to defend should fit in an envelope.

This is the way it’s supposed to work in “four corners” states. But exceptions have crept into the duty to defend calculation. Some courts, despite a high court mandate to look no further than the complaint and policy to determine if a defense is owed, are peaking at, or considering, other things. As a result, a “four corners” determination may not be as narrow as advertised.

Sometimes the consideration of information outside the complaint benefits the insurer and sometimes it benefits the insured. But the result is the same for both. Instead of the parties simply disagreeing whether the complaint, when compared to the policy, creates any potential for coverage–the usual basis of a coverage dispute--now add a possible dust up over whether additional information should also be considered.

This presents an interesting dilemma for the parties in a coverage dispute. Even if a prior court has applied a “four corners” exception, a party may be hesitant, and understandably so, to seek it in its own case. The decision to argue against application of a black letter rule of law – not to mention one that has likely existed for decades -- is not an easy one to make. Nor is it an easy task to accomplish.

Consider some of these examples of states that call themselves “four corners” – but sometimes use a “four corners, but” standard to determine if a defense is owed.

In Liberty Ins. Corp. v. Korn, No. 15-332-LPS (D. Del. Sept. 27, 2016), the court observed that the Delaware Supreme Court has adopted the “four corners” rule for purposes of determining an insurer’s duty to defend. However, the court added that “while the four-corners guideline encourages definition of the parties’ roles and responsibilities as early and efficiently as possible, it does not restrict a court from referring to the record when doing so would be useful to its analysis.” (emphasis added). The court concluded that, despite allegations that the underlying plaintiff suffered “bodily harm” being contained in medical records, and not within the complaint, they were useful to the analysis. Therefore, the records were considered for purposes of establishing the insurer’s duty to defend.

Rhode Island is a “four corners” state. However, in Peerless Ins. Co. v. Viegas, 667 A.2d 785 (R.I. 1995), the Supreme Court of Rhode Island inferred an intent to cause harm and injury in cases involving the sexual molestation of a minor. Thus, notwithstanding that the duty to defend is determined by the “pleadings test,” [a.k.a. “four corners”] the Rhode Island high court held that, if the policy contains an intentional act exclusion, an insurer is not obligated to defend an insured that sexually abuses a minor, even if the allegations in the complaint are described in terms of negligence.

In Copp v. Nationwide Mut. Ins. Co., 692 S.E.2d 220 (Va. 2010), the Supreme Court of Virginia acknowledged that, in several prior decisions, it applied the rule that only the allegations in the complaint and the terms of the policy can be considered in deciding if there is a duty to defend. However, the court departed from the “four corners” rule on the basis that none of the prior decisions involved the situation before it—applicability of an exception to the “expected or intended” exclusion if the insured acted in self-defense.

In Ramara, Inc. v. Westfield Ins. Co., 814 F.3d 660 (3d Cir. 2016), a complaint was silent as to any acts or omissions by a certain entity. Thus, the insurer argued that, because Pennsylvania is a four corners state, it did not have a duty to defend another party under an Additional Insured Endorsement. However, the reason why the complaint was devoid of allegations against the party was that it was the plaintiff’s employer. Therefore, it was not a party to the case because of the worker’s compensation bar.

The Third Circuit spoke repeatedly about Pennsylvania being a “four corners” state. Nonetheless, the court held that “where the Workers’ Compensation Act is relevant to a coverage determination, insurers (and the courts that review their determinations) must interpret the allegations of an underlying complaint recognizing that the plaintiff’s attorney in the underlying action drafted the complaint taking the existence of the Act into account.”

In Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 240 P.3d 67 (Or. Ct. App. 2010), the court acknowledged that Oregon is a “four corners” state. However, the court concluded that, “when the question is whether the insured is being held liable for conduct that falls within the scope of the policy, it makes sense to look exclusively to the complaint. However, the “same cannot be said with respect to whether a party seeking coverage is an ‘insured.’” Thus, the court allowed a party to use extrinsic evidence to establish its status as an insured under a vendor’s endorsement.

As these cases, and many others, demonstrate, a “four corners” state is sometimes a “four corners, but” state. This adds an additional uncertainty for parties disputing whether a defense is owed.

Vol. 5, Iss. 11
November 9, 2016

Additional Insured: Don’t Overlook This Easy To Overlook Issue


What do you call a New York Appellate Division decision that’s fifteen Lexis pages long? Answer: I don’t know. I’d never seen one until last month. From the court that skillfully issues decisions that can fit on postcards comes Gilbane Building Company v. St. Paul Fire & Marine Ins. Co., No. 653199/11,884 (N.Y. App. Div. Sept. 15, 2016), a dozen-plus page decision addressing a very interesting, important and easy to overlook additional insured issue. Ironically, the court choose a case that involves the interpretation of just two words to spill all that ink.

Gilbane Building involves a multi-party construction project and the decision has a few moving parts. To keep it simple I limit the background here to just what’s needed to make the points.

Gilbane Building Co./TDX Construction Corp. was a Joint Venture that served as a construction manager for a 15-story building for use by the Chief Medical Examiner of the City of New York. The Dormitory Authority of the State of New York (DASNY) agreed to finance and manage the project. Under the construction management agreement, any prime contractor, whether retained by DASNY or otherwise, was required to name the construction manager – being the Gilbane/TDX Joint Venture -- as an additional insured under its liability policies.

Samson Construction Company entered into a contract with DASNY to perform services as the prime contractor. Samson agreed to procure a commercial general liability policy with an endorsement naming several parties as additional insureds, including “the Construction Manager (if applicable)” [as well as specifically naming the construction manager -- Gilbane/TDX Construction Joint Venture].

Samson, as required, obtained a policy from Liberty Insurance Underwriters that contained an “Additional Insured-By Written Contract” clause, stating: “WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization with whom you have agreed to add as an additional insured by written contract but only with respect to liability arising out of your operations or premises owned by or rented to you.” (emphasis added).

DASNY sued Samson and the project architect seeking damages for Samson’s negligence in performing the work. The architect commenced a third-party action against the Joint Venture. The JV provided notice of the third-party action to Liberty. Liberty denied coverage on the basis that the JV had provided no documentation that Samson, the named insured, was supposed to defend and indemnify the JV. The JV filed an action against Liberty seeking coverage.

The trial court denied Liberty’s motion, holding that “plaintiffs qualified as additional insureds under the policy. The court found that the policy ‘requires only a written contract to which Samson is a party’ and that this requirement was met by Samson’s written contract with DASNY, which obligated Samson to procure insurance naming as additional insured ‘the Construction Manager (if applicable)’ and that the JV was undisputedly the construction manager.”

The Appellate Division – over a very lengthy dissent – reversed. The court’s decision was tied to a literal application of the policy language of the additional insured endorsement: “In this case, the ‘Additional Insured-By Written Contract’ clause of the CGL policy provides additional insured coverage to ‘any person or organization with whom you [Samson] have agreed to add as an additional insured by written contract.’ Contrary to Supreme Court’s determination, and consistent with our prior decisions in [citations omitted] we find that the language in the ‘Additional Insured-By Written Contract’ clause of the Liberty policy clearly and unambiguously requires that the named insured execute a contract with the party seeking coverage as an additional insured. Since there is no dispute that Samson did not enter into a written contract with the JV, Samson’s agreement in its contract with DASNY to procure coverage for the JV is insufficient to afford the JV coverage as an additional insured under the Liberty policy.” (emphasis added).

The court rejected the JV’s argument as distorting “the plain language of the additional insured clause of the Liberty policy issued to Samsom. Indeed, plaintiffs place undue emphasis on the phrase ‘by written contract’ and completely ignore the inclusion of the words ‘with whom’ as the object of the verb phrase ‘you agree.’”

The court criticized the dissent for ignoring the clear and unambiguous policy language in favor of attempting to give the contract a meaning based on “what the parties may have subjectively intended by certain terms.”

It is easy to see how the court reached this decision -- literal application of the additional insured endorsement. Plain and simple. However, it is also easy to overlook this issue when addressing whether a party is an additional insured on the basis that a contract requires that it be named as an AI. Being named as such a party in a contract is not the same as being named as such a party in a contract where the obligation to obtain such AI coverage falls on the named insured.

Vol. 5, Iss. 11
November 9, 2016

Federal Court Provides A Tutorial On “Other Claims” Discovery
Wow That’s A Lot Of Lawyers


First Horizon National Corp. v. Houston Casualty Company, No. 15-2235 (W.D. Tenn. Oct. 5, 2016) involves coverage for a $212.5 million settlement, of a False Claim Act claim, concerning errors and omissions in underwriting and origination of HUD mortgage loans. In general, one of the issues in the case was the applicability of an inter-related acts provision. It’s obviously a big case and it sounds pretty complicated. There are a lot of lawyers involved. The Lexis opinion lists 36 of them under the Counsel heading. The United States Constitution was ratified with just 39 signers.

The recent decision from the Tennessee federal court in First Horizon is long and generally involves the resolution of discovery disputes. I rarely address discovery dispute cases in Coverage Opinions. They are usually case specific -- not to mention deadly dull. But First Horizon caught my attention because of its lengthy treatment of the discoverability of an insurer’s treatment of similar claims. That is an interesting discovery issue and one with potentially significant (and labor intensive) consequences if allowed.

The insured propounded the following interrogatory on defendant insurers: “Identify by style of the case, case number, court, and status, any other lawsuit or litigation . . . initiated in the past 10 years, involving the denial of a claim (in whole or in part) for indemnification or defense pursuant to an executive risk insurance policy . . . similar to First Tennessee’s Policies, to which You have been a party, and where You asserted the defense that the underlying claim at issue was barred because it arises ‘out of the same or related Wrongful Acts’ (or similar language) contained in a matter reported under a prior policy period. Provide the status or outcome of each such matter.”

Not surprisingly the insurers objected to this discovery request. The court denied it for several reasons: “Under these circumstances, permitting the Plaintiffs to conduct ‘other claims’ discovery would indeed result in a fishing expedition, with little or no relevance to the Plaintiffs’ breach of contract or bad faith claim and with significant and disproportionate burden to the Defendants and the increased potential for further discovery disputes.”

However, of note, while the court denied the discovery request, it did not conclude that “other claims” discovery is per se prohibited. There had not yet been a determination whether the policy language at issue was ambiguous. Therefore, if any ambiguity were found to exist, the parties may present extrinsic evidence of the parties’ intent. Interestingly, the court then concluded that, even though there had not yet been a determination whether the policy language was ambiguous, it would address whether the materials sought would aid in the interpretation of the policy. The rationale being that, if discovery must wait until there were a finding of ambiguity, it would delay resolution of the dispute.

The court’s explanation, for its denial of “other claims” discovery, under these circumstances, is somewhat lengthy. To keep it simple I’ll set out verbatim a few of the reasons here. Needless to say, if you are involved with this issue, the case is a must read.

Relevance: “As the [Insurers] maintain, the positions they took in other claims depended on the policy language and the facts of the particular case, which are necessarily different from the policies and facts of the instant case. Even if the Defendants have in fact taken conflicting positions in the past regarding the same terms at issue in this case, it would not aid the court in interpreting the policy language at issue or in determining the Defendants’ intent in the instant case. Any relevance would be remote and the discovery requested would amount to nothing more than a fishing expedition. Further, even if such information may be considered remotely relevant, as discussed infra, its production would be unduly burdensome and disproportionate to this litigation.”

Even for purposes of bad faith, the court concluded that the “other claims” information was not relevant: “Discovery of ‘other claims’ is also irrelevant to the Plaintiffs’ bad faith denial of insurance coverage claim for the same reason that it is irrelevant to contract interpretation. Other bad faith claims ‘involve circumstances unique to each’ policyholder, such as different facts, different policies, and different applicable law.”

Unduly Burdensome and Disproportionate: “[T]he insurers’ files are not catalogued by coverage issues and each insurer would have to conduct a manual review of claims over the past 10 years to identify the claims that meet the criteria of the Plaintiffs’ interrogatory requests. Therefore, the Defendants cannot conduct a simple electronic search to produce the responsive documents. Furthermore, the Defendants have identified other substantial difficulties with the discovery requests. Even though the Plaintiffs indicated at the hearing that they were willing to limit the scope of requests, the requests are still burdensome. As previously indicated, the Defendants would have to identify the claims responsive to the requests, which task, they aver in their affidavits, would require thousands of hours of manual review. Once the claim files were identified, each Defendant would have to review each document in the file (because the Plaintiffs in essence request every document found in the claim file) and ensure that it does not contain privileged or confidential information, in some cases seek a court order or permission of the third party to produce the document, and ensure compliance with state law and regulation. Each Defendant estimates that these tasks would take thousands of hours to complete and would significantly interfere with their respective business operations.”

First Horizon is an interesting decision. While the court observed that “other claims” discovery is not per se prohibited, it also left no doubt that the barrier to obtaining such information is extremely high.

[The decision also addressed, in some detail, the discoverability of claims handling and underwriting manuals, reinsurance agreements and insurer reserves. All of the insured’s requests were denied.]


Vol. 5, Iss. 11
November 9, 2016

Federal Court Says Definition Of “Commenced” Is Ambiguous: Impact On CD Claims


Temperature Service Co. v. Acuity, No. 16C2271 (N.D. Ill. Oct. 14, 2016) involves coverage for damage to a building under a property policy. At issue was interpretation of the word “commenced.” While it’s a property case, I can’t see how it’s not potentially applicable to a liability coverage case where the meaning of “commenced” -- in the context of a “first manifestation” or “loss in progress,” etc. endorsement -- is at issue.

A commercial building was constructed in or around 1980. In August 2013, Plaintiff, Temperature Service Company, excavated around the building for the construction of a storage addition. “During the excavation process, Plaintiffs discovered that the soil around and under the insured property contained ‘urban backfill’ construction debris, asphalt, concrete and other manmade materials that cause ‘differential settlement’ of the earth.” It was determined that the “urban backfill” causes – and continues to cause -- cracks in the building foundation, steps, drywall and damage to the window frames and doors.

Temperature Service Company sought coverage for stabilization measures and other repairs under an Acuity property policy that insured against “loss or damage commencing during the policy period.”

As Acuity saw it, if “commencing” is construed to refer to “the single moment in time when all of the alleged damage to the insured property began or originated,” no coverage is owed because the insured cannot establish (and seems to admit it) that such date falls within the period of coverage. More specifically, Acuity maintained that the “property damage alleged to share a common cause—here, the alleged presence of ‘urban backfill’—can only begin once, presumably at the time the topsoil at the insured premises began to settle differentially.”

However, the court concluded that there was another – broader -- way to define “commenced” -- “each identifiable instance of new damage or loss, regardless of whether similar damage or loss, or damage or loss with a common but chronologically distinguishable cause, commenced prior to the policy period.”

Based on two possible definitions of “commenced,” the court concluded that the term was ambiguous (or at least agreed with other courts that so held) and construed it against the insurer.

Summary judgment was not appropriate, which the court explained as follows: “[T]he Court cannot reach the conclusion here that there is no evidence of damage commencing in the coverage period. On the incomplete record in this case, Plaintiffs have minimally established that a number of parties, including experts, observed multiple types of property damage in a variety of locations on the insured.”

Temperature Service Company has potential implications on claims under liability policies. It has become fairly routine for liability policies to include endorsements designed to minimize the impact of the continuous trigger on construction defect claims. These endorsements, going by such names as First Manifestation Endorsement, Claims in Progress Exclusion, Discovered Injury or Damage Exclusion and Prior Damages Exclusion were essentially designed to preclude coverage for “bodily injury” or “property damage” that took place before the policy period, even if the insured did not know that injury or damage had taken place and even if the injury or damage was continuous or progressive. As a result, coverage is effectively limited to “bodily injury” or “property damage” that first commences during the policy period – and that did not commence prior to the policy period. These exclusions may use the term “commenced” to describe this differentiation between potentially covered and non-covered “property damage.” Even an endorsement that does not use the word “commenced” may conclude that other words for “first occurs” have these two meanings.

Based on the definition of “commenced” adopted in Temperature Service Company, it is not all or nothing for the insured. In other words, even if some property damage caused by an insured commenced prior to the policy period (and is not covered), other property damage – even if related to the earlier property damage -- may have commenced during the policy period.

Vol. 5, Iss. 11
November 9, 2016

ALI Restatement Of Liability Insurance Makes Forbes.com
The ALI’s Restatement of The Law of Liability Insurance has certainly entered the arena for coverage professionals. What was once an obscure topic, known about by few, is now recognized as a significant, and potentially impactful, development on the liability coverage landscape. While the topic has received media coverage in the past, it has been limited to insurance publications. But no longer. A lengthy article about the ALI Restatement of Liability Insurance recently appeared on Forbes.com. The article discusses the background the project, some key provisions and gets comments, from both sides, on its potential impact. You can check it out here.

Wall Street Journal Addresses Challenges In The Trucking Insurance Market
An article in the October 15-16 issue of The Wall Street Journal – “Truckers Scramble To Get Insurance” – had this for a lede: “Truckers are finding it harder and costlier to line up coverage for their fleets, as a wave of blockbuster payouts over accidents pushes insurers out of the market.” Reporter Brian Baskin notes that, while the number of people killed in accidents involving large trucks is down 20% over the past decade, there have been a number of so-called “nuclear verdicts” – where juries awarded tens or even hundreds of millions of dollars. As a result, some large insurers in the trucking market have stopped writing coverage for for-hire fleets. Other insurers have increased premiums. All in all, there has been a scramble to line up coverage. There is a lot more to the article and if you are involved with trucking insurance it is worth checking it out.

Driving While Intexticated (From Gallagher Sharp, LLP)
The October issue of Gallagher Sharp, LLP’s fine insurance newsletter contains an excellent piece on so-called “driving while intexticated.” The Cleveland firm notes that it has noticed a growing trend in the amount of motor vehicle litigation alleging that the other driver was distracted by a cell phone and seeking punitive damages. The article looks at some cases involving the possibility of punitive damages on account of a driver being distracted by his or her cell phone. The upshot according to the firm: “More distracted driving and punitive claims are sure to come. Policyholders will face uninsured exposure and as a result may hire personal counsel. Insurers will reserve their rights and be sensitive to the issues raised by any punitive claim. Additional motion practice probably will be necessary. Insurers who are forewarned are forearmed in dealing with this emerging trend.”