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Coverage Opinions
Effective Date: September 25, 2019
Vol. 8 - Issue 8

Declarations: The Coverage Opinions Interview With Haben Girma
Harvard Law School's Only Deaf And Blind Graduate

Early in her time at Harvard Law, Haben Girma was called on in class. She answered the question. Then everyone turned around and stared at her in bewilderment, wondering "how did she know?" Haben's classmates were baffled because she is both deaf and blind. I had the thrill of speaking to Haben about her incredible achievement, new book, and what she's doing these days with her Harvard Law sheepskin. And she gave me the secret to how she knew that answer.

Randy Spencer's Open Mic
CVS Buys Aetna: Introducing The 22-Foot Long Insurance Policy

Encore: Randy Spencer's Open Mic
The Chicago Vomit Clean-up Fee And Other Cities' Warnings To Visitors

Roadside America: Lawyer Style
The World's Largest Warning Signs

Insurers Criticized For, Get Ready . . . Paying Claims

Most Significant Decision of 2019 (So Far): Allocation Between Covered And Uncovered Claims

Texas Supreme Court To Say: Howdy Duty To Defend

Tapas: Small Dishes Of Insurance Coverage
• The ROR Argument You Hope You Never Have To Make 
• Policyholder Counsel As Clever As Magical Mr. Mistoffelees!

Back Issues:
  Volume 5 - Issue 12 -December 7, 2016
  Volume 6 - Issue 2 -February 13, 2017
  Volume 8 - Issue 1 - January 3, 2019


Vol. 8 - Issue 8
September 25, 2019


CVS Buys Aetna: Introducing The 22-Foot Long Insurance Policy




I kid you not.  I was in CVS not long ago to pick up a prescription and my receipt was 53¼ inches long.  [My wife sews a lot so it was easy to find a tape measure.]

You know what I’m talking about.  You too have no doubt been treated to such retail goofiness.  The first few inches of the receipt spell out the transaction that brought me into the store.  Ironically, a prescription that was free.  After that, it’s instructions on how to share my feedback (which I’m kinda doing now), an award of $6 in “extrabucks” (whatever that is) and then it’s off to the races with a litany of coupons: $2 off Tums (28 count or larger), $5 off $22 of facial cleaners or moisturizers (any brand), $4 off $25 of vitamins (my choice to mix and match, which I guess means I don’t have to get all C but can get A, C and D), $2 off three protein bars (some brands only).  And these are just a few.    

Earlier this month a federal judge approved the merger of CVS and the behemoth health insurer Aetna.  [Really.  I’m still not making anything up.]  CVS Health Corp. described the merger this way: “As a combined company, we are working to transform the consumer health experience and build healthier communities by offering care that is local, easier to use, less expensive and puts consumers at the center of their care.” 

That may all be true.  But I see something else in my crystal ball to come out of the combined company -- seventeen foot long Aetna insurance policies.  The first six feet of the policy will provide the terms and conditions of coverage.  But it won’t stop there.  They won’t be able to help themselves.  The terms and conditions will be followed by ads for the company’s Medicare supplemental policies, a buy one get one free coupon for dental insurance and 50% off Pringles (cross-marketing with the retail side). 

Wait, my crystal ball isn’t finished.  Fueled by the constant pressure for growth, my look into the future also sees CVS Health getting into the liability insurance business.  Insurance is insurance, right?  Of course this will result in a 22 foot long CGL policy.  The first twelve feet will spell out the terms and conditions, and then the coupons and offers will kick in: 50% off terrorism coverage on your next policy, late notice excused (up to six months), punitive damages covered (up to $100,000), choose your own defense counsel (fine print: CVS Health panel rates apply).

I can imagine this claim scenario: An insured puts CVS Health on notice of a suit six weeks after the insured was served.  CVS acknowledges that it will provide a defense, but not reimburse the insured for its pre-tender defense costs, as they are not covered.  Oh yes they are, responds the insured, emailing the adjuster a Pre-Tender Defense Costs Are Covered coupon.


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



Vol. 8 - Issue 8
September 25, 2019


Encore: Randy Spencer’s Open Mic

The Chicago Vomit Clean-up Fee And Other Cities’ Warnings To Visitors







I was in Chicago last week – work trip and I also had the good fortune of doing a set at the legendary Second City.  What a thrill!

While coming into the city from O’Hare I took a look at the fare schedule posted in the back of the cab.  Base fare $3.25.  Ok.  That sounds about right.  Airport departure tax.  Not sure why you have to pay to leave a place, but I’m not going to make a fuss.  A dollar for each additional passenger.  That makes sense.  Vomit Clean-up Fee -- $50.00.  Whoa!  Never seen that before.  I guess that’s proof that Chicago is one hard-partying town. 


On reflection – after texting a picture to everyone and saying hey, check this out -- Chicago’s vomit clean-up fee is sensible risk management.  You probably can’t prevent a heave-risk from getting into the cab.  So the next best thing is to address it post-lost -- with a clean-up fee.  I asked the cab driver about the fee.  He said that he’s had to charge it twice in the past three years.  I started to ask some follow-up questions but it was clear that he wasn’t too keen on discussing it.       

As a visitor to Chicago I was happy to be told in advance that tossing cookies in the back of a cab is frowned upon.  This enabled me to act accordingly.  Now there there would be no surprises when I saw the extra fifty on my credit card statement.  [Query – what’s the rule on whether you can expense that?]  Other cities would be well-served to provide warnings or other useful information to their arriving visitors.  We live in a world of warnings.  So what’s one more.  If someone takes the time to tell me that putting my finger into an electric socket is a bad idea, why shouldn’t I be informed on my way into Vegas that the Eiffel Tower on the Strip is not the real one.

Here are some other warnings or back of the cab notices that other cities should provide to their arriving visitors:

Denver: Brownies may actually make you hungrier.

Buffalo: Don’t worry.  Toronto is only two hours away.

Los Angeles: Not responsible for the loss of your soul.

Phoenix: That whole dry heat thing doesn’t matter when it’s 108.

New York: The Ray’s Pizza you are in may not really be the original one.

San Antonio: The Alamo is overrated – but not as much as the River Walk.

New Orleans: Base fare includes vomit clean-up fee.



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



Vol. 8 - Issue 8
September 25, 2019


Roadside America: Lawyer Style

The World’s Largest Warning Signs


As I’ve mentioned in the last couple of issues of Coverage Opinions, there is a new feature – “Roadside America: Lawyer Style.” 

It showcases various of the world’s largest objects.  And since giant things can sometimes mean giant risks, each of the gargantuan objects will be accompanied by an appropriately-sized massive warning sign to keep visitors safe and lawyers at bay. 

Just so there’s no misunderstanding about how this works, the giant objects are real.  You can go see them for yourselves.  But the warning signs are not.  They are make-believe -- depictions of what the warning sign would be, if there were a former insurance adjuster, defense lawyer, coverage lawyer, risk manager or any other nervous Nellie in charge of the site.

In case you missed last issue’s “Roadside America: Lawyer Style,” you can check it out here 
World’s Largest Knitting Needles

The 2019 Guinness Book of World Records features the world’s largest knitting needles.  The needles, a creation of Betsy Bond, a then senior art student at Wiltshire College in Southwest, England, are 14 feet 6.33 inches long and 3.54 inches in diameter.
Now, you might be thinking that young Betsy also created the world’s largest big deal.  After all, it’s just a couple of long sticks, right?  But not so fast.  Those Guinness people are real taskmasters.  To be declared the world’s largest knitting needles, they needed to actually work.  Specifically, Betsy was required to use them to knit 10 stitches and 10 rows of yarn.   

Betsy said: “I did quite a lot of research. I kept rethinking, redrawing and redesigning.”  The needless were ultimately made from hollow plastic tubes (polypipe) with 3D printed plastic points and knobs.

Congratulations Betsy!  I’m sure you were the toast of Wiltshire College and no doubt lots of people come to visit your recording breaking knitting needles.  But lost in all this hoopla may be the serious risks posed by 14 foot long knitting needles.  This is why, for Betsy’s graduate school project, she created the world’s largest Don’t Poke Your Eye Out warning sign.





Vol. 8 - Issue 8
September 25, 2019


Insurers Criticized For, Get Ready . . . Paying Claims


Stories in the media, criticizing insurers for not paying claims, are about as dog bites man as they get.  But what about a story criticizing insurers for paying claims.  Now those you don’t see too often.  That’s more like dog helps man fix the paper jam in the copier.

But this is just what was published in late-August by ProPublica, which describes itself as a non-profit newsroom that investigates abuses of power.  In “The Extortion Economy: How Insurance Companies Are Fueling a Rise in Ransomware Attacks,” author Renee Dudley provides a lengthy discussion of ransomware and the role of insurers, under cyber policies, paying ransom to get their insureds’ crippled systems back up and running.

The author’s conclusion: Insurance companies are responsible for the proliferation of ransomware.  And, what’s more, they are doing so because it’s good for business.  The ProPublica article is very long.  Its thesis is this:     

“The FBI and security researchers say paying ransoms contributes to the profitability and spread of cybercrime and in some cases may ultimately be funding terrorist regimes.  But for insurers, it makes financial sense, industry insiders said. It holds down claim costs by avoiding expenses such as covering lost revenue from snarled services and ongoing fees for consultants aiding in data recovery.  And, by rewarding hackers, it encourages more ransomware attacks, which in turn frighten more businesses and government agencies into buying policies.”

Check out the ProPublica article here 






Vol. 8 - Issue 8
September 25, 2019


Most Significant Decision of 2019 (So Far):
Allocation Between Covered And Uncovered Claims


To me, any case that involves guidance on the treatment of allocation, between covered and uncovered damages, has the potential to be significant.  There can be reasons for an insurer to arrange for such allocation before a case goes to trial.  But, for various reasons, it doesn’t always happen.  Perhaps the insurer did not take the steps. Or, maybe it did, and the court said no-go.  As a result, the verdict that comes down against the insured is unallocated.  It’s just one number and does not include an explanation of which damages it represents, despite that it could represent more than one type.   

The insured will likely seek coverage for the entirety of this “general verdict,” despite the possibility (strong possibility) that it includes uncovered damages.  The insurer will likely be disinclined to pay damages that include some, or maybe a lot, that are uncovered.  However, the insured will likely maintain that the entirety of the verdict should be covered, since the insurer did not achieve a pre-trial allocation.  Or, at least the insurer has the burden to prove which damages are uncovered.  Despite the importance of this issue, it wants for case law. 

Last month the Eight Circuit addressed the allocation issue in RSUI Indemnity Co. v. New Horizon Kids Quest, Inc., No. 17-3567 (8th Cir. Aug. 12, 2019) (published).  Besides being significant, just because any case in this area has the potential to be, the decision is also noteworthy because it addresses the allocation issue in the context of excess polices.  The cases in this area – all that I’ve seen at least -- involve primary policies.  And that makes a difference.

I am going to quote liberally from the New Horizon opinion.  That’s easier for me.  And I’m really busy. 

New Horizon Kids Quest, Inc. operates a childcare facility at the Grand Casino Mille Lacs in Onamia, Minnesota.  New Horizon was sued for negligent supervision and training on account of J.K., then age three, suffering physical and sexual assaults at the hands of N.B., then age nine.

Travelers provided New Horizon with $3,000,000 of liability coverage and RSUI provided excess liability coverage of up to $8,000,000 per occurrence.  This is important – the RSUI policy included a Sexual Abuse or Molestation Exclusion. 

Travelers defended New Horizon in J.K.’s suit.  “Following a second trial [motion for new trial was granted after a $13 million award] at which New Horizon again conceded liability but contested J.K.’s claims of injuries and damages, the jury awarded total damages of $6,032,585, segregating its award into four damage categories but not finding whether J.K. suffered sexual as well as physical abuse and not allocating its award between those two claims.  Travelers paid its policy limits, plus interest.  New Horizon paid the remaining $3,224,888.59 and demanded indemnity from RSUI under its excess liability policy. RSUI then brought this action seeking a declaratory judgment that the policy’s ‘Sexual Abuse or Molestation’ exclusion barred coverage for that part of the award above Travelers’ policy limits.”

“The district court granted New Horizon summary judgment because, without an allocated award or jury interrogatory, RSUI is unable to prove ‘that the jury determined sexual abuse had occurred or that one cent of the award was based on such a determination.’”

RSUI appealed and the Eight Circuit reversed: “We conclude that RSUI, an excess liability insurer that did not control the defense of its insured in the underlying suit, must be afforded an opportunity to prove in a subsequent coverage action that the jury award included damages for uncovered as well as covered claims.  If the insurer sustains that burden, the district court must then allocate the award between covered and uncovered claims.”

While the court concluded that RSUI had the burden to prove that the jury award included an uncovered sexual assault claim, there is also the critical issue of which party would then have the burden to allocate the unallocated jury award.  The Eight Circuit (happy to do so, it seemed) handed that issue back to the District Court.

The New Horizon court’s decision was tied to, or at least influenced by, the fact that RSUI was an excess insurer.  And that’s what I believe makes it significant.  When a primary insurer fails to take steps to achieve a pre-trial allocation, between covered and uncovered claims, and then seeks to do it post-trial, the insured is able to respond that the insurer had its chance and did not take it.  Thus, the argument will likely be that the insurer is now obligated for the entirety of the general verdict, despite that it may include uncovered damages.  Or, at a minimum, the burden is on the insurer to prove which damages are not covered. 

But it can be a different story for an excess insurer.  The excess insurer is likely not involved in the day-to-day aspects of the underlying action, and, in fact, as noted by the New Horizon court, has no defense obligation.   New Horizon provides excess insurers with an opportunity to argue that, because they are in a different position than primary insurers, any adverse consequences for primary insurers, for the primaries’ failure to address allocation between covered and uncovered claims pre-trial, do not apply to them.  As a published decision, from a Circuit Court of Appeals, New Horizon has the potential to be influential with courts around the country.




Vol. 8 - Issue 8
September 25, 2019


Texas Supreme Court To Say: Howdy Duty To Defend


Those who do coverage work, involving Texas law, know that Supreme Court guidance would be useful on the question whether, or to what extent, extrinsic evidence can be used to determine an insurer’s duty to defend (including to disclaim such duty).  Austin may soon come to the rescue. 

Earlier this month the Fifth Circuit, in State Farm Lloyds v. Richards, No. 18-10721 (5th Cir. Sept. 9, 2019), certified the following question to the Supreme Court of Texas: “Is the policy-language exception to the eight-corners rule articulated in B. Hall Contracting Inc. v. Evanston Ins. Co., 447 F. Supp. 2d 634 (N.D. Tex. 2006), a permissible exception under Texas law?”

Of note, the panel of the Fifth Circuit that certified the question included Judge Willett, formerly Justice Willett of the Texas high court.  Giving his former colleagues extra work could be Judge Willett’s way of getting even for that tuna sandwich that went missing from the fridge in the justices’ kitchen in 2015.    

In simple terms, the issue is whether, based on B. Hall Contracting, for purposes of duty to defend, is the applicability of the eight corners rule, or permissibility of extrinsic evidence (including to disclaim a duty to defend), dependent upon the policy language.  Namely, does it matter if the policy states that the duty to defend applies only to a suit seeking damages because of “bodily injury” or “property damage” to which this insurance applies (standard ISO language these days) versus policy language stating that the duty arises even if the allegations of the suit are “groundless, false or fraudulent”).  [Note that the “groundless, false or fraudulent” duty to defend language is pretty unusual to see these days in commercial general liability forms.]     
Much could be said here about Texas duty to defend law and the role, or not, of extrinsic evidence in the analysis.  And the lawyers at Austin’s Shidlofsky Law Firm PLLC, Texas’s premier firm representing policyholders, have done just that.  Check out this extremely thorough post on the subject on the firm’s Insurance Law Blog. [Clocking in at 45 footnotes, it proves that that everything is bigger in Texas shtick includes blog posts.] 

This is a complex issue.  On one hand, the Texas high court has before it the narrow “policy-language exception” question – does policy language dictate which duty to defend rule applies?  But there is also the question how Texas law treats another duty to defend issue that is the subject of frequent discussion in the state: whether an insurer can walk away from a duty to defend a complaint based on extrinsic evidence that is solely related to determining coverage.  In other words, can an insurer disclaim a duty to defend because the extrinsic evidence it relies on involves “coverage only” facts -- and not facts that overlap with or involve the truth or falsity of the allegations in the underlying action.  The significance of Richards will be tied to how far the court goes in addressing duty to defend. 



Vol. 8 - Issue 8
September 25, 2019

The ROR Argument You Hope You Never Have To Make
At issue in ACCC Insurance Company of Georgia v. Walker, No. A19A0804 (Ga. Ct. App. Sept. 19, 2019) was whether the insurer, ACCC, which had undertaken its insured’s defense, did so under a reservation of rights that was timely, unambiguous and fairly informed the insured of its specific basis for its reservations about coverage.  Let’s hope that if you have this task, as an insurer or its counsel, you have more to work with than this: “ACCC argues that it orally informed Ermes Medrano of its reservation of rights in a voice mail message left on his telephone on April 5, 2017 — 19 days before it entered a defense on the Medranos’ behalf.”

Policyholder Counsel As Clever As Magical Mr. Mistoffelees!
Riddle: What does an insurer say when its win in a coverage case, about property damage caused by cats, is reversed on appeal?  Answer: I remember the time I knew what happiness was.  This is what happened to the insurer in Goldberger v. State Farm Fire & Cas. Co., No. 1 CA-CV 18-0112 (Ariz. Ct. App. Aug. 13, 2019). 

The Goldbergers, owners of a rental property, sought coverage from State Farm for damage to their property caused by feral cats.  The trial court held that no coverage was owed on the basis of the exclusion for losses caused by domestic animals.
The policyholders convinced the Arizona appeals court to reverse (good news, at least for the moment).  Following a thorough analysis, the court held that “the term ‘domestic animals’ as used in the Policy is ultimately not ambiguous. Instead, the term encompasses specific animals that are subject to the care, custody, and control of a person.”

The court explained: “The Goldbergers’ complaint alleges the cats that damaged their dwelling were ‘feral’ and were ‘allowed to access the property by their tenant.’  On this alone, we cannot say that the tenant, or anyone else, was keeping the feral cats in such a manner that the Exclusion precludes coverage.  Resolving all reasonable inferences in the Goldbergers’ favor, we must presume that the cats were feral, meaning they had no owner or keeper and were living in nature. See, e.g., Feral, The American Heritage Dictionary (5th ed. 2011) (‘Existing in a wild or untamed state.’). And the allegation that the tenant allowed the cats to access the property does not show the tenant exercised sufficient care, custody, and control over the cats so as to render them ‘domestic animals.’  Therefore, because the facts alleged in the complaint and the reasonable inferences drawn therefrom are within the Policy’s coverage, the superior court erred in dismissing the complaint.  During discovery, of course, additional facts may reveal that the tenant was actually keeping or maintaining these cats like the tenant in Bjugan. We need not explore all the possible purposes for which a domestic animal may be kept.  Suffice it to say that whether a particular animal falls within the Exclusion would normally be a factual question, depending on the purpose for which the animal is kept and the amount of care, custody, or control a person exercises over the animal.  Those or other facts may ultimately bring this case outside the Policy’s coverage, but they await factual development.”