Colorado Supreme Court Holds that the Notice-Prejudice Rule Does Not Apply to Date-Certain Notice Requirement in Claims-Made Policies

February 25th, 2015

By Eryk Gettel, Sedgwick San Francisco

Like many jurisdictions, Colorado’s notice-prejudice rule generally provides that an insured who fails to provide timely notice of a claim does not lose policy benefits unless the insurer establishes that the late notice prejudiced its interests.  Friedland v. Tranvers Indem. Co., 105 P.3d 639, 643 (Colo. 2005).  In Craft v. Philadelphia Indemnity Insurance Co., 2015 WL 658785 (Colo. Feb. 17, 2015), the Colorado Supreme Court held that this rule does not apply to date-certain notice requirements in claims-made policies.

Dean Craft was the principal shareholder and president of Campbell’s C-Ment Contracting, Inc. (CCCI).  Craft agreed to sell a portion of his CCCI shares to Suburban Acquisition Company (Suburban), and later sold his remaining shares back to CCCI.  Suburban and CCCI sued Craft for alleged misrepresentations and fraud regarding the stock sales.

At the time he was sued, Craft was unaware that CCCI had purchased a D&O policy from Philadelphia Indemnity Insurance Company (Philadelphia).  The policy required the insured to notify Philadelphia “as soon as practicable” after becoming aware of a claim, but “not later than 60 days” after the policy period expired.  The policy period was November 1, 2009 to November 1, 2010.  Craft did not report the matter to Philadelphia until March 2012 (more than one year after the policy had expired), and settled the underlying litigation in June 2012.  Philadelphia ultimately denied coverage for Craft’s legal fees and the underlying settlement because Craft had not complied with the policy’s notice provision.

Craft sued Philadelphia in Colorado State Court for breach of contract, breach of the implied covenant of good faith and fair dealing, and statutory violations.  Philadelphia removed the case to federal district court, and then successfully moved to dismiss the coverage action on the basis that Craft did not notify Philadelphia of the claim within 60 days of the policy’s expiration date.  After appealing the district court’s decision, the Tenth Circuit certified the following questions to the Colorado Supreme Court:  (1) whether the notice-prejudice rule applies to claims-made liability policies as a general matter; and (2) whether the rule applies to one or both types of notice provisions in claims-made policies.  Because the parties agreed that the prompt notice requirement was not at issue, the Colorado Supreme Court limited its analysis to the issue of whether the notice-prejudice rule applies to a claims-made policy’s date-certain requirement.  The court answered the question in the negative.

The court first explained how “occurrence” and “claims-made” policies differ in terms of the coverage they provide.  Whereas occurrence policies (like the policy in Friedman)provide coverage for injuries or damage that occur during the policy term regardless of when the claim is actually made, claims-made policies (like the policy in Craft) only provide coverage if the claim is made during the policy period or any applicable extended reporting period.  The court further explained that this conceptual difference is critical to the risks that insurers undertake and the premiums that insureds pay.  With a claims-made policy, the risk to the insurer passes when the policy expires.  Thus, the date-certain requirement in a claims-made policy is a fundamental policy term because it defines the temporal boundaries of the policy’s basic coverage terms.  The court found that, to extend the notice-prejudice rule in the context of a claims-made policy’s date-certain notice requirement, “would defeat the fundamental concept on which coverage is premised.”

The court also rejected Craft’s argument that strict enforcement of the date-certain notice requirement would result in a windfall for the carrier based on a technicality.  To apply the notice-prejudice rule so as to excuse an insured’s noncompliance with a date-certain requirement would essentially rewrite the policy and effectively create coverage where none previously existed.  By doing so, the insured — and not the insurer — would reap the windfall.

Court Confirms Insurer Permitted to Choose Counsel in Discharging Duty to Defend

February 13th, 2015

By Aaron Mandel, Sedgwick New York

An insurer’s duty to defend and how that duty gets discharged may be one of the most frequently litigated coverage issues.  Although typical policies afford insurers the right to control their insureds’ defense, insureds often prefer to appoint their own counsel and have their insurer reimburse them for their defense costs.  That is especially true where the insurer reserves its rights under its policy.  The latest opinion addressing this issue came out of the U.S. District Court for the Northern District of California in Travelers Property Casualty Co. v. Kaufman & Broad Monterey Bay, et al., No. 5:13-cv-04745-EJD (Feb. 11, 2015).

Sometime before February 2012, the developers (“KB”) of a housing project located in Northern California hired Norcraft to perform cabinet work.  Norcraft was insured under commercial general liability insurance policies issued by Travelers, which extended additional insured coverage to KB for liability arising out of Norcraft’s work.  In February 2012, homeowners sued KB for construction defects including defects in Norcraft’s work (the “underlying lawsuit”).  Travelers agreed to defend KB in that lawsuit after receiving a copy of Norcraft’s subcontract with KB – which Travelers did not receive until almost eight months after the underlying plaintiffs filed their lawsuit against KB – and appointed defense counsel to do so.  KB objected to the law firm Travelers appointed to defend them because they claimed it was “ethically conflicted from representing [KB] since it had represented parties adverse to [KB] in other cases pertaining to similar issues as the [underlying lawsuit].”

Facing KB’s objection to the appointed counsel, Travelers sought a declaration that KB’s objection was a “material breach of [Travelers’] policies and of the implied covenant of good faith and fair dealing.”  KB counterclaimed arguing that Travelers “did not intend to provide [KB] with an immediate, full, complete, and conflict-free defense” because Travelers knew about the appointed law firm’s alleged conflicts.  The parties cross-moved for summary judgment.

First addressing KB’s claim that Travelers did not “immediately” defend them in the underlying lawsuit, the court concluded that Travelers’ duty to defend was not triggered until it received all relevant information to determine the existence of coverage.  In that regard, the court noted that Travelers first received that information when it received a copy of Norcraft’s subcontract with KB and agreed to defend approximately one week later.

The court next addressed KB’s argument that Travelers did not provide it with a “complete” defense.  KB claimed that Travelers’ defense was not “complete” because it extensively reserved its rights to, among other things, withdrawing its defense if it later determined there was no coverage available under its policy.  The court concluded that this argument failed because KB did not explain why Travelers’ reservation of rights violated its duty to defend.

KB also argued that Travelers improperly “entered into a secretly negotiated settlement agreement” with the underlying plaintiffs that resolved their claims arising out of Norcraft’s work.  Rejecting KB’s argument that this violated Travelers’ duty to defend, the court wrote:

Since it is undisputed that [Travelers] had the duty to defend, [Travelers] had the right to control settlement negotiations of the covered claims without [KB’s] participation.  That [Travelers] settled only the claims arising out of the work of Norcraft does not make the settlement improper, nor does it indicate that [Travelers] further its own interests, and [KB] have not shown that it experienced increased defense fees and costs – outside of what it would have otherwise incurred – due to [Travelers’] withdrawal from the [underlying lawsuit].

Ultimately, the court concluded that, because Travelers “fulfilled its contractual duty to defend [KB] against all claims arising out of the work of Norcraft, . . . [Travelers] did provide a complete defense.”  And because it found that Travelers satisfied its duty to provide KB with an “immediate” and “complete” defense, the court found that Travelers was entitled to appoint counsel to defend KB in the underlying lawsuit.

UK Court: Directors Insured Under D&O Policies Cannot Avail Themselves of the Financial Ombudsman Service

December 2nd, 2014

By Luke Johnson and Tristan Hall, Sedgwick London

The question of whether directors insured under D&O policies are entitled to complain to the Financial Ombudsman Service (“FOS”) in respect of an insurer’s handling of a claim has been a frequent discussion point for those involved in D&O insurance.  R (on the application of Bluefin Insurance Services Ltd) v Financial Ombudsman Service Ltd [2014] EWHC 3413 (Admin) establishes that it is unlikely that the FOS will be able to entertain such complaints, and directors must rely on the dispute resolution provisions in their D&O policy.

This case concerned the handling of a complaint to the FOS by Mr Lochner (a former director of Betbroker Limited) against Bluefin Insurance Service Limited (“Bluefin”) in connection with the notification of a potential claim to Mr Lochner’s D&O insurer.  Some years after the notification, a claim was actually pursued against him that was not covered under his D&O insurance.

The FOS considered they had jurisdiction to hear the complaint on the basis that Mr Lochner was a consumer.  Bluefin brought judicial review proceedings of that decision.

The court rejected the FOS’s arguments that Mr Lochner was acting as a consumer and determined that the FOS had no basis on which to assert jurisdiction over Mr Lochner’s complaint.  In reaching this view, the Court considered that the claim against Mr Lochner arose out of acts which were undertaken by him as a director and in the course of his (former) business.  Therefore, “the subject matter of his complaint was wholly concerned with the potential loss arising from lack of insurance cover in respect of a liability which [Mr Lochner] has incurred in the course of his trade, business or profession”.

In light of this judgment it is unlikely that the FOS will be entitled to determine complaints made by directors in respect of the main potential liability D&O policies insure against: claims against them arising from actual or alleged wrongful acts committed in their capacity as directors or officers of a company.

However, this is not to say that all disputes in relation to D&O policies will fall outside the FOS’s jurisdiction.  For example, spouses of directors and officers are routinely covered under D&O policies (but only in respect of the directors/officers’ wrongful acts) and their potential liability does not necessarily arise in the course of any trade, business of profession.  Whilst such claims are rare, the court suggested in obiter that it may have reached a different conclusion if Mr Lochner’s spouse had sought to complain.

UK Securities Claims Update

November 26th, 2014

By Tristan Hall. Sedgwick London

At our financial lines seminar in London on 16 October, we considered the question of whether UK Securities claims are finally coming of age.  As part of that presentation, we reviewed the group action brought by investors against RBS and its directors and officers under Section 90 of the Financial Services and Markets Act 2000 (“FSMA”) regarding alleged misstatements made in a prospectus issued by RBS in connection with its rights issue in 2008.  The remedy afforded under Section 90 of FSMA is similar to that provided for under sections 11 and 12 (a) (2) of the Securities Act 1933 in the US.

It now seems likely that another high profile securities claim will be brought before the English Court as, on 25 November, it was reported that the law firm¹ representing one of the Claimant groups in the RBS case intends to file proceedings against Tesco and certain of its directors and senior management in connection with its recent announcement that the company had overstated its profit by £263 million.

It seems probable that the Tesco claim will proceed under Section 90A of FSMA, which covers misstatements or omissions in an issuer’s periodic financial disclosures or in information published to the market by means of a recognised information service.  The remedy afforded under Section 90A of FSMA is similar to that provided for under sections 10b and 18 of the Securities Exchange Act 1934 in the US.  Indeed, a putative class action already has been filed against Tesco and certain of its directors in New York federal court for and on behalf of purchasers of Tesco ADRs alleging violations of the Securities Exchange Act 1934.

Assuming the Tesco claim proceeds, then there will be two high profile claims before the English Courts that, for the first time, seek to test the remedies afforded to investors under FSMA.  The outcome of both claims will therefore be of significant interest to UK publicly traded companies, their directors and D&O insurers.

Another interesting feature of both claims is that they are being supported by litigation funding.  As we suggested at our seminar, the availability of litigation funding is likely to be a driver of UK securities litigation in the future.

 


 

¹ Stewarts Law – http://www.stewartslaw.com/tesco-to-face-legal-claim-from-shareholders-over-its-overstatement-of-profits.aspx

 

Banks Settle with U.K. Regulatory Authority Over Forex Manipulation

November 12th, 2014

Today it was announced that six banks settled with the U.K. Financial Conduct Authority and other regulators for a combined total of approximately $4.3 billion for their roles in the manipulation of the $5.3 trillion-a-day Forex market.  The six banks involved in the settlement include Citigroup, UBS, HSBC, Royal Bank of Scotland, JP Morgan and Bank of America.  While the settlement is larger than fines levied to date in connection with the Libor scandal, this may be just the beginning.  For example, Barclays was not part of these initial settlements and is reportedly still under investigation.  Further, the settlement does not include a settlement with many of the U.S. regulators that are conducting their own investigations, including criminal investigations by the U.S. Department of Justice which will likely involve individuals at the various banks.  The banks that settled today likely wanted to get ahead of the curve to limit their exposure as much as possible.  From the size of the fines, there must have been strong evidence against traders which resulted in the banks considering a settlement at this stage.  Additionally, the banks also face civil litigation in the U.S., which if successful could also present large exposures.  Click here to see an article from January 2014 authored by Sedgwick Chicago’s Jennifer Quinn Broda and Eric Scheiner on the regulatory scrutiny and potential insurance implications.

No CGL Coverage for Faulty Workmanship Under Pennsylvania Law

October 24th, 2014

By Gilbert Lee, Sedgwick New York

In State Farm Fire & Casualty Co. v. McDermott, 2014 WL 5285335 (E.D. Pa. Oct. 15, 2014), a federal court recently held that an insurer has no duty to defend or indemnify its insured against an underlying construction defect lawsuit containing causes of action sounding in negligence under a commercial general liability (“CGL”) policy affording coverage for property damage caused by an “occurrence.”  Upon considering the substance of the underlying lawsuit, the court concluded that under Pennsylvania law faulty workmanship is not an “occurrence” (defined to mean an accidental or unforeseeable event) that is covered under a CGL policy and, therefore, granted the insurer’s summary judgment motion.

In McDermott, the insured contracted with a homebuilder to provide plaster, stucco and window and door installation services for nearly three hundred homes built in Pennsylvania.  The insured was later named in a negligence and breach of contract lawsuit by the builder, alleging a variety of defective construction practices that purportedly resulted in water intrusion and corresponding home damages.  The insurer agreed to defend the insured subject to a reservation of its rights to disclaim coverage under the terms of the CGL policy prior to commencing a declaratory action challenging coverage.  

Relying on Pennsylvania case law, the court determined at the outset that faulty workmanship, and any resulting damages, is not an “accident” (as it is neither unexpected nor unintentional) and therefore not an occurrence under a CGL policy.  Thus, the issue of whether coverage was triggered under the policy hinged on the possibility that liability might rest on the insured’s alleged negligent work performance.  In reaching its decision, the court looked beyond the negligence allegations to conclude that, regardless of how it was framed, the substance of the insured’s potential liability stemmed from its alleged failure to meet contractual expectations.  Because the insured had a contractual duty to perform its tasks in a satisfactory manner, its alleged failure to do so was neither an accident nor an unforeseeable event covered under a CGL policy because the insured was bound to avoid that particular outcome.

Just the Fax: Illinois Appellate Court Concerned That TCPA Settlement Between Insured and Class Action Plaintiffs May Be Collusive

October 16th, 2014

By Michael J. McNaughton, Sedgwick Chicago

An all too familiar scenario: an insurer believes there is no coverage for a claim, but has a duty to defend its insured. In these situations, an insurer often pays for the insured’s independently-selected defense counsel and seeks declaratory judgment regarding coverage. But after the insurer surrenders control of the defense, it may also surrender the right to control a subsequent settlement. What happens if the insured seeks coverage for the settlement, but the insurer considers it unreasonable?

The Illinois Appellate Court recently addressed this scenario in Central Mutual Ins. Co. v. Tracy’s Treasures, Inc., 2014 IL App (1st Dist.) 123339 (September 2014). The Court considered whether coverage existed for the Idlas Telephone Consumer Protection Act (“TCPA”) class action settlement, and if the insurer could challenge the reasonableness of the settlement negotiated by the insured’s independent counsel.

In Idlas, Tracy’s Treasures, Inc. allegedly advertized its business services through unsolicited fax advertisements to a class of plaintiffs in violation of the TCPA. Central Mutual insured Tracy’s Treasures through primary and excess liability policies which contained $14 million in available limits. Central Mutual declined coverage in Idlas but provided the insured a “courtesy” defense. Central Mutual also filed a timely declaratory judgment against the insured seeking a determination of coverage. The insured obtained its own independent counsel in Idlas in light of the conflict with Central Mutual. Central Mutual consented to the substitution of counsel and agreed to pay a reasonable fee for his services.

The insured’s independent counsel did not disclose to Central Mutual that he had started settlement negotiations in Idlas a month before identifying himself to the insurer. Shortly thereafter, the insured filed a motion for preliminary approval of a settlement agreement in Idlas on behalf of the class, and participated in the subsequent fairness hearing. The insured’s counsel did not notify Central Mutual of these events. In the proposed Idlas settlement, the insured agreed to pay $14 million, collectible only against Central Mutual. Although the Idlas complaint defined the putative class to include persons who allegedly received unsolicited faxes from March 5, 2003 through March 5, 2007, the proposed settlement defined the class for the period from September 1, 2002 through July 22, 2003. Although no class members prior to July 22, 2003 came forward, the revised class definition triggered an additional $5 million excess policy issued by Central Mutual. Only 5,561 putative class members – roughly 4% of the total class – received the class settlement notice.

The circuit court approved the $14 million Idlas settlement. Plaintiff’s counsel would receive one-third of the amount collected from Central Mutual, plus costs. Each class member who submitted a claim would receive a pro rata share of the collected amount, not to exceed $500 pursuant to the TCPA. The plaintiff (and only class representative) would receive $9,500, nineteen times more than the potential recovery of every other class member. Unclaimed funds would be given to charitable organizations approved by the Court.

On Central Mutual’s motion for summary judgment in the coverage action, the court held amounts awarded to claimants under the TCPA were punitive in nature and not insurable as a matter of public policy based on the precedent set in Standard Mutual Ins. Co. v. Lay, 2012 IL App (4th) 110527. The insured appealed when Lay was subsequently reversed by the Illinois Supreme Court, which held sums recovered by TCPA claimants were liquidated rather than punitive damages.

Central Mutual raised the following issues on appeal to the Court: (1) although it conceded the applicability of the Illinois Supreme Court’s reversal in Lay, liquidated damages were not covered as a matter of law under its policies; (2) there was no coverage for the Idlas settlement because Central Mutual and the insured had already carved out personal and advertising injury from the relevant policies as part of a settlement for a prior TCPA lawsuit against the insured; and (3) the $14 million settlement was collusive and unreasonable as a matter of law.

The Court ruled in favor of the insured on the first two issues. First, it held the insurer should have included policy language that excluded sums for statutory penalties if it had wanted to avoid coverage for liquidated damages. Next, the Court noted that the confidential carve-out agreement between Central Mutual and the insured was not included as part of the appellate record. Even if available, the Court could not determine as a matter of law that the amount paid by Central Mutual was adequate consideration for the carve-out of personal and advertising injury coverage in its policies. The Court remanded for further consideration.

The primary focus of the Central Mutual decision was the issue of whether the Idlas settlement was collusive and unreasonable. The Court first addressed whether Central Mutual could challenge the settlement. Because Central Mutual “surrendered control of the defense,” the Court determined it also surrendered the right to rely on policy provisions which required its consent to settle. The Court indicated, however, that Central Mutual could still challenge the Idlas settlement because it had filed a declaratory judgment against the insured to preserve its coverage positions and provided a defense by paying reasonable fees for the insured’s independent counsel. Moreover, the Court recognized Central Mutual had been denied the opportunity to be heard on the reasonableness of the Idlas settlement. Although the Court could not hold the settlement collusive and unreasonable as a matter of law, it agreed with the trial court that the facts and circumstances regarding the settlement were “very troubling.” It remanded for further findings on whether the insured’s decision to settle and the settlement amount were both reasonable. The Court also provided guidance on the standard of reasonableness.

To determine if the insured’s decision to settle was reasonable, the trial court must examine the totality of the circumstances and whether the decision conformed to the standards of a prudent uninsured. The Court indicated that the trial court should consider whether a prudent uninsured would have: (1) foregone the opportunity to litigate potential defenses in light of the potential cost and chance of success; (2) sought contribution or indemnification from third-parties; (3) agreed to settle on terms which allowed unclaimed funds to be donated to charity; and (4) considered whether it truly faced “staggering” liability in Idlas from a “practical perspective” in light of the limited number of people notified of the class action and the trial court’s discretion to fashion a class action reward deterring future violations without destroying the insured’s business.

To determine if the amount of the settlement was reasonable, the trial court must examine what a reasonably prudent person in the position of the insured would have settled for on the merits of Idlas’ claim. The Court also stated this test was guided by a “commonsense consideration of the total facts bearing on liability and damage aspects of the plaintiff’s claim.” The Court stated the trial court should consider many of the same factors in its analysis to determine whether the Idlas settlement was reasonable, and further consider: (1) whether the settlement was the product of arm’s length negotiations; (2) what facts were available to the insured’s independent counsel which allowed him, in relatively short time, to value the Idlas claims at over $60 million with only a single class representative; (3) how the parties arrived at a $14 million settlement figure; and (4) any evidence showing there was bad faith, collusion or fraud.

An important takeaway from Central Mutual is to be mindful that the independent counsel’s sole obligation is to the insured. In its arguments, Central Mutual criticized the insured’s independent counsel for misrepresenting plans regarding the defense and settlement of Idlas. Although the Court recognized the insured’s counsel had attempted to “short circuit” Central Mutual’s ability to learn of or challenge the settlement, it also affirmed independent counsel had no duty to the insurer. Accordingly, an insurer should consider retaining monitoring counsel to protect its own interests after providing independent counsel for the insured.

Click here for additional posts on TCPA coverage actions.

New California Law Sets the Stage for Insurance Regulation of Uber, Lyft

October 8th, 2014

By Kara DiBiasio, Sedgwick San Francisco

The emergence and success of ridesharing companies has sparked questions and debates over the gaps in insurance coverage created when private drivers offer commercial driving services.  Ridesharing companies – such as Lyft, Uber, and Sidecar – allow private drivers to login to a mobile app and pick up passengers for a fee.  This innovative structure has changed the driver-for-hire climate in cities across America, including uncertainty about who will pay when one of these drivers gets into an accident.

Most personal automobile liability policies contain exclusions for commercial driving services, so anytime a driver is available for hire or driving a passenger, they likely are not covered by their personal auto policy.  Although a ridesharing company must provide commercial liability coverage, the overlap between the driver’s policy and the commercial coverage is often murky.  Seeking to clarify these potential gaps in coverage, the California Legislature passed AB 2293, which Governor Jerry Brown recently signed into law. 

The law has two primary effects on regulation of ridesharing companies.  First, it imposes disclosure requirements on the company.  Second, it sets minimum insurance coverage requirements for all ridesharing companies operating in California. 

For the disclosure requirements, each ridesharing company is required to disclose in writing to each driver the commercial coverage and limits of liability the company provides while the driver has the app enabled.  Drivers will also have to carry proof of the company’s commercial liability coverage when they have the mobile app enabled. 

The law also sets out insurance coverage requirements for each phase of the driver’s potential liability: when the driver is using the vehicle, but the app is not enabled; when the app is enabled, but the driver is not carrying a passenger; and when the driver is carrying a passenger.  During the first phase, the driver is just an ordinary private driver on the road; the law does not set any requirements for this phase.  During the second phase, the company must provide primary coverage for death and personal injury, as well as property damage.  In addition, the company must provide excess coverage of at least $200,000 to cover any liability of the company or the driver while the app is enabled.  After the driver picks up a passenger, the law requires the company to have primary coverage of at least $1 million for death, personal injury and property damage, as well as an additional $1 million in uninsured and underinsured motorist coverage.

The law also requires the commercial liability insurer to defend and indemnify any liability claim arising out of an accident, either while the app is enabled or while the driver is carrying a passenger.  The driver’s personal auto policy is neither primary nor excess coverage while the app is on or while the driver has a passenger, unless the policy expressly states that it affords such coverage.

Most of the provisions of the new law will take effect July 1, 2015.  Pennsylvania has begun working on similar regulations for ridesharing companies, and other states will likely follow suit in the near future.  Insurers should work with coverage counsel to make sure they are ready with policies that conform to these new regulatory requirements, in advance of the laws taking effect.

Cannonball! CGL Policy Does Not Cover Pool Contractor for Subcontractor’s Negligence

October 7th, 2014

By Jeffrey Dillon, Sedgwick New York

In Standard Contractors, Inc. v. National Trust Ins. Co., Civil Action No.:7:14-cv-66-HL, the U.S. District Court for the Middle District of Georgia recently granted a commercial general liability insurer’s motion to dismiss a contractor’s coverage action on the ground that the policy’s “Contractors Errors and Omissions” coverage applied only to property damage to the contractors’ work arising from the contractor’s own negligence, not that of its subcontractor.

The contractor sought coverage for the costs it incurred to repair damage to a pool facility it was hired to renovate. The contractor alleged that the damage to the pool and surrounding areas arose from the faulty workmanship of its subcontractor, which allegedly deviated from the design plan by failing to include essential parts and installing an improperly sized component.

In relevant part, the subject policy’s Contractors Errors and Omissions coverage applied to “property damage” to the contractor’s work “due to faulty workmanship, material or design….”  However, in order for coverage to apply, the damages must have resulted from the contractor’s negligent act, error or omission while acting in its “business capacity as a contractor or subcontractor.”  The policy specifically exempted from this coverage “[a]ny liability for ‘property damage’ to ‘your work’ if the damaged work or the work of which the damages arises was performed on your behalf by a subcontractor.”

The court ruled that the exemption prohibited the contractor’s claim for coverage, which the court found to arise solely from the negligent work of its subcontractor.  The court rejected the contractor’s argument that an exception to a policy exclusion, which appeared to extend coverage to damages arising out of work performed on the contractor’s behalf by a subcontractor, demonstrated that coverage attached.  The court found that the more specific and limited language of the coverage grant prevailed over the more broadly inclusive language of the exception to the policy exclusion.

 

 

Is it a Car or A Street Legal Robot: Insurance Issues for Autonomous Vehicles

October 6th, 2014

In mid-September, Mercedes-Benz became the latest car company to get a license to test self-driving vehicles in California.  Earlier in the month, GM announced that they will offer a hands-free Cadillac with new cruise control technology to adjust speed, braking and steering.  Since 2005, Google has been test-driving their autonomous vehicles (AVs) on public roads, and last summer unveiled the first test prototype for a vehicle with no steering wheel or brake pedal.     

These autonomous or self-driving vehicles will pose new challenges for the insurance industry, as will the semi-autonomous vehicles that already are entering the market.  Hilary Rowen addressed some of the issues in an article entitled, “Expect tort potholes for self-driving cars,” published in the San Francisco Daily Journal on September 26.  The article can be downloaded here.

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