Archive for the ‘Insurance Practices’ Category

Alex Potente Examines Bad Faith Insurance Cases in DRI Article

Friday, October 27th, 2017

Sedgwick San Francisco partner Alexander Potente has co-authored the article, “The Ramifications of a Less-Than-Thorough Investigation,” in the October 2017 issue of the Defense Research Institute’s For the Defense. The article, written with Farella Braun & Martel LLP partner Tyler Gerking, examines the questions, “Can an insurer defend itself against a bad-faith claim with information that it did not know? And when should the insurer have known the information?” Full article.

Potente, who was assisted by San Francisco associate Heather Zacharia in the research and preparation of the article, is an experienced trial lawyer who represents insurers in complex commercial insurance litigation matters, with an emphasis on bad faith litigation and coverage issues arising from claims involving class actions, product defects, public sector liability and environmental and other long-tail insurance coverage disputes.

DRI is the largest international membership organization of defense attorneys and in-house counsel. It provides access to publications written by specialized legal talent as a resource to over 22,000 defense practitioners in order to equip them in providing high-quality, balanced and excellent service to their clients.

Sedgwick London Receives High Marks From The Legal 500

Monday, October 16th, 2017

Sedgwick’s London office, Sedgwick, Detert, Moran & Arnold LLP, and seven Sedgwick London lawyers were recognized in the recently released The Legal 500 United Kingdom 2017.

In the Insurance and Reinsurance Litigation category, Sedgwick London was ranked in Tier 3, with a note that the office predominantly acts for London, Bermuda and Lloyd’s market insurers. In the summary, a significant case handled by Partner Mark Kendall and San Francisco-based Partner Bruce Celebrezze was recognized. Also recognized were Office Managing Partner Edward Smerdon, and Partners Karen Morrish, Tristan Hall and Duncan Strachan. Associates Lucy Dyson and Sarah Hennessy were listed as “up-and-coming”.

Sedgwick London was also ranked in the category of Professional Negligence. The summary mentions that Sedgwick London acts for insurers in a range of professional negligence cases, primarily those involving companies in traditional sectors, but is increasingly handling disputes pertaining to cyber liability issues. It recognized Tristan Hall, Karen Morrish and Edward Smerdon in this category.

The Legal 500 is a ranking firm that publishes nine guides each year. The ranking process includes reviewing the submissions provided by law firms and contacting clients and references. In each final guide, firms are ranked according to location and practice area, and leading individuals in each field are listed. Every firm ranked — and every individual mentioned — in The Legal 500 United Kingdom 2017 is recommended.

Sedgwick Supports the ACCEC Insurance Law Symposium

Wednesday, October 11th, 2017

The American College of Coverage and Extracontractual Counsel (ACCEC) is holding its Insurance Law Symposium at the prestigious University of Michigan Law School on Friday, October 20, 2017. Sedgwick partner Bruce Celebrezze, ACCEC President, will preside over the event.

The one-day program is designed to enhance and further the dialogue on the issues facing today’s insurance industry by bringing together insurance professionals and regulatory authorities to share insights. Topics include “From Rain Checks to Real Disasters: Insurance as the Necessary Grease in the Wheels of Commerce,” “How Transactional Liability Insurance Has Changed The Way Private Equity Firms and Corporations Approach Public and Private M&A Transactions,” “Good Faith/Bad Faith Claims Investigations: Information vs. Evidence—A Distinction with a Difference,” “Autonomous Vehicles and Aircraft: The Impact on Insurance,” and “Crisis Management and Incident Response: Using Insurance as a Loss Mitigation and Business Resiliency Tool.” The keynote luncheon speaker is Kyle Logue, Professor of Law, University of Michigan Law School.

Established in 2012, the ACCEC brings together pre-eminent lawyers representing the interests of both insurers and policyholders to improve the quality of the practice of insurance law and to increase civility and professionalism in its field. Its mission includes educating all sectors involved in insurance disputes—including the judiciary, legal and insurance professionals, and businesses—on critical topics such as best practices in policy formation and claims handling, developing trends in insurance law, and bad faith. Through its Board of Regents and its working committees, the ACCEC engages in a wide variety of activities designed to promote those goals, in addition to improving the civility and the quality of the practice of insurance law.

For more details about the Symposium, or to register, click here

Sedgwick Recognized in Chambers Latin America 2018 Guide

Tuesday, October 10th, 2017

Sedgwick’s London office, Sedgwick, Detert, Moran & Arnold LLP, and three London lawyers were recognized in the recently released Chambers and Partners’ Chambers Latin America 2018. This is the third consecutive year the firm has been ranked in Band 2. The firm is well regarded for its considerable experience handling large claims in Brazil, Venezuela and the Caribbean. Recently the firm handled D&O claims and advised financial institutions, in addition to cases involving losses from pollution and environmental accidents.

Chambers noted that the team is well-regarded with a growing client roster of insurers and reinsurers. They have considerable experience handling large claims throughout the region, with particular strength in Brazil, Venezuela and the Caribbean. Clients, according to Chambers, are impressed by the firm’s service, stating: “The team’s knowledge is very high, and they are very client-oriented and commercially aware.”

The 2018 guide ranked partners Mark Kendall in Band 2 (ranked since 2013) and Duncan Strachan in Band 3 (ranked since 2013) as notable practitioners. It ranked associate Lucy Dyson (ranked since 2016) as an associate-to-watch. Clients stated that Kendall “is decisive and very logical” and “knows the nuances of the regional markets very well,” while Strachan is “fully aware of commercial realities and is someone I would describe as a safe pair of hands.” Dyson was described as “very engaging and enthusiastic” and “someone who can gather and assess information under time pressure, which is extremely helpful.”

The Chambers Latin America 2018 guide covers a total of 20 jurisdictions and spans Mexico; Central America; the Caribbean islands of Cuba, the Dominican Republic and Puerto Rico; as well as Brazil and all the Spanish-speaking countries of South America. Each country is covered by at least two practice areas with the largest jurisdiction, Brazil, boasting in excess of 40 specialist practice areas. Brazil and Mexico also contain regional tables, reflecting the work of firms based all over their respective countries. More information can be found here.

Benchmark Litigation 2018 Recommends Sedgwick with National and Attorney Rankings

Wednesday, October 4th, 2017

Sedgwick LLP is pleased to announce that Benchmark Litigation – 2018, a guide that ranks litigation firms and attorneys in the United States and Canada, has recognized Sedgwick and its attorneys with numerous honors, including a firmwide national ranking for excellence in Insurance in the U.S., as well as accolades for four of the firm’s attorneys. These rankings reflect peer and client feedback in addition to litigation results.

Benchmark Litigation 2018 Sedgwick recognitions include:
• “US: Insurance” — National ranking
• Bruce Celebrezze — “Litigation Star” and “Local Litigation Star”
• Kevin Dunne —“Local Litigation Star”
• Ralph Guirgis — “Litigation Star” and “Local Litigation Star”
• Michael Healy – “Litigation Star” and “Local Litigation Star

The Benchmark multi-state editorial notes that “Sedgwick offers an elite group of experienced trial attorneys who specialize in a wide range of practice areas.” Firm chair Michael Healy, based in San Francisco, was recommended as an experienced product liability trial lawyer who has served in countless contentious matters throughout his 35-plus-year career.

Also recommended are Sedgwick San Francisco-based litigator Bruce Celebrezze as a leading litigator in the field of insurance law; Orange County office chair of the firmwide Insurance Division, Ralph Guirgis, for excellence in representing insurers in complex coverage disputes throughout the U.S. and abroad; and San Francisco counsel Kevin Dunne for his successes in representing corporations in class actions, unfair trade practice, products liability and other complex matters, including insurance disputes. San Francisco office managing partner, Stephanie Sheridan, is also mentioned as an experienced commercial and business litigator who maintains a strong focus on product liability and consumer class action disputes, while serving as chair of the retail and fashion industry practice group.

Now in its 11th year of publication, Benchmark Litigation annually determines firm and attorney rankings following phone interviews with litigators and their clients. During these interviews, researchers identify the leading litigators and firms by examining recent casework by firms and asking individual litigators to offer their professional opinions on peers. Sedgwick’s firm and attorney rankings can be found by clicking here.

Washington Bad Faith Law At A Glance – Third Edition

Tuesday, September 12th, 2017

By: Bob Meyers

Washington state can be a difficult jurisdiction for insurers. To help insurers avoid or mitigate their extra-contractual exposure, Sedgwick’s Bob Meyers published the Third Edition of Washington Bad Faith Law At A Glance, arguably the seminal and most comprehensive resource on Washington insurance bad faith law. In his paper, Bob Meyers cites notable Washington authorities relating to common law bad faith, the Consumer Protection Act and the Insurance Fair Conduct Act. For insurers’ ease of reference, he also includes excerpts from notable Washington insurance statutes and regulations.

In the Third Edition, Bob Meyers addresses several recent developments about which any insurer with exposure in Washington should be aware, including the Washington Supreme Court’s conclusion that a regulatory violation is not independently actionable under the Insurance Fair Conduct Act; the Ninth Circuit Court of Appeals’ conclusion that an insured under a liability insurance policy is not a “first party claimant” with a right of action under the Insurance Fair Conduct Act; a Washington Court of Appeals’ reaffirmation that an insurer generally has the right to select defense counsel; a federal judge’s reaffirmation that estoppel cannot be used to create insurance coverage that never existed; and a Washington Court of Appeals’ conclusion that an insured may assert a bad faith claim against an insurer’s claim adjuster. He also discusses recently filed Washington cases that address an insured’s burden of proving bad faith, the presumption of harm, coverage by estoppel, privilege and work product issues and damage issues.

To view the white paper, click here.

SEC Disgorgement Constitutes a Penalty – How Far Will the Argument Go?

Wednesday, June 28th, 2017

By: Carol Gerner

On June 5, 2017, Justice Sotomayor delivered the unanimous opinion in Kokesh v. SEC, 2017 U.S. LEXIS 3557 (June 5, 2017), holding that disgorgement collected by the Securities and Exchange Commission (SEC) constitutes a “penalty” under 28 U.S.C. §2462,[1] and thus subject to a five-year statute of limitations. In a relatively short, but thorough opinion, the Court overturned a Tenth Circuit decision finding that disgorgement was not properly characterized as a penalty within the federal statute and therefore not subject to the limitation period.

In the underlying case, the SEC sought civil monetary penalties, disgorgement, and an injunction barring Charles Kokesh, the owner of two investment-adviser firms, from violating securities laws in the future. After a 5-day trial, a jury found that Kokesh’s actions violated various securities laws. As to civil penalties, the district court determined that the 5-year limitations period precluded any penalties for misappropriation of funds prior to October 27, 2004 (i.e., prior to the date the Commission filed the complaint), but ordered a civil penalty of $2.3 million for the amounts Kokesh received during the limitations period. Regarding the Commission’s request for a $34.9 million disgorgement judgement ($29.9 million of which resulted from violations outside the limitations period) the court agreed with the Commission that because disgorgement was not a “penalty ” within the meaning of §2462, no limitation period applied. The court thereafter entered a disgorgement judgment in the amount of $34.9 million. On appeal, the Tenth Circuit affirmed, agreeing with the district court that disgorgement was not a penalty or a forfeiture, and therefore, the statute of limitations did not apply to the SEC’s disgorgement claims.

Thereafter, the Supreme Court granted certiorari to resolve disagreement among the Circuits regarding whether disgorgement claims in SEC proceedings were subject to the 5-year limitations period.  Applying legal principles governing the interpretation and meaning of a “penalty,” the court articulated three reasons why it concluded that SEC disgorgement constituted a penalty within the meaning of §2462. First, SEC disgorgement is imposed by the courts as a consequence for violating “public laws.” Second, SEC disgorgement is imposed for punitive purposes. Third, in many cases SEC disgorgement is not compensatory. Thus, the Court reasoned that SEC disgorgement “bears all the hallmarks of a penalty: It is imposed as a consequence of violating a public law and it is intended to deter, not to compensate.”

Since the Kokesh decision arose out of an SEC enforcement action, its impact will likely be seen in how the SEC chooses its targets for future enforcement actions. It remains to be seen, however, whether similar arguments that disgorgement is a penalty will be raised in other contexts. For example, the issue is often raised in insurance coverage disputes between insurers and insureds, as claims seeking disgorgement are generally not covered. Whether courts will be receptive to similar arguments in other contexts is an area insurers and their counsel should continue to monitor.

[1] 28 U.S.C. §2462, applies to “any action, suit or proceeding for the enforcement of any civil fine, penalty or forfeiture, pecuniary of otherwise.”

New York Court of Appeals Clarifies Scope of Additional Insured Coverage, Resolves Appellate Division Split?

Thursday, June 8th, 2017

In New York, differing views have been offered by the Appellate Divisions in the First and Second Departments regarding the scope of additional insured coverage when the named insured did not cause the accident. This split appears to be resolved by the New York Court of Appeals in its new decision in Burlington Ins. Co. v. NYC Transit Auth., No. 57, 2017 N.Y. LEXIS 1404 (N.Y. 2017), where the court held that additional insured coverage is only available if the named insured’s conduct is the proximate cause of the underlying injuries. In its decision, the Court of Appeals made clear that “there is no coverage because, by its terms, the policy endorsement is limited to those injuries proximately caused by [the named insured].” Given the Court of Appeals’ focus on policy language, this decision has the potential to impact a wide range of additional insured coverage disputes.

In brief, Breaking Solutions, Inc. purchased commercial general liability insurance from Burlington, which included an endorsement listing the NYC Transit Authority, MTA and the City as additional insureds. The additional insured endorsement at issue provides, in relevant part, that the NYC Transit Authority, MTA and the City are additional insureds:

only with respect to liability for ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ caused, in whole or in part, by:

  1. Your acts or omissions; or
  2. The acts or omissions of those acting on your behalf.

The plaintiff in the underlying litigation, a NYC Transit Authority employee, allegedly sustained injuries in a fall at a construction site while he was trying to avoid an explosion that occurred after a Breaking Solutions machine touched a live, underground electrical cable. Discovery in the underlying litigation revealed that the NYC Transit Authority was at fault. As a result, Burlington denied coverage to the NYC Transit Authority and MTA on the ground that neither entity qualified as an additional insured within the meaning of the policy, because the NYC Transit Authority was solely responsible for the accident that caused the underlying injuries.

In the subsequent coverage litigation, Burlington argued that the policy did not afford coverage in such circumstances (i.e., where the additional insured was the sole proximate cause of the underlying injuries). Reversing the Appellate Division, the Court of Appeals determined that “where an insurance policy is restricted to liability for any bodily injury ‘caused, in whole or in part’ by the ‘acts or omissions’ of the named insured, the coverage applies to injury proximately caused by the named insured.”

This decision should provide some relief and clarification for insurers that include additional insured endorsements on their liability policies, as the Court of Appeals now has established the extent of a named insured’s role in the accident for additional insured coverage to be triggered. However, insurers should be mindful of the analysis offered by the dissent, which explained that a stricter application of the policy wording should have been used to resolve the coverage question.

Insurers’ Antitrust Exemption in Crosshairs Again as Part of Potential Health Care Overhaul

Thursday, April 6th, 2017

Just when you thought the health insurance legal and regulatory landscape couldn’t get any more interesting, along comes the Competitive Health Insurance Reform Act of 2017 (the Act). The Act removes a longstanding antitrust exemption and places health insurers back under federal antitrust scrutiny. The House recently passed the Act overwhelmingly (416 – 7), and the Senate’s Judiciary Committee is now weighing it.

The Act amends the 1945 McCarran-Ferguson Act, which provides that federal antitrust laws, such as the Sherman Act and Clayton Act, do not apply to the “business of insurance.” McCarran-Ferguson allows states to regulate insurance, as state regulation of insurance was commonplace for much of American history. In 1944, however, the Supreme Court decided United States v. South-Eastern Underwriters Association, 322 U.S. 533 (1944), in which it determined that insurance was “commerce among the states,” making it subject to the Sherman Act. In response, Congress passed the McCarran-Ferguson Act, which was designed to legislatively repeal South-Eastern Underwriters and restore state prominence in insurance regulation.

Despite the history of state regulation of insurance, and the prompt nature of the McCarran-Ferguson Act’s passage after the Supreme Court’s decision in South-Eastern Underwriters, the insurance exemption from federal antitrust laws has been widely criticized.  Democrats have long supported a full repeal of McCarran-Ferguson with respect to all insurance, including health insurance. For instance, in the aftermath of Hurricane Katrina, perceived abuses by insurers led to calls by lawmakers to repeal the antitrust exemption. More recently, in 2010, a similar bill to repeal the exemption specific to health insurers stalled in the Senate after passing easily in the House.

The much-publicized focus on health insurance in recent years has again caused a reconsideration of the insurance antitrust exemption. The proposed Competitive Health Insurance Reform Act would prohibit price fixing, bid rigging and market allocation, which – according to the Act’s proponents – would unlock greater competition in the health insurance marketplace. This time, there is reason to believe that attempts to repeal the antitrust exemption may be different than prior unsuccessful attempts. While Democrats have long favored repeal, Republicans are also now behind the effort. The GOP sees repeal as part of the broader health insurance overhaul and hopes the potential increases in competition will lead to lower prices, increased choice and greater innovation in the health insurance industry. The White House also supports the Act, as Trump Administration advisers have stated they would recommend signing the Act into law if presented in its current form.

Keep your eye on this issue, as it may slip through the cracks in the news due to the flurry of activity related to health insurance and the Trump Administration, generally. If passed, health insurers would require additional compliance focus, as antitrust issues involving price fixing, bid rigging and market allocation have been outside health insurers’ wheelhouse for some time.

A Shock to the System: Significant Changes to the Discount Rate Applicable to Personal Injury Damages Awards in England and Wales

Wednesday, March 8th, 2017

In the United Kingdom, when victims of life-changing personal injuries accept lump sum compensation payments, the actual amount they are awarded by English Courts is adjusted according to the interest that they can expect to earn by investing the award. In finalising the compensation amount, English Courts apply a calculation called the Discount Rate – with the rate percentage linked legally to returns on the lowest risk investments, typically Index Linked Gilts.

On 27 February 2017, the Lord Chancellor and Minister of Justice announced significant changes to the Discount Rate applicable under the “Ogden Tables” to the calculation of the compensation payments and lump sum damages awards in England and Wales. The announcement was not welcomed by the UK insurance industry, as many UK insurers will face the prospect of significantly increased personal injury damages liabilities.  However, legal representatives for injured claimants have long been advocating for Discount Rate reform in England and Wales, against the background of a number of consultation exercises.

The decision by the Lord Chancellor to lower the Discount Rate from 2.5% to minus 0.75% was made in accordance with the UK’s Damages Act 1996, which makes clear that claimants must be treated as risk averse investors, reflecting the fact that they are financially dependent on this lump sum, often for long periods or for the duration of their life.  Compensation awards using the discount rate should, so far as possible, put the claimant in the same financial position that they would have been in had they not been injured, including loss of future earnings and future care costs.  The new Discount Rate of minus 0.75% comes into effect in England and Wales on 20 March 2017, following amendments to the current legislation.

The Discount Rate previously had been set in 2001, and remained unchanged for 16 years.  The Lord Chancellor’s recent change to the Discount Rate will see compensation payments rise in England and Wales, and, as such, it is likely to have a significant impact on the insurance industry, and a knock-on effect on public services with large personal injury liabilities (particularly the National Health Service).

In the Lord Chancellor’s announcement to the London Stock Exchange on 27 February 2017, the UK Government made four key pledges:

  • the UK Government has committed to ensuring that the NHS Litigation Authority has appropriate funding to cover changes to hospitals’ clinical negligence costs;
  • the Department of Health will work closely with general practitioners (GPs) and Medical Defence Organisations to ensure that appropriate funding is available to meet additional costs to GPs, recognising the crucial role they play in the delivery of NHS;
  • the UK Government will launch a consultation in the coming weeks to consider whether there is a better or fairer framework for claimants and defendants, with the government bringing forward any necessary legislation at an early stage. The consultation will consider options for reform – including whether the rate should in future be set by an independent body; whether more frequent reviews would improve predictability and certainty for all parties; and whether the methodology is appropriate for the future;
  • the UK Government’s Chancellor of the Exchequer, Philip Hammond, will meet representatives of the insurance industry to assess the impact of the rate adjustment.

It should be noted that in certain other common law jurisdictions such as Bermuda, the Courts already had moved in recent years towards a Discount Rate consistent with the minus 0.75% now applicable in England and Wales, on a case by case basis (see, e.g., Simon v Helmot [2012] UKPC 5; Argus Insurance v Talbot [2014] Bda LR 114; Warren v Harvey [2015] Bda LR 59; and Colonial Insurance v Thomson [2017] Bda LR 41).

Sedgwick Attorneys
Sedgwick’s insurance attorneys regularly present to clients and other industry professionals on a wide range of topics. For a complete list of our attorneys, click here.
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