active case links


SIXTH CIRCUIT Excess/Post-Judgment Interest/”Loss” (MI)

An insured’s argument that the definition of “loss” in an excess insurer’s policy included post-judgment interest on the $2 million self-insured retention underlying its retention. In Key Safety Systems, Inc. v. AIG Specialty Ins, Co., No. 17-1934 (6th Cir. April 20, 2018)(unpublished), the Sixth Circuit rejected the insured’s argument that coverage was compelled by the Georgia post-judgment interest statute, noting that the AIG policy required the insurer to pay judgments, whereas the statute distinguished between judgments and interest on judgments. Further, the court noted that this was not a case where AIG had controlled the insured’s defense or decision to appeal.

NINTH CIRCUIT Cyber/”Phishing”/Computer Fraud (WA)

The Ninth Circuit has ruled in Aqua Star (USA) Corp v. Travelers Cas. & Sur. Surety Company of America, No. 16‑35614 (Ninth Cir. April 17, 2018)(unpublished) that a Computer Fraud policy issued by Travelers did not cover “phishing” losses that the insured suffered after fraudsters fooled employees into sending wire transfers to bogus accounts. In an unpublished ruling, the court ruled that the loss was clearly excluded as resulting “directly or indirectly from the input of Electronic Data by a natural person having the authority to enter the insured’s computer system …”


The full Eleventh Circuit has agreed to grant en banc review of a three judge panel’s 2-1 decision last September in five consolidated class actions in which the plaintiffs claimed that various auto insurers violated anti-trust laws by conspiring to limit what they paid to body shops for auto repairs and in boycotting non-compliant shops. Quality Auto Painting Center of Roselle, Inc. v. State Farm Ind. Co., et al., Nos. 15-14160.

CALIFORNIA “Impaired Property” Exclusion/Sudden and Accidental

The California Court of Appeal has sustained the applicability of the “impaired property” exclusion to allegations that a medical facility was unable to operate its new MRI and X‑ray machines because the insured negligently failed to tighten a metal bolt in the course of installing the machinery. In All Green Electric Inc. v. Security National Insurance Company, B279456 (Al. App. April 17, 2018), the Second District also refused to find that a duty to defend existed because the insurer had not ruled out the possibility of a “sudden and accidental” event, declaring that unlike cases such as Vann, the underlying complaint specifically alleged that the unscrewed bolt was the cause and did not suggest any possible events as being involved.

CALIFORNIA “Expected or Intended”/Releases (NY)

In a lengthy and interesting opinion, the California Court of Appeal has sustained a lower court’s finding of coverage to a railroad for a disastrous train collision that claimed 24 lives in 2008. Despite evidence that Metrolink engineers used handheld electronic devices while on duty, in violation of Connex’s policies, and that Connex executives knew corporate rules were being violated and that accidents could result if engineers were distracted by their cell phones, the Second District ruled in Underwriters at Lloyd’s, London v. Connex Railroad LLC, B276373 (Cal. App. April 19, 2018) that the evidence was insufficient to sustain a finding that the insured “intended or expected or reasonably could have expected” this accident. The court ruled that, under New York law, the “reasonably could have expected” language only applied if a “reasonable person would conclude the injury and damage flow directly and immediately from an insured’s alleged intentional act.” While affirming the lower court’s entry of summary judgment on behalf of the insureds, the Court of Appeal further ruled that any further claims against the insurers were barred by reason of a release that was given to them by the insureds after they interpleaded the aggregate limits of their policies subject to the outcome of the coverage dispute. The Second District rejected the insureds’ argument that they were fraudulently induced to enter into the agreement and should not be bound by it.

TEXAS Pollution Insurance/Late Notice (TX)

Despite two opinions from the Fifth Circuit declaring that notice requirements in pollution liability policies bar coverage without regard to whether the insured’s delay caused prejudice to the insurer, a Kansas District Court applying Texas law has ruled in PetroSantander (USA), Inc. v. HDI Global Ins. Co., 2018 U.S. Dist. LEXIS 59696 (D. Kan. Apr. 9, 2018) that these earlier opinions are not a reliable source of Texas law as they failed to consider Order 23080 issued by the Texas Department of Insurance, which establishes a prejudice requirement for policies issued or delivered in Texas.


* * * Inside the Insurance Industry * * *

Memphis-based Sedgwick has substantially expanded its international footprint with its acquisition of Cunningham Lindsey. AIG has obtained authorization for establishing American International Group UK Ltd. And AIG Europe S.A. as a vehicle for transitioning its U.K. business to the Continent as Brexit goes forward. The American Association of Insurance Services has filed a proposed filed a cannabis business owners policy with the California Department of Insurance that reportedly provides a package of first and third party coverages for qualifying California cannabis dispensaries, storage facilities, distributors, processors and producers. Chubb released its first quarter earnings this week, declaring $6.5 billion in net P&C premiums (up 5.8%) and a combined ratio of 90.1% (compared to 87.5% in 2017). Anthony Vidovich, who until recently has served as global head of Claims, Insurance & Reinsurance for XL Catlin, will be joining AIG as its new Chief Claims Officer for general insurance lines effective May 14, 2018.

* * * New Coverage Litigation of Note * * *

Sentinel Insurance has filed a declaratory judgment action in the U.S. District Court in Chicago, alleging in Sentinel Ins. Co. v. Novo Surgical, Inc., No. 18-2797 (N.D. Ill.) that that the CGL policy that it issued to Novo Surgical does not cover a claim by Symmetry Surgical Inc. that the insured misappropriating Symmetry’s product numbering system and product descriptions for selling surgical instruments.

* * * MM In the News * * *

MM’s Joe Desmond and Justin Amos have published a provocative new article exploring whether punitive damages are insurable in Massachusetts. Boston partner Michael Aylward will present a paper on Friday at the Emerging and Environmental Claims Managers meeting in Orland entitled “Toxic Torts: A Social History,” exploring why asbestos litigation is still going strong after half a century whereas mass torts based on EMF, mold and breast implants came and went within a matter of years.

* * * Sign Up Now * * *

What happens when an elite defense group gathers the best of the best to teach trial technique to a new generation of lawyers? The FDCC’s Litigation Management College is scheduled this year for May 20-22 in Philadelphia. Sign up now—you won’t regret it.

active case links