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FIRST CIRCUIT Sexual Assault Exclusions/”Arising Out Of” (MA)

In a case that we argued for AIG back in February, the First Circuit ruled last week in AIG Property Cas. Co. v. Cosby, No. 17-1505 (1st Cir. June 7, 2018), that a Massachusetts District Court was correct in ruling that a sexual abuse exclusion in AIG’s homeowner’s policy did not unambiguously precluded numerous suits by women who claim that Cosby defamed them in denying their allegations of rape and sexual assault. The court did not reach the issue of whether the coverage triggering allegations of sexual assault “arose out of” the original incidents of assault, holding instead merely that the exclusion in AIG’s homeowner’s policy was ambiguous with respect to such claims because the umbrella policy issued to Cosby had different language in a separate sexual assault exclusion for “Limited Charitable Trustees and Directors Liability.”

NINTH CIRCUIT D&O/”Professional Services” Exclusion (CA)

The US Court of Appeals for the 9th Circuit has ruled in Hotchalk, Inc. v. Scottsdale Ins. Co., No.: 16-17287 (9th Cir. June 4, 2018) that qui tam claims against a vendor of online educational technology in which the claimants alleged that Hotchalk had violated federal regulations concerning the involvement of students who received financial aid are subject to an exclusion for a “professional services” under Scottsdale’s Directors and Officers policy. In an unpublished opinion, the Ninth Circuit affirmed the California District Court’s declaration that services that Hotchalk provided to universities, including its recruitment services, are “professional services” subject to this exclusion.

CALIFORNIA Arbitration

The Court of Appeal has ruled in Nielsen Contracting, Inc. v. Applied Underwriters, Inc., D072393 (Cal. App. May 3, 2018) that an insured’s argument that the worker’s compensation policies that it was sold were fraudulent was for a court to decide rather by an arbitrator pursuant to an arbitration clause in the agreement.

CONNECTICUT Stipulated Judgments/”Reach and Apply” Actions

A federal district court has ruled that an accident victim could not pursued bad faith claims against the liability insurers of the truck that struck her lacked standing to do so. Although Section 38a-321 gives tort claimants the right to pursue “reach and apply” actions against a defendant’s liability insurers “upon the recovery of any final judgment,” Judge Eginton ruled in Salinas v. HDI-Gerling America Ins. Co., No. 17-1755 (D. Conn. June 7, 2018) that no final judgment had entered in this case because the judge in the underlying tort proceedings denied the plaintiff’s motion for entry of the stipulated judgment that she had negotiated with the defendant/insured truck driver.

ILLINOIS Insurer Insolvencies

The Appellate Court has ruled in In Re Liquidation of Lumbermens Ins. Co., 2018 IL App (1st) 1170966 (Ill. App. Ct. June 1, 2018) that the state Director of insurance has sustained a lower court’s declaration that California Insurance Guarantee Association cannot be order to reimburse itself for general administrative costs from funds held in a special deposit. The First District declared that California law prohibited CIGA from using special deposits to pay for general administrative expenses.

MASSACHUSETTS Bad Faith/Statute of Limitations

The federal district court has dismissed a bad faith claim against a liability insurer, declaring in Hong v. Northland Ins. Co., No. 18‑0440 (D. Mass. May 30, 2018) that the four year limitations period for bringing an action under G.L. c.93A ran in this case from the date that the insured withdrew its earlier settlement offer and not, as the plaintiff argued, from the date a few weeks later when the plaintiff obtained a verdict against the insured. Brian Suslak of Morrison Mahoney represented the defendant.


On a certified question from a federal district court, the Washington Supreme Court has declared in Durant v. State Farm Mutual Automobile Insurance Company, No. 94771-6 (Wash. June 7, 2018) that efforts by State Farm to cut off PIP benefits under its auto policy after the claimant had reached “maximum medical improvement” violation of WAC 284-30-395(1) seeking to limit benefits beyond the regulations permitted declamation for services that are not reasonable or necessary or otherwise unrelated to the insured’s accident.


* * * Inside the Insurance Industry * * *

Windstorms, flooding and other severe weather events in May contributed to insureds property losses totaling $2 billion according to Aon.

Having failed in its recent campaign to acquire XL Group, Allianz is reported to be targeting a possible acquisition of other companies, including Zurich, RSA and Hartford Financial Services.

Zurich has purchased a minority interest in micro-business start up CoverWallet.

Marsh reports that captive insurers are increasingly using investment-linked security (ILS) vehicles to reinsure their risks.

XL Catlin has reportedly upgraded its environmental liability coverages for conrtactors and design professionals, including new covers for protective losses and green claims.

* * * New Coverage Litigation * * *

Travelers has filed a recoupment action against a general contractor in the federal district court in Denver, alleging in Travelers Indemnity Company of America v. Colorado Structures, Inc., No.:18-01372 D. Colo.) that it is entitled to reimbursement for sums that it spent to defend this insured in construction defect litigation before a court declared that it had no obligation to do so.

active case links