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Posts Tagged ‘policyholders’

Cooperation: A Policyholder’s Duty…or Downfall?

Posted on: April 12th, 2019

By: Marc Finkel

A policyholder’s duty to cooperate with its insurer is one of the most significant commitments made in the relationship between an insurer and its insured. It goes without saying that the consequences can be dire for an insurer when this commitment is broken. However, a potential remedy is possible when insurers are caught in the predicament of facing surprise exposure due to a policyholder’s failure to cooperate and adequately updating the insurer as to claims in litigation. This is illustrated in the recent case Ironshore Specialty Insurance Co. v. Conemaugh Health System Inc. et al., 2019 U.S. Dist. LEXIS 45690, currently being litigated in the Western District of Pennsylvania.

In that case, Ironshore defeated Conemaugh’s attempt to dismiss an insurance coverage dispute that began when Conemaugh, a large regional health care provider in western Pennsylvania, was found liable for a $19,000,000.00 award in a medical malpractice action. Ironshore, an excess insurer for Conemaugh, routinely requested updates from Conemaugh and Conemaugh’s defense counsel concerning the status of the underlying malpractice action. Ironshore was informed that the underlying matter was potentially “problematic” for Conemaugh, but Ironshore was never informed of the potential for a verdict that would trigger excess coverage under the Ironshore policy. Furthermore, Ironshore was not informed of the trial date or that there had been ongoing pre-verdict settlement discussions which would have required participation from Ironshore.

The underlying medical malpractice action was ultimately settled with a contribution from Ironshore that was subject to a “continued reservation of rights, including its right to recoup.” In denying Conemaugh’s motion to dismiss, the Court found that the Ironshore policy’s Cooperation Clause unambiguously required Conemaugh to “cooperate” with Ironshore by “making available all such information and records as [Ironshore] would reasonably require” upon Ironshore’s election to associate in the “investigation, settlement, or defense” of the underlying claim against Conemaugh. The Court further found that Ironshore’s allegations of receiving inadequate information concerning the status of the underlying claim, despite having made repeated requests for such information from its insured, was enough to allege a breach of the Cooperation Clause, thereby preserving Ironshore’s right to seek a claw back of the share it paid to settle the malpractice action.

In the coverage dispute, Ironshore positioned itself to potentially recover part or all of its contribution to the settlement proceeds from Conemaugh by taking the following steps beginning during the pendency of the underlying litigation: (1) making a clear and express election of its rights to associate; (2) regularly requesting reasonable updates from its insured; and (3) reserving its rights to seek recoupment as part of the underlying settlement agreement. The court recognized these efforts as solid bases for limiting Ironshore’s exposure by virtue of questionable cooperation by its insured.

If you have any questions or would like more information, please contact Marc Finkel at [email protected].

The Effects of the California Wildfires Continue

Posted on: January 7th, 2019

By: Matthew Jones

The California Insurance Commissioner recently issued a press release regarding the extensive insured losses from the numerous California wildfires. Those losses total over $9 billion, and are even expected to rise. The losses span across various lines of insurance coverage, including commercial, residential, personal and commercial vehicles, and agricultural, to name a few. In light of the substantial losses and long process toward recovery, the Commissioner issued a notice to all insurers asking them to expedite claims and issuing checks immediately for four months of out-of-pocket costs. This notice also requested that the insurers help out the policyholders as much as possible in being lenient regarding document production, which will likely be difficult for policyholders given the damages sustained. The Commissioner also issued a “declaration of emergency” to allow insurers to obtain help from out-of-state claims adjusters in order to deal with the high volume of claims. However, these out-of-state adjusters must be educated and versed in California consumer protection laws, which are much more stringent than other states.

So in a time of heartbreak and sorrow, the Commissioner is coming to the rescue to help ease the insurance claim process and help the thousands of victims get back on their feet. However, despite these efforts, extensive litigation is likely to come from these tragic events as homeowners try to make themselves whole again.

If you have any questions or would like more information, please contact Matthew Jones at [email protected].

Court Rules No Coverage For Pa. Law Firm’s Malpractice Suit

Posted on: November 26th, 2018

By: Barry Brownstein

An insurer does not have to cover a Pennsylvania law firm in a professional malpractice suit that a client filed after the firm allegedly used privileged information to benefit its attorneys’ side business in a real estate development.

The United States District Court for the Western District of Pennsylvania granted Westport Insurance Corp.’s motion for summary judgment in its case against Hippo Fleming & Pertile Law Offices (“HFP”) and attorney Charles Wayne Hippo Jr., agreeing with the insurer that the dispute over a shopping center development was exempted from coverage by the outside businesses exclusion in the firm’s professional liability policy.

Gregory Morris and Morris Development, one of HFP’s longtime clients, alleged that HFP had used information disclosed to the firm under attorney-client privilege to benefit a project by its side businesses, Templar Development and Templar Elmerton. Westport’s insurance policy contained a clear and unambiguous exclusion for lawsuits stemming from any of the policyholders’ outside businesses, and Hippo had not disclosed his involvement in the Templar companies when applying for the policy.

HFP argued that since the underlying lawsuit’s first two allegations of legal malpractice and breach of contract stemmed from the firm’s attorney-client relationship to Morris, Westport had a duty to defend them under the professional liability policy. The court, however, said it was Hippo’s dual role that gave rise to the claims against him.

The court emphasized that the plain language of the complaint in the underlying suit entirely discredits defendants’ argument that counts I and II are based solely on HFP’s role as Morris’s attorney. Counts I and II of the complaint allege that Hippo committed legal malpractice and breach of contract by simultaneously acting as Morris’s attorney and a competing real-estate developer. Therefore, the court held that Westport has no duty to defend because each claim in the underlying suit falls unambiguously within the policy’s outside business exclusion.

If you have any questions or would like more information, please contact Barry Brownstein at [email protected].