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BT Policyholder Protection Blog
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11 Jun 2018 Is a Settlement of a Restitution Claim Covered If Your Policy’s Ill-Gotten Gains Exclusion Applies Only In the Event of a Final Adjudication?

Can liability insurance insure a policyholder’s legal obligation to return to a third party amounts that the policyholder was never permitted to obtain in the first place? Insurance carriers would cite comments from Judge Posner, of the Seventh Circuit Court of Appeals: “[a]n insured incurs no loss within the meaning of the insurance contract by being compelled to return property that it had stolen, even if a more polite word than ‘stolen’ is used to characterize the claim for the property’s return.” In this vein, insurance company personnel and their coverage counsel frequently take the position that if liability policies exclude from covered “Loss” “matters which are uninsurable” under applicable law, that encompasses a judgment of liability for restitution of amounts which the policyholder was…

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27 Feb 2018 The Tenth Circuit Hands Another Win to Policyholders Seeking to Insure Defective Workmanship By Their Subcontractors

  Your company, an engineering firm, is hired by an agent for coal-fired plants to serve as contractor on projects to build jet bubbling reactors, which eliminate contaminants from the plants’ exhaust.  Your company, in turn, subcontracts the engineering and construction of the reactors’ internal components to another firm.  After the contractor’s work is done, the plants discover that the components are defective, causing the reactors to deform, crack or even collapse.   The agent notifies your company of the problem and asserts that it is liable for the costs of repairing and replacing the defective components, an amount which will run well into the hundreds of millions of dollars.   Your company tenders the claim under its commercial general liability (“CGL”) policy, which says that…

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26 Dec 2017 Payback: Can Settlements of False Claims Act Claims Be Covered Under D&O Policies?

In recent years, corporations have seen a dramatic upswing in claims alleging violation of the federal False Claims Act (FCA). Dating from the Civil War, the FCA at one time was a sporadically used civil law that made government contractors liable for fraudulent claims on the government. After the law was reformed in the 1980s to make it easier for individuals to sue on behalf of the government, employees and shareholders of corporations transacting with the federal government began viewing it as a powerful whistleblower statute.   With the increase in lawsuits alleging violations of the FCA, insurance companies have become more aggressive in denying outright any obligation to pay settlements of FCA claims on the grounds that they seek uninsured restitution or disgorgement. Contrary…

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15 Nov 2017 Tenth Circuit Holds that Governmental Investigation of Potential Criminal Violations is Not a ‘Claim’ Under a D&O Policy

  D&O insurance policies are key components of a corporation’s risk transfer portfolio, purchased to protect it against lawsuits presenting significant liability exposure to itself and its key officers and directors.   In recent years, as an alternative to targeted formal litigation and discovery in uncovering corporate wrongdoing, federal and state governments have increasingly utilized informal investigations. This trend has created an expensive new financial exposure in the business world, particularly for large corporations, which are often the targets of such inquiries, and corresponding questions about how D&O insurance policies cover such costs. Although many D&O policies have evolved to explicitly protect policyholders from the costs of responding to government investigations, many have not been amended, forcing courts to determine whether the existing language is…

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08 Sep 2017 Anti-Concurrent Causation Clauses: Why the Value of Your Property Coverage May Depend on Your State

A powerful storm pummels your city with high winds and heavy rains. After more than two days of intense wind and rain, the saturated hill behind your factory finally gives way and crashes into it. The building is severely damaged and your business operations are put on hold pending repairs. You need insurance money fast and file a claim with your property carrier.   Even though the policy doesn’t exclude property damage caused by wind or rain, it does contain an exclusion for earth movement “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.” The carrier denies coverage because of the earth movement exclusion.  Is the carrier right? As it turns out, the answer may depend on…

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30 Aug 2017 Fast-Moving Texas Insurance Law Changes: Starting Sept. 1, New Insurance Law Limits What a Policyholder May Recover

  House Bill 1774, passed by the Texas legislature in May, becomes law on Sept. 1 – just as Texans begin to assess the damages wrought by Hurricane Harvey. This law amends the Texas Insurance Code in a number of important ways, especially regarding what a policyholder can recover when an insurer doesn’t promptly pay a claim.   The new law applies to claims (not lawsuits) made on or after Sept. 1. A Texas company that owns property damaged in this storm should consider submitting a claim by Aug. 31.   The new law makes these important changes:   Waiting period. Starting with claims made as of Sept. 1, a policyholder generally will have to wait 61 days after giving notice to the insurance company…

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12 Jun 2017 Timing is Everything: E&O Policy Exclusions

  Imagine this: Your company runs a call center that takes incoming calls from customers of a nationwide corporation. Two years ago, a customer wrote a letter to your legal department stating that his call had been recorded without his knowledge or consent in violation of state law and demanding the payment of damages to resolve the matter. Your company made a small nuisance payment to the customer, but did not report this claim under the errors and omissions (E&O) policy in effect at the time.   This year, your legal department was served with a class action lawsuit alleging the company violated the laws of a number of states by not advising customers that their calls were being recorded. Your company’s E&O carrier denied…

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06 Mar 2017 Overcoming That Sinking Feeling Beating Earth Movement Exclusions in CGL Policies

  Co-authored by John Corbett and Andy Detherage.   The recent rainstorms in California rightly have been hailed as the end of a lengthy drought.  The inches of rain which fell in the span of a week have filled reservoirs and raised the water table in the parched ground.  Such a large volume of water, however, increases the danger of landslides in California’s notoriously unconsolidated hillsides and bluffs, and with it, the possibility of disputes over whether particular ground movement claims are covered by their liability policies.   Let’s look at a hypothetical example.  XYZ Construction is laying pipes under an existing street at the top of a bluff.  In the course of digging trenches to hold the pipes, one of XYZ’s diggers accidentally breaks…

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