ABA TIPS ICLC’s Post

ATTENTION ALL COVERAGE LAWYERS!! The TIPS Insurance Coverage Litigation Committee is seeking proposals for CLE presentations for its 33rd Annual Mid-Year Meeting to be held February 20-22, 2025, at the Estancia La Jolla Hotel & Spa. We are excited to welcome you back to La Jolla, California! Our Mid-Year Meeting there earlier this year was attended by insurance coverage practitioners, in-house and general counsel, brokers, academics, and state insurance and regulatory officials. As always, the meeting featured terrific panels and speakers covering timely and insightful insurance coverage topics. We already have received some great submissions for next year and hope you’ll join us in putting together additional cutting-edge panels. If you are interested in speaking on a panel, submitting a paper, and/or providing suggestions for presentations at the meeting, please contact Jason Reichlyn at jreichlyn@dykema.com and Steven Corhern at scorhern@balch.com. In submitting proposals, please provide a brief description of the topic, draft title, and anticipated panelists. Suggested topic areas include: •               Personal Lines Insurance Coverage/Litigation •               Property Insurance Coverage/Litigation •               Ethics •               Bad Faith •               Mediation/Appraisal •               Management Liability/Securities •               Professional Liability/EPL •               Construction/Property •               Emerging Risks •               Primary/Excess •               Regulatory/Restatement •               Cyber •               General Coverage Litigation DEADLINE FOR INITIAL SUBMISSIONS: May 20, 2024

Today's issue of Coverage Pointers is now available, our 685th issue since 1999. https://lnkd.in/gVVpKjMJ. Headlines below. Hey, what is Coverage Pointers? I asked the AI program, Perplexity, to tell me about CP. With footnotes omitted, this was the response: Coverage Pointers is a comprehensive bi-weekly electronic newsletter published by Hurwitz & Fine, P.C., a law firm based in Buffalo, New York. This publication focuses on providing summaries and analysis of important insurance law decisions from appellate courts in New York, Connecticut, and New Jersey, as well as selected opinions from state and federal courts across the United States and Canada. Key features of Coverage Pointers include: Frequency: Published every other Friday, ensuring readers receive timely updates on insurance law developments. Content: The newsletter offers summaries of significant insurance coverage decisions, with a particular emphasis on New York State courts. Scope: While primarily focused on New York, Connecticut, and New Jersey, it also covers relevant cases from other jurisdictions in the United States and Canada. Format: Designed for easy reading, it provides a "read-at-a-glance" summary of important decisions as they occur. Authorship: The newsletter is edited by Dan D. Kohane, a senior member at Hurwitz & Fine and a nationally respected insurance coverage counselor. Reputation: Coverage Pointers has gained recognition in the insurance industry for its comprehensive coverage of insurance law developments. Accessibility: It is available for free subscription, allowing interested parties to receive the newsletter directly via email. Coverage Pointers serves as a valuable resource for insurance professionals, attorneys, and others interested in staying informed about the latest trends and developments in insurance law. Its long-standing publication (over 26 years) and regular schedule make it a reliable source of information in this specialized legal area.

Professional liability insurance is designed to protect executives against claims of negligence or inadequate work arising from their services. Companies often use these policies to safeguard a business’s financial assets from the potentially high costs of lawsuits and settlements in the event someone alleges executives have failed to uphold their duties. The policies often cover CEOs, CFOs, and other board members, but often fail to include CISOs. New Jersey-based insurer Crum & Forster is looking to change that. The company recently unveiled a policy specifically designed to shield CISOs from personal liability. Nick Economidis, vice president of eRisk at Crum & Forster, told CyberScoop that the company saw an opportunity since CISOs may not be recognized as corporate officers under a directors and officers liability policy, which normally covers executive liability. “CISOs are in a no-win situation,” Economidis said. “If everything goes right, that’s what people expect. If something goes wrong, they’re the person that everybody looks at and they’re left holding the bag. Then, there are potentially significant financial ramifications for them because they’re often not covered by traditional [professional liability] insurance policies.” https://lnkd.in/dCh2WgmA

Insurance Expert Witness' Testimony Not Fully Excluded Despite his Alleged Lack of Participation in Post-Policy Premium Audits Plaintiff American Empire Surplus Lines Insurance Company ("AESLIC" or "Plaintiff") issued to J.R. a commercial excess liability insurance policy, which included a premium charge to be computed as a percentage of J.R.'s gross receipts during the policy period. Plaintiff assigned an advanced premium to the Policy based on J.R.'s estimate of its gross receipts during the policy period, which was subject to adjustment if a post-policy audit reflected that J.R.'s actual gross receipts exceeded its initial estimate. The post-policy audit concluded that J.R.'s actual gross receipts exceeded its initial estimate, and thus J.R. owed an additional premium in the amount of $487,386.00. Following non-payment of this additional premium, AESLIC brought this action on June 13, 2023, seeking to recover payment of said additional premium. After Nelson issued his expert report in support of J.R., Thomas M. Trezise issued his rebuttal report in support of AESLIC. Based on his review of the audit and the Nelson Report, Trezise offered the following four opinions: 1. The Policy was a surplus lines policy and, as such, not regulated by the State of New Jersey. [AESLIC] had full discretion to establish the forms and terms of the Policy as well as the rules and rates by which the premium was determined. 2. The terms of the Policy solely define the relationship between [AESLIC] and J.R.... Standards and practices, whether of admitted or surplus lines insurers, have no application. 3. The Policy provided coverage for significant risks. The coverage was not illusory. 4. J.R. and Nelson cannot challenge the underwriting process of [AESLIC]. While addressing a number of Nelson's premises and assumptions, Trezise maintained that "rate [at issue] was unmistakably and clearly stated and anyone familiar with basic arithmetic can understand how it determined the premium. The Policy has no flaw as to the definition of the [r]ates and is, therefore, enforceable." On August 16, 2024, J.R. filed its Daubert motion to exclude Trezise's expert opinion. https://lnkd.in/gmHR7Bxp

Two ships passing in the night: insurance defense counsel and the insurance companies who hire them. Let me explain… This is NOT a post to disparage defense firms or defense attorneys. After all, I started my career as an insurance defense attorney, had the good fortune of working with some amazing defense attorneys, and have many friends who are defense attorneys. Hell, my wife is an amazing medical malpractice defense attorney. This post is about the poor system engendered by the insurance industry that almost punishes defense attorneys for doing too much work on a file, thus creating a system where less is more. Before leaving my commercial/business litigation practice to focus on plaintiffs’ personal injury, I had the unique experience of prosecuting a legal malpractice case against an insurance defense firm on behalf of a general liability carrier. In a nutshell, the carrier hired the defense firm to represent its insured in the defense of a personal injury claim. After defense counsel failed to appreciate the plaintiff’s claims, the extent of his damages, and his theories of liability, defense counsel continued to advise the carrier (in writing, over and over) not to settle, even telling the carrier to reject 5 and low 6 figure settlement offers. The defense attorneys continued to claim there was not enough information for him to justify any of the offers made by the plaintiff. In actuality, all the information he needed was produced by the plaintiff and was in his file. The case went to trial and the carrier’s insured was hit with a $5 million verdict, plus fees, and punitive damages. The trial took only 3 days. What went wrong? Once the malpractice suit was in litigation, we learned through discovery that the defense attorney who was assigned to defend the underlying personal injury case was handling between 75-150 general liability cases at any point during his time at the firm. And, he was billing between 2200-2400 hours per year. Doing rough math, that results in very little attention to each file over the course of the year. With that many cases, it is IMPOSSIBLE to properly work a file, pay attention to and meaningfully participate in discovery, properly advise and counsel a carrier and their insured, or make any semblance of rational decision-making. The end result? A case that could have settled for less than $100k ended up costing the insurance company over $6 million once the dust settled. Who do you think really ends up paying that cost?…

Insurance awareness tips (1) D&O Directors and Officers liability insurance (D&O) provide liability coverage for company’s top management and executives in order to protect them from any claims which may arise from decisions and actions taken as part of their duties. Companies usually purchase D&O insurance because lawsuits are expensive, and the costs associated with them are rising. Moreover, if companies do not have a satisfactory D&O insurance it is unlikely that they will be able to attract top managerial talent, given the potential risks involved. D&O insurance reimburses the defense costs incurred by board members, managers, and employees in defending against claims made by shareholders or third parties for alleged wrongdoing. D&O insurance also covers monetary damages, settlements, and awards resulting from such claims. If the company cannot indemnify its directors, officers, or employees for amounts resulting from these claims, D&O insurance will step in to directly pay those costs – protecting the individual’s personal assets. If the company indemnifies the individual for such costs, D&O insurance will reimburse the company for such indemnity. The D&O policy will also provide some coverage for the company itself if it is sued.

Reflecting on an enriching experience last week at the 2024 Insurance Coverage Litigation Committee CLE Seminar. I extend my heartfelt thanks to my fellow panelists, whose insights and extensive experience added tremendous value to our “In-House Counsel - Headaches and Pain Relief Solutions” panel. Heather P. Arias, Esq., AIC's comment continues to resonate with me, reminding me of the importance of avoiding surprises when it comes to advising and counseling insurance companies; Suzanne Day's input on strategies to ensure attorney-client communications and work product are protected from disclosure leave a lasting impression, as well as Lori Siwik's valuable firsthand experiences shared about the key role that external risk managers and brokers play when faced with handling the insurance tripartite relationship in liability claims. My key takeaways from our panel discussion 1. No Surprises. Insurance companies want from (either coverage or defense) counsel substantive and timely communications, proactive strategies with a focus on resolution, and a realistic and practical view as to the exposure a case presents based on counsel’s experience and expertise. 2. There are two overarching problems insurers face from outside counsel: lack of communication and reactive versus proactive litigation strategies. 3. Some takeaways about in-house handling of claim files: - Claim files (or portions of it) within an insurance company’s records become protected by the work product doctrine when there is anticipation of litigation, which varies in every case but is generally when the insurer determines there is no coverage for the claim; carriers and policyholders alike are encouraged to split their files between pure claims handling materials and coverage dispute communications and materials;  - Unless the claim file is relevant to the underlying liability action, it should not be discoverable by plaintiffs in the underlying litigation against the insured;  - If materials in the claim file are created in the ordinary course of business of the insurer’s claim handling and investigation, they may be discoverable in litigation provided they are relevant to the dispute and not otherwise protected by attorney-client privilege or work product doctrine; 4. Managing potential for conflict of interests in the insurance tripartite relationship is a balancing exercise between the insured, insurer and defense counsel. Early recognition, analysis and solution of conflicts of interest that can disrupt the tripartite relationship is key, especially when the insurer defends under a reservation of rights. 5. Even when the insurer has policy-given control of the defense and settlement, the insured ultimately has the last word on whether to proceed to trial or settle the underlying case. Choosing to try a case when the insurer wishes to settle may however jeopardize the insured’s coverage, but it is a decision for the insured to assess.

The definition of the term insured in each of the PI and D&O policies plays a key role in shaping the wordings described above. A PI policy is issued to entities and the additional insureds of the entity which is the primary insured. So, the non- imputation and severability wordings are different from a D&O policy which basically covers individuals. In a PI policy it is usually the entity which is sued. Any illegal act or violation of one entity should not impute the other entity. That is basically the objective of the above clause in a PI policy. An entity which is an additional insured Or the primary insured will not be held responsible or reprehensible for the conduct of another insured in the act of negligence. Even if they are vicariously liable or responsible for the conduct of others the party which files the suit is concerned only about it's compensation and not about making others responsible. So, an insurer should not make others responsible and deny coverage. But, in a D&O policy any insured may be sued for not just violation committed by himself but also for not preventing the wrongful act committed by others as it covers managerial liability. But, in a D&O policy any insured may be sued for not just violation committed by himself but also for not preventing the wrongful act committed by others as it covers managerial liability. The D&O policy also excludes illegal scts. But, the role of an insured person in the act ie whether it is a wilful act or an act of negligence determines the coverage of the respective individual. This can be determined only by the court. So, in a D&O policy defence costs are paid and if later it is proven that the insured is guilty then the defence costs will have to be paid back by the insured. Basically, a D&O policy is issued to individuals who are more in need of financial support than entities.

Very important and informative article bt Scott Baldwin of the Savvy Director on D&O Insurance - What You Need to Know In their last Savvy Director blog, they explored how a director may incur personal liability because of their board service. Practicing due diligence is all well and good, but a director’s actions or inactions may still expose them to litigation and penalties. That’s why companies provide their directors with protection through indemnification. https://lnkd.in/dc44PMB8

Directors & Officers Liability Insurance, commonly known as D&O Insurance, is a critical component of risk management for organizations in Colorado. This comprehensive guide will provide you with an in-depth understanding of D&O Insurance, its key components, and its significance in protecting the leadership of your organization. Additionally, we will explore the legal landscape for D&O Insurance in Colorado, evaluate the various aspects of D&O insurance policies, and navigate the claims process. Whether you are a director, officer, or a concerned stakeholder, this ultimate guide will equip you with the knowledge you need to make informed decisions about D&O Insurance in Colorado. Learn more below!