Exhaustion Clause Precludes Gap-filling by the Insured

The New York Supreme Court, Appellate Division, First Department affirmed the lower court’s dismissal of Forest Laboratories v. RSUI, thus finding that RSUI’s exhaustion clause precludes gap-filling and requires complete exhaustion by the underlying insurers themselves before the excess RSUI policy is implicated.

In the case, Forest Labs settled with two other excess insurers below RSUI’s layer for less than limits.  RSUI moved to dismiss based on its exhaustion clause, which states that the policy is only implicated when the “Underlying Limits of Liability” are exhausted “solely as the result of actual payment of a Covered Claim pursuant to the terms and conditions of the Underlying Insurance thereunder.” RSUI thus argued  Forest Labs could not implicate the RSUI excess policy by settling with other underlying insurers and filling in the gap itself because the RSUI clause, when referring to the underlying insurance, requires that actual payment be made “thereunder.”  In other words, an insured cannot make a payment “under” an insurance policy.

The principal authority relied on by RSUI was JPMorgan Chase & Co. v. Indian Harbor Ins. Co., 930 N.Y.S.2d 175 (Sup. Ct. N.Y. Cty 2011), which involved five different excess policies.  Some of the policies expressly required payment of underlying limits by the underlying insurers.   Others – more similar to RSUI’s –  required payment of limits “under” such underlying insurance.  Without specific analysis, the court in that case ruled in favor of the excess insurers, which RSUI argued effectively conflated the two types of exhaustion language, meaning that neither of them permit exhaustion by an insured’s gap-filling.  In its order, the First Department in Forest Laboratories cited JPMorgan Chase as the basis for its ruling.

Although the market has significantly revised exhaustion clauses in recent years, this decision shows that courts will still accurately interpret older clauses, many of which may still be in play despite their age.  Eric Blanchard and William Bila of Walker Wilcox Matousek LLP represented RSUI in the coverage litigation and appeal.

WWM Wins Appeal in Washington

WWM attorneys Robert Conlon and Christopher Wadley won an appeal on behalf of WWM’s client, a professional liability insurance carrier, in the Court of Appeals of the State of Washington, Division Three.  The ruling affirmed the reasonableness of a reduced consent settlement ruling of the lower court, potentially saving the client more than $3 million.

A motion was filed by the claimant and an individual attorney insured under a professional liability insurance policy, in which the claimant and insured sought court approval of a proposed $3.8 million consent judgment to be entered against the insured without the consent of the insured’s liability carrier.  WWM successfully opposed the motion and the court found the proposed $3.8 million judgment to be excessive and reduced the amount to $688,875.  As the claimant and insured’s first settlement was not final, they entered a second settlement over a year later for $2.9 million or whatever lesser amount the court deemed reasonable.  Claimant then filed a “Petition for Finding New Settlement Reasonable and/or Motion for Reconsideration of Verbal Ruling.”  WWM moved to strike the petition, arguing that it was untimely and did not identify a basis in fact and law seeking reconsideration as required by CR 59(b). The court denied the new motion and granted WWM’s motion to strike.  The Judge entered an order finding that the reasonable settlement value of the consent judgment was $688,875, which claimant appealed.

On appeal the claimant attempted to argue that not having a hearing on the second settlement was improper under CR 59 and that the court failed to explain how it applied the individual reasonable factors delineated in Glover v. Tacoma Gen. Hosp., (98 Wn.2d 708, (1983)).  The Washington Division III Court of Appeals panel disagreed.  “He provides no legal authority suggesting that any of the three matters he relies upon is a reversible abuse of discretion and his arguments are unpersuasive.”  Accordingly, the court affirmed the lower court’s judgment.

Manuel Hidalgo v. Jeffrey Barker et al., 309 P.3d 687 (Wash. Ct. App. 2013)

WWM Client Wins Asylum

WWM Partners recently assisted a 22 year old Kosovo woman in successfully obtaining asylum in the United States.

The client, a Kosovarian immigrant, came to the United States due to her fears of persecution by the Kosovarian government, its citizens, and her family on account of her membership in a particular social group of Kosovarian gay woman.

As part of WWM’s association with the National Immigrant Justice Center (NIJC), WWM assisted the client in preparing her asylum application and represented the young woman at her Immigration Hearing. The client was granted asylum based upon the physical and mental persecution she received while in Kosovo from her father and others in society due to her sexual orientation.

WWM Wins Appeal in the West Virginia Supreme Court

Bob Arnold and Ryan Rodman of WWM recently won an appeal in West Virginia that involved novel insurance coverage issues in a compelling factual context.  The case arose out of the tragic death of Charleston WV police officer Jerry Jones, who was killed by a ricocheting bullet fired by another officer during a police pursuit.

In March 2011, Officer Jones’ Estate brought a declaratory judgment action in Kanawha County, West Virginia, seeking underinsured motorists (“UIM”) benefits from WWM’s client, an insurer of the City of Charleston.  The declaratory judgment alleged that Patrolman Jones was killed in the early morning hours of September 13, 2009, at the conclusion of a car chase.  Patrolman Jones and other officers had successfully surrounded an automobile driven by criminal suspect Brian Good.  When Mr. Good was instructed to exit his car he revved his engine as if threatening to advance toward the police cruisers.  After ordering Mr. Good to stop, several officers opened fire.  Patrolman Jones was struck by a stray bullet and died as a result of his injuries. Continue reading

WWM Wins Appeal in the United States Court of Appeals for the Third Circuit

WWM attorneys Robert Conlon and Robert Arnold won an appeal on behalf of WWM’s client, a professional liability insurance carrier, in the United States Court of Appeals for the Third Circuit.  The ruling affirmed the United States District Court for the District of New Jersey (USDCNJ) grant of summary judgment for WWM’s client.  WWM’s client declined coverage for a third-party claimant’s lawsuit for legal malpractice against one of the insured law firm’s attorneys on the basis that the lawsuit related back to another claim against the attorney made outside of the policy period and, thus, did not constitute a “Claim” made during the policy’s term of coverage. In response to the denial, the insured attorney and law firm filed a declaratory judgment action against WWM’s client in New Jersey state court alleging that the client breached the insurance contract by declining coverage for the claim. WWM successfully removed the matter to the USDCNJ and thereafter the insureds filed a motion for summary judgment. WWM’s client also filed a cross-motion for summary judgment. Continue reading

WWM Wins Dismissal of Hearing Loss Coverage Suit in Federal District Court

WWM attorneys succeeded in obtaining the dismissal on behalf of its client, Pacific Employers Insurance Company, of a declaratory judgment action filed by Bridgestone Americas Tire Operations LLC. By order dated February 27, 2013, an Ohio federal judge dismissed Bridgestone’s suit seeking to hold Pacific liable for hearing loss claims made by Bridgestone factory employees, finding that the dispute had already been decided by a prior federal court decision.

U.S. District Judge Sara Loi vacated her own March 2012 order that denied Pacific Employers Insurance Co.’s Motion to Dismiss based on res judicata grounds and entered dismissal of Bridgestone’s Complaint. In doing so, Judge Loi found that Pacific Employers Insurance Co.’s motion for reconsideration convincingly argued that the doctrine of res judicata barred Bridgestone’s suit given that the same issues had been previously litigated in a federal action filed in Louisiana that was subsequently affirmed on appeal by the Fifth Circuit Court of Appeals. Judge Lioi had previously denied Pacific Employers Insurance Co.’s initial bid to dismiss the Ohio suit after erroneously determining that the Louisiana action did not involve the same insurance policies at issue in the Ohio suit. Continue reading

WWM Secures Significant Number of Occurrences Ruling from the Illinois Appellate Court in Wrigleyville Porch Collapse Coverage Litigation

Bob Conlon Successfully Argued for the Limitation of the “Time and Space” Test Adopted by the Illinois Supreme Court in Addison Ins. Co. v. Fay  to Cases Involving “Ongoing Negligent Omissions”

On January 11, 2013, the Illinois Appellate Court, First District issued a significant ruling on the issue of number of occurrences under a comprehensive general liability policy. As explained below, the Court’s ruling provides clarification and refinement of the Illinois Supreme Court’s number of occurrences decision in Addison Ins. Co. v. Fay, 232 Ill. 2d 446 (2009). Continue reading

WWM Obtains Summary Judgment for Client Insurer: No Duty to Defend or Indemnify Legal Malpractice Claims

In January 2012, Gilbert Sollek brought a declaratory judgment complaint seeking a declaration of rights under a claims-made-and-reported legal malpractice policy that Westport Insurance Corporation had issued to Sollek’s former lawyer, Vann Leonard. Sollek asserted a claim against Leonard in an underlying lawsuit alleging negligence, legal malpractice, and unjust enrichment due to Leonard’s alleged failure to negotiate a successful settlement of Sollek’s home equity line of credit with Sollek’s bank. Westport denied coverage for Sollek’s claim against Leonard, and for the claims of other former clients against Leonard, after Leonard pled guilty to multiple counts of embezzling clients’ funds from his trust account. Sollek sued Westport in Mississippi state court seeking to recover under Leonard’s malpractice policy. Westport subsequently removed the action to the U.S. District Court for the Southern District of Mississippi. Continue reading

WWM Wins Major Pro Rata Allocation Ruling in Missouri Pollution Coverage Action

Bob Arnold, Peter Daniels and Garry Glass Secure Pro Rata Allocation in Missouri Pollution Coverage Action

Granting a motion filed by Walker Wilcox Matousek, Missouri Circuit Judge Thea Sherry has ruled that pollution losses should be allocated pro rata under Illinois and Missouri law. The case involved three separate lines of insurance issued to predecessors of policyholder, Mallinckrodt. Mallinckrodt sought insurance under all of these policies for environmental claims at over twenty different sites throughout the United States.

The court began its analysis with choice of law, observing that it was unnecessary to decide which state’s law applied if there was no actual conflict among the possible choices. The parties agreed that Missouri and Illinois were potentially applicable, so the court examined the laws of those states. Turning to Illinois first, the court focused on two cases: Outboard Marine Corp. v. Liberty Mutual Ins. Co., 283 Ill.App.3d 630 (2nd Dist. 1996) and Zurich v. Raymark Indus, Inc., 514 N.E.2d 150 (Ill. 1987). Continue reading

WWM Successfully Defends Favorable Trial Ruling on Bad Faith Before 9th Circuit Court of Appeals

WWM Attorneys Robert Conlon and Christopher Wadley successfully defended, on appeal before the Ninth Circuit, a trial judgment they obtained in favor of a legal malpractice liability insurer in a complex, multimillion-dollar coverage and bad faith lawsuit. Weinstein & Riley, P.S. v. Westport Ins. Corp., Nos. 11-35325, 11-35341, 2012 WL 2024770 (9th Cir. June 6, 2012).

The case arose out of two underlying lawsuits involving the insured attorney. The first action, which was filed against the insured attorney in Oregon, involved the forced sale of a company that the attorney owned and controlled, and the separation of that company from the insured attorney’s law firm. The second action, which was filed against the insured attorney in Washington, involved malpractice claims against the insured attorney and his firm brought by the company he formerly owned and controlled, after the insured attorney sold his interests in the company. The insured attorney sought coverage from his legal malpractice carrier for approximately $2 million in attorney’s fees incurred in the underlying lawsuits. Continue reading