Florida District Court Finds That A Non-Insured Party Does Not Preclude Application of Insured Versus Insured

Bill Bila and Cassandra Jones recently obtained judgment on the pleadings in the Southern District of Florida, finding no coverage under a Directors & Officers policy pursuant to an Insured versus Insured exclusion.

The January 30, 2017, ruling came after the insureds initiated coverage litigation, arguing that the insurer had a duty to defend the underlying lawsuit, as well as a duty to indemnify for the settlement amount. The insured condominium association initially tendered the underlying lawsuit, which was brought by the former association board president and another condominium unit owner, alleging that the board mismanaged the installation of hurricane resistant glass. The underlying lawsuit was filed in November 2013, and the former Association president served in that capacity until early 2012. The insurer denied coverage for the underlying lawsuit, raising several exclusions, including the Insured versus Insured exclusion. The parties in the underlying lawsuit reached a mediated settlement in March 2016, after which the insureds instituted a coverage action in Florida State court, seeking recovery of their underlying defense costs and the amount of the settlement.

On behalf of the defendant, our firm removed the case to federal court, filed a counterclaim and subsequent motion for judgment on the pleadings. Plaintiffs did not dispute that the former board president served on the board within three years of the underlying lawsuit, as required under the policy’s Insured versus Insured exclusion. Instead, plaintiffs argued that the insurer wrongfully refused to defend because the presence of a non-insured plaintiff in the underlying lawsuit required allocation between covered and uncovered matters. The court, relying on Florida law, found that the Insured versus Insured exclusion applied to bar coverage for the entire case from its inception because both insured and non-insured persons were initial parties to the suit. The court rejected plaintiffs’ allocation argument, finding that the provisions were inapplicable because the action was not covered.

The Marbella Condominium Association v. RSUI Indemnity Co., 9:16-cv-80987, Southern District of Florida

Related Claims First Made Prior to D&O Policy Period Precludes Coverage, Florida District Court Holds

WWM recently obtained summary judgment on behalf of RSUI Indemnity Company when a Florida federal judge held it had no duty to cover an underlying $40 million consent judgment arising from claims of real estate fraud because every underlying claim asserted against the insured shares the same factual basis as a 2008 counterclaim that was “first made” before the policy’s inception.  RSUI Indemnity Co. v. Attorney’s Title Insurance Fund Inc., No. 13-670, M.D. Fla.

Attorneys’ Title Insurance Fund Inc. and Florida Title Co. (collectively, ATIF) sued Section 10 Joint Venture LLP, Sky Property Venture LLC and CAS Group Inc., seeking to recover $3 million that they paid for an allegedly fraudulently sold property. The underlying lawsuit alleged claims for equitable lien/constructive trust, injunctive relief and unjust enrichment.  Section 10 counterclaimed for slander of title, wrongful lis pendens, declaratory judgment, tortious interference and wrongful injunction.

ATIF sought coverage for the counterclaims from its commercial general liability insurers and RSUI, its directors and officers liability insurer.  Eventually ATIF’s unjust enrichment count was the only remaining claim, and Section 10 filed a claim for malicious prosecution against ATIF. The parties in the underlying dispute reached a settlement that resulted in a $40 million judgment against ATIF. Section 10 agreed to enforce the judgment only against ATIF’s insurers pursuant to Coblentz v. Am. Sur. Co. of New York, 416 F.2d 1059 (5th Cir. 1969).

ATIF’s liability insurer filed suit in the U.S. District Court for the Middle District of Florida, seeking a declaration as to coverage and RSUI intervened.  RSUI moved for summary judgment, arguing that there is no coverage because Section 10’s claim is a single claim that predates any RSUI policy.  The District Court agreed stating:

Contrary to Section 10’s position, the policies’ language is clear and unambiguous. For a claim to qualify for coverage, it must be first made during the respective policy period and it must not be factually or otherwise related to a previous claim. If it is factually or otherwise related to a previous claim, and that claim was first made before the respective policy periods, there is no coverage available. That is what occurred here. Every claim asserted against ATIF in the underlying state court litigation shares the same factual basis as the 2008 Counterclaim, which was ‘first made’ before the respective policy periods began. As such, there is no coverage afforded under the policies for these claims.

The judge added that the “Prior and Pending Litigation Exclusion, even in its modified form, is in harmony with this construction” rejecting Section 10’s argument that there was conflict between the Related Claims Condition and the Prior and Pending Litigation Exclusion.

RSUI was represented by the WWM team of Bill Bila, Robert P. Conlon and Cassandra L. Jones.

WWM Secures Summary Judgment Ruling Significantly Reducing Damages in Illinois Consumer Fraud Act Claim

Neil Holmen and Jeremy Kerman recently obtained a favorable partial summary judgment ruling in the Circuit Court of Cook County that will reduce our clients’ potential damages from nearly $1,000,000 to the low-five figures.

The April 1, 2016 summary judgment victory, and the Court’s August 3, 2016 denial of plaintiffs’ motion to reconsider came in a class action lawsuit brought on behalf of the tenants of an apartment complex in the South Loop neighborhood of Chicago. The plaintiff, on behalf of a proposed class of building tenants, sought the recovery of all sums paid by all tenants to the building owner and authorized management agent for gas, water and sewer utility services. The basis of the claim was that from mid-2011 to the time of the filing of the lawsuits, the owner and/or the authorized management agent allegedly failed to provide the tenants with the formula used to allocate utility charges amongst the tenants as required by the Illinois Tenant Utility Payment Disclosure Act (“TUPDA”). Specifically, plaintiff claimed that that the defendants’ failure to comply with the TUPDA was a violation of public policy, which in turn was a violation of the Illinois Consumer Fraud Act (“ICFA”), and that the purported class was therefore entitled to damages in the full amount of all utility payments ever made to defendants.

On behalf of the defendants, our firm prepared a partial summary judgment motion asking the court to find that plaintiff’s damages were limited to only those actually suffered (i.e. the overbilling for utilities, if any such overbilling even existed). The court agreed that plaintiff’s damages should be limited, noting that plaintiff’s complaint sought a refund of all amounts tenants paid for utilities during the purported class period, not just overcharges. Significantly, the court also recognized that one of the requirements to succeed on a cause of action under the ICFA is that a plaintiff must suffer actual damages, which the court defined as “actual pecuniary loss.” The court held then that the damages sought by the plaintiff were not “actual pecuniary loss,” but amounted to a penalty against the landlord, and that the terms of the TUPDA does not allow for any such penalty. The effect of the court’s ruling was to limit the plaintiffs’ damages to amounts paid by tenants in excess of the correct prorata share for each tenant, if any.

Walsh v. McCaffery Interests, Inc. and CJUF III McCaffery Roosevelt Residential I, LLC, No.2014 CH 16257, Circuit Court of Cook County, Illinois


Illinois Four Corners Rule Inapplicable in Declaratory Judgment Actions, Seventh Circuit Confirms

WWM recently obtained a reversal in the Seventh Circuit on behalf of Landmark American Insurance Company.  Reversing a decision by the United States District Court for the Northern District of Illinois, the Seventh Circuit held that Landmark is entitled to conduct discovery regarding whether a defendant to a lawsuit is an insured as defined by the Landmark policy.  Landmark American Ins. Co. v. Peter Hilger, No. 15-2566, 2016.

Peter Hilger was named in two lawsuits alleging that he and several codefendants persuaded credit unions to fund loans by misrepresenting the value of life insurance policies offered as collateral.  Landmark had issued a professional liability policy to an entity owned by one of Hilger’s codefendants – O’M and Associates LLC (“O’MA”).   Hilger was an employee of a different company called Allied Solutions, LLC, yet insisted that he was insured under the Landmark policy and thus entitled to a defense because he was an independent contractor of O’MA. 

Landmark filed a declaratory judgment action, confident that discovery would show that Hilger was not acting as an independent contractor performing professional services for O’MA and thus not actually an insured under its policy.  The District Court, in a misapplication of the four corners rule, granted Hilger’s motion for judgment on the pleadings.  The District Court limited its analysis to the underlying complaints alone and concluded that because they “paint an ambiguous picture” of Hilger’s relationship with O’MA, it had to interpret the allegations in favor of coverage.  Landmark was thus forbidden to search for the truth and forced to defend Hilger, who it believed to be a stranger to the policy.

The Seventh Circuit reversed:

Hilger thinks that the broad scope of an insurer’s duty to defend means that in all duty to defend disputes, the court is limited to a review of the allegations of the underlying complaint.  That’s true when an insurer tries to deny coverage without seeking a declaratory judgment or defending under a reservation of rights.


But Landmark did seek a declaratory judgment, so that limitation doesn’t apply here.

Because Landmark filed a declaratory judgment action, it may discover and present evidence beyond the underlying complaints, so long as it does not tend to determine an ultimate issue in the underlying action (which it did not in this case).  The ruling provides insurers a measure of protection against having to automatically defend strangers to their policies based solely on the allegations in a complaint.

Landmark was represented by the WWM team of Eric Blanchard, Kevin MikulaninecRobert Conlon and William Bila.

10th Circuit Affirms Decision In Favor of WWM Clients

WWM attorney Jill A. O’Donovan successfully defended various insurer clients against an appeal before the United State Court of Appeals for the Tenth Circuit of a District Court decision finding there was no coverage for a pilot against claims arising from a 2008 crash involving his homebuilt, personal aircraft under a product liability policy issued to Garmin International, Inc.

Oregon resident Henry P. Bartle crash landed his homebuilt airplane in February 2008 while on a sightseeing flight with his stepdaughter and her friends.  When his passengers filed suit against him and others for their injuries, Mr. Bartle tendered the defense and indemnification of the lawsuit to his own personal aircraft liability insurer and, later, Garmin’s insurers.  With regard to the tender to Garmin’s insurers, Mr. Bartle claimed that he built his aircraft in a “joint venture” with Garmin after receiving a discount on a navigational system installed in his aircraft from his best friend and neighbor who was a Garmin employee.  Mr. Bartle claimed that relationship entitled him to coverage as an “Insured” under Garmin’s product liability policy.

The insurers filed a declaratory judgment in the District Court of Kansas seeking, in part, a ruling that Mr. Bartle did not qualify as an “Insured” under the Garmin policy.  Although Mr. Bartle claimed that there was clear evidence of a “joint venture” or other relationship between himself and Garmin to establish that he was an “Insured,” he submitted over 700 pages of documents as “evidence” in response to the insurers’ Motion for Summary Judgment on that issue without proper citation.  The insurers objected to this “document dump” and blatant violation of the court rules.  The District Court agreed and ultimately refused to consider all evidence that did not conform to the rules regarding proper citation.  The Court then found that any evidence that was properly submitted failed to establish any relationship that would warrant coverage.

On appeal, the Tenth Circuit Court of Appeals found the District Court “acted well within its discretion in setting aside the unwieldy mass of data that Mr. Bartle attempted to rely on without providing correct, specific references in accordance with the local rules.”  The Court noted that the burden rested with Mr. Bartle’s attorneys “desiring to practice before a court to submit evidence in conformity with the rules of that court.” 

Turing to the merits, the Tenth Circuit then evaluated the evidence considered by the District Court.  The Court noted that the plain language of the Policy required more than merely proof of a joint venture, partnership or other entity to qualify as an “Insured.”  Rather, it agreed with the insurers that Mr. Bartle also must prove Garmin had an ownership interest in that entity, was obligated to provide insurance for, or exerted financial or managerial control over that entity.  The Court did not find any evidence of any of those factors in the evidence properly presented.  Although Mr. Bartle argued the existence of an “Insured” relationship in documents not considered, the Court found “the merits cannot be separated from the process, and ultimately Mr. Bartle bore the responsibility to present evidence that would allow a rational trier of fact to find in his favor.”

Certain Underwriters at Lloyd’s London et al. v. Garmin International Inc. et al., No. 13-3310, 2015 WL 1383117 (10th Cir. March 27, 2015)

WWM Client Wins Asylum

WWM Partners successfully represented a citizen of Cameroon in his bid to obtain asylum in the United States.

The client sought asylum in the United States after being persecuted by the Cameroon police for his membership in the Southern Cameroon National Council and for his support of Anglophones in Cameroon.

In connection with WWM’s association with the National Immigrant Justice Center, WWM represented the client at his Immigration Hearing.  At the conclusion of the hearing, the Immigration Judge concluded the client had suffered past persecution in Cameroon and based on events since that time, had a reasonable fear of future persecution should  he be returned to Cameroon.   

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