Negotiating Commercial Contracts – Insurance Words of Wisdom

Risk signOne of the key insurance policy provisions that is often included in commercial contracts to transfer risk is the requirement that one contracting party make the other contracting party an additional insured on their insurance policy, according a website post for SandRun Risk.

The authors discuss the 2013 Insurance Services Office revisions to the standard additional insured endorsement form.

The three significant changes are:

  • Insurance provided to an additional insured will apply only to the extent permitted by law
  • If additional insured coverage is required in a contract or agreement, the additional insured will not be provided coverage that is any broader than required in that contract or agreement with the named insured
  • The limits available to an additional insured will be the lesser of the limits required by contract or available under the policy

Read the article.

 

 




Lawyer Who Tried to Bilk Insurance Companies Out of $300,000 Sentenced to Prison

A former attorney in Texas has been sentenced to five years in prison after pleading guilty to insurance fraud and barratry, or litigation for profit, The Fort Worth Star-Telegram reported.

The Tarrant County district attorney said that Richard Kent Livesay schemed to bill insurers for fraudulent hailstorm damage to roofs without the knowledge or consent of homeowners.

The DA’s office said Livesay would have received more than $300,000 in fraudulent payments if his fraud hadn’t been discovered first by investigators from the Texas Department of Insurance.

Livesay also had to surrender his law license and to provide restitution to his victims, the report says.

Read the Star-Telegram article.

 

 




Dallas Firm Secures $166M Verdict in Fort Worth Murder-for-Hire Case

Attorneys for Dallas-based Fears Nachawati Law Firm have secured a $166 million verdict against the daughter and son-in-law of a North Texas woman who was killed in 2014 for the proceeds of life insurance policies totaling $5 million.

Jurors in Tarrant County’s 141st Judicial District Court determined Mark and Virginia Buckland were central figures in the conspiracy that led to the stabbing death of Anita Fox that was carried out by two members of a nomadic ethnic clan known as Irish Travellers. The multimillion-dollar verdict is believed to be among the largest in Tarrant County this year, according to the firm.

Though the couple has never been charged criminally in the murder, the jury found that they had crafted an insurance scheme in which they would be the sole beneficiaries of a series of policies, in part without the knowledge of the 69-year-old Ms. Fox.

Read details of the case.

 

 




McKool Smith Wins the Most ‘Top 100 Verdicts’

McKool Smith has racked up some new recognition, including being named again in The National Law Journal‘s “Top 100 Verdicts” list.

The NLJ recognition represents the 18th time the firm had a top 100 verdict, more than any other law firm since the rankings began.

In a release, the firm said: “In 2002, The National Law Journal published its first annual listing of the nation’s ‘Top 100 Verdicts.’ Since that time, no law firm in the country has won more Top 100 Verdicts than McKool Smith.”

Other recent recognition includes being named Trial Group of the Year by Law360, and receiving Band 1 rankings in Chambers USA for Texas commercial litigation and Texas intellectual property.

Law360 also presented the firm its Insurance Practice Group of the Year honor.

Inn 2017, Texas Lawyer presented the firm its Litigation Department of the Year award, and Managing Intellectual Property named the firm Patent Plaintiff Firm of the Year.

McKool Smith, based in Dallas, also has offices in Houston, Austin, Marshall, Silicon Valley, New York, Washington DC, and Los Angeles.

 

 




Is Your Insurance Provision Meeting Its Full Potential?

It is easy to skim over contracts’ insurance provisions or simply defer to risk experts, but there are a few questions that should be considered during the next review of the insurance section of a contract, advises Morgan, Lewis & Bockius LLP.

The article by Michael L. Pillion and Jessica M. Pelliciotta discusses four such questions:

How do your indemnification and other risk allocation provisions interact with your insurance provisions?

What types of insurances and how much coverage should you require?

Will you know if there are changes to the insurance coverages?

Does your contract require the other side’s insurer to provide a waiver of subrogation?

Read the article.

 

 




Wells Fargo Faces $1 Billion Fine to Settle Loan Abuses

Reuters reports that Wells Fargo & Co. has been offered a penalty of $1 billion by regulators to resolve outstanding investigations related to auto insurance and mortgage lending abuses, the third-largest U.S. bank by assets said on Friday.

The news agency previously had reported that the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency were preparing a fine of up to $1 billion for Wells Fargo’s auto insurance and mortgage lending abuses.

“The U.S. Federal Reserve has also imposed restrictions on the bank’s growth, forbidding it to expand its balance sheet beyond 2017 levels until it makes internal changes that addressed its board and risk management,” according to the latest Reuters report.

Read the Reuters article.

 

 




Berkshire’s National Indemnity Ordered to Pay $43 Million for Asbestos Settlement

Berkshire Hathaway Inc.’s National Indemnity Co. has to pay more than $43 million of Montana’s asbestos-related settlement costs, a state judge has ruled. according to a MarketWatch report.

Reporter Nicole Friedman explains: “Montana had reached a $43 million settlement in 2009 with people injured by asbestos at a vermiculite mining operation in Libby, Mont. The victims claimed the state had knowledge of unsafe conditions at the mine for decades and failed to protect workers.”

National Indemnity  provided general liability insurance to the state at the time of the alleged exposure, but it had argued those insurance policies didn’t cover the asbestos-related claims.

Read the MarketWatch report.

 

 

 




Harvey Weinstein’s Insurer Refuses to Pay for Legal Defense

Variety is reporting that Harvey Weinstein’s insurance company is refusing to defend him against 11 sexual harassment lawsuits, saying that his alleged misconduct is not covered under his personal liability policies.

Chubb Indemnity Insurance Co. sued on Wednesday, asking the New York Supreme Court for a declaration that it is not obliged to fund the disgraced producer’s legal defense, according to reporter Gene Maddaus.

The suit says that some of Weinstein’s policies cover damages he is obligated to pay “for personal injury or property damage.” The damages must arise from “an accident or offense” to be covered.

But Chubb’s position is that Weinstein’s alleged pattern of sexual assault and harassment does not qualify.

Read the Variety article.

 

 




Long-Running Construction Defect Fight in Texas Ends With Defense Win

A decade-long construction defect battle involving a South Padre Island, Texas, luxury condominium complex damaged during Hurricane Dolly has been resolved in a take-nothing defense win secured by attorneys of the West Mermis law firm for the general contractor, G.T. Leach Builders.

The condominium developer, Sapphire, initially sued its insurance brokers for negligence for allowing the builder’s risk insurance policy to expire, leading to claims for extensive damage to the Sapphire condominium project from the 2008 storm. Nearly three years later, G.T. Leach and several of its subcontractors were added to the $30 million lawsuit.

The trial team, led by Lawrence J. West, presented evidence proving that the developer’s allegations of multiple breach of contract claims were unsupported, according to the firm. They demonstrated that the contract contained express provisions that prevented the Developer from recovering the $30 million it was demanding.

Read details of the case.

 

 




Defense Scores Arbitration Win in Long-Running Construction Defect Fight in Texas

A decade-long construction defect battle involving a South Padre Island, Texas, luxury condominium complex damaged during Hurricane Dolly has been resolved in a take-nothing defense win secured by attorneys of the West Mermis law firm for the general contractor, G.T. Leach Builders.

The condominium developer, Sapphire, initially sued its insurance brokers for negligence for allowing the builder’s risk insurance policy to expire, leading to claims for extensive damage to the Sapphire condominium project from the 2008 storm. Nearly three years later, G.T. Leach and several of its subcontractors were added to the $30 million lawsuit.

In a release, the firm said G.T. Leach sought to enforce the arbitration provision of its contract, with appeals ultimately progressing to the Texas Supreme Court. The company was represented by attorneys from Houston-based West Mermis, which routinely handles construction and contract disputes, products liability and general business matters.

The release continues:

The Texas Supreme Court’s decision in G.T. Leach Builders, LLC vs. Sapphire VP LP, 458 S.W.3d 502 (Tex. 2015), which sent the dispute to arbitration, stands as a landmark opinion now routinely cited in similar cases.

After settling with all other parties, Sapphire entered into arbitration with G.T. Leach in 2017. During the proceedings, the defense team, led by West Mermis name partner Lawrence J. West, provided evidence refuting multiple breach of contract claims and challenging factual allegations.

“Despite claims to the contrary, the Sapphire project had not been completed when Dolly made shore. It was imperative to show the arbitrator that our client acted reasonably and responsibly,” said Mr. West. “It was an exceptionally complex case that had endured a number of detours, but we are pleased to have secured the decisive win G.T. Leach deserved and that this chapter can finally be closed.”

Also representing G.T. Leach were West Mermis attorneys Justin W. Safady and Stephen A. Dwyer.

 

 




Freeborn Adds Four Attorneys to Tampa, Chicago and Richmond Offices

Freeborn & Peters LLP has expanded its Insurance and Reinsurance Industry Team with the addition of attorneys Melissa B. Murphy, Steven D. Pearson, Michael J. Braggs and Sarah E. Chibani.

Murphy and Chibani are based in the firm’s Tampa, Fla., office. Pearson joins Freeborn’s Chicago office, and Braggs is based in the firm’s Richmond, Va., office.

Last year, Freeborn opened its first Florida office, in Tampa, and combined with New York City firm Hargraves, McConnell & Costigan P.C. In 2016, the firm combined with Richmond, Va., law firm Brenner, Evans & Millman P.C.

“We are thrilled to welcome Melissa, Steve, Michael and Sarah to the firm as we continue to expand the breadth and depth of our services to our insurance industry clients,” said Joseph T. McCullough IV, a partner and leader of Freeborn’s Insurance and Reinsurance Industry Team. “Our group’s reputation in the industry among the regional, national and international markets is exceptional as we continue to recruit highly knowledgeable and experienced insurance and reinsurance practitioners.”

Lawrence P. Ingram, a partner and member of the Insurance and Reinsurance Industry Team and head of Freeborn’s Tampa office, said, “Melissa and Sarah are great additions to our insurance industry team in Tampa. Our clients will greatly benefit from their combined experience in diverse commercial and insurance coverage litigation matters.”

In a release, the firm said Murphy is a partner who focuses her practice on business and commercial litigation. She has practiced in the area of real property litigation, contracts and indebtedness, and enforcement of restrictive covenants. She also has experience in insurance brokerage issues, as well as working with financial institutions. Prior to joining Freeborn, Murphy practiced at Cobb Cole, focusing on similar matters. She received her J.D. (magna cum laude) from Florida State University College of Law and her Bachelor of Arts (summa cum laude) from Florida State University.

Also a partner, Pearson focuses in the areas of insurance non-compete, insurance coverage, bad faith, reinsurance, non-medical professional liability defense and complex general commercial litigation. He also litigates large-scale attorney fee disputes and has testified as an expert witness in such matters. In addition, he has served as national and regional counsel for a number of insurance companies in a broad array of industry sectors. Most recently, Pearson was a partner at Cozen O’Connor. He previously spent 24 years at Meckler Bulger Tilson Marick & Pearson LLP. He received his J.D. from DePaul University College of Law and his Bachelor of Arts from the University of Minnesota.

Braggs is an associate who focuses his practice primarily on personal injury defense. He has trial experience and has handled all aspects of litigation, including trying more than 100 cases to verdict before judges and juries, both civil and criminal. He also has served as counsel in numerous mediations and arbitrations. Prior to joining Freeborn, Braggs served as staff counsel for GEICO, conducting negotiations and settlement agreements on behalf of GEICO insureds, as well as handling and managing significant circuit court litigation from inception through trial. He also served as an assistant public defender in the Office of the Public Defender in Fredericksburg, Va. Braggs received his J.D. from the University of Richmond School of Law and his Bachelor of Arts from North Carolina State University.

Also an associate, Chibani focuses her practice on insurance coverage litigation, professional liability defense and complex commercial litigation. Prior to joining Freeborn, Chibani was an associate in the First-Party Property insurance law group at Cole, Scott & Kissane, P.A., in Miami. She received her J.D. (cum laude) from the University of Miami School of Law and her Bachelor of Arts from Boston University.

 

 

 




Company Blames Gibson Dunn in Aetna HIV Settlement Notice Fiasco

A day after Aetna sued the claims administrator Kurtzman Carson Consultants for exposing confidential medical information about Aetna clients in a settlement notification, a KCC subsidiary brought a new suit blaming Aetna and its lawyers at Gibson Dunn & Crutcher for failing to protect the privacy of Aetna customers, according to Reuters.

The underlying case is based on the mailing of prescription notices sent to Aetna insureds. Those mailings by KCC were in envelopes that included transparent windows that displayed text including the words  “when filling prescriptions for HIV medications.”

KCC now claims that “Aetna and Gibson knew that windowed envelopes were being used in the mailings in question.” The law firm is not named as a defendant, but the firm’s actions on Aetna’s behalf are mentioned throughout the complaint, writes Alison Frankel.

Read the Reuters article.

 

 

 




Does the Insurance Policy Incorporate the Service Contract by Reference? An Examination of In Re Deepwater Horizon

Image by U.S. Coast Guard

A Steptoe & Johnson article takes a look at the way additional insured coverage under an insurance policy is analyzed when there is an underlying drilling contract limiting the additional insured coverage to the scope of the liability assumed in the service contract.

The article in The National Law Review discusses In re Deepwater Horizon, a Texas Supreme Court case that governs allocation of risk, assumed liabilities, and the granting of additional insured status in underlying service contracts, and the precedent the case established.

The article also considers some other cases that were litigated after the Deepwater Horizon case.

Read the article.

 

 




The Eighth Circuit Raises the Bar for Would-Be Indemnitees

The U.S. Court of Appeals for the Eighth Circuit issued an order dealing with indemnification for prior settlements, and it could have a hugely beneficial impact on potential indemnitors, including sellers of mortgage loans as well as insurers, reports Bilzin Sumberg in its Mortgage Crisis & Financial Services Watch.

The appellate court affirmed a lower court’s ruling that, when an insured seeks indemnification for settlements that encompassed both covered and non-covered claims, the insured must present sufficient evidence to establish with reasonable certainty the value that the settling parties attributed to the covered claims, explain Philip R. Stein and Shalia M. Sakona.

They discuss the background of the case, the limitations on using expert testimony to establish allocation, and the application of the holding to the mortgage industry.

Read the article.

 

 




The Importance of Attention to Risk Allocation Provisions in Contracts

A recent Indiana Court of Appeals decision illustrates the importance of having an overall risk allocation strategy in contracts where appropriate, and paying close attention to the language used to express that strategy, writes Christian Jones of Barnes & Thornburg.

In the post on the firm BT Policyholder Protection Blog, Jones writes that this is particularly when multiple contracts and parties are involved.

“This case illustrates the difficulty of coordinating risk allocation language across multiple contracts. [The insurer] might have attempted to pursue subrogation claims under any circumstances, but it seems possible that litigation might have been avoided if all of the contracts at issue had contained their own express waiver of subrogation clauses” Jones explains.

Read the article.

 

 




Are Smart Contracts Smart Enough for the Insurance Industry?

In an article in the Pillsbury Policyholder Pulse blog, and  discuss the question: Will insurance policies become the laboratory to test the thesis behind smart contracts?

“Whether there is room for smart contracts in the insurance context remains to be seen. Generally, the ‘if this occurs, then that’ nature of insurance policies lends itself to the conditional nature of smart contracts,” they write.

There are drawbacks, they explain, writing that it would be unrealistic to expect smart contracts to eliminate ambiguities and resulting disputes any more than such disputes are currently eliminated by traditionally written contracts.

Read the article.

 

 




Keys to Negotiating Indemnity Agreements

The effective management of indemnification and related insurance obligations is an active agenda item for top-level business leaders, including any CFO, CEO and general counsel, points out James Buldas in an article on the website of Business Insurance.

“It is, therefore, imperative, whether you are a Fortune 500 company or a small business, that your company’s risk management and legal departments strategically manage indemnification and insurance obligations to minimize the always increasing cost-of-business demands,” writes Buldas, a partner at Pietragallo Gordon Alfano Bosick & Raspanti L.L.P. in Pittsburgh.

His article covers the language of the indemnity agreeement, selecting the governing law, specificity in insurance obligations, requesting the appropriate additional insured endorsement, and communication between legal and risk management departments and brokers.

Read the article.

 

 




Insurance Giant Receives New York Subpoena on Sales Practices

The New York Times is reporting that New York’s attorney general has subpoenaed TIAA, the giant insurance company and investment firm, seeking documents and information relating to its sales practices, according to people briefed on the inquiry.

Last month, the newspaper raised questions about the firm’s sales methods. TIAA oversees almost $1 trillion in client assets, for more than four million workers at thousands of nonprofits, according to reporter Gretchen Morgenson.

A related SEC complaint was filed by former TIAA employees who contend they were pressured to sell products that generated more revenue for the firm but were more costly to clients while adding little value.

Read the NYT article.




IADC Explores Privacy and Data Protection Issues in Defense Counsel Journal

The International Association of Defense Counsel (IADC) has dedicated the October 2017 edition of its Defense Counsel Journal (DCJ) to the exploration of privacy issues.

The October issue is available for free and without a subscription via the IADC’s website. This current issue is the second part of the IADC’s “Privacy Project V” publication. The first part was published as the July 2017 issue of the DCJ. All past DCJ articles are accessible online.

“In a world where we seem to be moving away from an expectation of privacy because of security concerns arising from worldwide terrorism and rapid advances in technology, it is up to the courts, legislatures, and regulatory bodies to balance these realities with everyone’s prized civil liberty of privacy,” said Andrew Kopon Jr., IADC President and a founding member of Kopon Airdo, LLC in Chicago. “The rule of law requires that these entities safeguard and thoughtfully examine this balance in real time or we may completely lose the expectation of privacy.”

The October DCJ features articles by IADC members that address diverse privacy topics from a global perspective. Frequently and favorably cited by courts and other legal scholarship, the DCJ is a quarterly forum for topical and scholarly writings on the law, including its development and reform, as well as on the practice of law in general. The IADC is a 2,500-member, invitation-only, worldwide organization that serves its members and their clients, as well as the civil justice system and the legal profession.

“The pace of technology is amazing and overwhelming at the same time,” said Michael Franklin Smith, editor and chair of the DCJ Board of Editors and a shareholder at McAfee & Taft in Tulsa, Okla. “Hopefully this issue of the Defense Counsel Journal provides practitioners with added insights to help them navigate their clients’ privacy in today’s rapidly changing world.”

The IADC’s Privacy Project is dedicated to the memory of Joan Fullam Irick, the IADC’s first female president, who made the issue of corporate and personal privacy a key theme for her administration. The project was spearheaded by IADC Privacy Project V Editorial Board co-chairs Eve B. Masinter, a partner with Breazeale, Sachse & Wilson, L.L.P., in New Orleans, and S. Gordon McKee, a partner with Blake, Cassels & Graydon, LLP, in Toronto.

The October 2017 “Privacy Project V” issue of the DCJ includes the following articles:

–“A Look at Canadian Privacy and Anti-Spam Laws” – Promotes compliance with Canada’s comprehensive federal and provincial privacy laws – and specifically the obligations imposed by Canada’s anti-spam legislation – that outline the framework and rules for the collection, use and disclosure of personal information by federally regulated, private-sector organizations operating across Canada.

–“Discovery of the Insurer’s Claims File: Exploring the Limits of Plaintiff’s Fishing License” – Analyzes the objections to a plaintiff’s broad request for the insurer’s claims file and the majority rules governing successful objections by defense counsel to discovery of the materials in that file.

–“Drones: A New Front in the Fight Between Government Interests and Privacy Concerns” – Addresses expansion of the warrant requirement to regulate when drones may be used, as well as legislation on how they may be used, which would allow for incorporating this new technology while also separating the benefits from the dangers it presents.

–“Data Privacy Protection of Personal Information Versus Usage of Big Data: Introduction of the Recent Amendment to the Act on the Protection of Personal Information (Japan)” – Provides practitioners with an understanding of three important changes made by Japan’s recently amended Act on the Protection of Personal Information (PPIA) and how these changes are likely to play out in practice.

–“Global Positioning Systems and Social Media – Anathemas to Privacy” – Focuses on the recent surge in the use of global positioning systems in the automotive industry and the unique set of related privacy and liability concerns.

 

 




Silicon Valley Software Startup, Ex-CEO Fined Nearly $1M

SECSilicon Valley software startup Zenefits and its co-founder Parker Conrad have been fined nearly $1 million by the U.S. Securities and Exchange Commission as part of a settlement over charges that they had misled investors, reports Reuters.

Zenefits will pay a $430,000 penalty and Conrad, who resigned as chief executive from the company in early 2016, has been fined more than $533,000, according to Reuters reporter Heather Somerville.

“The SEC found that Zenefits made ‘false and misleading statements and omissions’ to company investors by failing to disclose that it was not compliant with state insurance regulations,” Somerville reports. “Zenefits employees had sold health insurance without proper licensing, the company said, a violation that led to fines from several states.”

Read the Reuters article.

 

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