Insurance Coverage Litigation Lawyer & Attorney : Rivkin Radler Law Firm : Long Island, New York

Sorry I haven't written much lately. Note that a recent case shows that late notice lives on as a viable defense in New York. Wells Fargo Bank, N.A. v. Zurich American Insurance Co., 2009 NY Slip Op 1396; 2009 N.Y. App. Div. LEXIS 1390 (App. Div. First Dep't Feb. 26, 2009).

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I spoke at the Ontario Bar Association's annual meeting yesterday.  It's interesting to hear the Canadian point of view concerning insurance coverage.

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Political pundits ask “what’s the matter with Kansas,” but on the duty to disclose information in a policy application, there is nothing the matter with Kansas. The Supreme Court held that “an insurance company may invoke a policy exclusion for undisclosed risks if, in completing the application, the applicant failed to disclose known information which would reasonably be perceived as a potential risk.” American Special Risk Management Corp. v. Progressive Cas. Ins. Co., 286 Kan. 1134 (2008).

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I don’t know whether it is my long term affiliation with insurance companies or my living in the anti-gun northeast, but I just can’t believe that policyholders can credibly claim coverage for shootings. Year after year, I read insureds’ coverage arguments for shootings and think that no one can take the cases seriously. Yet, another such case is working its way through a court system. Alfa Mutual Insurance Co. v. Bone, 2009 Ala. LEXIS 4 (Jan. 9, 2009). Trial court entered summary judgment for the policyholder on the expected or intended issue, and found an issue of fact concerning whether the shooting was a “willful or malicious” act. It’s true that the policyholder had a long convoluted explanation. But at the end of the day, if two guys have a fight and one fighter shoots the second fighter, how can that be insured?

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The Madoff Mess will eventually raise interesting insurance issues; not so much with Madoff as with the middlemen.  The entities that fed clients to Madoff will surely be sued.  Their due diligence will be questioned.  But, will the middlemen's problems be considered insured?

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If you have any doubt that the financial crisis will lead to D&O claims from banks and other similar entities, read Gretchen Morgenson's article in yesterday's (11/2/08) New York Times.  http://www.nytimes.com/2008/11/02/business/02gret.html?scp=1&sq=morgenson%20loan%20didnt%20like&st=cse
Very interesting!

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Interesting new waiver decision from New York.  Adames v. Nationwide Mutual Fire Ins. Co., 2008 Slip Op 7597 (2d Dep't App. Div. Oct. 7, 2008): "A notice of disclaimer 'must promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated' and '[a]n insurer's justification for denying coverage is strictly limited to the ground stated in the notice of disclaimer.'  Thus, an insurer waives any ground for denying coverage that is not specifically asserted in its notice of disclaimer, even if that ground would otherwise have merit."  (Citations omitted.)

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I just read an interesting pollution exclusion decision from the Supreme Court of Alabama. State Auto Property & Casualty Insurance Co. v. Arkansas Department of Environmental Quality, 370 Ark. 251; 258 S.W.3d 736; 2007 Ark. Lexis 378 (Ark. 2007). While the court declined to overrule past decisions finding the definition of "pollutant" ambiguous in the context of pollution exclusions, the court accepted extrinsic evidence to cure the ambiguity and hold that gasoline is a "pollutant." I note this case because it is so unusual to see a court maintaining the view that a provision is ambiguous, yet curing the ambiguity and finding for the insurer.  Undoubtedly, the court was reluctant to overrule its earlier decision, but the court was looking to move away from that decision.

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It is interesting and frankly scary to read about AIG's crisis.  It will also be interesting to see how this crisis changes the way other insurers do business.  As AIG's problems will be attributed to many causes, other insurers are likely to make many different corrections.  To me, one correction seems most likely.  As noted in this morning's Wall St. Journal (9/15/08 C1), AIG had pushed into "new businesses beyond the world of traditional insurance."   AIG was involved in businesses ranging from plane leasing to skiing.  Many other insurers have acted similarly, though perhaps not to the same extent as AIG.  I expect insurers now to heed the advice from Jim Collins's book "Built to Last": they will "stick to their knitting"; focus their energies on what they know best.  Insurers are likely to back off from fields distant from their core businesses.  Though I disagree with many aspects of Mr. Collins's advice, this advice might well be prudent.

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