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Five Key 2021 Coverage Decisions (not Reported in the Leading Insurance Blogs)

Updated: Dec 16, 2021



MasonADR, LLC: Report (December 6, 2021)


Five Key 2021 Coverage Decisions (not Reported in the Leading Insurance Blogs)


This is the inaugural edition of an annual update I’ll be sharing each December. The article summarizes five noteworthy decisions that have not been reported in the highest-profile insurance blogs. These decisions fall “below the radar” sometimes through inadvertence, but sometimes also because, even though the decision announces an interpretational or procedural rule that may alter the outcome of numerous future coverage cases, it doesn’t concern a high-profile substantive issue (such as COVID-19, for example). Yet these cases are important to know about, so I employ searches tailored to capture “under the radar” cases, because learning of a decision adopting an unusually broad “duty to defend” standard, for example, can be as important to a coverage lawyer’s success as knowing in whose favor a $500 million (but otherwise generic) pollution cleanup case was decided.


Here are my top five for 2021:


Smith v. Financial Pacific Ins. Co., No. B302014 (Cal. App. November 15, 2021) Opinion at: https://casetext.com/case/smith-v-fin-pac-ins-co


Held: An insurer’s “genuine dispute” over coverage does not bar a “bad faith failure to settle” claim.


Significance: While the “genuine dispute” defense has been applied to defeat bad faith claims in first-party property cases under California law, this decision declares the defense to be unavailable in “failure to settle” cases and, further, questions whether the defense applies in any respect with regard to “bad faith” in third-party liability cases.


Schuback v. Around the World Travel, No. 779 MDA 2020 (Pa. Super. Ct. July 1, 2021) Opinion at: https://casetext.com/case/schuback-v-around-the-world-travel


Held: When the underlying complaint alleges facts by which the defendant would qualify as an “Insured,” the insurer must defend the action even if actual facts show the defendant does not qualify as an “Insured.” Quote: “To require an insured to prove his or her coverage status at the outset of a claim could result in a second declaratory judgment action, like this one, for every personal injury action filed. This would stall an already overburdened court system.”


Significance: The decision departs from case law holding that the actual facts determine “Insured status” and similar threshold issues (such as whether an involved auto was scheduled for coverage under an auto policy) for purposes of the duty to defend. Through artful pleading, plaintiffs’ attorneys will be able to force insurers to defend non-Insureds (from whom they never received premium).


State of Missouri ex rel. Kilroy was Here, LLC v. Hon. Joan L. Moriarity, Circuit Judge, 1822-CC11663-01 (Mo. App. Aug. 31, 2021). Opinion at: https://casetext.com/case/smith-v-fin-pac-ins-co


Held: Privilege does not apply to work product created by insurer’s outside coverage counsel insofar as the work product concerned counsel’s participation in the defense of the underlying action. Quote: “[M]aterials and testimony sought by the subpoena [to coverage counsel] are discoverable to the extent that (1) [counsel] acted as de facto co-counsel in [Insured’s] defense, (2) communications were made in the presence of a third party, or (3) any other exception to the attorney-client privilege applies.”


Significance: Actions of coverage counsel in associating with defense counsel in the defense of the Insured may cause coverage counsel to be deemed a “de facto” attorney for the Insured and thus result in waiver of the privilege as to counsel’s evaluation of defense issues and related information.


Dennis M. Jeter v. Ameron Int’l Corp. et al, 2021-CA-0048 (La. App. June 23, 2021). Opinion at: https://law.justia.com/cases/louisiana/fourth-circuit-court-of-appeal/2021/2021-ca-0048.html


Held: Defense costs incurred defending long-tail claims shall be allocated based upon each insurer’s time on the risk, such that Insured is responsible for defense costs allocable to time periods when it did not purchase insurance. Quote: “As bodily injury … is limited to that which occurs during the policy period, the duty to defend is likewise limited to each [insurer's] periods of policy coverage.”


Significance: policyholders must bear the share of defense costs which are allocable, pro rata, to time periods when they had not purchased insurance applying to the loss at issue. The court indicated, moreover, that the “unavailability” of such insurance would not alter this result.


Dubuisson v. National Union Fire Insurance of Pittsburgh, P.A. et al, 15-civ-2259 (S.D. N.Y. July 26, 2021). Opinion at: https://casetext.com/case/dubuisson-v-national-union-fire-insurance-of-pittsburgh-pa


Held: Claim against insurer under NY General Business Law §349 was time-barred because it was brought more than fifteen years after last alleged act of misconduct. Payment of premiums, though it continued within the limitations period, failed to preserve timeliness of suit. Quote: “While Plaintiffs argue that [the insurer] ‘violated the law every day it did not cancel the purported Policies and each and every time it collected premiums from Plaintiffs,’ these wrongs are merely ‘the continuing effects of earlier unlawful conduct.'”


Significance: A New York GBL §349 claim will be deemed time-barred unless new wrongs, causing new damages, occur within the limitations period.


Disclaimer: This report is intended for educational purposes only and does not constitute legal advice.



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