Contract Interpretation

U.K. HIGH COURT ENDORSES EXPOSURE TRIGGER FOR ASBESTOS-RELATED LIABILITIES

March 1, 2011 by Carlton Fields

The U.K. Court of Appeals ruled on trigger of coverage issues in a consolidated appeal of cases involving underlying personal injury litigation arising from exposure to asbestos, in light of employers liability policies that generally cover liability for injury “sustained” during the policy year in question. The opinion discusses the unique long latency of mesothelioma, a cancer caused by exposure to asbestos, but which typically does not manifest into disease for as long as forty years or more. The court held generally that the insurer on the risk at the time of exposure — not the time of manifestation of the disease — is responsible for the liability. The ruling is grounded in industry custom, but addresses recent conflicting precedents, generally arising from differing policy wordings over time. The court distinguished a prior ruling, Wasa Int’l Ins. Co. Ltd. v. Lexington Ins. Co., [2009], which involved a conflict between the plain language of a reinsurance contract and a presumption arising from industry custom that insurance and reinsurance cover the same risks, and which ultimately applied the plain policy language as written, despite the presumption. Nevertheless, the court distinguished the Wasa case, noting the varying policy wordings in the employers liability policies at issue. It also recognized the consequences of its ruling on reinsurance liabilities and wordings as well, which it noted have likewise varied over time. Employers’ Liability Insurance “Trigger” Litigation, [2010] EWCA Civ. 1096 (U.K. Court App. Civ. Div. Oct. 8, 2010).

This post written by John Pitblado.

PREJUDGMENT INTEREST AWARDED IN BEER BOTTLER’S BATTLE WITH BREWER

January 6, 2011 by Carlton Fields

Coors Brewing Company sought to terminate its distributor agreement with Finger Lakes Bottling. After Finger Lakes refused a check in the amount calculated by Coors to be the fair market value at termination, Coors initiated an arbitration pursuant to the agreement to have an arbitrator determine the amount. The arbitrator set an amount, but specifically declined to rule on pre-judgment interest, finding it beyond the scope of the parties’ submission, and thus denied Finger Lakes’ request for the interest, though without prejudice to raising the issue in enforcement proceedings. Finger Lakes then filed an application to confirm the award. The court confirmed the award and, exercising its discretion, granted Finger Lakes pre-judgment interest at the weekly average one-year Treasury rate. Finger Lakes Bottling Co., Inc. v. Coors Brewing Co., No. 09-6024 (USDC S.D.N.Y. Oct. 18, 2010).

This post written by John Pitblado.

TERMS OF REINSURANCE TREATY USED TO HELP INTERPRET TERRITORIAL LIMITATIONS IN INSURER’S MARKETING AGREEMENT

January 5, 2011 by Carlton Fields

A state court of appeals affirmed that the trial court properly interpreted territorial limitations in a general agency agreement to market the insurer’s policies, in part, by looking to warranty limitations in a reinsurance treaty entered into between the insurer and two third-party reinsurers. Apex Lloyds Insurance Company sued its managing general agent, Texas All Risk General Agency Inc. (“TAR”), after TAR allegedly breached the territorial limitations in its agency agreement designed to limit large claims exposure, and included in the agreement to satisfy the department of insurance and Apex’s reinsurers. The reinsurance treaty, which TAR was aware of at the time it entered into the agreement with Apex, provided that only 20% of policies could be sold in a certain county. Texas All Risk General Agency, Inc. v. Apex Lloyds Insurance Co., No. 10-10-017 (Tex. App. Nov. 10, 2010).

This post written by Ben Seessel.

APPELLATE COURT REINSTATES CLAIMS BY BENEFICIARY OF REINSURANCE AGREEMENT

January 4, 2011 by Carlton Fields

A New York appellate court reversed the dismissal of contract and breach of fiduciary duty claims asserted against J.P. Morgan, which managed investments on behalf of a foreign reinsurer. The plaintiff – a beneficiary of the investment management agreement between the reinsurer and J.P. Morgan – sued J.P. Morgan as a result of its investment in, and alleged failure to heed plaintiff’s warnings about, certain mortgage-backed securities. The trial court dismissed the claims, but the appellate court reversed, finding that the claims were not pre-empted by New York’s Martin Act, which empowers the Attorney General to bring criminal actions against violators. The Attorney General submitted an amicus brief arguing against pre-emption, pointing to the benefit of parallel civil proceedings by so-called ‘private attorneys general’ such as the plaintiff. Assured Guaranty (UK) Ltd. v. J. P. Morgan Investment Management, Inc., No. 603755/08 (N.Y. App. Div. Nov. 23, 2010).

This post written by John Pitblado.

SECOND CIRCUIT AFFIRMS THAT INSURER NEED NOT PROVIDE A DEFENSE AND INDEMNITY IN ARBITRATIONS

December 30, 2010 by Carlton Fields

In a summary order by the Second Circuit Court of Appeals, the Court affirmed the lower court’s summary judgment that found that a professional liability insurer was not required to defend and indemnify its insured for certain ongoing arbitration proceedings in which the insured was a defendant. The Second Circuit agreed with the lower court that as of the inception date of the policy, the insured “had knowledge or a reasonable basis upon which to anticipate that a wrongful act or interrelated wrongful act could result in a claim” under the underlying policies. The district court’s opinion reveals that the definition of Claim in the policies expressly covered demands made in either litigation or arbitration. Quanta Specialty Lines Ins. Co. v. Investors Capital Corp., No. 10-0219 (2d Cir. Nov. 16, 2010).

This post written by Michael Wolgin.