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Insurance Coverage Update August 2014

Covered in this post: 

Covered in this post: 

  • Directors' and Officers' Liability Coverage Not Available When Policyholder Committed No "Wrongful Act" against Third Party
  • Settlement Agreement Upheld as Reasonable under Griggs Standard
  • Insurer's Fraudulent Joinder Argument Ineffective in Preventing Remand to State Court
  • Claim Documents Prepared by Attorney May Be Discoverable Where Counsel Primarily Engaged in Claims Handling

NEW JERSEY

Directors' and Officers' Liability Insurance
Directors' and Officers' Liability Coverage Not Available When Policyholder Committed No "Wrongful Act" against Third Party   PNY Techs., Inc. v. Twin City Fire Ins. Co., 2014 U.S. Dist. LEXIS 96489 (D.N.J. July 16, 2014)   The District Court of New Jersey granted summary judgment to an insurer because the policyholder corporation's bad foreign exchange deal was not an "entity claim for a wrongful act," as the counterparties' "entity claims" were traceable to a legitimate contract rather than a "wrongful act" committed by the policyholder.   The former CFO of the insured corporation entered into several foreign exchange transactions with four banks.  The deals eventually exposed the insured to payment demands from those banks.  The insured in turn submitted claims to its directors' and officers' liability insurer, who denied coverage responsibility in relation to the transactions.   Read the full summary...
 
Reasonableness of Underlying Settlements
Settlement Agreement Upheld as Reasonable under Griggs Standard   Travelers Prop. Cas. Co. of Am. v. USA Container Co., 2014 U.S. Dist. LEXIS 99635 (D.N.J. July 21, 2014)   Judge Linares found in a New Jersey District Court opinion that an insurer challenging the reasonableness of its insured's underlying settlement did not meet its burden under Griggs by questioning the structure of the deal and pointing out that the insurer failed to provide an expert report.   The insured -- a company engaged in the business of supplying industrial containers, logistical services, and warehousing -- subcontracted with a third party to transfer corn syrup from rail cars to drums.  The subcontractor overheated the corn syrup, thereby causing the insured's client to incur approximately $700,000 in damages.  The client in turn demanded that the insured compensate it for its loss.   Read the full summary...
 
Insurance Coverage - Proper Forum
Insurer's Fraudulent Joinder Argument Ineffective in Preventing Remand to State Court   Saddy Family, LLC v. Loud  2014 U.S. Dist. LEXIS 88366 (D.N.J. June 30, 2014)   District Court Judge Joel Pisano remanded this insurance coverage dispute to New Jersey state court, as he found Plaintiff had not fraudulently joined a non-diverse Defendant for the sole purpose of defeating federal jurisdiction.   The insured's Seaside Heights commercial buildings were damaged by wind and flooding during Superstorm Sandy. The insurer denied each of the insured's resultant claims, including one based on lost business income. The insured then filed an insurance coverage action in New Jersey Superior Court. The insurer in response removed the dispute to federal court on the basis of diversity jurisdiction.     Read the full summary...

NEW YORK

Privilege - Claim Files
Claim Documents Prepared by Attorney May Be Discoverable Where Counsel Primarily Engaged in Claims Handling   National Union Fire Ins. Co. of Pittsburgh, Pa. v TransCanada Energy USA, Inc., 2014 N.Y. App. Div. LEXIS 5536 (N.Y. App. Div. 1st Dep't July 31, 2014)    First Department Appellate Division affirms trial court's ruling that insurers could not satisfy burden of demonstrating that certain documents prepared by in-house lawyers were privileged under the attorney-client privilege or work-product privilege.     A group of insurers sought reconsideration of a special discovery masters finding that documents that pre-date a claim rejection are not protected from disclosure.  The insurers collectively argued that the documents sought were protected by the attorney-client privilege, the work-product doctrine, and the common-interest doctrine. The lower court, after an in camera review, found that the only documents that were protected from disclosure were those documents that contained actual legal advice.  Turning to the other documents, the lower court "found that the majority of the documents sought to be withheld are not protected by the attorney-client privilege or the work product doctrine or as materials prepared in anticipation of litigation."       Read the full summary...

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