Introduction: Selection Process And The Year’s Biggest Bust

First off, 2023 was an off-year for significant insurance coverage decisions.  It’s just luck of the draw whether it’s a year with an abundance of importance coverage decisions. For the year gone by, it was not.  Don’t get me wrong, there were unquestionably ten decisions that met the selection criteria discussed below.  But in some years, more than others, there is much more competition for those slots.  For 2023, the number of decisions vying for them was not as robust as I would have liked.   

Even the decision I was most-looking forward to -- Ken’s Foods v. Steadfast Insurance Co., from the top court in Massachusetts -- turned out to be a total dud.

In 2018, Ken’s Foods, the salad dressing folks, had a discharge at a processing facility which caused wastewater to enter a Georgia waterway.  Ken’s took steps to clean-up the pollution and address the situation with state officials.  Ken’s also spent over $2 million to prevent a suspension of its operations.  In doing so, Ken’s prevented a loss in excess of $10 million that would have been covered by an environmental policy with Steadfast.  Ken’s sought coverage for the money spent on these prevention efforts.  Steadfast declined, saying that the policy did not cover the prevention of a suspension, but, rather, a complete suspension.

The First Circuit certified the following question to the Supreme Judicial Court of Massachusetts: “To what extent, if any, does Massachusetts recognize a common-law duty for insurers to cover costs incurred by an insured party to prevent imminent covered loss, even if those costs are not covered by the policy?”

This is a fascinating question and I was very much looking forward to the answer.  The  Supreme Judicial Court of Massachusetts provided one -- but in a manner tied to the specific policy language and not based on a more general, common law principle, whether an insurer is obligated to pay for uncovered damages to prevent what will be covered damages. 

The Massachusetts top court stated: “Although the certified question regarding a common-law duty is posed in general language, we decline to answer the question abstractly, as opposed to in reference to the specific policy language at issue, including the coverage provisions, the exclusions, and, finally, the term that the policy does not contain that we are essentially asked to incorporate. We conclude that in the instant case, the plain, unambiguous language of the coverage provisions and exclusions are controlling. A common law doctrine cannot displace the clear provisions of the [p]olicy, … particularly when the [p]olicy directly addresses and circumscribes the applicability of the doctrine.” (citation omitted). 

Important decision for the parties involved?  Absolutely.  But for a guy who writes an annual article discussing the year’s ten most significant coverage decisions?  Total dud.

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As I explain every year, the most important consideration, for selecting a case as one of the year’s ten most significant, is its potential ability to influence other courts nationally.  These are coverage decisions (usually, but not always, from state high courts) that (i) involve a frequently occurring claim scenario that has not been the subject of many, or clear-cut, decisions; (ii) alter a previously held view on an issue; (iii) are part of a new trend; (iv) involve a burgeoning or novel issue; (v) provide a novel policy interpretation; or (vi) offer an important lesson for insurers in the claim handling.  Some of these criteria overlap.  Admittedly, there is also an element of “I know one when I see one” in the process.  In addition, cases that meet the selection criteria are usually (but not always) not included when the decision is appealed.  In such situation, the ultimate significance of the case is up in the air. 
 
That being said, the most common reason why many unquestionably important decisions are not selected is because other states do not want for guidance on the issue, or the decision is tied to something unique about the state.  Therefore, a decision that may be hugely important for its own state – indeed, it may even be themost important coverage decision of the year for that state – will be passed over, as one of the year’s ten most significant, because it has little chance of being called upon for guidance by other states at a later time.  In other words, a state with its own case law on an issue is unlikely to turn to the decision of another state for direction. 

The “Ten Most Significant Coverage Decisions of the Year” are listed in the order decided.

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