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Vol. 3, Iss. 4
March 5, 2014
 
 

When putting together Coverage Opinions I often come across interesting cases, articles or general news items that are worthy of note, but not long enough to justify a stand-alone article. So these items usually go by the wayside. Then the idea came to me that if I aggregated these small items they would collectively be the equivalent of a typical CO article. Now these nuggets would not be lost. [Like so many ideas, once you think of it you wonder why it took so long to do so.]

So welcome to the inaugural edition of the Tapas column – where small dishes of insurance coverage news and notes are served. Let’s see if it works. [If it doesn’t, then like so many bad ideas, you wonder why you didn’t see it coming before you tried it.]

West Virginia High Court Finds Single Occurrence (for purposes of a limit and not a deductible, that is)

I often hear that a certain state is “bad for insurers.” Having spent four years researching the law on 21 coverage issues, across 50 states, I do not believe that such a place exists. Are there bad states for insurers on certain issues? Of course. But blanket assertions, that a certain state is just plain bad for insurers, are not provable. Even West Virginia.

While it won’t be enough for insurers to start looking for office space in Wheeling, West Virginia’s highest court held in Kosnoski v. Rogers, No. 13–0494 (W.Va. Feb. 18, 2014) that the emission of carbon monoxide, from a gas boiler furnace, was a single event – despite there being injuries to two families, occupying separate apartments, a leak taking place over the course of an evening and each apartment being exposed to different levels of carbon monoxide. As a result, the policy at issue was subject to a $1,000,000 occurrence limit and not a $2,000,000 general aggregate limit.

Appeals Court Allows Discovery Of Claims Files In Other Claims

In FC Bruckner Associates, L.P. v. Fireman’s Fund Ins. Co. (N.Y. App. Div. Feb 18, 2014), a New York appellate court addressed an insured’s attempt to rebut an insurer’s presumptive prejudice from late notice (addressing Ohio law). At issue was late notice under an excess policy.

The insured sought to rebut the presumption by showing that the insurer, as an excess insurer, would not have become more involved in the handling of the underlying action had it received notice at an earlier time. Thus, the insured sought to review other claim files under the excess policy. The court permitted the discovery: “The requested claims files may shed light on defendant’s excess claims handling practices and policies during the pertinent time period by showing the actions that defendant took when it received timely notice of claims arising under the same excess policy. Therefore, the requested files are material and necessary to plaintiffs' prosecution of this case.”

Sometimes I Don’t Want People To Read Coverage Opinions

It is hard to pay too much attention to those three paragraph decisions, on a discovery issue no less, from the New York Appellate Division. But National Union v. TransCanada Energy USA, Inc., 650515/10 (N.Y. App. Div. Feb 25, 2014) caught my eye because it involved an issue that is near and dear to me and so many Coverage Opinions readers – discoverability of a coverage opinion authored by an insurer’s outside counsel. That’s what the appeals court allowed in TransCanada: “The motion court properly 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. The record shows that the insurance companies retained counsel to provide a coverage opinion, i.e. an opinion as to whether the insurance companies should pay or deny the claims. Documents prepared in the ordinary course of an insurer’s investigation of whether to pay or deny a claim are not privileged, and do not become so merely because the investigation was conducted by an attorney.” (citation and internal quotes omitted).

Given it’s brevity I can’t say much about this decision. But the issue is an important one and no shortage of cases have addressed it. In general, it is not as cut and dry as the TransCanada court makes it sound. Different scenarios affect whether an outside counsel’s coverage opinion may be discoverable.

Data Breach Article Of A Different Flavor

These days the only thing more prevalent than data breaches are articles about data breaches. Many of these articles focus on the nature of the cyber threats, specific breaches (ala Target), the cyber insurance industry, coverage issues, relevant laws, statistics, costs and projections of the future picture.

A lengthy blog post on The Security Advocate recently focused on an aspect of data breach that has not been talked about much. In “Suffer a Data Breach? Your 1st Call Should Be to … a Lawyer,” the author warns that if your first call after a data breach isn’t too a lawyer, then “every panicked email, detailed investigative report and potentially embarrassing internal memo could be subject to discovery in a subsequent government investigation or lawsuit and wind up in the hands of class action plaintiffs’ attorneys determined to make your organization pay.” But, if you call a lawyer first, the author says, and K&L Gates partner Roberta Anderson concurs, privileges could attach that protect these documents from discovery.

 
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