Welcome to the 15th annual look back at the year’s ten most significant insurance coverage decisions. Wow! Fifteen years! That’s the crystal anniversary – in case you were thinking of sending me a gift.
In any given year there are numerous coverage decisions of significance. That’s just the law of large numbers. Some years it seems like insurers win more of the big ones. Some years it seems like it is the policyholders. But this year there was no sense that one side clobbered the other. Some years there is one coverage decision that stands out as, far and away, the king of the mountain. This year no case hogged the spotlight. Some years it is difficult to select ten coverage cases as the most significant – because there are too many candidates or not enough. This year the porridge was just right.
While no one case stole the show in 2015, there was a coverage issue that made a lot of noise: bad faith failure to settle. [I guess you could argue that, in some cases, it is not a coverage issue – but, rather, a liability issue. However, I would dispute that.] In any event, numerous decisions this year addressed bad faith failure to settle – but not just in the routine scenario, to wit, an insurer rejects a settlement demand within limits, the case goes to trial, there is an excess verdict and the issue before the court is whether the insurer’s decision to proceed to trial was made in bad faith, based on the state’s particular standard for such determination. In any year you can expect to see cases involving this “paradigm” bad faith failure to settle situation. But this year there were several decisions addressing unique aspects of the issue. Four of these bad faith failure to settle cases – one more like a cousin – are included as part of the ten most significant of the year. And a fifth one is in the same family.
As I always do at the outset of the annual Top 10 Cases of the Year, here is my description of the selection process (repeated from past years’ editions). The process is highly subjective, not in the least bit scientific, and is in no way democratic. But just because the selection process has no accountability or checks and balances whatsoever does not mean that it wants for deliberativeness. To the contrary, the process is very deliberate and involves a lot of analysis, balancing, hand-wringing and tossing and turning at night. It’s just that only one person is doing any of this.
[If you think I missed a case, tell me. I’ll be the first to admit that I goofed. I did so last year when I took myself to task for excluding the New York high court’s decision in K2-II, despite even providing an explanation why I initially excluded it.]
The selection process operates throughout the year to identify 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; or (v) provide a novel policy interpretation. Some of these criteria overlap. Admittedly, there is also an element of “I know one when I see one” in the process.
In general, 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. Many courts in coverage cases have no qualms about seeking guidance from case law outside their borders. In fact, it is routine--especially so when in-state guidance is lacking. The selection criteria operates to identify the ten cases most likely to be looked at by courts on a national scale and influence their decisions.
That being said, the most common reason why many unquestionably important decisions are not selected is because other states do not need guidance on the particular issue, or the decision is tied to something unique about the particular state. Therefore, a decision that may be hugely important for its own state – indeed, it may even be the most important decision of the year for that state – nonetheless will be passed over as one of the year’s ten most significant if it has little chance of being called upon by other states at a later time.
For example, this year the Nevada Supreme Court held in State Farm v. Hansen, No. 64484 (Nev. Sept. 24, 2015) that “Nevada law requires an insurer to provide independent counsel for its insured when a conflict of interest arises between the insurer and the insured. . . . We further conclude that an insurer is only obligated to provide independent counsel when the insured’s and the insurer’s legal interests actually conflict. A reservation of rights letter does not create a per se conflict of interest.” While the significance of Hansen for lawyers practicing in Lost Wages cannot be overstated, the decision was not considered for inclusion on the annual Top 10 Best in Show. There is simply no shortage of case law nationally addressing the independent counsel issue. In addition, the majority of courts have said the same thing as Hansen -- an insured is entitled to independent counsel IF the insured’s and the insurer’s legal interests actually conflict. So Hansen also failed to produce anything novel about the issue.
Lastly, I am not unmindful that this year’s Top 10 list includes four cases involving Pennsylvania law. I work in Pennsylvania. This is not some sort of insurance coverage jingoism in play. This is just how it worked out. Believe me. The last fourteen years of this list establishes that there is no Pennsylvania home-cooking here.
Best wishes for a healthy and prosperous 2016 and may any resolutions that you make last at least until February.
The year’s ten most significant insurance coverage decisions are listed in the order that they were decided.
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