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Insurance Sidebar :: Amy Stewart Law’s Blog on Insurance Coverage Issues
Category: Policy Interpretation
 Recently, Lloyd’s of London and the University of Cambridge co-authored a report forecasting that a major cyberattack on the East Coast of the U.S. could result in $70 billion in claims, stressing potentially gaping deficiencies in both traditional and cyber policies to respond to such an event.
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 Imagine a situation in which the employee of your company’s vendor is injured while performing work for your company under a service agreement. The employee, likely unable to sue his or her own employer due to the exclusive remedy provisions of an applicable state’s workers compensation act, sues your company.
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We recently predicted cyber insurers would attempt to avoid coverage on grounds the insured failed to implement appropriate security protocols. Regrettably for policyholders, that prediction is already becoming a reality.
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A bill now pending before the Texas Legislature would dilute the incentive for insurers to do the right thing, predicts Amy Kincaid Berry, Of Counsel at Dallas’ Amy Stewart Law. By revising sections of the Texas Insurance Code that penalize insurance companies for making late or insufficient payments to policyholders, Senate Bill 1628 would “remove significant consequences for bad behavior,” Berry says.
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 Churning the already choppy seas of Insurance Code damages case law, the Dallas Division of the U.S. District Court for the Northern District of Texas recently issued an opinion in Charla G. Aldous PC and Charla Aldous v. Teresa Lugo and Darwin National Assurance Company, supporting the Fifth Circuit’s so-called “independent injury requirement.” 2014 U.S. Dist. LEXIS 159684 (N.D. Tex. Nov. 12, 2014).
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 On January 15, 2015, the Texas Supreme Court will hear oral arguments concerning whether a “potentially responsible party” (PRP) letter from the Environmental Protection Agency (EPA) for liability for hazardous waste contamination triggers the duty to defend under commercial general liability (CGL) policies.
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 Amy Stewart and Marisa Jeffrey recently wrote an overview of corporate liability insurance for Inside Counsel magazine.
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 The pendulum seems to always swing to the left and right before it balances somewhere in the middle. For those who are old enough to remember the meteoric rise of insurance bad faith claims in the late 1980s, decisions issued in the latter part of the 1990s and beyond seemed to signal a near-anaphylactic reluctance by Texas courts to hold any insurer responsible for its conduct.
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 With the entrance of the Ebola virus into the United States this year, we have become acutely aware of public health issues raised by the threat of an outbreak, yet the potential economic impact of this virus and the associated need for proper risk management has not been considered as closely. The economic implications of the Ebola outbreak could be epic—the World Bank Group forecasts the affected countries’ economic loss to reach $32.6 billion by the end of the year.
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 The Fifth Circuit noted an absence of both controlling precedent regarding whether the terms “physical injury” or “replacement” are ambiguous and any case law interpreting these terms. For that reason and because these issues have been, and will likely continue to be, the subject of far-reaching insurance litigation, the Fifth Circuit certified these questions to the Texas Supreme Court...
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 Our Texas Supreme Court must be having the time of its life. Over the past few years, the High Court has issued a number of watershed decisions that have changed the way we think about insurance. On the heels of its decision last year in Lennar Corp. v. Markel American Insurance Co., and with the Deepwater Horizon case on the horizon, the Court is knee deep in liability policies.
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In the wake of the two recent Malaysia Airlines tragedies and escalating global conflicts, speculation is swirling on the international front about the future of aviation insurance. While standard aviation hull and liability insurance applies to airline accidents caused by pilot error or aircraft safety issues, war risk insurance kicks in when an airline mishap is caused by an act of war or terrorism, as in the case of the MH17 Malaysia Airlines crash and the shelling of Libya’s main airport just over a week ago.
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In jurisdictions across the country, courts and practitioners alike grapple with issues of policy interpretation when the litigants disagree about the meaning of an insurance contract.
Courts typically apply generally applicable rules of contract interpretation in the insurance context. When the parties advance different policy interpretations in the context of a coverage dispute, issues arise. If the court agrees that competing interpretations are both reasonable, the policy is ambiguous as a matter of law. Then what?
The practical challenge for litigants and their counsel in any jurisdiction is determining how the court will approach conflicting interpretations
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Although the interpretation of an insurance policy is typically governed by the general rules of contract construction, some rules contain insurance-specific nuances. Each of these rules gives some advantage to the insured, on the theory that the insurer is in the best position to avoid a dispute regarding the policy’s meaning in the first instance.
Of the three rules discussed here, the doctrine of “reasonable expectations” is arguably the most insured-protective rule, triggered by confusing policy language or deceptive conduct by the insurer. Many courts adhere to the notion that exclusionary clauses, on which the insurer bears the burden of proof, should be construed narrowly in favor of coverage. Finally, at some point in the interpretative process, courts in most jurisdictions resort to the doctrine of contra proferentem—automatic construction of the policy against the insurer. These rules may be applied in connection with or after the court makes a determination of ambiguity.
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With annual global insurance premiums totaling nearly $5 trillion, [1] policyholders are focused on making sure they receive the benefit of their bargains with the insurance industry. Add to that the fact that insurance policies aren’t the easiest documents to read and understand, and it’s not surprising that courts and practitioners alike wrestle with issues of policy interpretation in jurisdictions across the country. The basic interpretive guidelines are widely recognized by courts in most states. But when a dispute arises as the result of plausible competing interpretations, the analysis begins to unravel as courts seek to reach the “right” outcome in each case.
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Amy Stewart Law is a boutique law firm that represents policyholders exclusively in insurance coverage litigation and bad faith, with an emphasis in directors & officers liability, cyber insurance, fiduciary liability, professional liability and other specialty liability coverages.
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