CM Report of Recent Decisions (2010v2)
2010 Volume 2
A summary of significant recent developments in the law focusing on substantive issues of litigation and featuring analysis and commentary on special points of interest.
Articles in this report
Johnson Controls: Wisconsin Supreme Court Reads Duty To Defend Into Excess Policy
In a 4-3 decision, the Wisconsin Supreme Court ruled that a duty to defend could be read into an excess liability policy with its own insuring language promising only to indemnify the insured for covered amounts in excess of underlying limits. Johnson Controls, Inc. v. London Market, 2010 WL 2520941 (Wis. June 24, 2010).
Claim Denial Based On Insured's Failure To Cooperate Upheld
Generally, first-party insurance policies contain clauses requiring the cooperation of the insured upon making a claim. In Abdelhamid v. Fire Ins. Exchange, 182 Cal.App.4th 990 (2010), the California Court of Appeals explored the consequences of breaching such clauses.
Court Allows Subrogation In Contractual Indemnity Case
In Interstate Fire And Casualty Ins. Co. v. Cleveland Wrecking Co., (2010) 182 Cal.App.4th 23(2010), the California Court of Appeals assessed the ability of an insurer to subrogate against an express indemnitor.
Eastern District of Virginia Dismisses Policyholder’s Claim for Insurance Coverage for Chinese Drywall Costs that Policyholder Incurred Voluntarily
In Builders Mutual Ins. Co. v. Dragas Management Corp., 2010 WL 1257298 (E.D. Va. 2010), the Federal District Court for the Eastern District of Virginia found that liability insurer owed no duty to defend or indemnify builder for costs the builder incurred voluntarily to remove defective Chinese drywall.
Global Climate Change Law Under Review: ... Comer v. Murphy Oil USA
Just three weeks before the scheduled en banc rehearing of the Comer v. Murphy Oil USA appeal, and after the filing of hundreds of pages of supplemental briefing, the Fifth Circuit Court of Appeals notified the parties that the oral argument scheduled for May 24, 2010 was canceled. The Order entered April 30, 2010 indicated that another judge had recused due to new circumstances, leaving only eight judges able to participate in the case.
Insured's Own Counterclaim Can Be Relevant To Insurer's Defense Obligation
The usual rule for determining whether an insurer has a duty to defend in Illinois, as in most states, requires an analysis of whether the facts alleged in the underlying complaint against the insured fall within, or potentially within, the insurance policy. See, e.g., Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 860 N.E.2d 307 (Ill. 2006). A question sometimes arises, however, whether pleadings other than the underlying complaint may or must be taken into account in assessing the duty to defend. Recent Illinois case law has suggested that such other pleadings may sometimes be considered, but not when the pleading is one filed by a purported insured who is seeking coverage.
Minnesota Supreme Court Overrules Iowa National: Co-Primary Insurers Can Be Held Equally Liable For Defense Costs Despite Lack Of Privity
The Minnesota Supreme Court has overruled Iowa Nat’l Ins. Co. v. Universal Underwriters Ins. Co., (Minn. 1967), which held that absent a loan receipt agreement, "...an insurer that defends or participates in the defense of an insured has no basis for seeking recovery of defense costs from another insurer." Cargill Inc. v. ACE American Ins. Co., 2010 WL 2606020 (Minn. June 30, 2010). In Cargill, the Court holds that primary insurers, who insure the same insured for the same risks, and whose policies are triggered for defense purposes, can be equally liable for defense costs based on equitable contribution principles where there is otherwise no privity between insurers.
The Gulf Oil Spill: Assessing Exposures
On April 20, 2010 an explosion on the DEEPWATER HORIZON oil rig in the Gulf of Mexico killed 11 workers, injured 17 others and blew out an exploratory oil well 5,000 feet underwater. Since that time, an estimated 67 to 127 million gallons of oil have spilled into the Gulf. As efforts to successfully “cap” the well continue, the unprecedented Gulf Oil Spill presents insurers and other businesses with enormous potential exposures. Hundreds of lawsuits have already been filed against entities involved with the DEEPWATER HORIZON, including the rig’s owner, Transocean; operator and principal developer BP; Halliburton Energy Services, Inc., which installed and cemented the well’s production casing; and Cameron International Corporation, which built the well’s “blowout preventer”, a fail-safe device fitted at the base of the well.
Unwinding The Spiral - How English Courts Interpret “Follow The Settlements” Clauses
The London Market Excess of Loss spiral (the ‘LMX’ spiral) is a phenomenon which has caused repeated systematic collapses in the reinsurance market over the past two decades. In recent years, several arbitrations, involving thousands of LMX spiral-related claims, were put on hold pending the outcome of the case Equitas Limited v. R&Q Reinsurance Company (UK) Limited, and Equitas Limited v. ACE European Group Limited  All ER (D) 154 (Nov).
Vehicle Service Provider's Duty Of Care To Customers Narrowed To Limit Liability For Malfunctioning Vehicle Parts
With increasing frequency, courts have been called upon to decide the extent of a service provider’s liability for damages arising out of the malfunction of a vehicle part which is only tangentially connected to the parts serviced. Most recently, the Arizona Court of Appeals addressed this issue in Diaz v. Phoenix Lubrication Service, Inc. d/b/a Jiffy Lube, 230 P.3d 718 (Ariz. Ct. App. 2010), and held that a quick oil change service provider did not have a duty to examine the tires on its customers’ vehicles for wear, despite the fact that a tire pressure check was preformed as a part of each oil change.