Grab Your Umbrella — and Magnifying Glass

For the past two decades, policyholders and insurers have been fighting over whether the cost of cleaning up hazardous-waste sites is covered under general-liability policies by arguing over the nature of that liability. The argument has tended to center on the meaning of the word “damages” and the insuring agreement’s promise to afford indemnification for the sums payable “as damages.”
Departing somewhat from the standard version of these arguments, the California Supreme Court ruled in 2001 that covered “damages” were limited to amounts awarded by a court. Now, the court has reaffirmed that holding, County of San Diego v. Ace Property & Casualty Ins. Co. (Cal. Aug. 29, 2005), but in a companion case held that an umbrella policy that afforded coverage for “expenses” in addition to “damages” unambiguously applied to clean-up costs incurred in an administrative proceeding. Powerine Oil Co. v. Superior Court (Cal. Aug. 29, 2005). The court purports to be implementing the “mutual intent” of the parties, with the result that one insured has coverage due to the inclusion of the word “expenses” and the other one does not.

Read More

Walks and Quacks like a Duck: The Reach of Insurance Regulation to a Seller’s Provision of Insurance-Like Benefits – Of Warranties, Requirements Contracts, & Other Benefits

State regulation of insurance applies if the transaction in question is found to be “insurance.” If something is “insurance,” the entity providing it generally must be a licensed insurance company. If not licensed, then the entity exposes itself to fines and potential criminal liability, in addition to the invalidation of the “insurance” it provided. Many manufacturing, service, and retail companies can find it in their interest to package an insurance-like benefit along with the sale of its product or provision of its service. What are the legal risks to the company from providing this type of benefit to its customers and how can the benefit be structured to minimize the risk yet achieve business objectives?

Read More

An Insurance Company’s Duty to Consent

In many types of insurance policies, the carrier’s obligation to perform is tied to its consenting to the incurrence of costs or the settlement of an underlying case. One assumes that an insurer cannot withhold consent willy-nilly, for that would make coverage illusory. There is a dearth of authority, however, that makes express the circumstances in which an insurer is not permitted to withhold consent – that is to say, the circumstances in which it is required to consent. The Supreme Court of Iowa recently addressed that question and made clear that insurers are obligated to consent when faced with a reasonable request.

Read More