“Who pays” and “how much” continue to be central questions in insurance-recovery litigation by policyholders for asbestos, environmental clean up, pharmaceutical, lead-paint, toxic-tort and other conditions that produce loss over time. Because insurance contracts are governed by state law, the coverage wars apparently will continue until each inch of turf is won or lost. Most recently, the Delaware Supreme Court has weighed in on the question of trigger of coverage (“who pays”) for asbestos- liability claims, the Minnesota Supreme Court has addressed allocation of loss (“how much”) among triggered policies, and the New Hampshire Supreme Court has now been asked to address the allocation question, too.
A long-rumoured transaction between Equitas and Warren Buffett’s Berkshire Hathaway has been announced. This will be a two-step transaction whereby (1) Equitas will be absorbed into a National Indemnity Company subsidiary in exchange for a cash payment and a promise of providing additional reinsurance and (2) a channeling injunction will be obtained cutting off the exposure of Equitas, Lloyd’s, names, and Berkshire beyond the money in the new vehicle. If consummated, the deal will achieve the long-sought finality for names (the individual investors on the responsible pre-1992 syndicate years of account) and for the current Lloyd’s enterprise.
A liability insurer’s promise to defend its insured is at the core of the protection purchased by policyholders and, in most states, the insurer will be required to defend any suit alleging facts that possibly could result in a judgment against the insured that would be covered by the policy’s duty to indemnify. A duty to defend will be found where the undisputed facts surrounding a claim – typically the language of the policy and the allegations of the complaint – permit proof of a claim potentially covered by the duty to indemnify. The complaint-allegations test, or what some jurisdictions term the eight-corners rule, results in the duty to defend being found by courts easily, commensurate with the broad contract language and the policy’s intention to afford the insured “litigation insurance” protecting against the risk and burden of litigation.
In any given liability case, the insured defendant might win, in which event no indemnity would be required, or the insured defendant might lose the case on a ground that is outside the scope of coverage; nothwithstanding the possibility of results where the insurer will not have a duty to indemnify the policyholder, the insurer still has a duty to assume the defense, which matures at the outset of the liability case. Because the duty to defend arises based on the possibility of the duty to indemnify a complaint, rather than based on a prediction of the likely outcome or indeed the actual outcome, we typically say that the duty to defend is broader than is the duty to indemnify.
Although an insurer’s duty to defend will be triggered if the allegations raise the possibility of a duty to indemnify, sometimes
the complaint is unclear whether nestled within the allegations is a potentially covered claim. An interesting take on the issue arose in a recent Eleventh Circuit decision, Hartford Acc. & Indem. Co. v. Beaver (11 Cir. Oct. 16, 2006).
A picture may be worth a thousand words, but trial lawyers do not have a set of ready principles for the development of the pictures – graphics – we use at trial. A bulleted-list of points displayed in PowerPoint is hardly a substitute for a well-designed graphic that communicates to the jury. Where allowed by the budget, lawyers will work with trial-graphics firms to assist in making pretty pictures. But the case should remain that of counsel, which means that counsel must take responsibility for the development of graphics for trial.