Insurance Coverage Update October 2014

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Covered in this post:

  • New Jersey Appellate Division Touches Upon Various Issues Regarding Allocation and Exhaustion in a Long-Tail Environmental Claim
  • New Jersey District Court Dismisses Counts from Insureds' Hurricane Sandy Coverage Suit
  • New Jersey Appellate Division Finds No Coverage for Costs of Accepting Return of Defective Product
  • No Prejudice Requirement Added to New York Common Law Late Notice Standard
  • New York Judge Addresses Allocation of Continuous Trigger Liability

NEW JERSEY

Allocation
New Jersey Appellate Division Touches Upon Various Issues Regarding Allocation and Exhaustion in a Long-Tail Environmental Claim
 
IMO Indus., Inc. v. Transamerica Corp., 2014 N.J. Super. LEXIS 132 (App. Div. Sept. 30, 2014)
 
The Appellate Division: rejected an insured's contention that it's insurer must cover defense costs for an endless time until it has actually paid the indemnification limits of its policies; annualized occurrence and aggregates limits for multi-year policies; stub policies would be treated as having separate annual aggregate limits; the insured's payment of SIR was outside policy limits; and ruled that that coverage issues would not be re-litigated for each individual asbestos claim based on the excess insures decision to not associate with the underlying claims.  
  
 
Hurricane Sandy Litigation
New Jersey District Court Dismisses Counts from Insureds' Hurricane Sandy Coverage Suit
 
Gilliam v. Liberty Mutual Fire Ins. Co., Civil Action No. 14-cv-00361 (D.C.N.J., September 26, 2014)
 
New Jersey District Court dismisses counts of insureds' claim that sought, in the context of damage stemming from Hurricane Sandy, recovery on the basis of the Consumer Fraud Act and the policy's implied covenant of good faith and fair dealing. The Court also rejected the insureds' bid for punitive damages and attorney's fees as inappropriate in a first-party insurance claim setting. 
 
 
Defective Products Coverage
New Jersey Appellate Division Finds No Coverage for Costs of Accepting Return of Defective Product
 
Titanium Industries, Inc. v. Federal Ins. Co., 2014 N.J. Super. Unpub. LEXIS 2208 (App. Div., September 10, 2014)
 
The New Jersey Appellate Division finds insured not covered for costs related to the return of defective titanium it sold to a third party. The law of warranty rather than that of insurance coverage guides the apportionment between transacting parties of this type of loss.
 
An insured incurred liability when it sold defective titanium to a manufacturer of orthopedic implants and devices. In particular, the titanium material contained a defect called "alloy segregation" - or, the failure of alloys in the metal to completely melt, causing the alloy to separate over time. The manufacturer consequently scrapped items already made with the defective metal and returned the raw material to the insured.    

NEW YORK

Late Notice Defense
No Prejudice Requirement Added to New York Common Law Late Notice Standard
 
Indian Harbor Ins. Co. v. The City of San Diego, 2014 U.S. App. LEXIS 18986 (2d Cir. October 2, 2014)
 
The United States Court of Appeals for the Second Circuit finds no coverage for an insured who delayed fifty-eight days in notifying its insurer, clarifying that New York's common law does not require insurers asserting a late notice defense to show prejudice in addition to untimely notice.
 
The insured, a City, sought coverage in relation to three late-notified claims, including one in which the City waited fifty-eight days to notify its insurer of the relevant claim. The insurer in response filed a declaratory judgment action, arguing that late notice precluded coverage, though it did not argue it had suffered prejudice because of the insured's delay.
 
Environmental Liability Allocation
New York Judge Addresses Allocation of Continuous Trigger Liability
 
Keyspan Gas East Corp. v. Munich Reinsurance America, Inc., et al., 2014 N.Y. Misc. LEXIS 4469 (Sup. Ct. New York County, October 14, 2014)
 
Judge Scarpulla of the New York County Supreme Court reaffirms that allocation of continuous trigger environmental liability generally does not include years in which coverage was unavailable in the marketplace, but also decides that in this case a, 1971 law operated to force the insured to bear liability incurred during a period when coverage was commercially unavailable.
 
An insured incurred liability in connection with environmental cleanup at two former manufactured gas plant sites. It sought coverage from an insurer who had, between 1953 and 1969, issued the insured's predecessor-in-interest eight excess liability policies.