Insurance Law Alert

February 2019

In This Issue
Ohio Court Rules That Insurer Owes No Coverage To Opiate Distributor In
National Opiate Prescription Litigation
An Ohio court ruled that an insurer has no duty to defend or indemnify an opiate distributor
in suits filed by government agencies, because, among other things, such suits did not seek
damages “because of” or “for” “bodily injury.” Acuity v. Masters Pharmaceutical, Inc., No. A
1701985 (Ohio Ct. Com. Pl. Feb. 1, 2019). (Click here for full article)“Market leader for
insurer representation,offering unmatched ability
in handling bet-the-company
litigation and arbitration
proceedings.”– Chambers USA 2018

Ohio Court Rules That Contaminated Baby Food Is Not Covered Property
DamageAn Ohio court ruled that an insurer has no duty to defend or indemnify claims arising out of
the accidental contamination of egg-free baby food with eggs, finding that such claims did notallege covered property damage. Scottsdale Ins. Co. v. Spring Hill Jersey Cheese, Inc., No. 17
CV H 03 0209 (Ohio Ct. Com. Pl. Jan. 23, 2019). (Click here for full article)

Policyholder Not Entitled To Coverage For Trademark Infringement, Says
Idaho Supreme Court
The Idaho Supreme Court ruled that an insurer is not obligated to defend a trademark
infringement suit, rejecting assertions that a “prior publication” exclusion was ambiguous orinapplicable. Scout, LLC v. Truck Ins. Exchange, 2019 WL 347471 (Idaho Jan. 29, 2019).
(Click here for full article)

California Court Refuses To Enforce Wrap-Up Exclusion Where Coverage
Isn’t Duplicative
A California federal district court declined to enforce a wrap-up exclusion in a subcontractor’s
liability policy, reasoning that the purpose of the exclusion—to avoid duplicative coverage—was
not a concern because the subcontractor was not covered by the general contractor’s wrap up
policy. Employers Mutual Casualty Co. v. Fast Wrap Reno One, LLC, 2019 WL 480542 (N.D.
Cal. Feb. 7, 2019). (Click here for full article)

Ninth Circuit Certifies Right To Privacy Coverage Question To California
Supreme Court
The Ninth Circuit asked the California Supreme Court to address whether a generalliability insurer must defend right to privacy claims arising out of unsolicited text message
advertisements sent in violation of the Telephone Consumer Protection Act. Yahoo! Inc. v.
Nat’l Union Fire Ins. Co., 2019 WL 209713 (9th Cir. Jan. 16, 2019). (Click here for full article)



Simpson Thacher & Bartlett LLP

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Georgia Court Rules That Insurer Is Estopped From Denying Coverage
Based On Delayed Reservation
A Georgia federal district court ruled that an insurer was estopped from denying coverage as tocertain insureds based on a delay in reserving rights. Auto-Owners Ins. Co. v. Cribb, 2019 WL
451555 (N.D. Ga. Feb. 5, 2019). (Click here for full article)

Rhode Island Supreme Court Rules That Insurer Does Not Owe Good
Faith Settlement Duty To Third-Party Claimants
The Rhode Island Supreme Court ruled that an insurer’s duty to act in good faith with respect
to settlement is owed to its policyholder, and absent assignment, does not extend to third-party
claimants. Summit Ins. Co. v. Stricklett, 2019 WL 190358 (R.I. Jan. 15, 2019). (Click here forfull article)

Mississippi Supreme Court Dismisses Insurer’s Equitable Subrogation
Claim, Deeming Settlement Payment “Voluntary”
Answering a question certified by the Fifth Circuit, the Mississippi Supreme Court ruled thatan insurer was barred from seeking indemnity for a settlement because it was a “voluntary
payment.” Colony Ins. Co. v. First Specialty Ins. Co., 2019 WL 396894 (Miss. Jan. 31, 2019).
(Click here for full article)

Montana Supreme Court Rules That Dismissal Of Underlying Suit Is
Proper Remedy For Collusive Settlement
The Montana Supreme Court ruled that a settlement in a defective construction suit was
the product of collusion between the landowner and contractor and that the proper remedy
was dismissal of the underlying suit and consent judgment. Abbey/Land, LLC v. GlacierConstruction Partners, LLC, 2019 WL 350088 (Mont. Jan. 29, 2019). (Click here forfull article)

Florida Court Clarifies That Insurer Need Not Demonstrate Anticipated
Litigation In Order To Assert Attorney-Client Privilege
A Florida federal district court ruled that an insurer is not required to demonstrate thatit reasonably anticipated litigation in order to assert attorney-client privilege. Ranger
Construction Indus. v. Allied World Nat’l Assurance Co., 2019 WL 436555 (S.D. Fla. Feb. 4,2019). (Click here for full article)

Florida Appellate Court Rules That Insurer Lacks Standing To Bring
Malpractice Suit Against Law Firm Retained To Represent Insured
A Florida appellate court dismissed an insurer’s malpractice suit against counsel it hired torepresent the insured, finding that the insurer lacked standing to assert such claims. Arch Ins.
Co. v. Kubicki Draper, LLP, 2019 WL 318466 (Fla. Ct. App. Jan. 23, 2019). (Click here forfull article)

STB News Alert
Click here for news relating to Simpson Thacher’s insurance practice.

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Coverage Alerts:

Ohio Court Rules That Insurer
Owes No Coverage To Opiate
Distributor In National Opiate
Prescription Litigation

Masters, even if such injury continued during
the policy period. According to the underlying
suits, Masters filled suspicious orders andknew of the opiate addiction crisis prior to
obtaining insurance from Acuity.

An Ohio court ruled that an insurer has
no duty to defend or indemnify an opiate
distributor in suits filed by government
agencies, because, among other things, suchsuits did not seek damages “because of”
or “for” “bodily injury.” Acuity v. Masters
Pharmaceutical, Inc., No. A 1701985 (OhioCt. Com. Pl. Feb. 1, 2019).
Acuity sought a declaration that it owed
no defense or indemnity to Masters
Pharmaceutical in national prescription
opiate suits filed by government entities.
The underlying suits allege that opiate
manufacturers and distributors failed tomonitor and report suspicious opiate orders,which contributed to an epidemic that caused
financial harm to the government entities.
More specifically, the government entities
allege that they incurred increased expenses
relating to law enforcement, judicial resources
and medical costs, among other things.
The court granted the insurer’s summary
judgment motion, ruling that the damages
sought in the underlying litigation were not“damages because of or for a ‘bodily injury.’”
The court emphasized that the underlying
suits expressly stated that the plaintiffs were
not seeking damages “derivative of harm
visited upon third party persons or entities”
or for “citizens’ bodily injury.” Further, thecourt noted that government entities would
not have standing to seek damages on behalfof citizens who sustained bodily injury due toopiate addiction.
The court emphasized the distinction
between litigation brought by a government
entity “solely for its own economic loss” ascompared to litigation brought by individuals
harmed “directly by the prescription drugs.”
Thus, the court explained, even when medical
monitoring claims or taxpayer damages arealleged, those costs are economic burdens
borne by the government, not damages
caused by individual bodily injury.
Finally, the court held that there was nocoverage because the policy excluded claims
for bodily injury that was previously known to

Ohio Court Rules That
Contaminated Baby Food Is Not
Covered Property Damage
An Ohio court ruled that an insurer has no
duty to defend or indemnify claims arising outof the accidental contamination of egg-freebaby food with eggs, finding that such claims
did not allege covered property damage.
Scottsdale Ins. Co. v. Spring Hill Jersey
Cheese, Inc., No. 17 CV H 03 0209 (Ohio Ct.
Com. Pl. Jan. 23, 2019).
Nature’s One, a baby food manufacturer,
ordered egg-free dry milk from Spring Hill
to use in its egg-free baby formula products.
In 2015, Spring Hill inadvertently delivered
dry milk that was not egg-free. The error was
not discovered until after the nonconforming
dry milk was mixed with other ingredients.
Because the ingredients were impossible toseparate, Nature’s One was unable to sell
the formula. In ensuing litigation between
Nature’s One and Spring Hill, Scottsdale
provided a defense to Spring Hill but reserved
its right to deny coverage. Thereafter,
Scottsdale sought a declaration that it had no
duty to defend or indemnify Spring Hill.
The court granted Scottsdale’s summary
judgment motion, ruling that Nature’s One
did not suffer “property damage” under thepolicy. The court held that under both Ohioand California law, the mere presence of adefective ingredient or component (without
resultant harm or damage to other property)
does not constitute “physical injury to3tangible property.” The court also held that
Nature’s One did not experience a “loss ofuse” of property. The court reasoned that
Nature’s One suffered a “loss of value” rather
than a “loss of use.”
Finally, the court held that Scottsdale was notestopped from denying coverage based on
its defense of Spring Hill for approximately
seventeen months prior to reserving its rights.
The court explained that estoppel requiresa showing of prejudice and that allegationsof prejudice based on the possibility ofsettlement prior to the reservation of rights
were “completely speculative.”

Policyholder Not EntitledTo Coverage For Trademark
Infringement, Says Idaho Supreme
Court
The Idaho Supreme Court ruled that aninsurer is not obligated to defend a trademark
infringement suit, rejecting assertions that a“prior publication” exclusion was ambiguous
or inapplicable. Scout, LLC v. Truck Ins.
Exchange, 2019 WL 347471 (Idaho Jan.
29, 2019).
Gone Rogue Pub was sued for trademark
infringement based on its use of the logo
“ROGUE.” Truck Insurance refused to defend
on the basis of a prior publication exclusion,
which barred coverage for advertising injuries“[a]rising out of oral or written publicationof material whose first publication took place
before the beginning of the policy period.” Insupport of its denial, Truck Insurance reliedon the fact that the underlying complaint
alleged that Gone Rogue Pub published its
ROGUE logo on Facebook approximately
one month before the policy commenced.

An Idaho trial court agreed and granted theinsurer’s summary judgment motion.
The Idaho Supreme Court affirmed, rejecting
three arguments asserted by the policyholder
on appeal. First, the policyholder argued
that Truck Insurance could not denycoverage based solely on the allegations in
the complaint and was obligated to consider
extrinsic facts known to it. Gone Rogue Pub
claimed that Truck Insurance was obligatedto defend because it knew that Gone Rogue
Pub did not open for business until after
the coverage period began, notwithstanding
the complaint’s allegation of trademark
infringement prior to the coverage period.
The court rejected this assertion, holding that
Idaho law does not require an insurer to lookbeyond the four corners of the complaint indenying a defense.
Second, the court rejected the contention
that the prior publication exclusion was
ambiguous. Gone Rogue Pub claimed
ambiguity based on a split in legal authority
as to whether a prior publication must be
independently “injurious” and actionable
in its own right, or whether the exclusion
applies so long as the prior publication
involves material sufficiently similar to later
publications. The court deemed the exclusion
unambiguous, finding that “the relevant
question for the exclusion . . . is not when
the claim first became actionable, but whenthe material giving rise to the claims was
first published.”
Finally, the court dismissed the assertion
that the exclusion did not apply because
advertisements published after policy
inception constituted “fresh wrongs” thattriggered coverage. The policyholder argued
that certain allegations in the complaint, suchas cybersquatting under the Lanham Act andinfringement for retail merchandise, separate
and apart from restaurant advertising,constituted “distinct, fresh wrongs” thatwere not excluded by the prior publication
provision. The court disagreed, emphasizingthat all alleged trademark infringements
arose from a common theme and that noallegations of “new content” constituted fresh
wrongs. As the court noted, the Third Circuit
rejected a similar “fresh wrongs” argumentin Hanover Ins. Co. v. Urban Outfitters, Inc.,806 F.3d 761 (3d Cir. 2015) (discussed in our
November 2015 Alert).

4

California Court Refuses To
Enforce Wrap-Up Exclusion Where
Coverage Isn’t Duplicative
A California federal district court declined
to enforce a wrap-up exclusion in a
subcontractor’s liability policy, reasoningthat the purpose of the exclusion—to avoid
duplicative coverage—was not a concern
because the subcontractor was not coveredby the general contractor’s wrap up policy.
Employers Mutual Casualty Co. v. Fast Wrap
Reno One, LLC, 2019 WL 480542 (N.D. Cal.
Feb. 7, 2019).
The coverage action arose out of aconstruction project that resulted in waterrelated damage to a building. The generalcontractor sued the subcontractor, alleging
breach of contract and negligence, among
other claims. Employers, the subcontractor’sinsurer, sought a declaration that it had no
duty to defend the suit. Employers relied on a
wrap-up exclusion that provided that “[t]his
insurance does not apply to ‘bodily injury’ or‘property damage’ arising out of either yourongoing operations or operations included
with the ‘product-completed operations
hazard’ . . . as a consolidated (wrap-up)
insurance program has been provided by theprime contractor.”
The court denied Employers’ summary
judgment motion, deeming the exclusion
inapplicable. The court explained that
although the general contractor had, in fact,
secured wrap-up coverage from a separate
insurer, the subcontractor was “not enrolled
in the wrap-up policy and its work was notincluded in its coverage.” The court therefore
held that “the terms of the [ ] exclusion,
intended to avoid duplicative coverage, do not
apply in this circumstance.”also to claims involving the right to seclusion(i.e., the right to be free from unwanted
intrusions). Last month, the Ninth Circuitasked the California Supreme Court for
guidance on this issue. Yahoo! Inc. v. Nat’l
Union Fire Ins. Co., 2019 WL 209713 (9th Cir.
Jan. 16, 2019).
The coverage dispute arose out of five classaction suits filed against Yahoo, alleging
that the company violated the TCPA bytransmitting unsolicited text message
advertisements to putative class members.
National Union refused to defend the suits,
arguing that coverage for claims arising outof “publication . . . of material that violatesa person’s right of privacy” does not include
TCPA claims, which implicate only the rightto seclusion. A California district court agreed
and granted National Union’s motion todismiss.
On appeal, the Ninth Circuit noted theunsettled state of California law on this issue
and certified the following question to the
California Supreme Court:
Does a commercial liability policy thatcovers “personal injury,” defined as“injury . . . arising out of . . . [o]ral or
written publication . . . of material that
violates a person’s right to privacy,”
trigger the insurer’s duty to defend theinsured against a claim that the insured
violated the Telephone Consumer
Protection Act by sending unsolicitedtext message advertisements that did
not reveal any private information?
We will keep you posted on any developmentsin this matter.

Ninth Circuit Certifies Right To
Privacy Coverage Question To
California Supreme Court
Previous Alerts have discussed conflicting
decisions as to whether fax blasting claims
brought under the Telephone Consumer
Protection Act (“TCPA”) are covered under ageneral liability policy. See March 2010 Alert,
September 2013 Alert, September 2017 Alert.
These cases address whether personal andadvertising injury coverage applies only toclaims involving the right to secrecy (i.e., theright to keep personal information private), or
5Reservation Of
Rights Alert:

Georgia Court Rules That Insurer Is
Estopped From Denying Coverage
Based On Delayed Reservation
A Georgia federal district court ruled thatan insurer was estopped from denying
coverage as to certain insureds based on adelay in reserving rights. Auto-Owners Ins.
Co. v. Cribb, 2019 WL 451555 (N.D. Ga. Feb.
5, 2019).
The coverage dispute arose out of aconstruction site accident that occurred in
May 2015. In April 2017, the injured worker
sued construction company BR Mountain
Homes. BR Mountain Homes promptly
notified its general liability insurer, AutoOwners, of the suit. Auto-Owners issued areservation of rights (“ROR”) addressed to
BR Mountain Homes “to the Attention of
Mr. Brian Thurman,” and retained counsel
to defend the underlying suit. Thereafter, inlate April 2017, the injured worker amended
the underlying complaint to add Thurman
and Davis, an officer and employee of BR
Mountain Homes. Three months later, AutoOwners issued ROR letters to Thurman andDavis.
The court held that Auto-Owners wasestopped from denying coverage as toThurman and Davis based on the threemonth delay in issuing RORs to thoseindividuals. The court explained that the first
letter was insufficient to reserve rights as toThurman and Davis because at the time it wassent, they had not been named as defendants.
Further, the court noted that the policy’srights and obligations applied separately toeach insured pursuant to a “separation of
insureds” provision.
Addressing a separate issue, the court ruledthat an issue of fact existed as to whether
BR Mountain Homes had breached thepolicy’s notice requirement. The policy
required notice “as soon as practicable ofan ‘occurrence’ or an offense which may
result in a claim.” It further stated that theinsurer could not be sued “unless all of[the policy] terms have been fully compliedwith.” Although BR Mountain Homes
notified Auto-Owners promptly after theunderlying suit was filed in 2017, it did not

notify Auto-Owners about the accident at
any point during the previous two-year
period. The court acknowledged that notice
was a condition precedent to coverage, but
concluded that timeliness is a question for
the factfinder. More specifically, the court
held that a jury must determine “whether this
delay was objectively reasonable, and if not,whether appropriate justifications exist for BR
Mountain Homes’ failure to provide notice toAuto-Owners in a timely fashion.”

Settlement Alerts:

Rhode Island Supreme Court Rules
That Insurer Does Not Owe Good
Faith Settlement Duty To ThirdParty Claimants
The Rhode Island Supreme Court ruledthat an insurer’s duty to act in good faithwith respect to settlement is owed to its
policyholder, and absent assignment, does notextend to third-party claimants. Summit Ins.
Co. v. Stricklett, 2019 WL 190358 (R.I. Jan.
15, 2019).
Stricklett’s automobile struck and injured
Alves. At the time of the accident, Stricklett
was insured by Summit. Summit investigatedthe claim and determined that Stricklett was
not at fault, and therefore notified Alves that
it would make no settlement offers. Nearlyeight years later, Alves hired new counsel,
reinitiated contact with Summit and madea settlement demand of $300,000. Summit
offered its policy limits of $25,000, which
Alves rejected.
Summit sued Stricklett and Alves, seeking
a declaration that it had no obligation to
pay any amount above policy limits. Alvescounterclaimed, arguing that Rhode Island
precedent established “‘a duty of good faithand fair dealing’ on the part of an insurer‘that runs to both . . . the first party claimant
insured and also to third party claimants.’”
The trial court ruled in Summit’s favor,
finding that Summit owed no duty to Alves
because he was not an insured or assignee ofthe rights of an insured. However, the trial
court also stated that “Summit does owe a
duty to the Alves[es] to act in a reasonable
manner and in good faith in settling theclaim against Mr. Stricklett.” The trial court
concluded that Summit fulfilled this duty.
6

The Rhode Island Supreme Court affirmed
but expressly clarified the “somewhat
contradictory holding” of the trial court. The
Rhode Island Supreme Court explained thatan insurer owes fiduciary obligations only to
an insured party or a party to whom insurance
rights have been assigned. Rejecting aserroneous the trial court’s statement relating
to Summit’s duty to Alves, the Rhode Island
Supreme Court stated: “We believe that thiskind of duty on the part of the insurancecompany to third parties would expand an
insurance company’s potential liability . . . too
far and essentially announce a new, judiciallycreated cause of action.”ruling that Omega was not covered under its
policy. Thereafter, but prior to a ruling in the
declaratory judgment action, Colony settled
the underlying action for $1 million, thepolicy limit. Colony then sued First Specialty,
one of Omega’s insurers, asserting equitable
subrogation and implied indemnity claims.
A district court dismissed Colony’s claims,
finding that Mississippi’s voluntary payment
doctrine precluded recovery. The doctrine
holds that a payment is not voluntary if it was“paid under compulsion” and the payor “waslegally liable” to the payee. Colony appealed
and the Fifth Circuit certified the following
questions to the Mississippi Supreme Court:
1) Does an insurer act under“compulsion” if it takes the legal
position that an entity purporting
to be its insured is not covered byits policy, but nonetheless pays asettlement demand in good faith to
avoid potentially greater liability
that could arise from a future
coverage determination?

Mississippi Supreme Court
Dismisses Insurer’s Equitable
Subrogation Claim, Deeming
Settlement Payment “Voluntary”
Answering a question certified by the Fifth
Circuit, the Mississippi Supreme Court ruledthat an insurer was barred from seeking
indemnity for a settlement because it was a“voluntary payment.” Colony Ins. Co. v. First
Specialty Ins. Co., 2019 WL 396894 (Miss.
Jan. 31, 2019).
An accident at a site owned by Omega
resulted in the death of an employee of
Accu-Fab & Construction. In an ensuing
wrongful death suit, Omega sought coverage
from Colony Insurance, Accu-Fab’s insurer.
Colony defended Omega under a reservationof rights, but maintained that it was not
an additional insured and that even if
Omega was an additional insured, coverage
was barred by an exclusion. Colony filed
a declaratory judgment action seeking a2) Does an insurer satisfy the “legal
duty” standard if it makes a settlement
payment on behalf of a purported
insured whose defense it has assumed
in good faith, but whose coverage under
the policy has not been definitively
resolved, even if the insurer maintains
that the purported insured is not
actually insured under the policy?
The Mississippi Supreme Court answered
the first question in the negative. The
court rejected Colony’s assertion that it
paid under compulsion because it faced
potentially greater liability if a settlement
was not reached. The court explained that “athreat to sue is not considered compulsion.”
The court further reasoned that in light ofColony’s consistent position that Omega was
not entitled to coverage under its policy, themere possibility of liability did not amountto compulsion. Finally, the court noted that
Colony was not under an immediate or urgent
necessity to make the settlement payment andcould have awaited a coverage ruling in thepending declaratory judgment action.
Because the first question was dispositive of
the matter, the court declined to answer thesecond certified question.

7

Montana Supreme Court Rules
That Dismissal Of Underlying Suit
Is Proper Remedy For Collusive
Settlement
The Montana Supreme Court ruled that asettlement in a defective construction suit
was the product of collusion between thelandowner and contractor and that the proper
remedy was dismissal of the underlying suitand consent judgment. Abbey/Land, LLC v.
Glacier Construction Partners, LLC, 2019 WL
350088 (Mont. Jan. 29, 2019).
Abbey/Land, a real estate developer,
contracted with Glacier for the constructionof a luxury home. Both were owned by thesame entity and Glacier’s only project was
the construction of the home for Abbey/
Land. When construction problems arose,several lawsuits were filed, including a suitby Abbey/Land against Glacier. That suitresulted in a settlement in which Glacier
agreed to a confession of judgment for $12
million. James River, Glacier’s insurer, moved
to intervene without success. On appeal, theMontana Supreme Court ruled that JamesRiver should have been allowed to intervene
to challenge the reasonableness of theconfessed judgment. On remand, a trial court
ruled that the judgment was the product ofcollusion. The trial court declined to dismissthe case and instead reduced the settlement
to approximately $2.4 million. The trial court
also awarded James River attorneys’ fees
under its “inherent powers.”
On appeal for the second time, the Montana
Supreme Court affirmed the lower court’s
finding of collusion. The court held thatthe record contained numerous facts
demonstrating collusion, including Glacier’s
agreement to expose itself to consequential
damages and the parties’ instructions that
opposing counsel operate “as a team on aunified strategy.” However, the court reversed
the reduction of the judgment, holding thatthe lower court abused its discretion by failingto dismiss the suit entirely. The Montana
Supreme Court reasoned that the lower court“faced evidence of collusion so egregious thatdismissal of Abbey/Land’s claims against
Glacier was the only appropriate remedy.”
Finally, the Montana Supreme Court
ruled that an award of attorneys’ fees wasproper, but not based on the lower court’s“inherent powers.” The Montana Supreme

Court explained that the narrow exceptions
to the “American Rule” prohibiting fee
shifting do not extend to the present caseand are typically limited to cases brought
by insureds. However, the court held that
James River was entitled to fees based on
the governing declaratory judgment act
statute, which allows a court to award “further
relief . . . whenever necessary or proper.”Privilege Alert:

Florida Court Clarifies That Insurer
Need Not Demonstrate Anticipated
Litigation In Order To Assert
Attorney-Client Privilege
A Florida federal district court ruled that aninsurer is not required to demonstrate thatit reasonably anticipated litigation in order
to assert attorney-client privilege. Ranger
Construction Indus. v. Allied World Nat’lAssurance Co., 2019 WL 436555 (S.D. Fla.
Feb. 4, 2019).
In this coverage action, the inadvertent
production of several documents led to a
dispute as to whether an insurer is entitledto maintain attorney-client privilege overdocuments if, at the time the attorney
was retained or rendered legal advice,
the insurer did not reasonably anticipate
litigation. The court rejected and clarified
a “handful of Florida appellate cases andSouthern District of Florida cases” that“have seemingly suggested or ruled that theattorney-client privilege only attaches in
the insurance company context when thelegal advice was obtained or rendered in
anticipation of litigation.” The court explainedthat attorney-client privilege is governedby Florida statutory law, which requires
communications to be “made in the rendition8

of legal services” without any “anticipatedlitigation” requirement. See Fla. Stat. §90.502(2) (2018).
Notably, the court expressly agreed with the
body of case law that requires “heightened
scrutiny” when a corporation (e.g., an
insurance company) asserts attorneyclient privilege. This heightened scrutiny
requires courts to evaluate whether (1) thecommunication would have been made but
for the contemplation of legal services and(2) the content of the communication relates
to legal services, as opposed to businessor non-legal activities. However, the court“flatly rejected” the assertion that thisheightened inquiry includes an anticipatedlitigation requirement.

Standing Alert:

Florida Appellate Court Rules That
Insurer Lacks Standing To Bring
Malpractice Suit Against Law Firm
Retained To Represent Insured
A Florida Appellate court dismissed aninsurer’s malpractice suit against counsel it
hired to represent the insured, finding thatthe insurer lacked standing to assert suchclaims. Arch Ins. Co. v. Kubicki Draper, LLP,
2019 WL 318466 (Fla. Ct. App. Jan. 23, 2019).
An insurer hired a law firm to defend its
insured in an underlying action. After the suitsettled for policy limits, the insurer sued thelaw firm for professional negligence, claimingthat the law firm’s delay in asserting a statuteof limitations defense resulted in a larger
settlement than should have been necessary.

A Florida trial court granted the law firm’ssummary judgment motion, finding thatthe insurer lacked standing to sue the law
firm and that there was no privity between
the insurer and law firm. The trial court
acknowledged that federal district courts in
Florida have recognized an insurer’s right tobring a malpractice claim against an attorneyretained to represent its insured, but deemed
those decisions non-binding, unpersuasive
and distinguishable.
The appellate court affirmed. The court
rejected the insurer’s public policy argumentthat precluding an insurer from bringing amalpractice action could shield law firms
from malpractice liability. The court stated:“[W]here nothing indicates that the law
firm was in privity with the insurer, or thatthe insurer was an intended third-party
beneficiary of the relationship between thelaw firm and the insured, we are unwilling to
expand the field of privity exceptions to apply
to this case.”

STB News
Alert:
Mary Beth Forshaw and Elisa Alcabes served
as contributing editors of the recentlypublished 2019 edition of “Getting the Deal
Through: Insurance Litigation.” Mary Bethand Elisa co-authored the publication’s
chapter addressing United States insurance
law. The publication provides expert advice
and insight into contentious insurance issues
in jurisdictions worldwide. To read the
publication, please click here.

9Simpson Thacher has been an international leader in the practice of insurance and reinsurance law for
more than a quarter of a century. Our insurance litigation team practices worldwide.

Mary Beth Forshaw+1-212-455-2846
mforshaw@stblaw.com

Michael D. Kibler+1-310-407-7515
mkibler@stblaw.com

Susannah S. Geltman+1-212-455-2762
sgeltman@stblaw.com

Andrew T. Frankel+1-212-455-3073
afrankel@stblaw.com

Michael J. Garvey+1-212-455-7358
mgarvey@stblaw.com

Elisa Alcabes+1-212-455-3133
ealcabes@stblaw.com

Lynn K. Neuner+1-212-455-2696
lneuner@stblaw.com

Tyler B. Robinson+44-(0)20-7275-6118
trobinson@stblaw.com

Summer Craig+1-212-455-3881
scraig@stblaw.com

Chet A. Kronenberg+1-310-407-7557
ckronenberg@stblaw.com

George S. Wang
+1-212-455-2228
gwang@stblaw.com

Daniel J. Stujenske+1-212-455-2419
dstujenske@stblaw.com

Bryce L. Friedman+1-212-455-2235
bfriedman@stblaw.com

Craig S. Waldman+1-212-455-2881
cwaldman@stblaw.com

This edition of the
Insurance Law Alert was
prepared by Mary Beth Forshaw
mforshaw@stblaw.com /+1-212-4552846 and Bryce L. Friedman
bfriedman@stblaw.com /+1-212-4552235 with contributions
by Karen Cestarikcestari@stblaw.com.

The contents of this publication are for informational purposes only. Neither this publication nor the
lawyers who authored it are rendering legal or other professional advice or opinions on specific facts
or matters, nor does the distribution of this publication to any person constitute the establishment of an
attorney-client relationship. Simpson Thacher & Bartlett LLP assumes no liability in connection withthe use of this publication. Please contact your relationship partner if we can be of assistance regardingthese important developments. The names and office locations of all of our partners, as well as ourrecent memoranda, can be obtained from our website, www.simpsonthacher.com.
Please click here to subscribe to the Insurance Law Alert.
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Av. Presidente Juscelino
Kubitschek, 1455
São Paulo, SP 04543-011
Brazil+55-11-3546-1000

Houston
600 Travis Street, Suite 5400
Houston, TX 77002+1-713-821-5650
Los Angeles
1999 Avenue of the Stars
Los Angeles, CA 90067+1-310-407-7500
Palo Alto
2475 Hanover Street
Palo Alto, CA 94304+1-650-251-5000
Washington, D.C.
900 G Street, NW
Washington, D.C. 20001+1-202-636-5500

ASIA

Beijing
3901 China World Tower
1 Jian Guo Men Wai Avenue
Beijing 100004
China+86-10-5965-2999
Hong Kong
ICBC Tower
3 Garden Road, Central
Hong Kong+852-2514-7600
Tokyo
Ark Hills Sengokuyama Mori Tower
9-10, Roppongi 1-Chome
Minato-Ku, Tokyo 106-0032
Japan+81-3-5562-6200

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