Insurance Law Alert

February 2024

In This Issue
Pollution Exclusion Does Not Necessarily Bar Coverage For Injury Claims
Arising Out Of California Wildfire Debris, Says Ninth Circuit
The Ninth Circuit ruled that a general liability policy potentially covered claims alleging
injuries caused by exposure to airborne wildfire debris, notwithstanding a pollution exclusion,and that the insurer had a duty to defend the underlying suit. Wesco Ins. Co. v. Brad Ingram
Constr., 2024 U.S. App. LEXIS 1488 (9th Cir. Jan. 23, 2024). (Click here for full article)“If you have amajor issue, an
exceptionally high value
or critical claim, Simpson
is where you turn.”– The Legal 500(quoting a client)

Ohio Supreme Court Rules That Tort Choice-Of-Law Rules Govern Bad
Faith Claims Against Insurer
The Ohio Supreme Court ruled that tort choice-of-law rules govern bad faith claims against an
insurer, notwithstanding the contractual nature of the relationship between the parties. Scott
Fetzer Co. v. Am. Home Assur. Co., 2023 Ohio LEXIS 2163 (Nov. 1, 2023). (Click here forfull article)

Reversing District Court, Sixth Circuit Rules That Policyholder’sSettlement Of Bankruptcy Fraudulent Transfer Proceeding Is Not“Uninsurable” Under Ohio Law
The Sixth Circuit ruled that a bank’s settlement payment in connection with a bankruptcy
fraudulent transfer proceeding was not an uninsurable loss under Ohio law and was nototherwise excluded by a policy provision. Huntington Nat’l Bank v. AIG Specialty Ins. Co.,
2024 U.S. App. LEXIS 2369 (6th Cir. Feb. 1, 2024). (Click here for full article)

New York Court Of Appeals Rules That Presence Of COVID-19 Virus At
Insured Property And Resulting Business Closures Do Not Constitute“Direct Physical Loss Or Damage” Under Property Policy
The New York Court of Appeals ruled that allegations of the COVID-19 virus at insured
property locations and the business closures and accommodations resulting from the pandemic
do not state a claim for “direct physical loss or damage” under a property policy. Consolidated
Rest. Operations, Inc. v. Westport Ins. Corp., 2024 N.Y. LEXIS 66 (N.Y. Feb. 15, 2024). (Clickhere for full article)

Simpson Thacher & Bartlett LLP

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London Court Dismisses Reinsurers’ Appeals Of Arbitration Awards For
Indemnity Of COVID-19-Related Business Losses
The High Court of England and Wales ruled that arbitration tribunals correctly held thatceding insurers were entitled to indemnity under excess-of-loss reinsurance policies forbusiness interruption losses resulting from the COVID-19 pandemic, finding that an infectious
disease outbreak constituted a “catastrophe” under the policy language. Markel International
Ins. Co. Ltd. v. General Reinsurance AG, No. CL-2023-000132 (Business and Property Courtsof England and Wales, Commercial Court Feb. 9, 2024); Unipolsai Assicurazioni SPA v.
Covéa Ins. PLC, No. CL-2023-000494 (Business and Property Courts of England and Wales,
Commercial Court Feb. 9, 2024). (Click here for full article)

Retrocessionaire May Assert Legal Malpractice Claim Against Insured’s
Counsel Under Theory Of Equitable Subrogation, Says New YorkAppellate Court
A New York appellate court ruled that a retrocessionaire is entitled to pursue a legal
malpractice action against insured’s counsel pursuant to the equitable subrogation doctrine.
Century Prop. & Cas. Ins. Corp. v. McManus & Richter, 2024 N.Y. App. Div. LEXIS 880 (App.
Div. 1st Dep’t Feb. 15, 2024). (Click here for full article)

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2Pollution Exclusion Does Not Necessarily Bar Coverage
For Injury Claims Arising Out Of California Wildfire
Debris, Says Ninth Circuit
HOLDING

The Ninth Circuit ruled that a general liability policy potentially covered claims alleging
injuries caused by exposure to airborne wildfire debris, notwithstanding a pollution
exclusion, and that the insurer had a duty to defend the underlying suit. Wesco Ins. Co. v.
Brad Ingram Constr., 2024 U.S. App. LEXIS 1488 (9th Cir. Jan. 23, 2024).

BACKGROUND

The underlying suit alleged injuries as a result of exposure to “clouds of toxic dust” formed
by California wildfires. According to the complaint, the dust, consisting of “ash, debris,
metal, concrete, and contaminated soil,” was “stirred up” during the cleanup process. The
district court ruled that the insurer had no duty to defend the suit based on a pollution
exclusion that applied to injuries or damage “which would not have occurred in whole or inpart but for the actual, alleged or threatened discharge, dispersal, seepage, migration,
release or escape of ‘pollutants’ at any time.” The Ninth Circuit reversed.

DECISION

The Ninth Circuit reasoned that under California law, the question of whether a pollution
exclusion applies to underlying claims turns primarily on two factors: the nature of the
injurious substance and the mechanism of exposure. The Ninth Circuit explained that whilewildfire debris may be a “pollutant,” the “mechanism of exposure described in thecomplaint does not clearly constitute an event commonly thought of as pollution.” Morespecifically, the court reasoned that the stirring up of wildfire-related dust during loading
and dumping operations at a waste facility does not, as a matter of law, fall within the scopeof “environmental pollution” so as to relieve the insurer of its defense obligations. In soruling, the court noted the absence of California precedent relating to “dust created or
disbursed by a naturally occurring event” and the broad scope of an insurer’s duty
to defend.

COMMENTS

Because the court was ruling on the insurer’s duty
to defend, rather than its indemnity obligations, it
did not reach the question of whether thepollution exclusion would ultimately bar coveragefor the underlying claims. And as the dissenting
opinion emphasized, the underlying claims appear
to fall squarely within the scope of the exclusion.
In particular, California courts have recognizedthat “natural materials” such as rocks and dirt,
may be deemed pollutants in certain contexts. See
Ortega Rock Quarry v. Golden Eagle Ins. Corp.,
46 Cal. Rptr. 3d 517 (Ct. App. 2006). Further, thedust at issue was classified as “toxic” and locatedin a heavily regulated cleanup site that required
contractors to be certified for “hazardous
substance removal.” The dissent also noted thatthe claims alleged a “release” of the toxic dust
during the cleanup process, rejecting the notionthat a release requires an escape from some sort ofstructure or protective barrier.

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Ohio Supreme Court Rules That Tort Choice-Of-Law
Rules Govern Bad Faith Claims Against Insurer
HOLDINGThe Ohio Supreme Court ruled that tort choice-of-law rules govern bad faith claims against
an insurer, notwithstanding the contractual nature of the relationship between the parties.
Scott Fetzer Co. v. Am. Home Assur. Co., 2023 Ohio LEXIS 2163 (Nov. 1, 2023).

BACKGROUND

The coverage dispute arose out of environmental cleanup operations at two Superfund sites
in Michigan. The Scott Fetzer Company had acquired a manufacturing facility located on
one of the sites when it merged with the facility’s previous operator, an Indiana company.
Fetzer sought coverage under various general liability and umbrella policies forenvironmental claims. When the insurers denied coverage, Fetzer filed suit, alleging breachof contract and bad faith. The court bifurcated the bad faith claim, and a discovery disputearose in that proceeding as to the production of certain allegedly privileged documents.
Fetzer argued that under Ohio law, an insurer may not withhold documents relating to
bad faith on the basis of attorney-client privilege. In response, the insurer claimed that
under Ohio’s choice-of-law rules, the discovery dispute was governed by either Michigan
or Indiana law. The insurer further argued that Michigan does not recognize a cause ofaction for bad faith and that Indiana law would not allow discovery of privileged material toestablish bad faith.
An administrative judge ruled that Ohio law governed the discovery dispute and ordered
production of certain documents. An appellate court affirmed. The appellate court reasoned
that bad faith was a tort, and was thus governed by Section 145 of the Restatement 2d ofConflict of Laws (the section that applies to tort claims). The criteria in Section 145 focus on
the place of the alleged injury of the tort, which in this case was Ohio. The Ohio Supreme
Court affirmed.

DECISIONThe Ohio Supreme Court rejected the insurer’s assertion that the bad faith claim was
subject to the choice-of-law criteria set forth in Restatement Section 188 (governing “anissue in contract”) and Section 193 (governing disputes over the “validity of a contract offire, surety or casualty insurance and the rights created thereby”). Under those Sections,the location of the subject matter of the contract and the place of contracting, here
Michigan and Indiana respectively, are paramount. The court reasoned that a badfaithclaim does not concern the “validity” of a contract and that an insurer’s duty to act in goodfaith is not one of the “rights created thereby.”
Further, the court rejected the insurer’s assertion that the “justified expectations” of theparties mitigated in favor of applying Section 193. The court explained that the justified
expectations of the parties is important in choice-of-law disputes arising out of contractual
obligations because contracting parties reasonably rely on the principal location of theinsured risk as a significant factor in anticipating governing law. In contrast, the justified
expectations of the parties is less important in negligence and tort cases, in which adefendant allegedly acts with a conscious disregard for the legal consequences of its
conduct and would not likely contemplate governing law.

COMMENTS

In arguing that contract-based choice-of-law principles should apply to the bad faith claim,
the insurer emphasized that a badfaith claim can only be litigated by the parties to theinsurance contract. The court acknowledged this fact, but reasoned that a bad faith claim“is not rooted in any particular text of the contract” but rather “arises by operation of law.”4

Reversing District Court, Sixth Circuit Rules That
Policyholder’s Settlement Of Bankruptcy Fraudulent
Transfer Proceeding Is Not “Uninsurable” Under
Ohio Law
HOLDING

The Sixth Circuit ruled that a bank’s settlement payment in connection with a bankruptcy
fraudulent transfer proceeding was not an uninsurable loss under Ohio law and was nototherwise excluded by a policy provision. Huntington Nat’l Bank v. AIG Specialty Ins. Co.,
2024 U.S. App. LEXIS 2369 (6th Cir. Feb. 1, 2024).

BACKGROUND

AIG issued a professional liability policy to Huntington National Bank. The policy defined“Loss” as “damages, judgments, settlements and Defense Costs,” but an endorsement(“Endorsement 8”) modified that definition to exclude various fines, penalties, punitive
damages or “matters that may be deemed uninsurable under the law.” Anotherendorsement (“Endorsement 7”), which related to Huntington’s “Lending Acts,” stated that
AIG “shall not be liable to make any payment for Loss in connection with any Claim or
Claims made against any Insured: for the principal and/or interest of any unrepaid,
unrecoverable, or outstanding credit.”
The policy became implicated when Huntington unwittingly became the bank for acompany involved in a Ponzi scheme. After the fraud was discovered and the company
declared bankruptcy, the trustees of the company filed adversary proceedings against
Huntington, alleging fraudulent transfers in connection with its banking services.
Huntington argued that the transfers were not recoverable because it accepted them ingood faith. Those proceedings resulted in several findings, including that Huntington
was a “transferee” of certain loan repayments and that Huntington’s affirmative defenseof good faith ended on a certain date, after which the trustee was entitled to recover loan
repayments. As to loan repayments during another time period, which remained in disputeand turned on Huntington’s knowledge or lack thereof of the voidability of the transfers,
the parties reached a settlement without any admission of liability or wrongdoing on thepart of Huntington.
AIG disclaimed coverage on the basis of Endorsements 7 and 8. Huntington sued, alleging
breach of contract and bad faith. An Ohio district court granted AIG’s summary judgment
motion, ruling that Huntington’s claim was uninsurable under Ohio law and that in any
event, coverage was barred by Endorsement 7. The Sixth Circuit reversed.

DECISION

The Sixth Circuit ruled that Huntington’s claim was insurable under Ohio law. The court
noted the absence of controlling Ohio precedent as to whether a claim for settlement of abankruptcy fraudulent transfer action is uninsurable, but noted that appellate court
decisions indicated that what is uninsurable under Ohio law “is quite narrow” and limited
to two categories: punitive damages and intentional torts.
Applying this framework, the Sixth Circuit concluded that Huntington’s settlement
payment was not akin to punitive damages and was not in response to an intentional act.
Rather, the claims against Huntington turned on whether the bank was a “transferee”
under federal bankruptcy law. Further, the court emphasized that “no showing ofintentional malice by the transferee is required under the fraudulent transfer provisionsof the bankruptcy code, meaning that an order to return funds is not a ‘punishment in5

any traditional sense.’” In short, the court held that liability under fraudulent conveyancestatutes “is not tantamount to the type of culpable conduct that Ohio courts have held
precludes insurance recovery.”
Additionally, the court ruled that Endorsement 7 was ambiguous and must be resolvedin favor of coverage. Huntington argued that under a plain meaning interpretation, theendorsement did not apply because the settlement payment was not for credit unrepaid,
unrecoverable, or outstanding, but rather “for a settlement based on wrongful acts asunderstood within the policy.” In contrast, AIG argued that Huntington’s insurance claim
was essentially an attempt to obtain recovery for loan payments it had been forced toreturn as a result of the bankruptcy proceeding settlement. The Sixth Circuit deemed bothinterpretations reasonable and construed the endorsement in favor of coverage.
COMMENTS

The decision is notable in several respects. First, the Sixth Circuit ruled that AIG bore theburden of proving that Huntington’s claims were “uninsurable under the law” because thatphrase was contained in an endorsement that constituted an exclusion. The court rejected
AIG’s contention that the endorsement modified the coverage provision defining “Loss”
and was thus part of the initial grant of coverage, for which Huntington would bear theburden of proof.
Second, the court deemed the phrase “uninsurable as a matter of law” unambiguous anddeclined to consider extrinsic evidence in this context. The court expressly rejected Sixth
Circuit cases that have allowed the consideration of extrinsic evidence to interpret policy
terms absent ambiguity.
Finally, in holding that Huntington’s claims were not uninsurable under the law, the courtemphasized the distinction between claims arising out of intentional and malicious conduct(which would be uninsurable) and claims arising as a result of Huntington’s failure toestablish good faith as an affirmative defense in the bankruptcy proceedings. The court
stated that whether Huntington genuinely continued to believe that the transfers werelegitimate receivables “is not tantamount to an intent to injure, malice, ill will, or othersimilar culpability.” The court went a step further, noting that even if Huntington suspectedor had a reasonable basis to know that the loan repayments would harm future creditors,
it “did not desire that result,” and thus did not possess the level of intent necessary toestablish uninsurability.

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New York Court Of Appeals Rules That Presence Of
COVID-19 Virus At Insured Property And Resulting
Business Closures Do Not Constitute “Direct Physical
Loss Or Damage” Under Property Policy
HOLDING

The New York Court of Appeals ruled that allegations of the COVID-19 virus at insured
property locations and the resulting business closures and accommodations resulting fromthe virus do not state a claim for “direct physical loss or damage” under a property policy.
Consolidated Rest. Operations, Inc. v. Westport Ins. Corp., 2024 N.Y. LEXIS 66 (N.Y. Feb.
15, 2024).

BACKGROUND

Consolidated Restaurant Operations, an owner and operator of restaurants, sought
coverage from Westport Insurance Corporation under an all-risk commercial property
policy for business losses incurred during the COVID-19 pandemic. When Westport denied
coverage, Consolidated sued, seeking a declaration of coverage and alleging breach ofcontract. A New York trial court granted Westport’s motion to dismiss, finding that
Consolidated could not establish “direct physical loss or damage” to its property, as
required by the policy. An intermediate appellate court affirmed, ruling that “direct
physical loss or damage” requires a showing of “actual, demonstrable physical harm” andthat the pleadings failed to allege such harm. In particular, the appellate court noted that
Consolidated did not identify any physical change or transformation of insured property.
The New York Court of Appeals affirmed.

DECISION

The New York Court of Appeals rejected Consolidated’s assertion that “direct physical loss
or damage” encompasses scenarios in which a physical event impairs the functionality of
insured property or renders it fully or partially unusable for its intended purpose. Deeming
this interpretation “untenable,” the court explained that “it would collapse coverage for‘direct physical loss’ into coverage for ‘loss of use.’” The court further noted that otherpolicy provisions—such as the “Time Element” and “Period of Liability” clauses—supported
this conclusion. Those provisions referred to “direct physical loss” and the “repairing andreplacing” of property, respectively, reinforcing the principle that the policy requires morethan mere loss of use of insured property.
Consolidated argued that even if the policy requires physical alteration to property, its
allegations satisfied this condition. Rejecting this assertion, the court explained that thecomplaint lacked allegations as to how the presence of the virus affected the physicalintegrity of property or gave rise to any need to repair or replace insured property.
Because the court ruled that the policy did not cover Consolidated’s claims in the first place,it did not reach the question of whether policy exclusions were applicable.

COMMENTS

The court noted that decisions are split as to whether “persistent contamination” or “total
uninhabitability” could satisfy the “direct physical loss” requirement. However, the court
explained that it need not decide that question because Consolidated failed to allege eitherof those scenarios. Rather, the complaint alleged a suspension and curtailment ofoperations and the necessity of remediation efforts—none of which rise to the levelof uninhabitability.
As to the overall conclusion that COVID-19-related business losses are not within the scopeof commercial property insurance, the decision aligns with the overwhelming majority ofdecisions across jurisdictions.
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London Court Dismisses Reinsurers’ Appeals Of
Arbitration Awards For Indemnity Of COVID-19-Related
Business Losses
HOLDING

The High Court of England and Wales ruled that arbitration tribunals correctly held thatceding insurers were entitled to indemnity under excess-of-loss reinsurance policies forbusiness interruption losses resulting from the COVID-19 pandemic, finding that an
infectious disease outbreak constituted a “catastrophe” under the policy language. Markel
International Ins. Co. Ltd. v. General Reinsurance AG, No. CL-2023-000132 (Businessand Property Courts of England and Wales, Commercial Court Feb. 9, 2024); Unipolsai
Assicurazioni SPA v. Covéa Ins. PLC, No. CL-2023-000494 (Business and Property Courtsof England and Wales, Commercial Court Feb. 9, 2024).

BACKGROUND

In two reinsurance arbitration proceedings, tribunals ruled in favor of the ceding insurers,
Covéa and Markel, which had issued direct policies to childcare businesses that sustained
economic losses in the wake of the COVID-19 pandemic.
In the Covéa proceeding, the tribunal ruled that the exponential increase in COVID-19
infections in the U.K. during the first three weeks in March 2020 amounted to “a disasterof sudden onset such as to qualify as a catastrophe.” The Covéa tribunal also addressed
the proper interpretation of an “Hours Clause,” which provided indemnity for “individual
losses” during certain specific durations of time. It concluded that reference to “individualloss” in that provision meant “a loss sustained by an original insured which occurs as andwhen a covered peril strikes or affects insured premises or property.” The tribunal further
held that “individual loss” occurred when the nurseries were closed on March 20, 2020,“with loss which the insured continues to sustain afterwards being aggregated with the loss
sustained during the 168 hour period.”
In the Markel arbitration, Markel initiallyargued that the relevant catastrophe was the
COVID-19 outbreak, but subsequently took theposition that the government’s decision to close
all childcare centers in March 2020 was theoperative catastrophe. The tribunal concluded
that the government order may be deemed acatastrophe, emphasizing that the order “cannot
be viewed separately from the pandemic
which demanded (however controversially)
its response.” As to the Hours Clause in thatreinsurance policy, the tribunal held thatcoverage was limited to individual losses which
occurred during the 168 hour period specified in
the policy.
The reinsurers’ appeals raised two primaryissues: (1) whether the losses for which theceding insurers sought indemnity “arose out ofand were directly occasioned by” a catastrophe
under the reinsurance policies; and (2) whether
the “Hours Clauses” in the reinsurance policies,
8which “confined the right to indemnity to ‘individual losses’ within a set period, had theeffect that the reinsurances only responded to payments in respect of the closure of theinsured’s premises during the stipulated period.” The court answered the first question in
the affirmative and the second question in the negative.
DECISION

The court ruled that the cedents’ claims for indemnity under the reinsurance policies “aroseout of and were directly occasioned by one catastrophe.” The court rejected the reinsurers’
assertions that a catastrophe requires physical damage to property, as well as a “sudden or
violent event or happening,” finding a lack of support in case law or dictionary definitions
for such an interpretation.
The reinsurers also argued that even if there had been a catastrophe for purposes ofreinsurance coverage, only business interruption costs incurred during the 168 hours
stipulated by the relevant section of the “Hours Clause” could be relied upon in seeking
indemnity. The court rejected this contention as well, deeming it inconsistent with theoverall language and intent of that provision.

COMMENTS

In its discussion of whether the losses arose from a “catastrophe,” the court also addresseda more nuanced argument. The reinsurers argued that a catastrophe is a type of“occurrence” or “event” and must therefore satisfy the “unities” of “time, place and way
which occurrences or events must ordinarily satisfy.” The court deemed this argument“both the easiest and most difficult of the issues” raised on appeal.
The court easily concluded the unities of time and place need not be satisfied in thiscase because neither reinsurance policy used the term “Loss Occurrence” or “Event” as astandalone term. Further, the court noted that overall policy language suggested an intent
to give a broad definition of “catastrophe”—one that the parties conceded would include
events such as bush fires that develop in a variety of locations over several weeks.
However, the court acknowledged the difficulty of distinguishing between acatastrophe properly so-called, which is an appropriate basis for
aggregating individual losses when seeking indemnity under a property
catastrophe excess of loss policy, and a series of discrete losses which sharesome common point of ancestry, but the adverse effect of which so far as adirect insurer is concerned are properly the subject of stop-loss protection.
The court noted that it need not answer that more challenging query because in the present
case, the elements of a catastrophe were clearly satisfied. The court observed that in othercases, the answer to that question is “likely to be heavily dependent on the commercial andcontractual context in which it arises.”9

Retrocessionaire May Assert Legal Malpractice Claim
Against Insured’s Counsel Under Theory Of Equitable
Subrogation, Says New York Appellate Court
HOLDINGA New York appellate court ruled that a retrocessionaire is entitled to pursue a legal
malpractice action against insured’s counsel pursuant to the equitable subrogation
doctrine. Century Prop. & Cas. Ins. Corp. v. McManus & Richter, 2024 N.Y. App. Div.
LEXIS 880 (App. Div. 1st Dep’t Feb. 15, 2024).

BACKGROUND

The dispute arose out of a personal injury matter, in which the defendant attorneys wereretained to represent Tower B, the owner of a work site, and its insurers. The injured party
was an employee of Rite-Way, a subcontractor hired by Tower B. Counsel for Tower B filed
a third-party complaint against Rite-Way, alleging breach of contract for failure to procure
the contractually required insurance, and for common law and contractual indemnificationand contribution, among other claims. During the pendency of that case, counsel
discontinued the third-party action against Rite-Way without authorization from Tower B
or its insurers. The court ultimately rendered a finding of liability against Tower B. Before
the damages portion of the trial commenced, Tower B settled the suit for $4.6 million.
Tower B was insured under a primary policy, which was reinsured by ACE INA. Century
and ACE INA then entered into a retrocessional agreement, pursuant to which Century
accepted 100% pro rata quota share reinsurance (retrocession) of ACE INA’s interest andliabilities with respect to certain insurance policies, including the Tower B policy. As aresult of this arrangement, Century was contractually obligated to fund a portion of thesettlement on behalf of Tower B.
Century paid $2.8 million of the settlement and then filed a legal malpractice suit asequitable and contractual subrogee of Tower B. Century argued that counsel was negligent
in voluntarily discontinuing the third-party action. Counsel moved to dismiss the suit,arguing that Century lacked standing to assert claims on behalf of Tower B and could notassert direct claims because it lacked privity with counsel. A trial court granted the motion
for lack of standing. The appellate court affirmed in part and reversed in part.

DECISION

The appellate court held that the trial court properly concluded that Century lacked
standing to assert a direct malpractice claim based on the absence of privity or “nearprivity” (a doctrine that recognizes a type of limited privity based on specific statements or
conduct for a particular purpose). However, the appellate court explained that even without
privity, a party may have standing to sue under contractual or equitable subrogation.
The court concluded that the malpractice claim could proceed based on equitable
subrogation, noting that New York law recognizes “the fairness of the proposition thatan insurer who has been compelled by his contract to pay to or on behalf of the insured
claims for damages ought to be reimbursed by the party whose fault has caused suchdamages . . . .”The court distinguished a New York appellate decision holding that a third-party
administrator for a primary insurer lacked standing to assert a legal malpractice claim as
equitable subrogee. In that case, the third-party administrator did not have any contractual
obligation to indemnify the underlying claims, whereas here, Century alleged that itwas contractually obligated to pay (and did pay) a portion of the settlement on behalf ofTower B.
10

COMMENTS

In addressing this matter of first impression, the court noted that New York appellate
courts have allowed an excess insurer, as equitable subrogee of the insured, to file suitagainst an insured’s attorney for malpractice.
Further, the court expressly rejected the reasoning of another New York appellate decision,
Reliance Ins. Co. v. Aerodyne Engrs., 204 A.D.2d 944 (App. Div. 3d Dep’t 1994). In
Reliance, the court held that because a reinsurer had no contractual obligation directly tothe insured, it had no subrogation rights. The Century court explained that in Reliance,
the Third Department relied on statements derived from a New York trial court decisionthat did not involve subrogation rights, and that in any event the holding in Reliance “goesagainst long established New York law that ‘[t]he right of subrogation is founded uponprinciples of equity and not in contract’ and ‘does not depend upon privity.’”

Simpson Thacher News
Simpson Thacher was named an Insurance Practice Group of the Year for 2023 by Law360.
The Firm was recognized for its work successfully guiding clients through some of the mosthigh-profile insurance-related litigation matters of the past year.
Bryce Friedman and Karen Cestari served as Contributing Editors of the 2024 edition of
Lexology Panoramic: Insurance Litigation and also authored the publication’s UnitedStates chapter. The chapter, which was formatted as a Q&A, highlights various areasof insurance litigation, including preliminary and jurisdictional considerations, theinterpretation of insurance contracts and notice to insurance companies, among othertopics. It additionally summarized emerging insurance litigation trends and an outlookfor 2024.

11

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.

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

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laura.lin@stblaw.com

This edition of the
Insurance Law Alert was prepared byBryce L. Friedman / +1-212-455-2235
bfriedman@stblaw.com
Sarah E. Phillips / +1-212-455-2891
sarah.phillips@stblaw.com andKaren Cestarikcestari@stblaw.com.

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