Insurance Law Alert

March 2015

In This Issue“Innocent Insured” Doctrine Does Not Prevent Insurer from Rescinding
PolicyThe Illinois Supreme Court ruled that the “innocent insured” doctrine does not preclude aninsurer from rescinding a policy based on misrepresentations in the policy application. Illinois
State Bar Assoc. Mut. Ins. Co. v. Law Office of Tuzzolino and Terpinas, No. 117096 (Ill. Feb.
20, 2015). (click here for full article)“We haveused other firms
for insurance to just get acase worked up, but if it looks
like it’s going to go to trial, we
will switch counsel to Simpson
Thacher. That alone sends theother side a message that things
are getting serious.”–Benchmark
Litigation
2015

Two Courts Address Insurer’s Duty to Defend False Claims Act Suits
Federal district courts in Illinois and Louisiana reached different conclusions as to whether
an insurer was obligated to defend a False Claims Act suit. United States Liab. Ins. Co. v.
Sigmatek, Inc., 2015 WL 801504 (N.D. Ill. Feb. 20, 2015); XL Specialty Ins. Co. v. Bollinger
Shipyards, Inc., 2015 WL 853993 (E.D. La. Feb. 26, 2015). (click here for full article)

Louisiana Appellate Court Refuses to Prorate Defense Costs for Long
Latency Disease Claims
A Louisiana appellate court ruled that an insurer was required to fully fund a policyholder’s
future defense costs in a long latency disease case even though the insurer’s policies covered
less than five percent of the time span during which underlying plaintiffs’ alleged exposure
occurred. Arceneaux v. Amstar Corp., 2015 WL 798980 (La. Ct. App. Feb. 25, 2015).
(click here for full article)

Eleventh Circuit Rules That Insurance Does Not Cover Cyber Theft Losses
The Eleventh Circuit ruled that a property, liability, and crime policy did not provide coveragefor losses resulting from the electronic theft of funds by cyber hackers. Metro Brokers, Inc. v.
Transp. Ins. Co., 2015 WL 925301 (11th Cir. Mar. 5, 2015). (click here for full article)

Eleventh Circuit Upholds Sanctions Against Non-Party for Bad Faith
Witness Preparation
The Eleventh Circuit ruled that a Florida district court did not abuse its discretion by imposing
sanctions against a non-party for its bad faith preparation of a trial witness. Sciarretta v.
Lincoln Nat’l Life Ins. Co., 2015 WL 795593 (11th Cir. Feb. 26, 2015). (click here for full article)


Simpson Thacher & Bartlett LLP

1

Fifth Circuit Rules That Houses Are “Advertisements” for Purposes ofAdvertising Injury Coverage
The Fifth Circuit ruled that houses with a design based on an infringed copyright constituted“advertisements” for the purposes of liability coverage. Mid-Continent Cas. Co. v. Kipp Flores
Architects, L.L.C., 2015 WL 795882 (5th Cir. Feb. 26, 2015). (click here for full article)

Indiana Supreme Court Rules That Broker May Be Liable for Insufficient
Coverage Based on “Special Relationship” with Policyholder
The Indiana Supreme Court denied a broker’s summary judgment motion on the basis thatquestions of fact existed as to a special relationship with the policyholder. Indiana Restorative
Dentistry, P.C. v. Laven Ins. Agency, Inc., 2015 WL 1087199 (Ind. Mar. 12, 2015).
(click here for full article)

Delaware Supreme Court Rules That Statutory Damages Are Not Excluded“Penalties”
The Delaware Supreme Court ruled that damages imposed against a policyholder pursuant to
a Louisiana state statute were not excluded “penalties” under an errors and omissions policy.
CorVel Corp. v. Homeland Ins. Co. of N.Y., 2015 WL 1021459 (Del. Mar. 6, 2015).
(click here for full article)

Florida Court Rules That Policy Limits Determine Amount in Controversy
for Diversity Jurisdiction
A Florida federal district court ruled that the $75,000 amount-in-controversy requirement fordiversity jurisdiction was met where the governing policy’s limit was $300,000. Witherup v.
State Farm Mut. Auto. Ins. Co., 2015 WL 419064 (M.D. Fla. Feb. 2, 2015).
(click here for full article)

2

Rescission Alert:“Innocent Insured” Doctrine
Does Not Prevent Insurer from
Rescinding Policy

an insured’s innocence is relevant to whether
an intentional acts exclusion applies, it isirrelevant to the rescission analysis because
Section 215 allows rescission as to innocent
insureds so long as the misrepresentation wasmaterial.

The Illinois Supreme Court ruled that the“innocent insured” doctrine does not preclude
an insurer from rescinding a policy based on
misrepresentations in the policy application.
Illinois State Bar Assoc. Mut. Ins. Co. v. Law
Office of Tuzzolino and Terpinas, No. 117096(Ill. Feb. 20, 2015).

The court also rejected Terpinas’ assertion
that a severability clause allowed for partial
rescission, reasoning that although theclause creates a “separate agreement for each
insured,” it does not “permit the application—or the misrepresentations it contains—to be
split off from any individual contract.”

A law firm was insured by the Illinois StateBar Association Mutual Insurance Company(“ISBA”). In a renewal application for thepolicy, Sam Tuzzolino (a member of thelaw firm) had represented that the firm
was not aware of any circumstances that
could give rise to a claim, when in fact hehad recently attempted to settle potential
malpractice claims. When ISBA learnedof this information, it sought to rescind
the policy. An Illinois circuit court granted
ISBA’s summary judgment motion, rulingthat rescission was proper and that ISBA had
no duty to defend an underlying malpracticesuit against the firm, Tuzzolino, and Will
Terpinas, another member of the law firm
who had not participated in the preparationof the policy. Terpinas appealed, arguing that
he was an “innocent insured” with respect
to the misrepresentation. An appellate court
agreed, and held that the policy should not
be rescinded as to that attorney. The Illinois
Supreme Court reversed.

Three other courts have also recently
allowed insurers to rescind policies based on
misrepresentations in policy applications.
See Maryland Cas. Co. v. Malone, 2015
WL 1088105 (N.D. Ga. Mar. 11, 2015)(rescission of liability policy proper because
misrepresentations in application were false
and material as a matter of law); Catlin(Syndicate 2003) at Lloyd’s v. San Juan
Towing & Marine Servs., Inc., 778 F.3d 69(1st Cir. 2015) (marine policy voidable underuberrimae fidei doctrine, which requires
insured to make full disclosure of all material
facts); Morales v. Castlepoint Ins. Co., 2015
WL 775007 (N.Y. App. Div. 2d Dep’t Feb.
25, 2015) (property policy void as a result ofmaterial misrepresentation in application,even if made without policyholder’s authority,
because policyholder ratified representations
by accepting and renewing policy).

Illinois statutory law permits rescission if astatement made in the application is false
and either (1) made with actual intent todeceive or (2) materially affects the risk
assumed by the insurer. See Ill. Ins. Code215 ILCS 5/154. Terpinas did not disputethat the misrepresentations at issue werematerial, but argued that Section 215
rescission was barred by a “common law
innocent insured doctrine.” The Illinois
Supreme Court disagreed. The court heldthat the doctrine is limited to cases in which
an innocent insured seeks to recover under apolicy notwithstanding application of a policy
exclusion (usually relating to intentional or
wrongful acts) as to other insureds. The court
explained that “the rationale for applying
the innocent insured doctrine to questions ofpolicy exclusions and insurance coverage isabsent from the rescission context.” Although3False Claims Act
Alert:

Two Courts Address Insurer’s Duty
to Defend False Claims Act SuitsAn Illinois federal district court ruled that aliability insurer was obligated to defend anunderlying qui tam suit filed under the False
Claims Act (“FCA”) because the suit alleged
wrongful employment practices within thescope of policy coverage. United States Liab.
Ins. Co. v. Sigmatek, Inc., 2015 WL 801504(N.D. Ill. Feb. 20, 2015).

supported a claim for “Wrongful Acts”
because it alleged a violation of Section
3730(h) of the FCA (entitled “relief from
retaliatory actions”), which permits anemployee to obtain damages for harassment,
discrimination, or discharge. Although only
one paragraph of the 200-plus paragraphcomplaint contained such wrongful actbased allegations, the court noted that the
aforementioned paragraph was incorporated
in each of the six counts of FCA violations.
The court held that “incorporating Section
3730(h) in each count, along with his
broad prayer for all relief to which he may
reasonably appear entitled to, is sufficient
to assert a claim for relief for wrongfulemployment practices.” The court therefore
ruled that the insurer had a duty to defend
the FCA action. Importantly, the court
distinguished cases in which the underlying
qui tam plaintiff did not seek damages forwrongful employment acts. The insurer filed
an appeal to the Seventh Circuit on March
20, 2015.
A Louisiana federal district court reacheda different conclusion in XL Specialty Ins.
Co. v. Bollinger Shipyards, Inc., 2015 WL
853993 (E.D. La. Feb. 26, 2015). In Bollinger,
the coverage dispute turned on whether thepolicyholder had provided timely notice of
FCA claims under two claims-made D&O
policies. The court held that it did not, andtherefore that the insurers had no duty
to defend.

A former employee of Sigmatek, amanufacturer of gun mounting systems,
sued the company alleging violations of the
FCA. The complaint alleged that Sigmatek
knowingly submitted false documents tofederal agencies in order to receive morethan $20 million in government contracts.
Sigmatek tendered defense of the FCA suit to
its insurer, who denied coverage on the basisthat the complaint did not allege covered“wrongful employment practices.” Thecourt disagreed.
The insurance policy covered any “Claim”
made against Sigmatek for “Wrongful
Acts,” defined as any actual or alleged actof discrimination, harassment, retaliation,
wrongful termination, or workplace tort.
The court concluded that the FCA complaint

The FCA suit arose out of a ship conversion
project that Bollinger had completed for
the U.S. Coast Guard. Bollinger sought
coverage from several insurers for the costsof defending the suit. The insurers refused todefend on the basis that Bollinger failed toreport a claim within the policies’ applicabledeadlines. Both policies at issue required
claims to be reported during the policy
period or within thirty days after the end of
the policy period. Because the factual record
established that notice was not provided
within the designated time frame of either
policy, the court found no coverage. In soruling, the court expressly rejected Bollinger’s
argument that notice should be considered
timely because its “Policy Period has been
extended year after year by its repeatedrenewals of its D&O coverage.” As the court
noted, Louisiana law rejects this “merged
into one” argument for notice requirements
in back-to-back claims-made policies. Last
4month, the Colorado Supreme Court rejected
a similar “seamless coverage” argument in
Craft v. Philadelphia Indemnity InsuranceCo., 2015 WL 658785 (Colo. Feb. 17, 2015)(reported in our February 2015 Alert).

Duty to Defend
Alert:Louisiana Appellate Court Refuses
to Prorate Defense Costs for Long
Latency Disease Claims
A Louisiana appellate court ruled thatan insurer was required to fully fund apolicyholder’s future defense costs in a longlatency disease case even though the insurer’s
policies covered less than five percent of thetime span during which underlying plaintiffs’
alleged exposure occurred. Arceneaux v.
Amstar Corp., 2015 WL 798980 (La. Ct. App.
Feb. 25, 2015).
The coverage dispute arose out ofoccupational hearing loss claims asserted
by employees of the policyholder, American
Sugar. The suit alleged that employees’
exposure to industrial noise at American
Sugar’s refinery resulted in hearing loss.
American Sugar sought coverage from
Continental under liability policies in
effect from 1963 to 1978. Continental did
not provide a defense, but agreed to pay
twenty-five percent of the defense costs,
reserving its right to contest its duty to
defend. Thereafter, American Sugar filed suitseeking reimbursement from Continental
for 100% of the defense costs incurred in theunderlying litigation since its inception, as
well as a declaration that Continental owed
a full defense going forward. In response,
Continental argued that Louisiana law allows
for the proration of defense costs based on
an insurer’s time on the risk in long latency
disease cases, and thus that Continental
was responsible for only 4.3 percent of thetotal defense costs (reflecting its 26 month
period of coverage during a 60 year period of
exposure). A Louisiana trial court disagreed
and granted American Sugar’s summary
judgment motion as to future defense costs,
but denied the claims for reimbursement
for past defense costs. The appellate
court affirmed.
Although Louisiana law endorses pro rata
allocation of indemnity costs among insurers

in continuous injury cases, Louisiana courts
have not directly addressed whether suchallocation should extend to defense costs aswell. Although the court noted that numerous
other jurisdictions have applied pro rata
allocation to defense costs as a matter of
equity, the court declined to do so here.
The court acknowledged that the Louisiana
Supreme Court “seem[ed] to indicate that thejurisprudence is moving in the direction ofproration of the duty to defend,” see Southern
Silica of La., Inc. v. La. Ins. Guar. Ass’n,979 So.2d 460 (La. 2008), but nonethelessconcluded that precedent was “fundamentally
distinguishable from the present case.” Anappeal may be forthcoming, as the appellate
court expressly noted that the present casepresented an opportunity for the Louisiana
Supreme Court to “decide to extend and/or
clarify the law on this issue.”

Data Breach Alert:
Eleventh Circuit Rules That
Insurance Does Not Cover Cyber
Theft Losses

The Eleventh Circuit ruled that a property,
liability, and crime policy did not provide
coverage for losses resulting from theelectronic theft of funds by cyber hackers.
Metro Brokers, Inc. v. Transp. Ins. Co., 2015
WL 925301 (11th Cir. Mar. 5, 2015).
Metro Brokers maintained bank accounts
with Fidelity Bank. In 2011, thieves used
a computer virus to gain access to Metro
Brokers employee identification numbers
and passwords, and illegally authorized thetransfer of payments from a Metro Brokers
client’s account to other accounts. Metro
Brokers sought coverage from Transportation
Insurance Company (“TIC”) pursuant toa Fraud and Alteration endorsement. TIC
denied coverage, citing a “malicious-code andsystem penetration exclusion.” In ensuing
litigation, a Georgia district court granted
TIC’s summary judgment motion. The
Eleventh Circuit affirmed.
The Eleventh Circuit ruled that the loss was
not covered by the Fraud and Alteration
endorsement, which provided coveragefor “loss resulting directly from ‘forgery’or alteration of, on, or in any check, draft,promissory note, bill of exchange, or similar
written promise, order or direction to pay asum certain.” The term “forgery” was defined5

as “the signing of the name of another personor organization with intent to deceive.” Thecourt held that the electronic fund transfers
did not involve any of the written instruments
listed in the endorsement and could not becharacterized as a “written promise, order ordirection to pay.” In so ruling, the court notedthat under federal and Georgia law, electronic
fund transfers are distinguished from andtreated differently than fund transfers madeby check, draft, or bill of exchange. The
court also held that because the theft did
not involve the “signing of [a] name,” there
was no forgery under the policy. In thiscontext, the court held that the use of stolen
identification numbers and passwords is not
equivalent to the signing of another person’s
name. Although a Georgia appellate court
has held that the theft of a bank card andpersonal identification number constituted
a “forgery” under a homeowners policy,
the Metro Brokers court distinguished thatdecision on the basis that the term “forgery”
was undefined in the policy at issue in thatcase, whereas here, the term was “expressly
and unambiguously” defined.

Bad Faith Alert:

Eleventh Circuit Upholds Sanctions
Against Non-Party for Bad Faith
Witness Preparation
The Eleventh Circuit ruled that a Florida
district court did not abuse its discretion by
imposing sanctions against a non-party forits bad faith preparation of a trial witness.

Sciarretta v. Lincoln Nat’l Life Ins. Co., 2015
WL 795593 (11th Cir. Feb. 26, 2015).
Lincoln National Life Insurance issued a $5
million life insurance policy to Barton Cotton.
Upon Cotton’s death, Lincoln discovered that
Cotton had used Imperial Premium Finance
Company to finance the purchase of the policyin order to market it to speculators under
an illegal stranger-originated life insurance
scheme. In ensuing litigation, Lincoln sought
to depose Imperial, which was not a party to
the suit but was under criminal investigation
at the time. Imperial sought a stay of its
deposition based on Fifth Amendment issues
or, alternatively, permission to prepare
and use an outside witness to testify as adesignated corporate representative. The
court allowed use of an outside witness
and Imperial hired Norris, an independent
economist. During Norris’s deposition andexamination at trial, he was unable to answer
a significant number questions about Imperialor the transaction at issue. After the jury
returned a verdict in favor of the Cotton
trust, the court sua sponte raised the issue ofsanctions against Imperial and Norris basedon Norris’s “blatant [ ] failure to follow therules for a designated witness.” Following
a hearing, the court imposed $850,000 in
sanctions against Imperial, finding that
Norris had “exhibited deliberate ignorance
to any inquiry harmful to Imperial’s interests
while at the same time trying to affirmatively
help the Trust and Imperial’s counsel at every
opportunity.” The Eleventh Circuit affirmed.
The Eleventh Circuit held that improper andstrategic witness preparation was a sufficient6basis for sanctions. The court explainedthat selectively educating a designatedwitness constitutes bad faith if the witness
is “knowledgeable about the helpful facts
and dumb about harmful ones.” In so ruling,
the court deemed it irrelevant that Lincoln
did not object to Norris’s testimony, notingthat even if Lincoln was arguably estopped
from seeking sanctions for failure to raise
the issue, such estoppel had no effect on the
court’s inherent power to raise and address asanctions issue. Although the decision sends
a clear message about the improper use of
a designated witness for strategic purposes,
the factual record in this case—namely, that
Imperial’s conduct was the “driving force
behind the litigation”—may have been asignificant factor.

“the houses themselves were used to attract
customers” and were the builder’s “primary
form of marketing” because homebuyers
viewed model homes, yard signs, and floor
plans prior to purchasing a home. The court
further reasoned that Texas law supported an
expansive interpretation of the terms “notice”
and “broadcast” to encompass the general actof imparting information to the public.

Advertising Injury
Alert:

Although it is well established that insurance
brokers owe a duty of reasonable care to
their clients, a broker generally has no duty
to provide specific coverage advice unlessthe broker and the insured have a “special
relationship.” The existence of a special
relationship depends on several factors,
including but not limited to the following:(1) whether the broker holds himself out
as a highly-skilled expert; (2) whether thepolicyholder relied on the broker’s expertisein its coverage decisions; and (3) whether
the broker received compensation, above
the customary premiums, for the advice
provided. Although this inquiry is inherently
fact-driven, courts frequently dismiss special
relationship allegations as a matter of law.
In a recent decision, however, the Indiana
Supreme Court ruled that summary judgment
was improper because questions of fact
existed as to a special relationship. Indiana
Restorative Dentistry, P.C. v. Laven Ins.
Agency, Inc., 2015 WL 1087199 (Ind. Mar.
12, 2015).

Fifth Circuit Rules That Houses Are“Advertisements” for Purposes ofAdvertising Injury Coverage
Our February 2015 Alert reported on an
Illinois appellate court decision holding thatin store displays constituted “advertisements”
under an advertising injury provision.
Last month, the Fifth Circuit adopted asimilarly expansive interpretation of theterm, concluding that houses with a design
based on an infringed copyright constituted“advertisements” for the purposes of liability
coverage. Mid-Continent Cas. Co. v. Kipp
Flores Architects, L.L.C., 2015 WL 795882(5th Cir. Feb. 26, 2015).
In litigation between an architecture firm
and a home builder, a jury found that thebuilder committed copyright infringementby building homes based on the architect’s
copyrighted designs without paying therequired license fee. Mid-Continent argued
that it had no duty to indemnify theunderlying judgment because it did not arise
from covered advertising injury. The policy
defined advertisement as “a notice that is
broadcast or published to the general public… for the purpose of attracting customers
or supporters.” Mid-Continent argued that
because a house is not a “notice” and cannot
be “broadcast” or “published,” it cannot be
an advertisement as a matter of law. The
court disagreed. The court reasoned that

Broker Alert:

Indiana Supreme Court Rules
That Broker May Be Liable for
Insufficient Coverage Basedon “Special Relationship” with
Policyholder

The Indiana Supreme Court held thatthe factual record supported “conflicting
inferences” as to a special relationship.
Several factors mitigated against a finding ofa special relationship: the broker received no
extra commission for specialized expertise;the parties had not met in person until the
insurance claim at issue arose; and policy
limit increases were typically initiated by
the policyholder rather than the broker.
However, the court noted that other evidence
weighed in favor of a special relationship: theextensive length of the parties’ relationship;
the issuance of annual questionnaires
7

by the broker to the policyholder about
insurance needs; the broker’s representations
in marketing materials that it was an“authorized administrator” for the specific
type of coverage at issue; and the broker’s
routine distribution of “risk review”
newsletters (authored by a third-party) toclients. In denying summary judgment, thecourt noted the “high bar” for summary
judgment under Indiana law and emphasizedthat special relationships remain the
exception rather than the rule.

damages were not penalties and therefore thatthe underlying settlement was covered under
the applicable policy. A Louisiana appellate
court affirmed. CorVel then appealed to
the Delaware Supreme Court, arguing that
under the prinicples of comity, Delaware law
should defer to Louisiana’s interpretation of
the statutory damages as non-penalties. The
Delaware Supreme Court agreed.

As reported in our March 2014 Alert, the
New York Court of Appeals similarly reversed
a summary judgment ruling in favor of abroker, finding questions of fact as to a special
relationship. Voss v. Netherlands Ins. Co.,2014 WL 804129 (N.Y. Feb. 25, 2014).

Penalties Alert:

Delaware Supreme Court Rules
That Statutory Damages Are Not
Excluded “Penalties”
The Delaware Supreme Court ruled thatdamages imposed against a policyholder
pursuant to a Louisiana state statute were
not excluded “penalties” under an errors andomissions policy. CorVel Corp. v. HomelandIns. Co. of N.Y., 2015 WL 1021459 (Del. Mar.
6, 2015).
The coverage dispute arose out of allegations
that CorVel, a “preferred provider
organization,” failed to comply with aLouisiana statute that required CorVel togive notice to a medical provider when a rate
discount is to be applied. The statute allows
the imposition of damages “double the fairmarket value of the medical services provided,
but in no event less than the greater of fifty
dollars per day of noncompliance or two
thousand dollars, together with attorney feesto be determined by the court.” La. R.S. §40:2203.1(G). CorVel settled the underlying
statutory claims and then sought coverage
from Homeland Insurance Company.
Homeland sought a declaration that it had
no duty to indemnify the settlement because
it constituted a “penalty” excluded by thepolicy. A Delaware trial court agreed andgranted Homeland’s summary judgment
motion. Shortly thereafter, a Louisiana trial
court, faced with the same coverage dispute
between CorVel and a different insurer, issued
a contrary ruling, finding that the statutory

The Delaware Supreme Court ruled thatdeference was warranted because theLouisiana appellate court “considered thesame Louisiana statute and analyzed almost
identical insurance policy language as thatinvolved in this case.” The Delaware Supreme
Court found it irrelevant that the Delaware
trial court had rendered its decision before
the Louisiana trial court issued its ruling. The
court also reasoned that the “center of thislitigation” had been in Louisiana and that
Delaware had “very little connection” to thelitigation. Therefore, the court concluded thatLouisiana law should govern interpretationof the Louisiana statute, notwithstanding
the parties’ agreement to apply Delaware
law to questions of policy interpretation.
The dissenting opinion criticized theruling, stating:the dispositive question of law is what
the contractual terms mean, which here
the parties do not dispute is governed by
Delaware, not Louisiana law. In otherwords, the issue is not what a state’s
8

particular statute calls the remedy, or
how that state’s courts would interpretthe statute; the question is whether the
remedy afforded by the statute in fact
amounts to covered damages or excluded
penalties as those terms are used in theparties’ contract.
As discussed in our June 2013 Alert, courts
have similarly addressed whether otherstatutorily-imposed damages (e.g., Telephone
Consumer Protection Act damages) areexcluded penalties under liability policies.

Jurisdiction Alert:
Florida Court Rules That Policy
Limits Determine Amountin Controversy for Diversity
Jurisdiction

A Florida federal district court ruled that the$75,000 amount-in-controversy requirementfor diversity jurisdiction was met where
the governing policy’s limit was $300,000.
Witherup v. State Farm Mut. Auto. Ins. Co.,2015 WL 419064 (M.D. Fla. Feb. 2, 2015).
In a coverage dispute between an automobile
insurer and an injured driver, the insurer
removed the case to federal court based ondiversity jurisdiction. The driver sought toremand the case back to state court, arguingthat the amount in controversy was not
met. The court held that where, as here, thecomplaint does not contain a specific damage

amount, the court may look to the noticeof removal or other relevant documents
to determine the amount in controversy.
However, the court emphasized that “itis the value of the claim, not the value ofthe underlying policy, that determines theamount in controversy.” The court concluded
that here, the value of the claim at issue was
the full policy limit because the validity ofthe entire policy was at stake. In particular,
the coverage dispute turned on whether the
subject policy was in force on the date of thecollision (or conversely, whether a rejectionof coverage as to the driver’s previous car
extended to his current car, which was
involved in the accident). The court reasoned
that the nature of this dispute “put theentire $300,000 value of the policy at stake”
because the “object of the litigation is todetermine whether UM coverage is in force… regardless of whether [ ] personal injury
damages actually reach that amount.”
The court distinguished several cases thatheld that a policy limit does not establish
the amount in controversy where a specificdamage amount is not pled. The court
explained that those “cases all hinge upon
the amount of plaintiffs’ personal injury
damages under concededly in-force policies.
None of those cases involve the validity of an
insurance policy or whether coverage exists at
all.”

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 Kay Vyskocil+1-212-455-3093
mvyskocil@stblaw.com

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trobinson@stblaw.com

This edition of the
Insurance Law Alert was
prepared by Bryce L. Friedman(bfriedman@stblaw.com/+1-212455-2235) and Deborah L. Stein(dstein@stblaw.com /+1-310-4077525) with contributions
by Karen Cestari(kcestari@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
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