Insurance Law Alert

January 2022

In This Issue
Declaring That Bellefonte Is No Longer The Law Of The Circuit, Second
Circuit Rules That Defense Costs Are Not Subject To Reinsurance Policy
LimitsThe Second Circuit ruled that defense costs were not subject to limits set forth in facultativereinsurance certificates. Global Reinsurance Corp. of Am. v. Century Indem. Co., 2021 WL
6122136 (2d Cir. Dec. 28, 2021). (Click here for full article)

Simpson Thacher
Names Lynn K. Neuner
Co-Chair of Global
Litigation Department-Click here to learn more

Supreme Court Of Delaware Rules That Insurers Have No Duty To Defend
Opioid Suits Against Pharmacy
The Supreme Court of Delaware ruled that insurers were not obligated to defend Rite Aid inunderlying opioid-related law suits because the suits sought economic damages, not personal
injury damages. ACE American Ins. Co. v. Rite Aid Corp., 2022 WL 90652 (Del. Jan. 10,2022). (Click here for full article)

Finding That Public Nuisance Claims Allege Damages Because Of Bodily
Injury, Ohio Appellate Court Rules That Insurer Must Defend Drug StoreIn Opioid Litigation
An Ohio appellate court ruled that an insurer was obligated to defend public nuisance suitsbrought by counties against a drug store, finding that the claims alleged damages because of
bodily injury. Cincinnati Ins. Co. v. Discount Drug Mart, Inc., 2021 WL 6142648 (Ohio Ct.
App. Dec. 30, 2021). (Click here for full article)

War Exclusion Does Not Bar Coverage For Malware Claims, Says New
Jersey Court
A New Jersey trial court granted a policyholder’s summary judgment motion, ruling that a war
exclusion in an all risk policy did not bar coverage for claims arising out of a malware attack.
Merck & Co., Inc. v. ACE American Ins. Co., No. UNN-L-2682-18 (N.J. Super. Ct. Jan. 13,2022). (Click here for full article)

Fifth Circuit Affirms Coverage Denial For Phishing Loss, Finding That
Policyholder Did Not “Hold” Lost Funds
The Fifth Circuit ruled that losses incurred through a phishing scheme were not covered by
a commercial crime policy because the policyholder never had ownership of the lost funds.
RealPage, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 21 F.4th 294 (5th Cir. 2021).
(Click here for full article)

Simpson Thacher & Bartlett LLP

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Five Federal Appellate Courts Affirm Dismissal Of COVID-19 Coverage
Suits, Finding That Loss Of Use Is Not Direct Physical Loss Under Policy
The Second, Fifth, Sixth, Tenth and Eleventh Circuits recently ruled that policyholders were
not entitled to coverage under property policies for business losses incurred in the wake of
pandemic-related shut downs. 10012 Holdings, Inc. v. Sentinel Ins. Co., 21 F.4th 216 (2d Cir.
2021); Terry Black’s Barbecue, LLC v. State Auto. Mutual Ins. Co., 2022 WL 43170 (5th Cir.
Jan. 5, 2022); Estes v. Cincinnati Ins. Co., 2022 WL 108606 (6th Cir. Jan. 12, 2022); Goodwill
Indus. of Central Oklahoma, Inc. v. Philadelphia Indem. Ins. Co., 21 F.4th 704 (10th Cir.
2021); Ascent Hospitality Management Co., LLC v. Employers Ins. Co. of Wausau, 2022 WL
130722 (11th Cir. Jan. 14, 2022). (Click here for full article)

Indiana Appellate Court Rules That Loss Of Use Is Insufficient To Allege
Direct Physical Loss Due To COVID-19 Under Property Policy
An Indiana appellate court ruled that policy language requiring “direct physical loss” did notencompass a claim for loss of use of the insured facilities during the COVID-19 pandemic.
Indiana Repertory Theatre v. Cincinnati Cas. Co., 2022 WL 30123 (Ind. Ct. App. Jan. 4,2022). (Click here for full article)

New Jersey Court Declines To Dismiss COVID-19 Coverage Suit, Finding
That Loss Of Use Of Casino May Satisfy Direct Physical Loss Requirement
A New Jersey trial court denied insurers’ motion to dismiss a COVID-19-related coverage suit,
ruling that a casino’s inability to use its property for its intended purpose could satisfy thepolicies’ physical loss requirement. AC Ocean Walk, LLC v. American Guar. & Liab. Ins. Co.,
2021 WL 6091224 (N.J. Super. Ct. Dec. 22, 2021).
(Click here for full article)

Absolute And Qualified Pollution Exclusions Bar Coverage For All Claims,
Says New York Appellate Court
New York’s Third Department ruled that pollution exclusions barred coverage for all
underlying claims against a manufacturing company, rejecting the policyholder’s assertion thatsome discharges were “sudden and accidental.” Tonoga, Inc. v. New Hampshire Ins. Co., 2022
WL 52903 (N.Y. App. Div. Jan. 6, 2022). (Click here for full article)

Reversing District Court, Fifth Circuit Rules That No “Claim” Was Made
During Policy Period Despite News Coverage Putting Insurer On Notice
The Fifth Circuit ruled that no claim was made against the policyholder during the relevant
policy period and therefore the insurer had no duty to defend. Jordan v. Evanston Ins. Co.,
2022 WL 141777 (5th Cir. Jan. 17, 2022). (Click here for full article)

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Reinsurance Alert:
Declaring That Bellefonte Is No
Longer The Law Of The Circuit,
Second Circuit Rules That
Defense Costs Are Not Subject To
Reinsurance Policy Limits
The Second Circuit ruled that defense
costs were not subject to limits set forth infacultative reinsurance certificates. Global
Reinsurance Corp. of Am. v. Century Indem.
Co., 2021 WL 6122136 (2d Cir. Dec. 28, 2021).
Global issued facultative reinsurance
certificates to Century that indemnified
expenses Century incurred in connection
with commercial liability policies issued toCaterpillar Tractor Company. When Century
sought reinsurance payments from Global for
amounts paid to Caterpillar, Global sought adeclaration that the limits of the reinsurance
certificates capped its obligations with respect
to both losses and defense costs. In contrast,
Century argued that the limits applied only to
indemnity losses and that Century’s defense
costs were payable in addition to policy limits.
A New York district court, applying Bellefonte
Reins. Co. v. Aetna Cas. & Sur. Co., 903 F.2d
910 (2d Cir. 1990), ruled in Global’s favor,
finding that certificates’ limits imposed a cap
on both losses and defense costs. (See March
2020 Alert). On appeal, Century argued that
defense costs were not subject to the limits
because the reinsurance certificates followed
form to Century’s underlying policies toCaterpillar, under which defense costs werein addition to policy limits. In a certified
question, the Second Circuit asked the New
York Court of Appeals whether New Yorklaw imposes a presumption that reinsurance
liability limits cap both loss and defense costs
regardless of the terms of the underlying
policy. The Court of Appeals answered thequestion in the negative, stating that ordinary
rules of policy interpretation apply in suchcases. Following remand by the Second
Circuit, the district court reversed its priordecision. Last month, the Second Circuit
affirmed that ruling.
The Second Circuit ruled that Global’s
reinsurance obligations were subject to thesame terms as Century’s underlying policies,
including the payment of defense costs inaddition to policy limits. The court explainedthat this result was supported by theunambiguous follow-form clause and expert
testimony relating to industry custom andpractice. In particular, the court emphasizedthat the follow-form clause specified that thereinsurance conformed “in all respects” to“all” terms and conditions of the underlying
policies unless expressly stated otherwise.
The court rejected Global’s contention that a“Reinsurance Accepted” provision established
an intent that the reinsurance contract
would not be concurrent with the underlying
Century policies as to whether defense costs
would be subject to the certificates’ limits.
The court noted that this conclusion was also
supported by expert testimony regarding
reinsurance industry custom and practice,which established that during the relevanttime frame, “unless otherwise specificallystated, facultative reinsurance certificatescovered investigation and defense expensein addition to limits of liability when thereinsured policy covered expense in addition
to its limits of liability.” The Second Circuit
stated: “To the extent that Bellefonte andUnigard suggest a different result, weconclude that those decisions . . . are nolonger valid law in our circuit.”

Opioid Alerts:
Supreme Court Of Delaware
Rules That Insurers Have No Duty
To Defend Opioid Suits Against
Pharmacy
Reversing a trial court decision, the Supreme
Court of Delaware ruled that insurers
were not obligated to defend Rite Aid inunderlying opioid-related law suits broughtby governmental entities because the suits do
not seek damages because of or for personal
injury. ACE American Ins. Co. v. Rite Aid
Corp., 2022 WL 90652 (Del. Jan. 10, 2022).
Ohio counties sued Rite Aid and others,
alleging that it failed to maintain effective
controls relating to the sale and distributionof opioids. The insurer denied coverage andin ensuing litigation a trial court ruled thatthe insurer had a duty to defend. (See October
2020 Alert). The trial court reasoned thatat least some of the amounts sought by thecounties were arguably because of personal
injury because those costs were “at leastin part grounded in medical care for the3

personal injuries suffered by the counties’
residents.”
The Delaware Supreme Court reversed,
emphasizing that the underlying complaints
expressly disclaimed personal injury damages
and sought purely economic damages
stemming from the opioid crisis. The Court
noted that although the counties’ economic
losses were “arguably linked to care for Ohio
residents affected by the opioid epidemic,”
they were nonetheless outside the scope ofcoverage.
In so ruling, the court disagreed withthe reasoning of Acuity v. Masters
Pharmaceutical, Inc., 2020 WL 34466532(Ohio Ct. App. June 24, 2020) (discussed
in our June 2020 Alert) and Cincinnati Ins.
Co. v. Discount Drug Mart, Inc., 2021 WL
6142648 (Ohio Ct. App. Dec. 30, 2021),
discussed below.

Finding That Public Nuisance
Claims Allege Damages Because Of
Bodily Injury, Ohio Appellate Court
Rules That Insurer Must Defend
Drug Store In Opioid Litigation

this context, although an equitable remedy,
arguably or potentially falls within the scope”
of coverage.
In addition, the appellate court ruled that theclaims sought damages “because of” bodily
injury, even though the complaints expressly
disclaimed damages for physical injury(either directly or derivatively). The court
reasoned that the economic losses at issue
were “because of” bodily injury because they
were based on money spent on medical andtreatment services provided to individuals
who were addicted to opioids.
Finally, the court rejected the insurer’s
contention that the underlying claims
did not allege an accidental “occurrence”
because public nuisance requires a showing
of intentional conduct. The court noted that
Ohio law distinguishes between an intent
to act and an intent to cause injury andexplained that while the complaints allegedthat Drug Mart intentionally marketed anddistributed opioids, they did not allege that it
intended to cause injury to individuals or toincrease the counties’ public service expenses.

An Ohio appellate court ruled that an insurer
was obligated to defend public nuisance suitsbrought by government entities against a drug
store, finding that the underlying complaints
alleged damages because of bodily injury.
Cincinnati Ins. Co. v. Discount Drug Mart,
Inc., 2021 WL 6142648 (Ohio Ct. App. Dec.
30, 2021).
The underlying complaints were nearly
identical to those in Rite Aid, alleging that
Drug Mart failed to adequately monitor
suspicious opioid orders. An Ohio trial court
ruled that the insurer had a duty to defend thesuits because they alleged “damages” “becauseof” bodily injury caused by an “occurrence.”
The appellate court affirmed.
The appellate court held that the underlying
claims alleged “damages” even though they
sought only “forward-looking, equitable”
relief. The court acknowledged that Ohio
courts have generally deemed equitable relief
to be outside the scope of covered “damages,”but noted certain exceptions to this ruleand concluded that the term “damages” wasambiguous. Construing this ambiguity in thepolicyholder’s favor, the court ruled that “thepayment of money into an abatement fund in

Cyber Alerts:
War Exclusion Does Not Bar
Coverage For Malware Claims, Says
New Jersey Court
A New Jersey trial court granted apolicyholder’s summary judgment motion,
ruling that a war exclusion in an all risk
property policy did not bar coverage forclaims arising out of a malware attack.
Merck & Co., Inc. v. ACE American Ins. Co.,
No. UNN-L-2682-18 (N.J. Super. Ct. Jan.
13, 2022).
Merck’s computer systems were infected bya malware attack, resulting in alleged lossesof more than $1.4 billion. Merck’s insurers
argued that the evidence established that4the Russian government was responsible forthe cyberattack and therefore coverage wasbarred by an exclusion that applied to:
Loss or damage caused by hostileor warlike action in time of peace orwar, including action in hindering,
combating, or defending against an
actual, impending, or expected attack:a) by an government or sovereign power(de jure or de facto) or by any authority
maintaining or using military, naval
or air forces; b) or by military, naval,
or air forces; c) or by an agent of suchgovernment, power, authority or forces.
Rejecting this assertion, the court noted thatdecisions interpreting war-related exclusions
have construed “war” to mean the use ofarmed forces in conflicts between nations
and have deemed such exclusions to beinapplicable to scenarios not directly linked
to military conflict. In so ruling, the court
noted that the exclusion did not include any
language indicating that it was intended toencompass cyberattacks.

Fifth Circuit Affirms Coverage
Denial For Phishing Loss, Finding
That Policyholder Did Not “Hold”
Lost Funds
Our March 2021 Alert reported on a Texas
district court decision holding that losses
incurred through a phishing scheme were notcovered by a commercial crime policy because
the policyholder never had ownership ofthe lost funds. Last month, the Fifth Circuit
affirmed that holding, ruling that the policy
was unambiguous and that there was nocoverage as a matter of law. RealPage, Inc. v.
National Union Fire Ins. Co. of Pittsburgh,PA, 21 F.4th 294 (5th Cir. 2021).
RealPage, a provider of online rent collection
services, contracted with Stripe, a software

company, to facilitate its payment-processing
services. Under the contract, Stripe
processed payments from renters throughits bank account and then forwarded thosepayments to RealPage’s clients. Criminals
used a phishing scheme to access the Stripe
dashboard and alter fund disbursement
instructions. As a result, the criminals
diverted more than $10 million. RealPage
reimbursed its clients for the lost funds it was
unable to recover and then sought insurance
coverage. The insurers denied coverage andmoved for summary judgment. The district
court granted the motion and the Fifth
Circuit affirmed.
The policy limited coverage to property “thatyou own or lease” or “that you hold for others
whether or not you are legally liable for theloss of such property.” RealPage concededthat it did not own or lease the funds thatwere designated for its property management
clients, but argued that it “held” the funds forpurposes of policy coverage. Rejecting thisassertion, the Fifth Circuit explained:
Essentially, RealPage provided routing
instructions to Stripe, and Stripe
effectuated the transactions and handled
the funds transferred from tenants toproperty managers. Under any definitionof “hold” that entails “keep[ing] incustody” or “possession,” RealPagecannot claim a loss under National
Union’s policy because RealPage
never “held” the funds intended for its
property manager clients.
The court also rejected RealPage’s contention
that “hold” was ambiguous and could beinterpreted to mean “control” over funds.
Further, the court noted that even accepting
RealPage’s conflation of “hold” with “control,”there would still be no coverage because
all funds were deposited in pooled clearing
accounts controlled by Stripe.

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COVID-19 Alerts:
Five Federal Appellate Courts
Affirm Dismissal Of COVID-19
Coverage Suits, Finding That LossOf Use Is Not Direct Physical Loss
Under Policy
The Second, Fifth, Sixth, Tenth and Eleventh
Circuits recently ruled that policyholders
were not entitled to coverage under property
policies for business losses incurred in thewake of pandemic-related shut downs.
In 10012 Holdings, Inc. v. Sentinel Ins.
Co., 21 F.4th 216 (2d Cir. 2021), the Second
Circuit held that an art gallery’s suspensionof business operations in compliance withexecutive orders did not constitute physicaldamage for insurance coverage purposes
under New York law. Additionally, thecourt held that civil authority coverage wasunavailable because the executive orders did
not result from direct physical loss to property
in the vicinity of the insured premises, butrather from the pandemic itself and the risk
it posed to human beings. Citing its decisionin 10012 Holdings, the Second Circuit also
upheld dismissals of policyholders’ COVID19 coverage claims in Kim-Chee LLC v.
Philadelphia Indem. Ins. Co., 21-1082-cv (2dCir. Jan. 28, 2022) and Rye Ridge Corp. et al.
v. Cincinnati Insurance Co., 2022 WL 120782(2d Cir. Jan. 13, 2022).
In Terry Black’s Barbecue, LLC v. State
Auto. Mutual Ins. Co., 2022 WL 43170 (5thCir. Jan. 5, 2022), the Fifth Circuit, applying
Texas law, ruled that losses stemming fromthe suspension of dine-in services at arestaurant were not covered by a property
policy because there was no “direct physicalloss” of covered property.
In compliance with government orders, therestaurant suspended its dine-in services.
Thereafter, it sought coverage under businessinterruption and civil authority policy
provisions. The insurer denied coverage,
and in ensuing litigation a Texas district
court dismissed the restaurant’s complaint,
ruling that physical loss required a “distinct,
demonstrable, physical alteration of theproperty” and that loss of use of property
did not satisfy that requirement. The Fifth
Circuit affirmed.

Adopting the district court’s interpretationof “physical loss,” the Fifth Circuit stated:“Nothing happened to TBB’s restaurants atall. In fact, TBB had ownership of, access
to, and ability to use all physical parts of its
restaurants at all times. And importantly, theprohibition on dine-in services did nothing tophysically deprive TBB of any property at its
restaurants.”
The Fifth Circuit expressly rejected therestaurant’s assertion that the loss of use ofits dining rooms for their intended purpose
amounted to a loss of “physical space”
sufficient to implicate coverage. The court
noted that the policy did not include thephrase “physical space” and that, in any event,
the restaurant was not deprived of access tothe dining rooms.

Finally, the court ruled that civil authority
coverage was unavailable because thatprovision required the suspension ofoperations due to a civil authority order“resulting from” actual or alleged exposure
to a disease. Declining to determine whatstandard of causation was required to meet
“resulting from,” the court held that therestaurant “failed to allege even a remotecausal relationship between the civil authority
orders and its restaurants’ alleged or actual
exposure to COVID-19.” Rather, the orders
were issued in response to the global
pandemic in order to slow the spread of
the virus.
In Estes v. Cincinnati Ins. Co., 2022 WL
108606 (6th Cir. Jan. 12, 2022), the Sixth
Circuit, applying Kentucky law, ruled that“physical loss” means that “a property ownerhas been tangibly deprived of the property
or that the property has been tangibly
destroyed.” Ruling that the insured dental
practice did not meet this standard, the court
noted that “COVID-19 did not destroy its
6

dental offices, and the government shutdown
orders did not dispossess it of them for asingle day.”
Applying similar reasoning, the Tenth andEleventh Circuits held that government
orders, which temporarily impeded thepolicyholders’ ability to use property for its
intended purpose, did not constitute a direct
physical loss. In Goodwill Indus. of Central
Oklahoma, Inc. v. Philadelphia Indem. Ins.
Co., 21 F.4th 704 (10th Cir. 2021), the Tenth
Circuit, applying Oklahoma law, explainedthat allowing a loss of use to satisfy the“direct physical loss” policy requirement
would ignore the word “physical.” Likewise,in Ascent Hospitality Management Co., LLC
v. Employers Ins. Co. of Wausau, 2022 WL
130722 (11th Cir. Jan. 14, 2022), the Eleventh
Circuit, applying New York law, rejected thecontention that physical loss includes morethan actual physical damage, explainingthat both physical loss and physical damage
require “‘an actual physical change toproperty that COVID-19 particles cannot
cause’ because a contaminated location canbe immediately restored to its previous state
by cleaning and disinfecting—no repair or
replacement required.”Indiana Appellate Court Rules
That Loss Of Use Is Insufficient To
Allege Direct Physical Loss Due To
COVID-19 Under Property Policy
An Indiana appellate court ruled that policy
language requiring “direct physical loss”
did not encompass a claim for loss of use of
the insured facilities during the COVID-19
pandemic. Indiana Repertory Theatre v.
Cincinnati Cas. Co., 2022 WL 30123 (Ind. Ct.
App. Jan. 4, 2022).
A theater sought coverage for business losses
incurred in the wake of federal and local

government shutdown orders. The insurer
denied coverage based on the absence of
direct physical loss or damage. An Indiana
trial court dismissed the coverage suit and theappellate court affirmed, ruling that the policy
was unambiguous and required physicalalteration to the property. The court held thatthe theater’s assertion that a loss of use ofproperty was sufficient to allege physical loss
was unreasonable and did not comport withother policy provisions, such as the “periodof restoration” clause, which contemplated
repair of property that had been physicallyaltered or damaged.

New Jersey Court Declines To
Dismiss COVID-19 Coverage Suit,
Finding That Loss Of Use Of Casino
May Satisfy Direct Physical Loss
Requirement
A New Jersey trial court denied insurers’
motion to dismiss a COVID-19-related
coverage suit, finding that a casino’s
inability to use its property for its intended
purpose could satisfy the policies’ physicalloss requirement. AC Ocean Walk, LLC v.
American Guar. & Liab. Ins. Co., 2021 WL
6091224 (N.J. Super. Ct. Dec. 22, 2021).
The casino alleged that COVID-19 presented
an imminent threat to its facilities andemployees, rendering the property unsafe. It
further alleged that viral particles attach andadhere to surfaces and objects, which renderphysical changes to property. The court ruledthat these allegations, accepted as true forpurposes of a motion to dismiss, sufficiently
stated a claim for physical damage toproperty. The court further stated that policy
language requiring direct physical loss may
be satisfied by demonstrating a loss of use ofproperty for its intended purpose, whether
or not the property has been altered by the
COVID-19 virus.
In addition, the court ruled that a pollution
exclusion in four applicable policies did not
bar coverage for the casino’s claims. In two
policies, contaminant was defined to include
a list of substances that did not include“virus,” whereas a policy provision entitled“Contamination” did include “virus” in its
definition. In two other policies, the pollution
exclusion expressly excluded “virus.”
Nevertheless, relying on a body of New
Jersey case law in which pollution exclusions
have been construed as applying only to7traditional environmental contamination,
the court ruled that the exclusions at issue
did not bar coverage for COVID-19-related
claims. The court noted that the provisions
overwhelmingly referred to environmental
and industrial pollution contaminants andstated: “Inserting the term ‘virus’ . . . does
not change the substance of the exemption.
When read as a whole, the exclusion remains
applicable to more traditional environmentalrelated damages and as such will not fulfill the
insured’s reasonable expectations.”
However, the court deemed a Biological or
Chemical Substance Exclusion in one policy
applicable to bar coverage, ruling that the
COVID-19 virus was a “pathogenic” substanceunder the clear meaning of that provision.

Pollution Exclusion
Alert:
Absolute And Qualified Pollution
Exclusions Bar Coverage For All
Claims, Says New York Appellate
Court
New York’s Third Department ruled thatpollution exclusions barred coverage for all
underlying claims against a manufacturing
company, rejecting the policyholder’sassertion that some discharges were “sudden
and accidental.” Tonoga, Inc. v. New
Hampshire Ins. Co., 2022 WL 52903 (N.Y.
App. Div. Jan. 6, 2022).
After the policyholder’s manufacturingsite was declared a Superfund site, thepolicyholder entered into a consent
agreement with the government to takecertain remedial measures. Thereafter,
numerous lawsuits were brought against
the policyholder, alleging bodily injury andproperty damage stemming from pollutionof water, soil and air at the site. The insurers
refused to defend or indemnify the claims
based on pollution exclusions in the relevant
policies. A New York trial court ruled that theexclusions applied as a matter of law and that
there was no duty to defend. The appellate
court affirmed.
The appellate court ruled that an absolute
pollution exclusion squarely applied. The
court deemed it irrelevant that at the time thepolicy was issued, the harmful substances atissue were not known to have a detrimental
effect on the environment. As to a qualified
pollution exclusion in a different policy,
the court ruled that the policyholder failed
to allege that the discharges at issue were
“sudden and accidental” so as to fall within
the exception to the exclusion. In particular,
the court explained that underlying
allegations of “improper dumping” and“spilling” of harmful solutions did not
sufficiently allege conduct that was “abrupt”
or “unintentional.” Rather, the court
explained, the gravamen of the underlying
complaints was that the policyholder dumped
toxic substances over a period of many years
as part of its routine practices. The court also
rejected the policyholder’s assertion that the“sudden and accidental” exception was met
by underlying allegations that there were“likely” “other ways” in which the toxins weredischarged into the environment.

Coverage Alert:
Reversing District Court, Fifth
Circuit Rules That No “Claim” Was
Made During Policy Period Despite
News Coverage Putting Insurer On
NoticeDisagreeing with a district court holdingthat “information received and recorded asa timely claim by the parties will be deemeda timely claim” under a claims-made policy,
the Fifth Circuit ruled that no claim was made8

against the policyholder during the relevant
policy period and therefore the insurer had no
duty to defend. Jordan v. Evanston Ins. Co.,
2022 WL 141777 (5th Cir. Jan. 17, 2022).
The insurance dispute arose out of injuries
suffered by a child after ingesting small
magnetic toys. During the relevant policy
period, numerous news stories were
published about the incident, which the
manufacturer forwarded to its insurers. Upon
receiving those media accounts, Evanston
opened an internal “Claim/Occurrence” file.
Months later, and after the policy period had
ended, the toy company received a demand
letter from the injured child’s family, which
it forwarded to its insurers. Evanston denied
coverage.
In a declaratory judgment action, aMississippi district court denied Evanston’ssummary judgment motion. The trial court

sidestepped the question of whether thenews constituted a “claim” against the
toy manufacturer, and instead ruled that
Evanston had effectively received notice of aclaim, as evidenced by its internal files. The
Fifth Circuit reversed, ruling that no claim
was made against the toy manufacturer
during the policy period and therefore the
district court erred in finding that Evanston
had received notice of a claim.
The Fifth Circuit concluded that the news
articles did not constitute a claim because
they did “not evidence an assertion of an
existing right[,] any right to payment or toan equitable remedy.” The court deemed
it irrelevant that Evanston occasionallyreferred to the media reports as a “claim” in
its internal files, explaining that awareness ofan alleged injury is not sufficient to constitutea claim.

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

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trobinson@stblaw.com

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irethy@stblaw.com

This edition of the Insurance Law
Alert was prepared by
Mary Beth Forshaw / +1-212-455-2846
mforshaw@stblaw.com andBryce L. Friedman / +1-212-455-2235
bfriedman@stblaw.com
with contributions by Karen Cestarikcestari@stblaw.com.

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