Source: https://www.insurancelawhawaii.com/insurance_law_hawaii/excess-coverage/page/2/
Timestamp: 2019-04-26 12:04:21+00:00

Document:
The Indiana Supreme Court reversed summary judgment issued to reinsurer Continental Casualty Company (CNA) and determined it must reimburse the insured for settlement costs under the E & O policy. Wellpoint, Inc., et al. v. National Union Fire Ins. Co. of Pittsburgh, PA, et al., 2015 Ind. LEXIS 316 (Ind. April 22, 2015).
Anthem, Inc. was a large managed health care organization. Anthem was its own primary and excess insurer for E&O liability. It had numerous excess reinsurers. Beginning in 1998, anthem was confronted by various lawsuits alleging it and other managed care organizations failed to pay claims in a full and timely manner, thereby breaching state and federal statutes. The various lawsuits alleged substantially the same wrongful conduct, namely that after promising to pay doctors in a timely manner for their services, Anthem sought to improperly deny, delay and diminish payments due.
The cases were consolidated into a federal multi-district litigation proceeding in the Southern District of Florida. Claims for breach of contract, unjust enrichment, and violations of state prompt pay statutes were dismissed or dropped. Anthem then settled the underlying litigation in July 2005 without admitting and instead denying any wrongdoing or liability. The settlement called for both cash payments and implementation of specific business practices consistent with requested injunctive relief.
The primary reinsurer for Anthem's self-insurance E&O policy, National Union, paid and exhausted its coverage. CNA and other excess reinsurers denied coverage for Anthem's defense and settlement of the underlying litigation. The ultimate settlement amounted to $198 million.
Anthem filed suit, claiming it had professional liability coverage under Part II of the CNA Policy, which provided that payment would be made for the "Loss of the Insured resulting from any Claim first made against the Insured . . . for any Wrongful Act of the Insured . . . but only if such Wrongful Act . . . occurs solely in rendering of or failure to render Professional Services."
CNA moved for summary judgment, arguing there was no coverage because claims settled in the underlying litigation did not arise out of acts that occurred "solely" in Anthem's rendering of, or failure to render, professional services. The trial court granted summary judgment to CNA.
The Indiana Supreme Court reversed. "Professional Services" were "services rendered or required to be rendered solely in the conduct of the Insured's claims handling or adjusting . . . ." The clear language of the policy therefore extended coverage to "any Claim or Claims" resulting from "any Wrongful Act" by Anthem that occurred "solely in the rendering of or failure to render" "claims handling and adjusting" services. Therefore, the policy covered not only Anthem's actions in adjusting and paying reimbursement claims from health care providers, but also its failure to do so.
The wrongful acts alleged in the underlying litigation - engaging in an improper, unfair, and deceptive scheme designed to systematically deny, delay and diminish claim payments - were clearly alleged wrongful acts by Anthem in the course of its claims handling and adjusting services. Therefore, they were Wrongful Acts occurring in the rendering or failure to render Professional Services. As a matter of law, the relief sought by Anthem fell within coverage for professional liability in Coverage II of the policy.
CNA also argued an exclusion for dishonest or fraudulent acts barred coverage. The exclusion provided, "the coverage section does not apply . . . (b) to any dishonest or fraudulent act or omission." An exception to the exclusion read, "this exclusion shall not apply to any Claim seeking both compensatory and punitive damages based upon or arising out of allegations of both fraud and bad faith in the rendering of or failure to render Professional Services." The court held that Anthem's claim of settlement losses satisified the exemption and avoided the application of the exclusion as a matter of law.
An exclusion for the liability of "any insured" for assault and battery precluded coverage for the Diocese sued in a sexual abuse case. Interstate Fire & Cas. Co., Inc. v. Roman Catholic Church of the Diocese of Phoenix, 2014 U.S. App. LEXIS 14735 (9th Cir. July 30, 2014).
The Diocese settled four lawsuits for alleged sexual abuse by its priests. The Diocese filed a declaratory judgment action seeking indemnification under Interstate Fire & Casualty's excess liability policy. The policy promised to indemnify "the Assured for all sums which the Assured shall be obligated to pay by reason of the liability imposed upon the Assured." The policy described the "Assured" to include the Diocese and "any official, trustee or employee of the Diocese working in any parishes, schools, cemeteries, and other agencies of the Diocese."
(a) to liability of any Assured for assault and battery committed by or at the direction of such Assured . . .
On cross motions for summary judgment, the district court granted summary judgment in favor of the Diocese on the assault and battery exclusion. The district court construed the assault and battery exclusion as applying only to the offending priest. "Such insured" meant "that insured", i.e., the assured who committed the assault and battery.
On appeal, the insurer argued that because the exclusion precluded coverage for "any assured" - and because "such assured" refers back to "any assured" - the assault and battery exclusion categorically excluded coverage for both the insured who committed the assault and battery as well as innocent co-insureds.
The Ninth Circuit agreed.The word "such" was defined as "having a quality already or just specified, used to avoid repetition of a descriptive term." This definition indicated that "such Assured" in the exclusion carried the precise meaning as the assured "just specified." The assured "just specified" was "any Assured" - those who allegedly committed the assault and battery as well as innocent co-insureds.
Consequently, the district court was reversed.
When two boys drowned at a summer camp, the issue arose as to whether there were one or two occurrences. Fellowship of Christian Athletes v. AXIS Ins. Co., 2014 U.S. App. LEXIS 13176 (8th Cir. July 11, 2014).
The two boys could not swim, and their camp permission forms indicated that they were non-swimmers. One night, the Fellowship of Christian Athletes (FCA) had a pool party. After the party, the FCA staff realized the two boys were missing. They had drowned, and their bodies were found lying side-by-side at the bottom of the deep end of the pool. The death certificate for one boy listed the time of death as 10:44 p.m., while the other boy's time of death was listed as 10:42 p.m.
The FCA was insured under three policies. AXIS Insurance Company insured FCA under a CGL policy with $1 million limits per occurrence and $5 million in the aggregate. The FCA also had two umbrella policies, one issued by Ironshore Speciality Insurance Company, which provided up to $10 million in coverage in excess of Axis's policy. Under the second umbrella policy, RSUI Indemnity Company covered up to $5 million in excess of the Axis and Ironshore policies.
The FCA filed suit against the insurance companies, seeking a determination of whether the deaths were caused by one occurrence or two occurrences under the Axis policy. The district court granted Axis's motion for summary judgment and held that the drownings were caused by one occurrence. Therefore, Axis's liability was limited to $1 million, and Ironshore would be liable for damages over $1 million. Ironshore appealed, arguing that there were two occurrences under the Axis policy and therefore liability extended to $2 million.
The Eighth Circuit affirmed. Under Missouri law, the "cause" approach applied to determine the number of occurrences. Under the cause approach, an insured's single act was considered the accident from which all claims flowed. Some states adopted a time and space test, which found two occurrences if two injuries were not so closely linked in time and space as to be considered one event. But Missouri had not adopted the time and space test.
Ironshore argued that there were two separate occurrences because the underlying lawsuit alleged negligent supervision and the boys were under the care of two different camp counselors. However, the conduct of the insured, the FCA, not the camp counselors, was the proper focus. The underlying litigation alleged that the FCA was negligent in allowing the boys to attend the pool party while knowing they could not swim and in failing to properly train and supervise the camp counselors. Further the boys arrived at the pool at the same time, swam in the pool during the same one-hour period, and were discovered at the bottom of the pool at the same time.
Accordingly, the FCA's alleged negligent conduct constituted one occurrence because the underlying lawsuit claimed that the drownings were caused by exposure to the same general harmful conditions.
The federal district court determined the excess carrier's declaratory judgment action to establish it had no coverage obligations should be stayed while the underlying case was still pending. Scottsdale Ins. Co. v. Ortiz & Assocs., 2014 U.S. Dist. LEXIS 64286 (D. Ore. May 9, 2014).
The subcontractor's employee was killed on the job site when struck by a dump truck owned by the general contractor, Inland Asphalt Co. Island was sued for wrongful death. Island was an additional insured under the subcontractor's primary policy and excess policy with Scottsdale.
Inland put Scottsdale on notice of the underlying wrongful death lawsuit, but did not tender its defense to Scottsdale.
While the underlying case was pending, Scottsdale initiated an action for declaratory judgment seeking a determination that there was no coverage. Scottsdale maintained that the auto liability exclusion in the excess policy precluded coverage for the underlying lawsuit. Inland moved to stay the coverage action until the underlying suit was resolved.
The court granted Inland's motion. The declaratory action put Inland in a conflicting position while the underlying suit remained pending. To defend itself in the coverage action, Inland may have to argue it was negligent in providing treatment to the decedent in some other manner that fell outside Scottsdale's auto exclusion. This is the classic "Proscutean Dilemma" forewarned by the Hawaii Supreme Court in Dairy Road Partners v. Island Ins. Co., Ltd, 92 Haw. 398, 417, 992 P.2d 93, 112 (2000). Such a position would conflict with a denial of liability in the underlying suit.
The Eighth Circuit determined the Archdiocese of St. Louis had no indemnity coverage after settling a suit in which it had no liability. Chicago Ins. Co. v. Archdiocese of St. Louis, 2014 U.S. App. LEXIS 1769 8th Cir. Jan. 29, 2014).
The Archdiocese was sued when the son of the underlying plaintiff committed suicide after allegedly being sexually molested. After a motion to dismiss, two claims for intentional conduct remained against the Archdiocese and an allegation that the Archdiocese"inappropriately, recklessly, and/or intentionally placed [the boy] in a knowingly dangerous environment."
The parties settled. The Archdiocese then turned to its insurers for indemnification. The Archdoicese held an excess policy issued by Chicago Insurance Company. The policy promised to indemnify for loss, defined as "the sums paid as damages in settlement of a claim or in satisfaction in a judgment for which the insured is legally liable."
CIC denied the claim for coverage and filed suit for a declaratory judgment. The district court agreed that the Archdioscese could not be held legally liable under Missouri precedent. If the insured could not be held legally liable, the Archdiocese failed to establish that a defined "loss" occurred.
On appeal, the Archdiocese argued it was potentially liable, which triggered indemnification if its settlement. The Eighth Circuit agreed with the district court. Under Missouri law, whether an entity was negligent depended on whether a reasonably prudent person would have anticipated danger and provided against it. In order to determine how a "reasonably prudent Diocese" would act, a court would have to excessively entangle itself in religious doctrine and policy. Therefore, the Archdiocese could not show the settlement was in reasonable anticipation of liability.

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