This year, 2014, is lining up with interesting insurance coverage cases pending across the country which may lead to far reaching decisions.
In California specifically, it is apparent to us that the Hartford Insurance Company has been dominating the insurance coverage litigation scene and we hope will not be continuing to erode the rights of policyholders.
We already had a decision in Hartford v Swift 59 Cal 4th 277 (2014) where the Court determined what constituted an implied disparagement claim and found that the lawsuit against the insured did not pass muster for coverage under the Hartford CGL. But other cases are pending before the California Supreme Court including two that may be of greater interest: Hartford v J.R. Marketing S211645 (on whether an insurer can sue its insured’s independent counsel directly in a reimbursement action) and Fluor Corp. v Superior Court (Hartford is the real party in interest) S205889 (on whether an earlier decision, Henkel v. Hartford 29 Cal 4th 934 (2003), limiting assignments of liability policies, without an insurer’s consent, when the insured company is merged into another or acquired by another company, should be reconsidered). Boy, that Hartford has been keeping our Courts busy!
We have already addressed our concerns with Hartford’s effort in J.R. Marketing which may well chill the attorney-client relationship between its policyholders and their counsel, if insurers are permitted to seek reimbursement from the policyholder’s counsel, as well as from the policyholder.
The Fluor case addresses the unfair windfall to an insurer who is paid a premium and issues a liability policy to a company for a full year, where the insured company is then taken over by another company, before the insurance policy expires. The insurer who refuses consent to assigning the policy to the successor company thus enjoys the full year premium without the risk of exposure to insured losses, even where the successor company assumes all the liabilities of the insured company.
The Henkel decision had allowed an assignment without the insurer’s consent only after a judgment or settlement, which Fluor argues is an unfair limitation given the law on the books, which is found in Insurance Code §520. This provision §520 of the Insurance Code is a statute on the books since the 1870’s barring any limitation on assignment of insurance policies after a loss occurs and was not considered in the Henkel decision. Policyholders are awaiting the Fluor decision with bated breath.
We will shortly write more on cyber insurance issues—but cases pending around the country are now addressing whether actual harm is a necessary component in order for an insured to be entitled to a defense, even where there is otherwise a potential breach of the right of privacy or other basis for coverage.