Insurance Coverage and Claims Handling: A Patchwork of Laws Applies to National Endeavors

Two recent decisions remind us that a one-sizefits- all approach to coverage analysis and claims handling is ill-advised. Insurance claims representatives situated within the jurisdiction for which they handle claims generally need to familiarize themselves with the law of one jurisdiction. Not so with claims representatives who frequently handle wide swaths of territory, such as those in the aviation insurance business. Their ability to maintain familiarity with the ever-changing law in numerous states presents greater challenges, and differentiated handling is required by the patchwork of state laws. As illustrated by the two recent cases discussed in this Alert, local distinctions can create different duties and procedural requirements with outsized consequences potentially befalling the insurer that fails properly to account for these differences in its coverage analysis and claims handling.

The first recent case, which was decided by the U.S. Court of Appeals for the Ninth Circuit on June 11, 2012 held that insurers have a duty to make reasonable efforts to settle cases when their insured’s liability is reasonably clear and likely to exceed the policy’s limit of liability, irrespective of whether a settlement demand is made by the plaintiff. In Yang Fang Du v. Allstate Ins.Co., No. 10-56422 (9th Cir. Jun. 15, 2012), the panel predicted that California law imposes this duty on insurers but concluded that the Allstate subsidiary involved in that case had insufficient information about other persons injured in the subject accident to have been obligated to agree to a global settlement. The company had offered $100,000 (the applicable per claim limit), but refused to put up the remaining $200,000 available under its policy for a global settlement.

Please see full Alert below for further information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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