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January 21, 2007

Cone of Silence or Echo Chamber: A Policyholder’s Privileged Communications and its Insurers

An insurance company that receives a claim from one of its policyholders inevitably wears both a white hat and a black one. The insurer is there to help its insured deal with the claim – it may dispatch claims handlers or service providers to help the policyholder in its time of need; the insurer, however, also is the insured’s adversary in the sense that it must determine whether it has any obligation to pay the insured. To the latter extent, the insured and the insurer have directly adverse interests. (The law of first-party insurance bad faith is predicated on the recognition in part of this fundamental adversity of interests between the insurer and its insured, especially at the precise moment when the insured is calling upon the insurer for performance.)

The insurer’s wearing two hats poses the opportunity for mischief when those roles get confused or blurred. Take the example of a defense lawyer hired by an insurance company to defend the insured: the defense attorney plainly has an attorney-client relationship with the insured, the touchstone of which is confidentiality. Assume that the defense lawyer is told a fact by the insured that supports the insurer’s denying coverage: the insured confesses to being drunk while driving, the insured acknowledges that it knew of a latent problem before it purchased the policy, or the insured knew of the potential claim against it for a long time but had simply hoped it would go away and so did not notify the insurer sooner. The insurance company might wish to learn of this fact because it might permit it to terminate its defense obligation and avoid paying anything on the claim. In these circumstances, may the defense counsel tell the insurance company about this admission from the insured?

Ratting out the insured in this fashion would be found to be a breach of the lawyer’s duties to his or her client (the policyholder). What happens if the insurance company acts on this information to deny coverage? Has the insurer breached any duty?

Different courts have approached this question somewhat differently, but no court (to my knowledge) is comfortable with the insurer acting on this information. The Arizona Supreme Court has held that the insurer has committed an act of bad faith if it denies coverage based on defense counsel’s breach of the policyholder’s confidence. In Parsons v. Continental National American Group, 660 P.2d 94 (Ariz. 1976), the court held:

When an attorney who is an insurance company’s agent uses the confidential relationship between an attorney and a client to gather information so as to deny the insured coverage . . . . we hold that such conduct constitutes waiver of any policy defense, and is so contrary to public policy that the insurance company is estopped as a matter of law from disclaiming liability.

550 P.2d at 99. Other courts have adopted an exclusionary-rule approach, barring the insurer from using the information or any fruit from the poisonous tree in service of a denial of coverage Employers Cas. Co. v. Tilley, 496 S.W.2d 552, 560-61 (Tex. 1973); Snodgrass v. Baize, 405 N.E.2d 48, 54 (Ind. App. 1980). These cases recognize that mixing the insurer’s two roles – mixing up its white and black hats – is at a minimum inappropriate and potentially abusive. This double betrayal – of confidence and using the confidence as a weapon against the insured – calls for some remedy.

But let’s vary the situation somewhat, from an insurer that has provided defense counsel to an insurer that has not provided counsel when the insured believes it should have done so. In those circumstances, the insured will defend the liability case against it and separately pursue coverage against the insurer in a coverage case. Routinely, we see insurers seeking discovery of underlying defense counsel’s files. Often, this is seemingly an effort to obtain evidence that will embarrass the insured and sway the jury – for example, a memo from defense counsel to the insured evaluating the liability case and stating something like “the [insured] company’s conduct flagrantly disregarded standards for appropriate conduct and safety and this led directly to the injury.” In a coverage case, the insurer would like to proffer this kind of document against the insured to argue that the insured expected/intended the injury and thus coverage should not be provided. (Moreover, carrier counsel wants to argue at closing that “even the insured’s defense counsel agrees that the insured flagrantly disregarded safety standards, etc. etc.”) Discovery of this kind of document also makes carrier counsel’s job easier because the defense lawyer has investigated and synthesized the facts leading to the liability claim.

Insurers have argued that they are entitled to the discovery of this information in the coverage case on the ground that it fits within the scope of discovery and that, although the documents constitute privileged communications, no privilege is properly assertable as against them. The rationale insurers offer is that they share a common interest with the insured in these privileged communications.

A tiny number of jurisdictions have accepted this argument, and the vast majority of cases have rejected it. In Illinois for example, where the argument has been accepted, insurance companies have an unfettered right of access to defense counsel’s files. Waste Management Inc. v. International Surplus Lines Ins. Co., 579 N.E.2d 332 (Ill. 1991). The Illinois Supreme Court reasoned that, even though the insurer was alleged to have breached its contract with the policyholder, the insurers nonetheless shared a “common interest” with the insured in defeating the underlying plaintiff’s claim against it. Because the insurers “shared” in the privilege, relevant materials could not be withheld on this ground. (In other words, like Big Brother, in Illinois one’s insurers are always looking over defense counsel’s shoulder, even where the insurer has breached its contract to perform.)

Thus, even though there is direct adversity of interests between the insurers and the policyholder at the time that the insurers are seeking discovery of defense counsel-s files, the Illinois courts hold that at the time of document creation (as opposed to disclosure) the insurer’s are privy to the thoughts of defense counsel.

Policyholders find this argument preposterous; the insurer may be in breach of contract and unquestionably is seeking bullets to fire at the insured. Ruling that insurers are on the same side as the policyholder and therefore get access to defense counsel’s files confuses the two different roles of insurers – in service of a coverage denial insurers plainly have adverse interests with the insured, and when the insurer has failed to perform they have failed to come to the insured’s aid and rescue (the role that forms the premise for the Illinois courts’ ruling that insurers have a common interest with the insured). As the Fifth Circuit observed in a related context:

We know of no case in which the insured’s duty of assistance and cooperation has been used to force a putative insured to divulge to the insurer every jot and tittle of information which may aid the insurer in defeating his claim for coverage but which in no way hinders the insurer’s ability to provide the insured with a proper defense.

Martin v. Travelers Indemnity Co., 450 F.2d 542, 553 (5th Cir. 1971).

Most courts have rejected the Illinois approach, on a variety of rationales. See Remington Arms. Co. v. Liberty Mut. Ins. Co., 142 F.R.D. 408, 418 (D. Del. 1992). One is that, properly understood, the common interest “privilege” is no privilege at all but rather is a shorthand way of considering whether the disclosure of otherwise privileged communications effects a waiver of the privilege. See United States v. McPartlin, 485 F.2d 1321, 3336 (7th Cir. 1979). As a result, whether there is a common interest depends on the circumstances at the time of disclosure. In these circumstances, while the coverage war is en flagrante there will typically not be a common interest. Put differently, the insured’s privilege still exists and may properly be interposed as a basis for refusing to produce otherwise relevant documents and materials. In Re Envtl. Ins. Declaratory Judgment Actions, 612 A.2d 1338, 1341-43 (N.J. Super. App. Div. 1992). An insurer cannot force a waiver by the fact that a coverage suit is pending. (Relatedly, courts uniformly hold that the mere fact that the insured has been required to file a suit against its insurer does not waive privilege or put all privileged communications “at issue” (which is simply another variant of waiver principles). See FDIC v. US, 527 F. Supp. 942, 950-51 (S.D.W.Va. 1981) (advice-of-counsel defense places communications at issue and subject to discovery); Long Island Lighting Co. v. Allianz Underwriters Ins. Co., 749 N.Y.S.2d 488, 496 (App. Div. 2002); Home Ins. Co. v. Advance Mach. Co., 443 So. 2d 165, 168 (Fla. 1st Dist. App. 1983); Rockwell Int’l Corp. v. Superior Court, 26 Cal. App. 4th 1255, 1268 (1994).)

Nor is the insured’s duty of cooperation with its insurers construed as a waiver of privilege. Metropolitan Life Ins. Co. v. Aetna Cas. & Sur. Co., 730 A.2d 51, 63-64 (Ct. 1999); Martin, 450 F.2d at 553. See also Gulf Ins. Co. v. Transatlantic Reinsurance Co., 788 N.Y.S.2d 44 (1st Dep’t 2004).

So, insurers cannot compel insureds to provide them with privileged (or work product) information. This is true both informally and in the context of coverage litigation. Nevertheless, insureds and their insurers may wish to exchange defense counsel’s evaluation of a case, for example. Can an insured provide its carrier with privileged communications without fear that it has effected a broad waiver with respect to the tort claimants? Does a policyholder need fear that its carrier will use that communication against it to deny coverage?

Policyholders may wish to share defense-counsel’s analysis with its insurers to facilitate the insurers decision to pay to settle a case. I have found it reasonably common in the directors’ and officers’ liability insurance, fiduciary-liability insurance, and errors and omissions insurance contexts that policyholders and their insurers do share privileged communications, reflecting the reality that in many cases the insurers will pay for settlement of the underlying claim against the insured. On the other hand, in the product-liability and mass-tort context, such sharing of information is seemingly more rare.

If an insured elects to share privileged information, is there a risk of finding of waiver? While I am reluctant to provide a definitive conclusion one way or the other, no doubt there is a risk that a court may find waiver.

The starting point for any analysis of this problem is that, in most jurisdictions, there is no insured-insurer privilege. Linde v. Resolution Trust Corp., 5 F.3d 1508, 1514-15 (D.C. Cir. 1993) (“we now firmly reject any sweeping general notion that there is an attorney-client privileged in insured-carrier communications”). As the Linde court ruled:

An insured may communicate with its carrier for a variety of reasons, many of which have little to do with the pursuit of legal representation or the procurement of legal advice. Certainly, where the insured communicates with the carrier for the express purpose of seeking legal advice with respect to a concrete claim, or for the purpose of aiding an insurer-provided attorney in preparing a specific legal case, the law would exalt form over substance if it were to deny application of the attorney-client privilege. However, a statement betraying neither interest in, nor pursuit of, legal counsel bears only the most attenuated nexus to the attorney-client relationship and thus does not come within the ambit of the privilege. . . . . [I]f what is sought is not legal advice, but insurance, no privilege can or should exist.

Linde, 5 F.3d at 1515. See also Aiena v. Olsen, 194 F.R.D. 134, 136 (S.D.N.Y. 2000). As the Alaska Supreme Court explained, “communications between insured and insurer are not in the same class as communications between client and attorney, because the insurer may use its information for purposes inimical to the interests of the insured.” Langdon v. Champion, 752 P.2d 999, 1002-03 (Alaska 1988). Thus, some courts have found that otherwise privileged communications lose their protection from sharing them with an insurer. See Go Medical Indus. Pty., Ltd. V. C.R. Bard, Inc., 1998 WL 1632525 (D. Conn. Aug. 18, 1998); Hartford Fire Ins. Co. v. Guide Corp., 206 F.R.D. 249, 250-51 (S.D. Ind. 2001).

Even if both the carrier and its policyholder would benefit from a defense victory over a tort plaintiff, that may not be sufficient to establish a “common interest” to maintain privilege. See Shamis v. Ambassador Factors Corp., 34 F. Supp. 2d 879, 893 (S.D.N.Y. 1999) (holding that the fact that two entities would benefit from a judgment in favor of the plaintiff, that is not sufficient to find that they share an identical legal interest). What constitutes a common interest has been defined in the following manner:

A community of interests exists among different persons or separate corporations where they have an identical legal interest . . . . The key consideration is that the nature of the interest be identical, not similar, and be legal, not solely commercial. The fact that there may be an overlap of a commercial and legal interest for a third party does not negate the effect of the legal interest in establishing a community of interest.

North River Ins. Co. v. Columbia Cas. Co., 1995 WL 5792, at *3 (S.D.N.Y. Jan. 5, 1995) (citation omitted). The court continued, “What is important is not whether the parties theoretically share similar interests but rather whether they demonstrate actual cooperation toward a common goal.” Id. at *4. Stated further, the same court held in International Insurance Co. v. Newport Mining Corp., 800 F. Supp. 1195 (S.D.N.Y. 1992):

The “common interest,” logically viewed, and New York law supports, which makes the privilege inapplicable, is where an attorney actually represents both the insured and the carrier – joint representation – and accordingly both clients are working together with a single attorney toward a common goal.

Id. at 1196 The International Insurance court found that, while the insurance carrier and its insured shared the same desire for a successful defense of a legal claim against the insured, this was insufficient to find a common legal interest. Id. The International Insurance case involved a defendant-insured seeking to withhold from a plaintiff-carrier materials that were privileged. When the plaintiff-insurer argued that the common-interest exception should apply and the privileged materials (which were otherwise relevant) therefore should be produced, the court disagreed. The court stated:

I conclude that while the insurer had the same ‘desire’ as its insured to have a successful defense of [the actions that necessitated the case at bar], for if coverage was later determined to exist, it would be responsible for any obligation of its insured remaining, this in my view is an insufficient ‘common interest’ to warrant invasion of the attorney-client relationship with the privilege . . .

By extension, and this is the key point, if the insured provided these types of materials to its insurers, then it is providing the communications to an entity that does not share a common interest; therefore, privilege (or immunity) may not be preserved vis a vis (other) third parties. Kansas City Fire & Marine Insurance Corp., 351 N.Y.S.2d 767, 768 (App. Div. 1974).

In Go Medical Industries Pty, Ltd. v. C.R. Bard, Inc., 1998 WL 1632525, a patent-infringement action, the defendant sought production of the plaintiff’s communications with its insurance carrier, which included certain opinions of its lawyer that had been provided to the carrier. The plaintiff alleged the common-interest extension of the attorney-client privilege shielded these documents from discovery. The court in Go Medical disagreed, finding that the plaintiff and its insurance carrier did not share common legal interests:

Go Medical’s [the plaintiff] purpose in providing these documents to CIC [its insurance carrier] was to try to obtain coverage from CIC for expenses Go Medical would incur in litigation to stop the alleged infringement of its patent. However, whereas Go Medical’s interest is in protecting its patent, CIC has no interest in the [] patent. CIC’s interest in Go Medical’s infringement claim is limited to CIC’s coverage of Go Medical’s litigation expenses. An insurer’s contractual obligation to pay its insured’s litigation expenses does not, by itself, create a common interest between the insurer and the insured that is sufficient to warrant application of the common interest rule of the attorney client privilege.

Id. at *3.

So, can communications with an insurer be conducted in a manner that does not result in a waiver? Certainly, if the insurer acknowledges coverage and takes over control of the defense, unquestionably in that circumstance the insurer is functioning as the insured’s lawyer and is entitled to no less protection. When the insurer has not yet provided full-throated acknowledgement of coverage, the insured and the insurer need to lay a foundation to show that, in the particular circumstance, the exchange of privileged information should not be deemed to be a waiver. To accomplish this, the parties are advised to make clear that there is a purpose related to the settlement or defense of the underlying case that justifies sharing the information – that is, the justifies extending the cone of silence over lawyer-client communications of the policyholder to include the carrier. (The carrier’s merely sharing the hope that the policyholder may win the liability case is not likely to be sufficient basis for proving sufficient commonality of interest. E.g., Shamis, 34 F. Supp. 2d at 893.)

So the issue for all counsel involved – policyholder, carrier, tort plaintiffs, government investigators – is whether a foundation has been established that satisfies a showing that in the particular circumstance disclosure of privileged/work product material is consistent with preserving the confidentiality protections we otherwise protect them with. See Cutchin v. State of Maryland, 143 Md. App. 81 (2002); Metroflight Inc. v. Argonaut Ins. Co., 403 F. Supp. 1195 (N.D. Tex. 1975); Reavis v. Metro Property & Liability Ins. Co., 117 F.R.D. 160 (S.D. Cal. 1987); Bellman v. District Court, 531 P.2d 632 (Colo. 1975); Grand Union Co. v. Patrick, 246 So.2d 474 (Fla. Dist. Ct. App. 1971); People v. Ryan, 197 N.E.2d 15 (Ill. 1964). Some courts have ruled that statements to an insurance adjuster are protected by the work-product doctrine, and thus the plaintiff who later sues the insured making the statement cannot obtain its discovery. In re Fontenot, 13 S.W.3d 111 (Tex. App. 2000); Heidebrink v. Moriwaki, 706 P.2d 213 (Wash. 1985). Some courts have employed seemingly more stringent proof requirements to show that privilege should be preserved. In Re Bevill, Bresler & Schulman Asset Mgmt Corp., 805 F.2d 120, 126 (3d Cir. 1986); Government of Virgin Islands v. Joseph, 685 F.2d 857, 862 (3d Cir. 1982); Sheet Metal Workers Int’l Ass’n v. Sweeney, 29 F.3d 120 (4th Cir. 1994); Ft. Howard Paper Co. v. Affiliated FM Ins. Co., 64 F.R.D. 694 (E.D. Wisc. 1974); Travelers Ins. Cos. v. Superior Court, 143 Cal. App. 3d 436 (1983).

The key lesson is that, if one desires to preserve the privilege (or immunity) that would otherwise attach to a statement shared with an insurance company, the circumstances surrounding sharing the statement should indicate that it is being provided to assist the insurer in the defense or in evaluating the settlement of the claim. E.g., Exxon Corp. v. St. Paul Fire & Marine Ins., 903 F. Supp. 1007, 1010 (E.D. La. 1995). In other words, to the extent that one can show that the insurer’s role is in protecting the interest of the insured, then the communication is more likely to remain protected. If the role of the insurance company is more ambiguous – that is, if it is unclear which hat the insurer is wearing and whether the statement might be used against the insured in service of a denial of coverage – then the risk of a court finding waiver is increased. See Hedebrink, 706 Pl.2d at 220 (Goodloe, J., dissenting) (“The use of the statement for a purpose adverse to the interest of the insured is certainly inconsistent with the claim of privilege upon his behalf.”); see also Vermont Gas Systems, Inc. v. United States Fid. & Guar. Co., 151 F.R.D. 268, 277 (D. Vt. 1993); cf. Great American Surplus Lincs, Inc. v. Ace Oil Co., 120 F.R.D. 533 (E.D. Cal. 1988) (preserving insurer’s privilege re information shared with reinsurer). Ideally, the policyholder and the insurer will enter into an agreement that pledges the insurer will maintain the communication in confidence, is receiving the communication for the purpose of evaluating the defense of the claim or settlement of the claim, and will not use the communication as a basis to deny coverage to the insured (subject to the insurer’s being able to use the documents in defense of a failure-to-settle bad-faith claim and allowing the insurer to seek the identical discovery in a coverage case against the insured, though without being able to argue that sharing the information effected a waiver). Such an approach differentiates the insurer's white hat and black hat and allows the policyholder's privileged information to be kept under the insurer's hat.

Posted by Marc Mayerson at 4:08 PM | Comments (8) | TrackBack

August 22, 2006

Conflict of Laws and Insurance Disputes: Choice of Law or Choice of Outcomes?

Most insurance policies are silent as to which state’s substantive law governs their terms. As a result, insurance-coverage lawyers often find ourselves deep into the world of choice of law and conflict of laws, a subject most of us sidestepped in our law-school education. Conflicts issues are (largely) untethered from the merits yet can be outcome determinative, so it is crucial to understand and focus on choice-of-law principles in complex insurance disputes, which can yield the application of different state laws within a single case to issues of contract formation, performance, and bad faith.

There are two paradigmatic approaches to choice of law, but nuances in every state affect the analysis. What one can call the First Restatement or lex loci contractus approach looks to some formal act involved in the making of a contract and holds that the location of that act tells one which state’s law governs. Now more than 75 years old, several states still follow its teachings.

Then there is the Second Restatement approach, promulgated thirty years ago, which is plainly the dominant intellectual framework for choice of law in the US. This looks to the state with the “most significant relationship” between the issue to be resolved and the states affected. See Restatement 2d §§ 6, 188, 193. The Second Restatement analysis proceeds issue by issue, that is, one state’s law can apply to one issue in a case and another state’s law to a different one. (This is a principle called depeçage.)

In the absence of a contractual choice-of-law clause (which in any event is considered merely to be evidence of the proper choice of law and not determinative in and of itself), one can predict the governing substantive law only if one starts with a particular forum in mind. The choice of forum is not directly a selection of the forum’s law; instead, it is a selection of the forum’s rules for choice of law (there being no difference between suing in state or federal court on this issue, Klaxon Co. v. Stentor Electric Mfg. Co., 313 US 487 (1941)).

The choice-of-law question is not what law governs this contract for all purposes but rather what law should govern a particular issue for which there is a difference were one state’s or another’s law to apply. One law can govern a single contract issue or a discrete claims-handling issue, all depending on the interests of the state involved. Typically, the law of the forum applies unless and until a party demonstrates that another state’s law should apply to a particular issue. E.g., Trostel & Sons Co. v. Employers Ins. of Wausau, 576 N.W.2d 88 (Wis. Ct. App. 1998). (Note also that some states have enacted choice-of-law statutes that will supersede the common-law choice-of-law analysis, so long as their application passes muster under constitutional principles. See generally Sangamo Weston Inc. v. National Surety Corp., 414 S.E.2d 127 (S.C. 1992). )

The court’s selection of a given state’s law can be change the result, which introduces great instability in the relationship between insureds and carriers given that a race to the courthouse may lead to one result (coverage) or the other (none). To be concrete, in one matter I handled for the Michigan subsidiary of an Illinois corporate parent, we considered suing in South Carolina (where one of the carrier defendants was located), which would have resulted in the application of Georgia law (where the broker was located) and which we thought would be relatively favorable; instead, we sued in Illinois and argued successfully for the application of Illinois law to the contract (which we obviously perceived to be a bit more favorable than Georgia law). See generally Babcock & Wilcox Co. v. Arkwright-Boston Manufacturing Mutual Ins. Co., 867 F. Supp. 573 (N.D. Ohio 1992); Gabe's Construction Co. v. United Capitol Insurance Co., 539 N.W.2d 144 (Iowa 1995) (additional-insured issues); Auto Europe, LLC v. Connecticut Indemnity Co., 321 F.3d 60 (1st Cir. 2003) (location of subsidiary in forum an important contact even where parent negotiated policy). In that case, we were seeking insurance recovery for a nationwide product-liability problem, involving possible death cases and a nationwide, multi-industry product recall and replacement program involving the Consumer Products Safety Commission (CPSC). That on the same facts it was possible to apply any of Georgia, Illinois, or Michigan law underscores the malleability of the issue as well as the importance of considering carefully choice-of-law in deciding how to manage insurance recovery. See Piper Aircraft Co. v. Reyno, 454 U.S. 235, 250 (1981) (“Ordinarily, these plaintiffs will select that forum whose choice-of-law rules are most advantageous.”).

Additional complexity is introduced when one considers insurance bad-faith issues or similar remedial measures that may exist both at common law and as a matter of statute in individual states. The question in part concerns due process: does the state legislature have the power to regulate the conduct at issue? The question may also involve choice of law: does the state’s law apply to the transaction at issue? Ever since the US Supreme Court decision of Allstate Ins. Co. v. Hague, 4498 U.S. 302 (1981), which was a 4-1-3 decision (with 1 recusal), the analysis has been collapsed into the choice-of-law inquiry alone, eschewing examining the power of a state to regulate conduct. As the Third Circuit has explained:

[T]he relevant issue is the constitutionality of a choice of substantive law (not constitutional limitations on the permissible scope of a state’s substantive law). In our case we must ask whether New York’s substantive law would constitutionally apply to the facts we review, not whether New York could permissibly choose to apply its law (the choice of which substantive law to apply being an issued reserved to Pennsylvania law).

Budget Rent-a-Car System, Inc. v. Chappell, 407 F.3d 166, 176 (3d Cir. 2005).

Through the 1940s and 1950s, there was a series of US Supreme Court cases that approached these issues by looking at Due Process, Equal Protection, and Full Faith and Credit. Some of these cases have fallen into disfavor under Hague but others were cited in Hague and thus have continued vitality. E.g., Watson v. Employers Liability Corp., 348 U.S. 66 (1954). I have argued in a case that Watson dictates that the forum (Virginia) state’s statute on bad faith applies to benefit the (former) Virginia subsidiary of a D.C. company that purchased insurance from a New York company and that suffered a fidelity loss through the operation of a (sub)subsidiary in New Hampshire. On its face, the statute applied to admitted insurers doing business in the state (as was true in my case), and we posited that the legislature meant to protect Virginia citizens from the misdeeds of foreign, but admitted, insurers. While we could run that argument under choice-of-law principles, e.g., Babcock & Wilcox, 867 F. Supp. 573, to me it makes more sense to approach the matter as one of the scope of legislative authority, which is what Watson speaks to.

The Supreme Court’s decision in Watson is not a choice-of-law case but rather concerns the constitutionality of applying a state insurance statute. Watson involved Louisiana’s direct-action statute, which conflicted with a provision in the insurance policy requiring that no action could proceed against the insurer until the underlying tort claim was resolved. Given that the dominant approach to selecting which law to apply involves consideration of which state “‘would have the strongest interest in seeing its laws applied to the particular case,’” United Western Grocers, Inc. v. Twin City Fire Ins. Co., slip op. at 9550 (9th Cir. Aug. 14, 2006) (citation omitted), Watson remains relevant in assessing state interest.

At issue there was a bodily injury claim stemming from the use in Louisiana of a home hair-care product manufactured by an Illinois subsidiary of a Massachusetts company where the insurance policy was negotiated and issued in Massachusetts and delivered in Massachusetts and Illinois. “The basic issue raised . . . . is whether the Federal Constitution forbids Louisiana to apply its own law and compels it to apply the law of Massachusetts or Illinois.” 348 U.S. at 69. The plaintiff was a tort victim with no privity of contract seeking to force the insurer to provide coverage to the defendant-tortfeasor, the Illinois company.

The Supreme Court ruled that Louisiana had an interest in applying its law because the tort victims, while strangers to the contract, were Louisiana residents who obtained medical care in Louisiana and drew upon other Louisiana private and public services in connection with their injuries. “Where, as here, a contract affects the people of several states, each may have interest that leave it free to enforce its own contract policies . . . . [M]ore states than one may seize hold of local activities which are part of multistate transactions and may regulate to protect interests of its own people, even though other phases of the same transactions might justify regulatory legislation in other states.” 348 U.S. at 73, 72.

As Watson anticipates, coverage disputes can involve the application or potential application of the law of more than one state within a given case. Two recent federal district court decisions addressed choice of law in the context of both coverage questions and alleged bad-faith conduct. A comparison between them highlights the vagaries of judicial outcomes in this area. (Choice-of-law decisions are invariably fact bound, so it is always difficult to conclude that rulings are inconsistent.) In one case, an out-of-state statute was held not to be available for bad-faith conduct by claims handlers occurring in that jurisdiction; in the other, while the bad-faith acts took place in a different state – the jurisdiction whose law plainly governed the coverage questions – the court nonetheless applied the law of bad faith where the effects of that conduct were felt and thus afforded a more vigorous remedy to the policyholder who had moved to a different jurisdiction after the policy period.

In Cecilia Schwaber Trust Two v. Hartford Accident & Indem. Co., 2006 WL 1888691 (D. Md. June 26, 2006), the policyholder sought coverage as construed under Maryland law with regard to a property located in Baltimore but sought to impose bad-faith liability on the insurer based on the location of the insurer’s claims handlers (Pennsylvania). The federal district court held that Maryland had an affirmative policy against allowing first-party bad faith claims (that is, claims for unreasonable denials of coverage), which the policyholder sought to side-step by arguing that the location of the wrong at issue – bad-faith claim denial – occurred in Pennsylvania, whose law should apply under principles of lex loci delicti. The court ruled, however, that although Pennsylvania’s bad-faith scheme is implemented pursuant to a statute the question was controlled by what law properly governed the contract/coverage claim. Id. at *3.

Moreover, the court observed:

Plaintiffs are Maryland residents pursuing a claim for damage to a Maryland property under an insurance contract they admit is governed by Maryland law. Maryland has consistently refused to permit tort claims based on bad faith conduct by insurers . . . . I am confident that Maryland would not choose to import tort claims from other states in a case such as this, particularly when those tort claims are not intended to protect Maryland residents..

Id. The court sought to buttress its conclusion by arguing that the mirror-image result would likewise be absurd: that is, if a Pennsylvania policyholder with Pennsylvania property suffered bad faith at the hands of a Maryland-based claims handler, then the Pennsylvania citizen would have no bad-faith remedy. Id. at n.3.

But the problem of analytical symmetry posited by the Schwaber court does not exist: there is nothing inconsistent for choice-of-law purposes in applying Pennsylvania law on claims-handling conduct to claims handers dealing with Marylanders and applying Pennsylvania law also to claims handlers dealing with Pennsylvanians, so long as the claims handlers in each instance are located and licensed in Pennsylvania. Pennsylvania can well have an interest in ensuring that all insurance operations conducted in its state conform to its standards. (New York for example has always sought to require licensed insurers to conform to the standards of New York wherever they may operate.)

A useful contrast to the Maryland case is another federal court decision decided one week before, Love v. Blue Cross and Blue Shield of Georgia, Inc., 2006 U.S. Dist. LEXIS 42275 (D. Wis. June 20, 2006). In Love, the insured purchased a health-insurance policy in Georgia and was a permanent resident there. Later, the insured moved to Wisconsin, and the dispute concerned the handling of certain bills submitted for treatments received in Wisconsin.

The question presented was whether a Georgia statute applied, which limited bad-faith remedies, or whether Wisconsin common law did. The insured applied for coverage in Georgia, lived in Georgia, and Georgia law applied to construe the policy. The court stated that applying the law of wherever the insured roamed would lead to “confusion, not predictability, in the law.” Id. at *7. Consequently, the court concluded that “predictability of results is fostered when a state’s substantive law applies to a policy issued in that state by a state corporation to a resident of that state, especially when, as here, the policy in question explicitly states that Georgia law should apply.” Id.

Nevertheless, the court concluded that Wisconsin had a strong interest in protecting Wisconsin residents regarding services provided in Wisconsin, even from an out-of-state insurer that issued a policy under out-of-state law to someone who then lived outside the state. Id. at *11-12. This was true even though “a policy issued in Georgia to Georgia residents might well cost less because of the damage caps the [Georgia] state legislature has put in place” and “the processing of the claims occurred in Georgia.” Id. at *9, *12. As the court concluded, “Wisconsin has indicated its belief that bad faith is a tort for which a wide array of damages [should be] available, and it has a strong interest in ensuring that its residents receive full compensation for such torts.” Id. at *19.

That an insurance contract was issued and delivered in Massachusetts did not preclude the application of Louisiana law in Watson, where Louisiana had a more direct and concrete interest in the particular dispute before the court. A Maryland policyholder suffering bad faith at the hands of Pennsylvania claims handlers perhaps should have the same remedies that a resident of Pennsylvania would have in the same circumstances, Schwaber notwithstanding. The former Georgia policyholder in Love was found to have the same remedies available as Wisconsin residents because the impact of the insurer’s alleged post-policy bad-faith conduct occurred there, even though performance otherwise would be gauged under Georgia law.

The choice-of-law issue, albeit seemingly divorced from the merits, can determine who wins or loses a coverage case. See Fluke Corp. v. Hartford Acc. & Indem. Co., 7 P.3d 825 (Wash. App. 2000), aff’d, 34 P.3d 809 (Wash. 2001) (finding insurance coverage for punitive damages following choice-of-law analysis). Given the current regime of state-by-state regulation of the insurance industry and the absence of choice-of-law provisions in policies, fighting over which law to apply (and to which issues) is one more crucial battle in complex insurance disputes.

Posted by Marc Mayerson at 5:39 PM | Comments (3) | TrackBack

June 5, 2006

Discovery of Other-Insured Claim Files in Insurance and Bad-Faith Disputes

Among the typical skirmishes in insurance-coverage litigation is the scope of discovery. In seeking discovery in insurance-coverage cases and for insurance bad-faith claims, policyholders seek information from insurers about the underwriting of the policy at issue and the carrier’s handling of the policyholder’s claim for coverage. Disputes arise once the policyholder moves beyond those materials to information showing the general practice of the insurer, how the insurer’s response to the particular insured compares with how it has handled other claims, and the insurer’s own understanding of the policy language as evidenced through claims-handling manuals, training materials, and other types of interpretative aids. See generally Saldi v. Paul Revere Life Ins. Co., 224 F.R.D. 169 (E.D. Pa. 2004); Colonial Life v. Superior Court(Perry) 31 Cal. 3d 785 (1982); Carey-Canada v. Cal. Union Ins., 118 FRD 242 (D.D.C. 1986). One recurring subject has been other-claims information, that is, information in claim files dealing with other insureds.

Policyholders argue that such extrinsic evidence is both discoverable and potentially admissible. A recent case from the Federal Court in the District of Columbia had occasion to address the discoverability information from insurers that is stored electronically. In J.C. Associates v. Fidelity & Guarantee Ins. Co., 2006 WL 1445173 (D.D.C. May 25, 2006), Magistrate Judge John M. Facciola ordered the production of various “other claim” file information in the context of a dispute over application of the “absolute pollution exclusion.” In the earlier days of environmental coverage litigation, policyholders and insurers reached détente on production of the “ten and ten” – the ten oldest environmental claim files and the ten most recent. In this era of ediscovery, however, the J.S. Associates case looked more generally to information that was stored electronically.

In addressing the relevance of claim-file information in general, Magistrate Judge Facciola ruled:
[

T]he information plaintiff seeks is clearly relevant. For example, information as to how defendant interpreted the absolute pollution exclusion would qualify as an admission under Rule 801 of the Federal Rules of Evidence and relevant to the claim presented by plaintiff if that interpretation is different from the interpretation that the defendant is asserting in this case.

Id. at *1. The insurer had searched its computerized index of its 1.4 million claim files, which yielded 454 similar claims. The originals were not stored in electronic format, and the court considered the costs of manually reviewing the 454 claim files for relevant information as against the amount in controversy, $124,000. To balance the competing interests, the court required the insurer to scan the originals into a searchable format and directed it to search that population using the terms “1) pollution, 2) pollutant, 3) pesticide, and 4) insecticide.” Id.

For any of the 454 converted files that contained one of the search terms, the insurer was required to manually review the material for privilege. The insurer further was told to log the costs of the privilege review, but to count attorney time only for work “that requires an attorney’s skill and judgment.” Id. at *2. Citing the judge’s own prior decision in McPeek v. Ashcroft, 202 F.R.D. 31, 34 (D.D.C. 2001), the court reserved ruling on further discovery and the costs of any such discovery.

While the law is not uniform, the J.C. Associates decision is consistent with courts that recognize that extrinsic evidence from insurance companies may be offered to show (i) an ambiguity or uncertainty in policy terms, (ii) a coverage-promoting meaning when considered in context, or (iii) the reasonableness of the insured’s proffered construction. The evidence may also block a carrier from advocating a coverage-defeating construction in the particular case. Statements by the carrier may constitute admissions, as Judge Facciola found, or statements against interest. E.g., Gerrish Corp. v. Universal Ins. Co., 947 F.2d 1023 (2d Cir. 1991); Phoenix Ins. Col. v. Glens Falls Ins. Co., 253 F. Supp. 1014, 1019 (M.D. Fla. 1966) (state filings); Greer v. Northwestern Nat’l Ins. Co., 743 P.2d 1244 (Wash. 1987); Allegheny Airlines Inc. v. Forth Corp., 663 F.2d 751, 755 (7th Cir. 1981); Aetna Cas. & Sur. Co. v. Haas, 422 S.W.2d 316, 320 (Mo. 1968); Grinnell Mut. Reinsurance Co. v. Voeltz, 431 N.W.2d 783, 787-89 (Iowa 1988); Ford Motor Co. v. Northbrook Ins. Co., 838 F.2d 829, 833 (6th Cir. 1988).

More generally, “the interpretation given to the same contract by one of the parties in its dealings with third parties . . . has some weight – as demonstrating the past interpretation of at least one of the parties, and also suggesting the reasonableness of that interpretation.” Tymshare, Inc. v. Covell, 727 F.2d 1145, 1150 (D. C. Cir. 1984) (Scalia, J.).

The policyholder’s burden is to offer a construction of the policy language that is both linguistically permissible and reasonable. In discharging its burden of showing a reasonable construction, a policyholder’s proffering extrinsic evidence out of the mouths of insurer witnesses or from their pens or keyboards can be helpful. As one court stated in a related context, “[a]ny suggestion that an insured’s identical interpretation is unreasonable is absurd.” Montrose Chem. Corp. v. Admiral Ins. Co., 5 Cal. Rptr. 2d 358, 369 (Cal. App. 1992).

Often judges seem to take the position that they understand what a particular policy provision must mean when they see it. But that is not the relevant legal question; the task for the judge is not to pick the best construction or the one he or she thinks makes the most sense. Rather, the hermeneutical task is: what construction does the language admit and is the construction being offered a reasonable one? To this end, evidence from claim files and other materials from insurers sheds light – and thus is discoverable and potentially admissible on motions for summary judgment and at trial.

Posted by Marc Mayerson at 5:05 PM | Comments (2) | TrackBack

March 19, 2006

Witness for the Prosecution: Me!

Insurance lawyers face a dilemma in that we sometimes can be called as witnesses in bad-faith trials. As a result, policyholder counsel like me need to consider whether we should be the person who interacts with the insurance company’s representatives, for we risk being disqualified from serving as trial counsel for our clients.

The potential for disqualification of the policyholder's lawyer stems in part from the fact that settlement discussions with the insurance company are admissible in bad-faith cases. Many lawyers and claims handlers seem surprised that settlement discussions to resolve an insurance claim constitute evidence in bad-faith cases and point to the settlement “privilege” as a shield.

But like the heffalump and the griffin, the settlement privilege is the stuff of myth: in the absence of an actual confidentiality contract between the parties that specifies that all communications for settlement are inadmissible for any purpose and in any proceeding, e.g., Tower Action Holdings, LLC v. LA County Waterworks Dist., 129 Cal. Rptr. 2d 640, 647 (Cal. App. 2002), communications during the course of settlement discussions are admissible for any purpose other than proving liability on the claim itself. See Federal Rule of Evidence 408. Indeed, Rule 408 states expressly that settlement-related discussions are admissible for “another purpose.”

Evidence of the insurer’s conduct during negotiation of a settlement of the insured’s (or a third-party’s) claim may be admitted at trial for purposes other than proving the insurer’s liability to pay under the contract. E.g., Crackel v. Allstate Ins. Co., 92 P.3d 882, 893 (Ariz. App. 2004); see also ESPN Inc. v. Office of Comm’r of Baseball, 76 F. Supp. 2d 383, 412-13 (S.D.N.Y. 1999); American Re-Insurance Co v. United States Fid. & Cas. Co., (N.Y. App. Div. June 2, 2005).

Insurers’ settlement communications and conduct are relevant evidence. Insurers must negotiate with their insureds in good faith, neither providing "lowball" offers nor "hoping the insured will settle for less," Zilisch v. State Farm Mut. Auto. Ins. Co., 995 P.2d 276, 280 (Ariz. 2000), nor failing “in good faith to effectuate prompt, fair and equitable settlements of claims” nor failing to provide “reasonable explanation of the basis . . . for the offer of a compromise settlement” nor compelling insureds to “institute litigation” where they recover substantially more than what the insurer has offered. E.g., Unfair Claims Settlement Practices Act, A.R.S. sec. 20-461(A)(6), (A)(7), (A)(14). A policyholder’s means of proof that its insurer violated these various obligations during the process of adjusting the claim is to offer evidence of how the insurer sought to negotiate the claim. Evidence during settlement or during the claim-adjustment process, therefore, is admissible to prove undue delay or bad intent or for impeachment of the insurer’s witnesses. E.g., Southwest Nurseries LLC v. Florists Mut. Ins. Inc., 266 F. Supp. 2d 1263 (D. Colo. 2003); Bower v. Stein Eriksen Lodge Owners Ass’n Inc., 201 F. Supp. 2d 1134, 1139 (D. Utah 2002) (while denying admission of the particular evidence, ruling that “[e]vidence of a party’s bad faith may fall under ‘another purpose’ [under Rule 408].”). All this evidence goes to the insurer’s independent obligations to conduct itself in good faith, rather than its liability for the claim itself (which is the purpose for which Rule 408 limits the admission of evidence). (Fed. R. Evid. 105 allows for a party to ask the court to provide a limiting instruction to the jury making this clear.)

While policyholders may welcome that this type of evidence can be admitted in the litigation against the insurance company, the next question is what is that evidence and who are the witnesses? The reality is that the policyholder’s lawyer may be the person who on behalf of the policyholder witnessed the insurer’s course of conduct during settlement negotiations. If this is so, then there is risk that the lawyer will be disqualified from representing the policyholder in the insurance litigation for he or she may be a percipient witness at trial of the insurance bad-faith claim.

This is the question that was presented in a recent case, Carta v. Lumbermen’s Mut. Cas. Co., __ F. Supp. 2d __, 2006 WL 595496 (D. Mass. March 13, 2006). In general, a lawyer representing a party at trial is not allowed to be a witness because it can prejudice the other side and confuse the jury.

Nevertheless, motions to disqualify policyholder counsel in such circumstances are highly disfavored for the obvious reason that they can be offered not for reasons of fairness and the appearance of neutrality of court proceedings but rather for tactical advantage and harassment. “Thus, it is clear that disqualification should be allowed only when ‘absolutely necessary.’” Carta, 2006 WL 595496 at *4.

In Carta, the court described the anticipated scope of testimony of the plaintiff’s lawyers:

The proposed testimony of the plaintiff’s lawyers is certainly relevant and material – indeed, her two attorneys are the only people who will be able to testify on the plaintiff’s behalf about the settlement negotiations with the defendants, the correspondence that went back and forth between the parties, the meetings that were had between the plaintiff’s counsel and defense counsel and the strategic decisions made during the settlement process. Even the plaintiff herself likely would not be able to testify about such matters since they were undertaken by the attorneys themselves, not by the plaintiff, and they involve technical legal nuances that the plaintiff herself probably would not understand.

Id. at *5. The Carta court furthermore rejected (in my view, too quickly) the lawyers’ argument that proof of the bad-faith case would come solely from the mouths and pens of the insurer’s witnesses – so the policyholder’s representatives’ testimony would be unnecessary.

Where as in Carta the policyholder is willing to hamstring its own case by limiting the scope of proof that may be offered, the court should be more chary in disqualifying counsel and should defer pulling the trigger until absolutely necessary (that is, defer until it is certain there is actual prejudice to the insurance company rather than merely a prospect of prejudice). Courts should also be leery of permitting the insurance company’s witnesses to prevaricate necessitating rebuttal through the testimony of the policyholder’s attorney.

An adequate remedy in most circumstances is simply to prevent the policyholder’s counsel from testifying at the trial, even if that limits the scope of proof of the bad-faith claim. What Carta also teaches – along with the admissibility of settlement discussions – is that the policyholder (or its counsel) should be mindful in structuring the interactions with its insurer to make sure that it has the witnesses it wants at trial. (The policyholder should be mindful also that all its dealings with the insurance company – including its settlement correspondence – are trial exhibits.)

Dealing with insurance companies in the resolution of complex and contentious claims requires, as in chess, that one see the whole board, which includes understanding the risk that the policyholder’s selected counsel might later be the target of a motion to disqualify as a key witness to the insurance company’s bad-faith tactics.

Posted by Marc Mayerson at 3:41 PM | Comments (3) | TrackBack

March 12, 2006

Aloha to Unasserted Coverage Defenses: Waiver, Estoppel, and Mend the Hold in Insurance Cases

Sometimes when an insurance company does not have an obligation to perform, it can be required to pay anyway. There are typically three doctrinal hooks that force insurers to provide coverage in circumstances where the terms of the contract strictly speaking does not require them to do so: waiver, estoppel, and “mend the hold.”

While commonly conflated, the doctrines are different, and there’s no good reason for lawyers for either insurers or policyholders to wrap their arguments in the wrong garb. As the Hawai'i Supreme Court recently reiterated:

In the context of insurance law, . . . the terms “waiver” and “estoppel” have often been used without careful distinction, and thereby abused and confused. . . . The fact that these doctrines are closely akin and often may coexist does not mean they are identical in connotation.

Enoka v. AIG Hawai'i Ins. Co., Inc. (Haw. Feb. 23, 2006), slip op. at 32 (citations omitted). In the Enoka case, the Hawai‘i Supreme Court was forced to “attempt to extricate” the two arguments, which were used “interchangeably throughout [the] opening brief, ” and in doing so the Hawai‘i Supreme Court helpfully collected cases nationwide on both waiver and estoppel in the insurance context. In addition to waiver and estoppel, insurance cases also may involve the less commonly invoked “mend the hold” doctrine, which like the others is a principle whose effect is to preclude an insurer from interposing an otherwise valid ground for avoidance.

By way of background, it is important to recognize that insurers have duties to investigate claims submitted by insureds, may only reasonably assert the grounds they interpose for refusing to perform, and must assist their insureds in perfecting claims against them. Let’s assume that an insurer has done all this and thereafter asserts two valid grounds for refusing to perform, each of which is sufficient to bar coverage. In such circumstances, the insurer quite obviously has no obligation to pay and has breached no duty to the insured.

Let’s say that instead, the insurer asserts two grounds for refusing to pay, but only one is valid. It is still possible (at least in some jurisdictions, including Hawai'i) for the insurer to be liable for first-party bad faith – or flipping the matter around, a valid ground for denial of coverage is not a license to commit bad faith. E.g., Enoka. But in those circumstances, the insurer will not be liable for breach of contract.

But where the situation is reversed, that is, where the invalid ground is asserted, and the valid ground is not, questions of waiver, estoppel, and mend-the-hold arise. Really, the question is whether we should allow the insurer belatedly to assert the valid ground for denial. (The use of the word “belatedly” in the previous sentence is not a question-beg but rather is a matter of definition: these issues do not arise if the assertion of the valid coverage defense is timely.)

There is nothing wrong with an insurer’s electing not to press one defense or another. Moreover, one does not wish to encourage insurers to change tack after they learn that a claim may be expensive (and covered) and seek to refuse to perform on a ground they initially thought to be a trifle. Precluding insurers from resuscitating defenses thus forecloses opportunistic behavior.

Similarly, the law does not wish to induce in insureds a false sense of security, that is, even if the insurer asserts an invalid ground, one can suppose the insured would have understood the ground not to be valid, and therefore have assumed there will be coverage (once the misunderstanding is cleared up and since the insured does not know the insurer will (later) rely on the unasserted, valid ground). Allowing insurers then to raise seriatim defense after defense undermines the objective of security that the insurance is meant in part to provide.

Further, where an insurer interposes only the invalid ground, we do not want to create a situation where an insured acts in a manner different from how it would have acted had the insurer articulated the valid ground for denying coverage; in other words, if an insured changes its position in a fashion based on the nonassertion of the coverage defense, the insurer should not later be permitted to revive the coverage defense that it could have asserted earlier.

A countervailing consideration is that absent unusual circumstances a policyholder that incurred a loss never comprehended within the insurance contract should not be able to manufacture coverage merely from an insurer’s misstep.

These are all principles that animate how insurance law deals with the situation of the untimely assertion of a valid coverage defense by insurers, many of which are explored by the Hawai'i Supreme Court in Enoka.

The Enoka court first addressed whether the insurer in that case “waived” its coverage defense. Sometimes the case law in this regard is confused in drawing a distinction between express and implied waivers: it is not the “waiver” that is express or implied; rather, it is the insurer’s conduct that may be said to waive a defense expressly or by implication. Either way there is a waiver, and the only question is how that waiver is proved at trial. (The idea is similar to the “difference” between an express and implied contract – there is no difference, the only distinction is one of proof.) So it is with “waiver,” and the question is whether the insurer mouthed or wrote the words that it was waiving a particular defense or whether though silent the carrier’s conduct indicates its waiver.

There is no doubt that insurers are free to waive their valid coverage defenses or to make a payment to an insured for a loss that was never covered by the insuring agreement to begin with. (Insurers may give such succor deliberately to foster positive business relationships with the particular insured or may make payment for other reasons, such as obtaining the favor of politicians or insurance regulators.)

Waiver can be evidenced by conduct inconsistent with the assertion of the coverage defense, and courts are more willing to find such waivers when the defense concerns “technical” or “forfeiture” grounds, such as timely notice or proof of loss; courts are less likely to find a waiver if that which is being claimed to have been waived goes to the non-existence of coverage in the first place (i.e., that a loss was not covered by the insuring agreement, without regard to exclusions, etc.).

Accordingly, a demand by an insurer for more information after a deadline for submitting claims whose expiration is readily apparent will be deemed to be a waiver of that deadline. Enoka, slip op. at 37. (One can also conceive of this as an estoppel claim based on the insured’s going to the effort to respond to this request, but its aptness is questionable given that the expiration of the deadline should be as apparent to the policyholder as it is to the insurer which leads to questions of the reasonableness of the insured’s reliance on the insurer’s request for more information, etc. etc.)

But where the carrier’s defense relates to a “coverage issue”, waiver will be less likely to be found from conduct alone. The notion largely goes to the burden of proof on each party’s prima facie case: the insurer bears the burden of showing exclusions and limitations on coverage and as with any affirmative defense it can be waived (in this context classed as a “technical” defense); this is different, however, from an insurer’s “waiving” its objection to the policyholder’s failure to sustain its prima facie case for coverage (classed as a “coverage” issue).

The other common fount for argument that an insurer cannot revive a defense to performance is estoppel, which prevents an insurer from switching positions in its dealings with the particular insured. (One should also be aware of the notion of “judicial estoppel,” which prevents litigants from taking inconsistent positions from case to case where the party had prevailed on a prior ground, Iowa v. Duncan (Iowa Feb. 17, 2006); Whiteacre Partnership v. Biosignia Inc. (N.C. Feb. 6, 2004) (containing a lengthy discussion of estoppel and judicial estoppel).)

Many if not most courts say that estoppel may not be used to “broaden the coverage” granted to begin with, Enoka slip op. at 39. Nevertheless, estoppel can apply to broaden coverage in three circumstances according to the Enoka court:

1. Where the insurer or its agent made a misrepresentation at policy inception that, if corrected at that time, would have enabled the insured to protect itself by buying back an exclusion or purchasing a different policy form;
2. Where the insurer undertook and controlled the insured’s defense in a liability matter without mentioning the coverage issue (and thus prevented the insured from protecting its interest in the conduct of the defense or in settling the matter, a topic on which I have previously commented .
3. Where the insurer has acted in bad faith or relatedly where allowing the change of position would be manifestly unjust.

“Estoppel” requires detrimental, reasonable reliance by the “innocent” party and injury that would result from allowing the change in position. In the first exception, the principle applied is meant to prevent “sharp practices” and is more a pure invocation of equity. (There is also the related idea of estoppel in pais, which applies more broadly in that the party claiming the benefit of the estoppel need not be the same as the person to whom the representation was made (i.e., there is no “mutuality” limitation), as in Free v. Sluss, 87 Cal.App.2d Supp. 933 (1948) and Morton Int'l Inc. v. General Accident Ins., 134 N.J. 1, 629 A.2d 831 (1993) (unnecessarily called “regulatory estoppel” when estoppel in pais is sufficient).) It is also related to a rule of contract construction whereby an promisor will be held to a meaning of a contract in the sense it knew the promisse had understood it at the time of contract formation.

The third situation again is more a broad principle of equity such that where the conduct involved is sufficiently unreasonable, equity will prevent a party from changing its position in order to prevent manifest injustice – i.e., detrimental, reasonable reliance is not needed. (Injury is implicit, otherwise there would be no fight over the issue: de minimis non curat lex.) This type of circumstance may fall also under “quasi estoppel” principles but mutuality is required for quasi-estoppel to apply. See Whiteacre.

Waiver and estoppel are not confined to contracts or insurance contracts, but there is one additional doctrine that is derived from contract law whose operation is similar, which is the “mend the hold” principle. The most important recent articulation of this rule is the opinion for the Seventh Circuit authored by Judge Posner in Harbor Ins. Co. v. Continental Bank Corp., 922 F.2d 357, 362 (7th Cir. 1990). And while notions of estoppel and waiver are sprinkled into analyzes of the rule, the core notion, as stated by the US Supreme Court well more than a century ago, is that:

Where a party gives a reason for his conduct and decision touching any thing involved in a controversy, he cannot, after litigation has begun, change his ground, and put his conduct upon another and a different consideration. He is not permitted thus to mend his hold.

Railway Co. v. McCarthy, 96 US 258, 267-68 (1877). The phrasing “mend the hold” hearkens to wrestling.

The mend-the-hold idea is grounded in contract law (substantive law) rather than being a mere implementation of a procedural rule requiring the articulation of claims or defenses (or elections of remedies). It effectuates ex ante decisionmaking and conduct (which undergirds all contract law), whether that prospective private ordering takes place at the time of contract formation or at the time of contract performance (or non-performance). As the Kansas Supreme Court held, “[s]ince the defendant here, before litigation was commenced, gave only as its reason for nonperformance a ground which was inadequate, it could not, after suit was filed, ‘mend its hold’ and rely upon other and different defenses. It was limited in the trial to the single defense it asserted at the time of breach.” Heidner v. Hewitt Chevrolet Co., 199 P.2d 481, 484 (Kan. 1948); see also Coporacion de Mercadeo Agricola v. Mellon Bank Int’l, 608 F.2d 43, 348 (2d Cir. 1979); Western Grocer Co. v. New York Oversea Co., 28 F.2d 518, 520-21 (N.D. Cal. 1928).

Mend-the-hold should have particular force in insurance cases, as the Seventh Circuit found in Continental Bank, but courts sometime dilute its effect by importing (in error) some of the limits to estoppel more generally, Design Data Corp. v. Maryland Cas. Co., 503 N.W.2d 552, 560 (Neb. 1993). But it is in the insurance context and real-estate-brokerage contexts that the doctrine has most typically been applied. See Sitkoff, “Mend the Hold” and Erie, 65 U. Chi. L. Rev. 1059 (1998). It also prevents insurers from insulating against the application of waiver or estoppel by putting in general language in disclaimer/denial letters or reservation-of-rights letters whereby they purport to reserve generally other grounds that have not been articulated, a practice that if validated by the courts undermines the whole purpose of requiring insurers to investigate claims and state their coverage positions.

Insurers are supposed to be the masters of the contracts they sell, and all three of these doctrines create incentives for insurers to do their job right the first time. (They also give insurers incentives to over-articulate defenses to coverage, an incentive that (one hopes) may yield self-correction in the marketplace due to consumer revolt from being greeted with interminable denial-of-coverage letters and regulatory displeasure from such market conduct.) On balance, forcing the prompt articulation of coverage defenses, a corollary of the rule that insurers have the duty to investigate claims, is a good thing, and courts should not hesitate in the individual case to apply waiver, estoppel, or mend the hold, even though an “undeserving” insured obtains coverage from the carrier’s mistake. In the long run everyone – insurers too – benefits from a system that requires insurers, which are responsible for the terms of coverage, sell peace of mind and promptness of performance in the time of need, and have trained forces of claims handlers (paid for by policyholders through the collection of premiums), to both put up and shut up.

Posted by Marc Mayerson at 5:17 PM | Comments (2) | TrackBack

February 19, 2006

The Risks of the Seas and of Federal Courts Seizing -- or Being Seised of -- Jurisdiction

Insurance contracts typically are creatures of state law. As a result, unlike other kinds of complex litigation, insurance-coverage disputes often are litigated in state, not federal, court. There are exceptions to this where there is diversity jurisdiction, though in complex, multiparty coverage cases it is often unusual for there to be complete diversity between and among all the parties.

Insurance disputes can end up in federal court under admiralty jurisdiction, which provides a jurisdictional hook to get into federal court where the insurance is maritime in character – or what is sometimes referred to as “salty.” There are traditional forms of maritime insurance that are subject to federal jurisdiction, such as hull, protection and indemnity, and cargo. Other forms of coverage may have a relationship to maritime risks, and parties may fight over getting into federal court and having federal admiralty law apply.

Where policies are not expressly maritime – or are combination policies with some maritime and traditional non-maritime coverage parts – there is a fair amount of uncertainty as to whether a case should be in federal court. The Second Circuit confronted these issues in Folksamerica Reinsurance Co. v. Clean Water of New York Inc. (2d Cir. June 30, 2005), a case that may well have impact on whether disputes associated with hurricane Katrina will be subject to federal-court jurisdiction, even though the particular facts concerned a bodily injury claim brought by a worker cleaning a vessel.

Clean Water was one of several entities covered under the policy at issue, which contained both a “Shiprepairers Legal Liability” section and a Comprehensive General Liability section. This package policy had combined limits for both sections, and a single premium for the policy as a whole. It was the insurer that argued for admiralty jurisdiction, arguing that it had a stronger basis for a misrepresentation defense under the standards of federal admiralty law.

The Second Circuit’s opinion is a lengthy tour of the issues concerning the standards for divining which types of contracts are sufficiently salty as to qualify for admiralty jurisdiction. The court characterized the question before it as a seemingly “simple inquiry: Is the Policy a maritime contract giving rise to admiralty jurisdiction?” Slip op. at 5. The federal courts possess a unique lawmaking authority under Article III for admiralty matters, with the essential idea being that it is important to have a uniform law for maritime matters even in the absence of Congressional action. This power stems from the need to “protect maritime commerce,” (p. 6). In the case before it, the dispute concerned “an insurance claim based on a ship-maintenance-related injury sustained by a ship oil-tank cleaner aboard an ocean-going vessel in navigable waters.” (p. 8)

Nevertheless, the coverage had little to do with maritime issues: the question concerned ordinary CGL coverage. While a portion of the package policy unquestionably was maritime in character, the coverage under which the dispute arose was the general-liability section, and on this basis the district court found the policy to be divisible and that the nonmaritime aspects predominated (and thus there was no jurisdiction).

The Second Circuit reviewed recent Supreme Court jurisprudence that it believed undermined aspects the prior Second Circuit precedent. In general, “admiralty jurisdiction will exist over an insurance contract where the primary or principal objective of the contract is the establishment of ‘policies of marine insurance,’” (p. 12) but positing the issue this way obviously is circular.

Courts typically have looked at whether the maritime aspects predominate or whether they are incidental. The Second Circuit here found there was “nothing intrinsically ‘shore side’ about a CGL policy.” (p. 15). Instead, the keys are the terms of the insurance and the nature of the business insured, with the label or form of the policy not being determinative. (p. 16-17)

In the case at hand, the policy excluded typical or traditional maritime risks, though the court found ultimately an overlap in the coverage provided for premises/operations, products, completed-operations, pollution, and incidental-contract coverage. While concluding that the contracts coverage was not maritime, the Second Circuit found that the other portions were in the circumstances maritime in nature.

In Clean Water, the insured’s repair and maintenance operations on seagoing vessels implicated marine issues, and the insured’s replacement of parts on the ship in its maintenance activities similarly were maritime. As the court stated, “[t]he risk of injuries from, and damage to, a ship after defective or faulty repair or maintenance is a ‘maritime risk’ that includes the risk of ‘the loss of the ship or goods.’” (p. 22) While this coverage overlapped with P&I coverage, that confirmed rather than confuted admiralty jurisdiction.

In finding that disputes under the policy to be subject to admiralty jurisdiction, the court summarized:

In the circumstances of this case – a contract with two sections, one of which provides fully marine insurance [the shiprepairers legal liability], and the other specifically modified to cover maritime risks – we conclude that the Policy is marine in nature . . . [and that] the primary objective of the policy is to establish marine insurance. (p. 29)

The Second Circuit conceded that part of the policy unquestionably was nonmarine and that the policy did not fall within the traditional categories of marine insurance, yet it found there was a sufficient nexus to the risks of the sea as to merit the exercise of admiralty jurisdiction. The court’s lengthy opinion is not altogether satisfactory in guiding litigants on the question of how much of the policy needs to be maritime in nature and the required nexus between the dispute at issue and the maritime portions of the coverage for federal-court lawmaking to govern and for the federal court to be seised of jurisdiction under 28 USC § 1333(1).

Posted by Marc Mayerson at 3:34 PM | Comments (0) | TrackBack

December 6, 2005

Your Broker May Be Your Friend – But Ain't Your Lawyer

Policyholders often assume they have a confidential relationship with their insurance brokers. Not so.

Communications with or by brokers can become unwelcome pieces of evidence in insurance-coverage cases. Brokers have not been schooled in the need to recognize that their communications constitute evidence, for good or ill. Broker communications often are unhelpful in coverage cases because (with due respect): (i) brokers are not lawyers and so sometimes make casual, overly broad or unduly fuzzy statements about what’s covered or not; (ii) brokers don’t keep up with changing insurance-coverage law in every jurisdiction and the cutting-edge of coverage disputes; and (iii) brokers suffer from bureaucratic capture (that is, bend toward the thinking of insurance carriers). Most courts hold that insurance brokers are agents of the insured, rather than being true neutrals in a transaction, so insurance-company lawyers will argue that infelicities in broker correspondence should be deemed agent-admissions against the insured.

Where the broker is assisting the policyholder in pursuing an insurance claim, everyone needs to understand that the involvement of a broker may destroy the attorney-client privilege and work-product immunity. In a recent case, Sony Computer Entertainment America, Inc. v. Great American Ins. Co., 229 F.R.D. 632 (N.D. Cal. 2005), the court held that the presumption of confidentiality of attorney-client communications was vitiated by the participation of the policyholder’s broker. But the legal rule is not that if any non-lawyer is in the room no privilege attaches; rather, disclosure to a non-lawyer may be consistent with the preservation of attorney-client privilege or attorney work-product immunity if the person is there for a reason in furtherance of the legal representation. Sony’s lawyers, however, failed to make that showing; consequently, the court granted the insurer’s motion to compel discovery.

In contrast to Sony is Miller v. Haulmark Transport Systems, 104 F.R.D. 442 (E.D. Pa. 1984), where the court found that the broker’s presence was necessary to assist counsel in preparing an answer to a complaint. As the court explained:

[T]he presence of [the broker] at the meeting does not constitute a waiver of the privilege as to the contents of that meeting, or the other material sought. [The broker] was instrumental in arranging that coverage, and his purpose at the meeting was to aid in the preparation of an answer. The presence of one so closely related to [the insured] and this [coverage] lawsuit for the limited purpose of aiding the attorneys involved in defending the lawsuit does not void the privilege.

Id. at 445. As the Haulmark court further explained, “As a general matter, the privilege is not destroyed when a person other than the lawyer is present at a conversation between an attorney and his or her client if that person is needed to make the conference possible or to assist the attorney in providing legal services.” Id.

Sometimes the shoe is on the other foot, that is, the policyholder seeks discovery from a managing general agent for the carrier. As with the policyholder’s broker, whether communications involving the MGA are covered by privilege or work product depends on the facts demonstrated. See Great American Surplus Lines Ins. Co. v. Ace Oil Co., 120 F.R.D. 533 (E.D. Cal. 1988). One issue that makes it difficult for insurers to claim privilege or work product in such circumstances is that the ordinary activities of insurance claims people (or MGAs serving as conduits) are not considered to be “in anticipation of litigation,” S.W. Heischman, Inc. v. Reliance Ins. Co., 30 Va. Cir. 235 (1993); Brooklyn Union Gas Co. v. American Home Assur. Co. (N.Y. App. Div. Nov. 3, 2005) -- otherwise the insurer in effect has a business practice of anticipating litigation with its own policyholders, which would be bad faith.

None of the foregoing is meant to gainsay that brokers can play helpful roles or to deny that they serve as important repositories of factual information (cf. UpJohn Co. v. United States, 449 US 383 (1981)). What policyholders and their brokers need to recognize is that, if it is intended that the broker share in the attorney-client privilege (or work-product immunity), the broker’s participation must be demonstrably necessary to the legal representation. In other words, one can cloak communications where the broker is present only as an incident to the lawyer’s need to gather factual information (or to prepare for litigation) or otherwise to formulate confidential legal advice to the client.

In addition to making the specific factual showing in a concrete context, policyholders and their brokers should consider entering into an all-purpose confidentiality agreement, presumably as part of the basic retention arrangement between them. This confidentiality covenant should provide:

1. The broker understands that from time to time the policyholder may become involved in a dispute with its insurance carrier(s).

2. The broker understands that part of its duty to its client is to maintain information that pertains to the policyholder’s coverage and thus might be pertinent to a legal dispute.

3. The broker recognizes that the policyholder (the broker’s client) and its counsel might communicate with the broker as to the facts or issues concerning an insurance dispute.

4. The broker will keep any such communications confidential and limit the dissemination of its involvement with counsel to those employees who need to be aware of the communications for purposes of serving the client.

In the event of a discovery dispute, it is still necessary to make the requisite showing about the particular communications at issue, but it would be helpful to me as policyholder attorney to be able to point to the governing confidentiality agreement to demonstrate that our claim of non-waiver of privilege (or work product) is not an after-the-fact invention by counsel to stifle discovery.

Note: A version of this commentary was published in Insurance Coverage Law Bulletin (January 2006) at 11.

Posted by Marc Mayerson at 1:59 PM | Comments (5) | TrackBack

December 3, 2005

Discovery of Insurer Reserve Information: Implied Admission of Coverage or Attorney Work Product ? Or Both?

One common area of discovery disputes in insurance-coverage cases concerns reserve information from carriers. The policyholder-side thinking goes that it is inconsistent with the insurer’s flat denial of coverage for it to accrue a reserve on the claim, especially a reserve at close to full value. There is some logical and emotional appeal to this “putting your money where your mouth is” discovery, that is, requiring that what the carrier says to the jury be consistent with where it is putting its money.

Of course, a reserve accrued on the claim doesn’t prove conclusively there is coverage: carriers argue that reserves simply reflect litigation risk or that statutory requirements re solvency compel the accrual of reserves – points that go to the weight of the evidence. Carriers are concerned that reserve evidence is prejudicial to their coverage denial in the eyes of jurors (because a reserve seems to be an implied admission of coverage or at least the reasonable possibility of coverage), and so carriers tend to fight assiduously to prevent reserve information from coming to light.

The Supreme Court of West Virginia recently weighed in on the issue, West Virginia ex rel Erie Ins. Prop. & Cas. Co. v. Mazzone (W. Va. Nov. 30, 2005). In Erie, the carrier resisted discovery on the grounds that reserves reflected opinion work product. The court did not reach the question but instead ruled on the more preliminary issue of the relevance of reserves. The court’s discussion of the reserve-setting process in general seems to cast substantial doubt that a viable work-product objection will lie, though the court did not rule this out; more important, the court implies that reserves are of dubious relevance.

While ruling that reserves potentially were discoverable and rejecting the no-discovery rule urged by the insurer, the West Virginia high court directed trial courts to analyze concretely the pertinence of reserve information for the particular case, but with a thumb on the scale against discoverability. As the case syllabus states:

In making a determination in the context of discovery about the relevancy of insurance reserves information, the trial court should take into account the nature of the case, the methods used by the insurer to set the reserves and the purpose for which the information is sought, and only grant requests for disclosure when its findings of fact and conclusions of law support a determination that the specific facts of the claim in the case before it directly and primarily influenced the setting of the reserves in question.

The court did not reject the policyholder position about “implied admission of coverage,” so a policyholder still will be able to argue that reserves indicate the carrier actually believes there is coverage (thus showing the relevance of this discovery); but the court was skeptical that reserves in fact shed light on the question whether coverage is owed.

Ironically, the closer to an implied admission of coverage that a reserve determination becomes the more substantial an insurer's claim of work product would seem to be. The further reserve setting moves away from the merits of the case, the less probative the reserve would seem to be (and concomitantly the less compelling the work-product claim). (Some of these points are developed in the lengthy concurring opinion of Justice Davis filed a week after the majority opinion in Erie was issued.) In other words, the Erie case shows that the claims both of relevance (by the policyholder) and of work product (by the insurer) are directly correlated.

Posted by Marc Mayerson at 12:36 PM | Comments (11) | TrackBack

June 9, 2005

D&O Implications of the AIG Mess

New York’s Attorney General and Insurance Commissioner have filed a civil complaint against AIG, Maurice Greenberg, and Howard Smith. (A copy of the complaint is available at http://www.oag.state.ny.us/press/2005/may/Summons%20and%20Complaint.pdf .) Further insight into the nature of the transactions comes from the SEC’s complaint against a former executive of General Re, who allegedly aided and abetted some of the allegedly fraudulent conduct engaged in by AIG to improve its balance sheet, which made a $144 million decrease in reserves in fourth quarter 2000 look like a $106 million reserve strengthening, and a $187 million decrease the following quarter appear as a $63 million increase in reserves, measures that improved AIG’s appearance to Wall Street and positively affecting its share price. (The SEC’s June 6 complaint is available at http://www.sec.gov/litigation/complaints/comp19248.pdf ) While an increase in reserves decreases an insurance company’s surplus, a positive one-dollar movement in AIG stock price supposedly increases Greenberg’s personal worth by $65 million, according to the NY complaint. Other actions have been filed against Mr. Greenberg relating to AIG, including one filed the same day by Ohio seeking to block his now well-known effort to give several million AIG shares of stock to his wife as the turbulence was increasing. See http://www.kpmginsiders.com/display_reuters.asp?cs_id=133552

Corporate policyholders, directors and officers should monitor these matters because AIG is seeking coverage under the directors’ and officers’ insurance policies that it purchased to protect its directors against claims of liability. According to Business Insurance, “AIG purchased about $125 million of limits, with Great American Insurance Co. of Cincinnati, Ohio, writing the first $25 million layer . . . . Great American often offers primary D&O limits to financial institutions, but the insurer typically does not write primary coverage for other large risks, according to market executives. Warren, N.J.-based Chubb Corp. participates on a low excess layer of AIG's program, according to sources.” See AIG Set to Test Own Cover, BUSINESS INSURANCE (May 16, 2005), at 1, available at http://www.businessinsurance.com/cgi-bin/article.pl? articleId=16843&a=a&bt=aig

Here’s the point: For AIG – or Messrs. Greenberg and Smith – to seek insurance coverage, they likely have to take the position that certain exclusions dealing with fraudulent misconduct (that we can assume appear) do not apply and that certain monetary relief being pursued against them represent covered ‘losses.’ But when AIG does this, it will be admitting that such a construction of the policy language supporting coverage is reasonable, setting the stage for the argument that relative to its own insureds similar constructions are reasonable, yielding the result that as AIG reaches for coverage it exposes itself on the policies it issued. (And
AIG’s own insurers should adopt the inverse tack of looking to AIG’s positions in service of denials of coverage to buttress their arguments that AIG now is making opportunistic arguments seeking recovery here. E.g., Serio v. National Union, 2005 NY Slip Op 03977 (May 17, 2005), available at http://www.courts.state.ny.us/reporter/3dseries/2005/2005_03977.htm. Oh what a tangled web.)

AIG may recognize this box and elect not to pursue the coverage it purchased so as to protect the coverage it sold. But it cannot control Messrs. Greenberg and Smith who no doubt as major shareholders of AIG have an interest in AIG’s not paying claims, but probably have an interest in not paying out of their own pockets for their attorneys (or any settlement or judgment) either. Given the nature of the conduct alleged, it may well be that AIG cannot indemnify these gentlemen pursuant to standard corporate indemnifications, which means that Greenberg and Smith will seek this coverage on their own. (Whether AIG can avoid indemnifying these alleged scoundrels is a tricky question. See Bergnozi v. Rite Aid Corp., http://courts.state.de.us/opinions/ (qnuzep45rti2tom1sweqc5r1)/download.aspx?ID=37080 (Del. Ch. Oct. 20, 2003); Globus v. Law Res. Serv. Inc., 418 F.2d 1276, 1288-89 (2d Cir. 1969). While the individual’s own pursuit of D&O coverage may not be quite the admission against interest that AIG’s seeking this coverage is, it still is probative, given who they were in the company and their knowledge of insurance.

Maybe AIG will commit hari kari on the coverage it purchased in the hope of obtaining the result that both the D&O coverage it purchased does not apply and that Messrs. Greenberg and Smith are not entitled to indemnification under the corporate indemnity. Compare http://www.sec.gov/news/press/2004-67.htm (indicating SEC’s ire at Lucent’s indemnifying its directors/officers). That seemingly would be the company’s best play.

At all events, in coverage disputes henceforth with AIG, Great American, and Chubb, policyholders should be pursuing discovery into the exchanges on coverage.

A final twist bears mention: Throughout Attorney General Spitzer’s complaint, he relies on the individual defendant’s invocation of his right to refuse to self-incriminate under the Fifth Amendment. Of course, in a criminal case, a prosecutor may not invite a jury to assume that the answer to a question that is not responded to on Fifth Amendment grounds supports an inference that the defendant is guilty; in a civil case, that limitation generally does not apply. (See generally Robert Johnston, Inferring Dishonesty: The Fifth Amendment and Fidelity Coverage, available at http://www.spriggs.com/news/pdfs/ACFB9AE.PDF .) But the New York action is a civil complaint, which presumably makes use of Greenberg’s invoking the Fifth fair game to support the inference that the answer would support the violation being alleged. (Query whether the State may sidestep the Fifth Amendment this way, which surely will be litigated in the case.)

But given the crucial use of the refusals-to-answer as an element of proof in the State’s case, one can assume that the D&O insurers will contend that the failure to answer somehow lays the foundation for a breach of the duty to cooperate. See Allstate Ins. Co. v. United Ins. Co., 2005 NY Slip Op. 02419 (March 28, 2005) http://www.courts.state.ny.us/reporter/3dseries/2005/2005_02419.htm. There ordinarily is not an “examination under oath” provision in D&O policies, and one can surely mount the argument that the D&O insurers’ (hypothesized) demand that Messrs. Greenberg and Smith waive their Fifth Amendment protections or sacrifice D&O coverage smacks of bad faith (see Gruenberg v Aetna Insurance Co., 9 Cal 3d 566 (1973); cf. Sakup v. State, 227 N.E.2d 822 (1967) (New York first-party bad faith). This is especially true in the context of an insurance policy with (we suppose) exclusions for fraud and one that lacks an examination-under-oath provision; in other words, it would be incongruous to permit the D&O insurers to deny coverage for refusing to answer questions/breach of cooperation when a crucial purpose of the policy is to protect against claims alleging fraud. Compare Federal Ins. Co. v. Kozlowski, 2005 NY Slip Op 02287 (March 22, 2005) http://www.courts.state.ny.us/reporter/3dseries/2005/2005_02287.htm (requiring insurer to defend and precluding litigation of its rescission claim while liability action against directors and officers were pending).

The ebbs and flow of the related liability and coverage matters here bears monitoring by policyholders and, for the parties involved, careful consideration of the big picture. (For other comments and tracking of the AIG mess, see the White Collar Crime Prof Blog.) These same tensions will arise regarding the application of ERISA fudiciary-liability insurance coverage, since (at least one) ERISA-based class action has been filed against Mr. Greenberg and others.

Posted by Marc Mayerson at 4:42 PM | Comments (6) | TrackBack