Contributed by Troutman Sanders LLP
Insurance is the transfer of risk associated with potential future liabilities in exchange for payment of a premium. This straightforward concept has evolved into a complex market addressing exposures arising out of virtually every business activity. This includes potential exposures for economic loss arising out of the management of a business and the provision of services (D&O and E&O insurance), exposures for bodily injury or property damage (general liability insurance), and exposures to the insured’s own facilities (property insurance). In addition, insurers often share risk with others (through reinsurance) and must minimize risks associated with their handling of claims (bad faith exposures). Given the breadth of the insurance market, economic conditions directly impact the manner in which insurers underwrite coverage, handle claims and resolve disputes with their insureds.
DIRECTORS’ AND OFFICERS’ (D&O) AND ERRORS AND OMISSIONS (E&O) INSURANCE
High-profile instances of corporate mismanagement that are alleged to have contributed to the financial struggles since 2008 implicate D&O insurance. Securities litigation continues to be the primary source of D&O claims, creating underlying liability arising out of merger and acquisition decisions, corporate disclosures and reporting, and management self-interest. Actions by trustees seeking to hold corporate executives liable for the debts of bankrupt corporations are common. New laws and stricter enforcement of existing laws at both the federal and state levels have resulted in increased enforcement actions giving rise to claims under D&O policies. Finally, there is an increasing number of claims against corporate executives in foreign jurisdictions.
Similarly, E&O coverage may be implicated because the professionals involved in corporate decisionmaking (e.g., lawyers, accountants, investment advisors and bankers) are exposed to claims both from corporate management (who look to cast blame upon others) and from investors who suffered financial loss. In addition, while doctors and lawyers historically have been the biggest purchasers of professional liability coverage, the E&O market has developed a number of specialized coverages, including products related to cyber liability.
D&O and E&O insurance is usually written on a claims-made basis, triggering the coverage in force when the claim is made and reported to the insurer. In many circumstances, the interests of the insurer and insured are aligned in seeking to successfully defend the claim in a manner that minimizes liability. As a result, insureds frequently rely upon the expertise of their insurers as they work to resolve claims. Mediation of these claims frequently occurs, where insurers and insureds sit together at the table, unified in their negotiations with underlying plaintiffs. Complications arise, however, when underlying litigation asserts claims which are not covered, seeks the recovery of “ill-gotten” gains, or alleges fraudulent conduct. Similarly, conflicts between insurers and insureds may arise when the claims relate to matters that existed prior to the applicable policy period, involve claims between insureds on the same policy, or involve bankruptcy issues. In addition, these claims often involve an entire tower of coverage (and, sometimes, multiple towers with different lines of coverage), and the involvement of many parties increases the challenges presented.
GENERAL LIABILITY AND PROPERTY INSURANCE
General liability insurance traditionally provided coverage to third parties for bodily injury or property damage taking place during the policy period that was caused by the insured. As a result, general liability policies historically have been implicated by mass tort (notably, asbestos) and environmental claims. Those claims remain a significant source of exposure for insurers. Recent claim activity has also drawn attention to the personal and advertising injury coverage typically found in general liability policies. Insureds have attempted to access this coverage for lawsuits related to “fax blasts,” debt collection, and similar statutes, and there has been an increase in associated coverage disputes. Similarly, although most general liability policies attempt to exclude coverage for solely economic loss, the recent corporate scandals (and the corresponding exhaustion of D&O and E&O coverage) have caused insureds to seek such coverage under general liability policies. Unlike the vast body of law applying to mass tort and environmental claims, the law applying to personal and advertising injury claims is less developed, thereby increasing uncertainty as to the scope of afforded coverage.
General liability coverage is most often written on an occurrence basis; the coverage in place when the injury allegedly occurs is triggered. Determining when the injury occurs (and thus what policies are triggered), and the related issue of what to do when the loss occurs over multiple policy periods, continues to be a significant source of coverage litigation. In addition, the relationships between contracting parties in various commercial scenarios and the interplay of the coverage purchased by those parties is an issue that is frequently litigated, as parties may seek coverage under policies issued to another entity.
Property insurance is most significantly impacted by natural disasters. Notwithstanding the devastation caused by Hurricane Sandy, the property insurance market appears strong. Property insurers, however, continue to closely monitor weather-related data to understand the potential scope and frequency of weather disasters and appropriately price their coverage. Because property insurance generally does not provide coverage for all property-related risks, the scope of various exclusions for certain risks (i.e. flooding, mold, etc.) is often a source of dispute. In addition, property insurance provides coverage for damage to the insured’s own property but generally does not provide coverage for damages associated with loss of use of property. Business interruption insurance addresses such risks. The interplay between the coverage afforded by property insurance and business interruption insurance is an issue that continues to be refined through both litigation and policy language adjustments.
Reinsurance is the method by which insurers transfer their own risk. Reinsurance arrangements can take a number of different forms, involving a single identified risk, a class of risks, or even an entire book of business. In recent years, multinational holding companies have entered into reinsurance arrangements with numerous casualty insurers in which the holding company reinsures environmental or asbestos liabilities associated with general liability claims for policies issued before 1985. This amalgamation of risks through reinsurance arrangements is expected to continue. Unlike direct insurance, reinsurance disputes are rarely resolved in the courts. Instead, most reinsurance contracts have binding arbitration provisions that provide for resolution of all disputes through private arbitration.
Insurers’ conduct in handling claims is governed by state regulations and common law. When insurers allegedly violate those requirements, they are accused of “bad faith.” Most commonly, liability can be imposed upon insurers because they failed to appropriately defend an insured or respond to a settlement demand. In certain circumstances, insurers may find themselves exposed to losses in excess of the applicable policy limits (for example, when an insurer fails to respond to a policy limits settlement demand and the insured suffers a judgment that exceeds those limits). Insureds and underlying plaintiffs sometimes enter into consent judgments and assign policy rights that permit the underlying plaintiffs to proceed directly against insurers. In this circumstance, the underlying plaintiffs focus on the insurers’ claims handling conduct, with the hope that the potential bad faith exposure will motivate insurers to more readily settle claims, even in the face of strong coverage defenses.
Insurance: Dispute Resolution: Insurer - Nationwide
THE FIRM Simpson Thacher & Bartlett continues to be the star firm in the nationwide insurance market. Clients do not hesitate in referring big-ticket insurance and reinsurance matters to the capable hands of the firm's attorneys. The group has a reputation in the market for a track record of very good results. The team furnishes advice to some of the world's most significant insurance groups including The Travelers Companies, Berkshire Hathaway, Equitas and American Nuclear Insurers. Acting for Travelers affiliates USF&G, the team recently secured a high-profile summary judgment before the New York Appellate Division in a historic asbestos case.
Commercial Awareness "They understand our business very well and send updates on the law when it changes."
KEY INDIVIDUALS "Excellent" Barry Ostrager is nationally recognized as "a big name" both in the insurance and the reinsurance fields. Clients recommend him for asbestos bankruptcy cases and praise him for his impressive leadership and willingness to be in the front line in facing difficult points.
"Sophisticated" attorney Mary Kay Vyskocil "stands out" in the nationwide insurance as well as the reinsurance rankings. The scope of her expertise encompasses securities, financial services industry and general coverage disputes. Commentators emphasized that she has "had another really great year, a spectacular year."
THE FIRM This widely acclaimed firm houses a formidable insurance practice, with 15 US-based offices and over 60 worldwide. Dentons has experience in dealing with a diverse range of financial, property and casualty, class action and bad faith coverage cases. Clients praise it for taking a result-oriented approach which they find to be ideal for high-exposure cases. The practice has recently mourned the passing away of eminent insurance practitioner Paul Glad.
Sources say: "Top-notch firm, very good results with them. They are good litigators, good strategists, and they understand the insurance industry."
KEY INDIVIDUALS Highly recommended Reid Ashinoff is "a good strategic thinker on a pragmatic level" according to sources. He has been busy acting for Genworth Financial Wealth Management in several class actions involving federal securities and mortgage-related consumer protection lawsuits.
Cochair of Dentons's global insurance sector, Michael Barr is "strong on strategy, argument, case management and very good in resolution settings as well." He has been heavily involved in cases relating to the financial industry crisis, for example representing Royal Indemnity in a surety-related fraud trial.
Litigator Ronald Kent is a favorite among clients, who comment that "his calm demeanor and good sense of humor only add to the effectiveness of his thoughtful but aggressive approach to litigation." His practice focuses on natural and man-made catastrophic losses, but he has wide experience also in general insurance matters.
The firm recently mourned the passing of market-leading practitioner Paul Glad, one of the deans of the contentious Bar.
THE FIRM Duane Morris is known as a leader in the California insurance Bar. With 20 offices across the USA and international branches in Vietnam, Singapore and the UK, Duane Morris has expanded to affirm its presence globally. The team is prominent in insurance coverage disputes, with core expertise in environmental and professional liability matters.
Sources say: "We found them to be very proficient in arbitration but also in general matters - very bright lawyers and their work is of very high quality."
KEY INDIVIDUALS Philip Matthews is a highly esteemed insurance litigator. He is known as "somebody who pursues a client's case thoroughly and is incredibly professional in doing it." He has recently dealt with the Thorpe Insulation bankruptcy arising out of asbestos cases.
Senior statesman Thomas Newman "knows the business inside and out." He has wide experience in appellate courts, where he argues reinsurance and insurance coverage disputes.
Andrew Gordon enjoys a "good reputation for London market issues." He recently acted for CNA in settling a London market coverage case just before jury selection.
THE FIRM This highly respected practice group advises insurers in big-ticket coverage matters from D&O to environmental. With an extensive domestic coverage, the firm boasts offices in Century City, Chicago, Los Angeles, New York, Phoenix and Washington, DC. Clients speak at length about the team's bench strength that enables it to seamlessly try large and complex cases. Steptoe & Johnson is playing an instrumental role acting for The Hartford in the high-profile NFL concussions case.
Client Service "The firm is highly responsive, outcome-focused and willing to partner with us in finding solutions."
Commercial Awareness "They have great knowledge across the board, and they are very sensitive to the company's particular outlook on cases. There is no need to reinvent the wheel with them."
KEY INDIVIDUALS "Very fine lawyer" James Rocap is an undisputed "leader in his field." He focuses on environmental matters and is frequently chosen to counsel The Hartford in complex insurance cases.
"Very effective lawyer" Roger Warin has a reputation in the market for his insurance work in connection to professional liability matters. Peers describe him as a "formidable" and "tough but fair adversary."
THE FIRM This firm is one of the best in New York and has also carved out a strong presence for itself in the nationwide market. The team is well known for its prominent role in representing prominent insurance clients, such as AIG, Chartis and National Union Fire Insurance. Acting on behalf of the latter, the group secured a victory against Everest Re in connection to a historical environmental cleanup case.
Sources say: "They are really good at what they do. They are good because they are very smart, they have lots of experience and their approach to litigation or arbitration is really very sound."
KEY INDIVIDUALS Edward Krugman combines sound legal knowledge with a sharp analytical mind. Peers would be happy to refer work to him, finding him an "extremely intelligent guy, creative and effective." He has a long-standing insurance and reinsurance expertise, having recently represented Chartis International in a political risk insurance dispute.
"Fantastic" Thorn Rosenthal is recognized as "one of the new leaders in the market." He is involved in insurance and reinsurance disputes domestically and internationally. He is involved in a number of class actions acting on behalf of XL Capital.
THE FIRM Cozen O'Connor has a nationally known insurance practice, with a particular stronghold in Pennsylvania. The group's impressive client portfolio features giant property and casualty insurer Chubb Group and reinsurance companies such as Munich Re and Everest Re. The firm acted for ACE American Insurance against American Medical Response Northwest, seeking coverage for lawsuits relating to sexual abuse allegations.
Commercial Awareness "They are smart, strategic and practical. They are experienced coverage attorneys that listen to the client, have innovative ideas and are results-oriented. They also work well with other insurer counsel."
KEY INDIVIDUALS Stephen Cozen, founder and chairman of the firm, is based in the Philadelphia office. He is highly praised by sources, who describe him as a "very fine lawyer and very fine person." He is experienced in litigating insurance coverage issues on behalf of insurers.
THE FIRM Peers recognize this firm as a key player in the US insurance space, with offices in Washington, DC, San Francisco, Los Angeles, Irvine and New York. The team is recognized as a leader in reinsurance and complex insurance coverage in mass torts from asbestos to medical devices-related lawsuits. The firm has been busy representing ACE in several high-stakes coverage disputes.
Client Service "We have found that C&M lawyers are all experts in their areas and have very good client service ethos."
KEY INDIVIDUALS "Experienced" Clifford Hendler is recognized in the market for playing a front-line role in asbestos disputes. Clients single him out for his "superb" ability to understand their needs and develop productive relationships with adversaries.
Cochair of Crowell’s insurance and reinsurance group, Paul Kalish has a national reputation in connection to reinsurance and insurance coverage asbestos and D&O issues. Clients say: "He is extremely responsive and is prepared for emergencies."
THE FIRM This team is active in insurance coverage matters and reinsurance cases. The group acts for a wide range of market players, including major insurance companies such as ACE and CIGNA. One recent highlight is the representation of Century Indemnity in the ongoing insurance litigation against Montrose Chemical Corporation of California relating to the manufacturing and distribution of insecticide DDT.
Sources say: "They are easy to deal with, strategic and good partners."
KEY INDIVIDUALS Head of the firm's insurance practice Richard Goetz is "one of the best oral advocates" and is "very strategic, thoughtful and very bright," according to sources. Recent clients include Century Indemnity and Resolute Management.
Commentators endorse Tancred Schiavoni as a "bulldog of a litigator." An experienced insurance practitioner, he recently secured a victory on behalf of Resolute Management before the Ninth Circuit allowing insurers to challenge certain bankruptcy reorganization plans in the context of the Thorpe Insulation litigation.
THE FIRM With nine offices nationwide, this insurance outfit is seen to be expanding on a global scale. Market commentators praise the firm for its high standing in reinsurance and insurance bankruptcy-related matters. The group recently secured a win for TIG Insurance in the California Court of Appeal in a reinsurance dispute with Transport Insurance Company.
Client Service "They are willing at any time to make accommodation to provide us with the advice we are seeking." "We have significant contact with them and are able to obtain advice we need on a very quick basis."
KEY INDIVIDUALS Chicago-based attorney Susan Stone is considered "very prominent" in the reinsurance arena. She recently acted for Chartis/AIG in an appellate case involving workers' compensation insurance premiums.
THE FIRM This well-regarded team is spread across the USA with 12 offices from San Diego to New York. The firm handles the full range of insurance coverage matters including D&O, E&O, medical malpractice and toxic tort. Clients heap praise on the attorneys' practical style as well as on their consistent approach across the board. Troutman Sanders recently represented HCC Insurance Holdings and XL Insurance in multiple coverage actions arising out of MF Global Holdings' 2011 bankruptcy.
KEY INDIVIDUALS Gary Dixon is a nationally established insurance practitioner, whose practice focuses on D&O, property and casualty, and financial issues. Clients praise his sensitivity to their needs and his strategic thinking skills.
THE FIRM Hogan Lovells remains a stronghold in the insurance field, with over 40 offices around the world and ten in the USA. Clients speak at length about the group's commitment to their needs and its ability to build solid business relationships. The team represents insurers in coverage matters mainly in the financial and healthcare industries.
Sources say: "Hogan Lovells does an excellent job of being a diligent advocate on behalf of its client."
KEY INDIVIDUALS Litigator David Hensler, based in Washington, DC, is a point person for the firm.
THE FIRM This litigation boutique is known for the deep expertise of its attorneys when it comes to insurance and reinsurance disputes. The team boasts a long-standing relationship with the London market and experience in dealing with life insurance matters. The top-drawer client roster includes Hannover Re, Berkshire Hathaway and Catlin Group.
Sources say: "They are very confident and timely; they are creative and very knowledgeable."
KEY INDIVIDUALS Nick DiGiovanni is a key contact.
Considered "one of the best," James Rubin of Butler Rubin Saltarelli & Boyd LLP has a significant presence in the reinsurance space. Peers observe that he is "effective in arbitrations." He is busy representing Liberty Mutual Insurance in a workers' compensation matter against AIG.
DC-based David Raim of Chadbourne & Parke LLP is a well-established reinsurance practitioner. He recently acted for St. Paul Reinsurance, a subsidiary of The Travelers Companies, in a retrocessional losses coverage arbitration against Scandinavian Reinsurance. Popular with clients, he has the "ability to manage complex, unusual issues arising in reinsurance."
Sources enthuse about Peter Chaffetz of Chaffetz Lindsey LLP, a "very bright and experienced" attorney, who "provides very sound practical advice." He divides his time between complex reinsurance arbitrations and insurance commercial disputes.
Steven Schwartz recently joined Chaffetz Lindsey LLP from Locke Lord. Sources emphasize that Schwartz has a sound knowledge of how the industry works and is "very competent." His practice focuses on reinsurance arbitrations.
Much admired in the insurance arena, Paul Koepff of Clyde & Co US LLP is considered "a true leader" and peers admire him for his amazing track record of arbitration victories. He was engaged in IMG v Westchester Fire, a jury trial in Ohio relating to a coverage suit in an underlying fraud claim alleging loss of property use by a group of investors.
William Shelley recently joined Gordon & Rees, LLP from Cozen O'Connor. He is identified as "terrific, top-flight and very smart" by commentators. He is heavily involved in insurance commercial disputes acting on behalf of major carriers.
Margaret Warner of McDermott Will & Emery LLP is a leading name in the world of insurance representation. Clients highly value that "she is deeply aware of insurance company rights and obligations and is a common-sense businessperson."
Former Dewey & LeBoeuf partner John Nonna of Patton Boggs LLP retains a superb reputation in both the insurance and reinsurance arenas. Sources invariably identify him as a "very good litigator operating at a very high level" who is "preeminent in the field." He recently acted for Tower Insurance Company of New York against Munich Re in a complex reinsurance dispute.
According to sources, James Ruggeri of Shipman & Goodwin LLP is "really extremely well versed in coverage issues and in big, complex cases." His areas of expertise includes environmental and D&O liability issues, with particular knowledge of asbestos cases.