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                   BRIEFING                                                                                              Winter 2011

                   Eastern District Of Pennsylvania Applies Bellefonte Decision And Holds That

                   Expense Is Subject To Limits Of Facultative Reinsurance Contract
                                                                                 REINSURING AGREEMENTS AND
                     SUMMARY In Pacific Employers Insurance Company v.           CONDITIONS
                     Global Reinsurance Corporation of America, the U.S.
                     District Court for the Eastern District of                  In consideration of the payment of premium,
                     Pennsylvania recently followed the Second Circuit’s         and subject to the terms, conditions and limits
                     Bellefonte Reinsurance Company v. Aetna Casualty and        of liability set forth herein and in the
                     Surety Company, 903 F.2d 914 (2d Cir. 1990) decision        Declarations made a part thereof, the
                     in holding that defense costs were included within          Reinsurer does hereby reinsure ceding
                     the limits of a facultative reinsurance contract.           company named in the Declarations. . . .
                   Pacific Employers, as reinsured, entered into a               A. . . . The liability of the Reinsurer, as
                   facultative reinsurance contract with its reinsurer,             specified, in Item 4 of the Declarations, shall
                   Global, reinsuring an umbrella commercial liability              follow that of the Company and shall be
                   policy Pacific Employers issued to Buffalo Forge                 subject in all respects to all the terms and
                   Company. Buffalo Forge subsequently was named as a               conditions of the Company’s policy except
                   defendant in numerous asbestos products personal                 when otherwise specifically provided herein
                   injury lawsuits triggering coverage under the umbrella           or designated as non-concurrent
                   policy. After Pacific Employers made defense and                 reinsurance in the Declarations ….
                   indemnity payments to Buffalo Forge on account
    Philadelphia   of asbestos losses which exhausted the $1 million             E. All loss settlements made by the Company,
                   retention of the facultative certificate, Pacific Employers      provided they are within the terms and
                   billed Global for defense and indemnity which it                 conditions of this Certificate of Reinsurance,
     Pittsburgh                                                                     shall be binding on Reinsurer. Upon receipt
                   contended were covered by the reinsurance contract.
                                                                                    of a definitive statement of loss, the
                   When Global declined to pay, Pacific Employers filed
      Princeton    suit for breach of contract and declaratory judgment
                                                                                                                  CONTINUED ON PAGE 2

                   under the facultative certificate. Pacific Employers
                   asserted that Global was obligated under the                  Inside this Briefing
                   contract for up to $1 million in loss and, in                 Eastern District Of Pennsylvania Applies Bellefonte
                   addition, a pro rata share of expense. Global filed           Decision And Holds That Expense Is Subject To Limits
                   a counterclaim seeking a declaration that its                 Of Facultative Reinsurance Contract
                   maximum liability to Pacific Employers under the              Ninth Circuit Vacates Arbitration Award On Grounds
                   facultative certificate was limited to $1 million in          That Forum Selection Clause Was Not Followed
                   loss and expense combined.                                    Second Circuit Affirms Trial Court Decision
                   The relevant provisions of the facultative certificate        Granting Reinsurer Judgment On The Pleadings
                                                                                 Finding Follow-The-Fortunes Does Not Expand
                   are as follows:
                                                                                 Reinsurance Agreement’s Term Of Coverage
                      ITEM 4 – REINSURANCE ACCEPTED                              New Jersey Supreme Court Holds There Must Be
                      $1,000,000 ANY ONE OCCURRENCE AND                          Substantial Nexus Between Claim And Excluded
                      IN THE AGGREGATE WHERE APPLICABLE                          Conduct For Exclusion Of Claims “Arising Out Of”
                      PART OF $4,000,000 WHICH IS EXCESS OF                      Excluded Conduct To Apply
                      $1,000,000 WHICH IN TURN IS EXCESS OF                      Note: The information contained in this Thorp Reed &
                      UNDERLYING INSURANCE.                                      Armstrong, LLP Insurance & Reinsurance Briefing is intended
                                                                                 solely for the education and information of the recipient
                                                                                 and should not be construed as legal advice or opinion.
BRIEFING                    Eastern District Of Pennsylvania Applies Bellefonte Decision And Holds That
                            Expense Is Subject To Limits Of Facultative Reinsurance Contract
                            CONTINUED FROM PAGE 1

                                 Reinsurer shall promptly pay its proportion of               Further, the court held that the “subject to the terms,
                                 such loss as set forth in the Declarations. In               conditions and limits of liability set forth herein and in
                                 addition thereto, the Reinsurer shall pay its                the Declarations”(emphasis added) language from the
                                 proportion of expenses (other than office                    Reinsuring Agreements and Conditions section of the
                                 expenses and payments to any salaried                        contract (which applied to Condition E) made clear that
  Insurance & Reinsurance

                                 employee) incurred by the Company in the                     the terms of Condition E were subject to the limits of
                                 investigation and its proportion of court costs              liability in the Declarations, noting that the only “limits
                                 and interest on any judgment or award, in the                of liability”provision in the contract was the $1 million
                                 ratio that the Reinsurer’s loss payment bears to             limit in Item 4 (Reinsurance Accepted).
                                 the Company’s gross loss payment. . . .
                                                                                              The court made no reference to the “follow-the-
                            The issue for the court to decide was whether expense             fortunes”language in Condition A. It does not appear
                            was subject to the $1 million limit of the reinsurance            Pacific Employers argued that this language, in
                            contract. Pacific Employers argued that the $1 million cap        conjunction with Condition E, required Global to pay
                            did not apply to expense. Global asserted that it did.            expense in addition to the $1 million limit applicable
                                                                                              to losses.
                            After discussing Pennsylvania law on interpretation of
                            contracts, the court found that the overall $1 million limit      The court observed that this case is similar to the Second
                            clearly and unambiguously included expense because it             Circuit’s Bellefonte decision in which that court held that
                            defined Global’s maximum exposure under the contract.             reinsurers were not liable for defense costs beyond the
                            Thus, the court held, the reinsurance agreement provided          limits outlined in the reinsurance contracts. The parties
                            a $1 million total cap on Global’s liability for loss, expense,   disputed the authoritative impact of Bellefonte and its
                            or any combination of the two. The court stated that if the       progeny, but the court characterized the case as
                            parties had intended to exclude expense from the total            constituting well reasoned, persuasive authority,
                            liability limit, they could have made that clear in the           noting that it had been cited by Couch on Insurance.
                            “Reinsurance Accepted”section of the facultative certificate
                                                                                              Pacific Employers then filed a motion for reconsideration,
                            or somewhere else in the contract. In a footnote, the court
                                                                                              arguing, in part, that the footnote in which the court
                            noted that any agreement to treat expense differently or
                                                                                              said Pacific Employers’ interpretation of the limit
                            to exclude expense from the $1 million limit would have
                                                                                              provision would have led the reinsurer to charge a
                            most likely led to a higher reinsurance premium.
                                                                                              higher reinsurance premium showed that the court
                            Pacific Employers argued that the “in addition thereto”           improperly relied on evidence outside the four corners
                            language in the third sentence of Condition E made                of the contract. Pacific Employers asserted that since the
                            clear that Global’s obligation to pay expense was                 court relied on such evidence, it should be afforded the
                            “in addition”to its obligation to pay loss and that the           opportunity to introduce other extrinsic evidence which
                            phrase “its proportion of such loss as set forth in the           Pacific Employers claimed supported its position. While
                            Declarations”in the second sentence of Condition E                the court’s comment in the footnote would seem to
                            demonstrated that only “loss”was subject to the $1                go well outside the bounds of usual judicial contract
                            million limit in the Declarations. Since the reinsurer’s          interpretation given the lack of any reference in the
                            obligation to pay expense was not qualified by any                record to premium evidence, the court rather brusquely
                            reference to the cap in the Declarations, Pacific Employers       rejected Pacific Employers’ argument, stating that it did
                            argued that expense was not subject to the limit.                 not rely on extrinsic evidence in interpreting the contract.
                                                                                              The motion for reconsideration was, therefore, denied.
                            The court rejected Pacific Employers’ argument, holding
                            that Condition E did not address limits of liability, but         IMPORT OF DECISION Although the Bellefonte result
                            merely outlined two separate proportions of loss and              was roundly criticized in the reinsurance community when
                            expense that Global was required to pay. There is no              it was first issued 20 years ago, courts have consistently
                            separate limit for expense in Condition E, and there is           agreed with the decision and upheld its basic premise
                            no language excluding expense from the $1 million cap.            that a reinsurance contract’s limit of liability provision,
                            The court again stated that if the parties had intended           if clearly written, is enforceable.
                            there to be separate limits for loss and expense, they
                            could have made that clear in their contract.

            2               Philadelphia | Pittsburgh | Princeton | Wheeling
                                                                                                                               Insurance & Reinsurance
Ninth Circuit Vacates Arbitration Award On Grounds That
Forum Selection Clause Was Not Followed
SUMMARY In Polimaster, Ltd. v. RAE Systems, Inc., the U.S.       claims and awarding $2.4 million in damages to RAE
Court of Appeals for the Ninth Circuit recently reversed a       on its counterclaims. RAE then obtained confirmation
federal trial court’s confirmation of a California arbitration   of the arbitral award in California federal court.
award on the grounds that the arbitrator failed to enforce       Polimaster appealed.
an arbitration agreement’s forum selection clause. Instead of    The parties agreed that the arbitration agreements and
declining to hear counterclaims asserted by the respondent       award were governed by the New York Convention.
which under the arbitration clause were to be arbitrated in      Polimaster contended that the “arbitral procedure”set
Belarus where the petitioner was located, the arbitrator         by the arbitrator, which allowed RAE’s counterclaims to
decided the counterclaims on the merits in California.The        be heard in California, was “not in accordance with the
appeals court held that the award should be vacated under        agreement of the parties”and, thus, violated Article V,
the Convention on the Recognition and Enforcement of             § 1(d) of the New York Convention. Accordingly,

Foreign Arbitral Awards (“New York Convention”) which            Polimaster argued it had a valid defense to the
provides that an award may be vacated if the procedures          enforcement of the arbitral award.
used in the arbitration were not in accordance with the
parties’ contract.                                               In determining whether the procedure used by the
                                                                 arbitrator was contrary to that which was specified in
                                                                 the parties’ agreements, the court began by examining
Polimaster is a Belarus company that designs and
                                                                 the language of the parties’ arbitration agreements.
manufactures radiation monitoring instruments. RAE
                                                                 RAE argued that the agreements were ambiguous
is a Delaware corporation with its principal place of
                                                                 about where counterclaims were to be heard. Polimaster
business in California. The parties entered into a
                                                                 asserted that the contracts required RAE’s claims to be
licensing agreement and a buy/sell agreement which
                                                                 arbitrated in Belarus.
both provided that disputes were to be arbitrated at the
“defendant’s site.”The parties agreed that “defendant’s          The court concluded that the contracts were not
site”meant the geographical location of the defendant’s          ambiguous and found that they contained a clear
place of business. Under the agreements, RAE was to              designation of the forum for arbitration, in effect a
manufacture and distribute radiation detection devices           forum selection clause. The court also decided the
developed by Polimaster.                                         parties contemplated that all claims for affirmative
                                                                 relief, including those styled as counterclaims, were
After disputes arose in the course of performing the
                                                                 to be arbitrated at the “defendant’s site.”A party is a
agreements, Polimaster filed suit against RAE in federal
                                                                 “defendant”as to any dispute where another party
court in California. The parties agreed to arbitrate their
                                                                 seeks damages against him. Thus, Polimaster was a
dispute in California, which was defendant RAE’s “site.”
                                                                 “defendant”as to RAE’s counterclaims. Under the
RAE filed an answer and several “counterclaims”against
                                                                 contracts, that dispute should not have been arbitrated
Polimaster in the arbitration. Polimaster asked the
                                                                 in California.
arbitrator to dismiss RAE’s counterclaims, arguing
that any claims by RAE against Polimaster could not be           While the court noted that the joinder of counterclaims
arbitrated in California because the arbitration agreement       into a pending proceeding is widely contemplated by
required that they be brought at the “defendant’s site,”         various rules of procedure, the parties here did not
which Polimaster asserted was Belarus.                           incorporate those rules into their contracts. The court
                                                                 found that the clause in the parties’ agreement was
The arbitrator refused to dismiss RAE’s counterclaims,
                                                                 adequate to provide for separate arbitrations, each at
holding that the contract did not specify where
                                                                 the “defendant’s site.”
counterclaims were to be brought. The arbitrator
applied procedural compulsory counterclaims rules from           Under the court’s holding, if one party asserted a claim
the Federal Civil Rules of Procedure and the California          and the other party filed a counterclaim, the claim would
Rules of Procedure. The arbitrator held that it would be         be arbitrated in one jurisdiction – Belarus or California –
contrary to basic notions of fairness, judicial economy,         while the counterclaim would be adjudicated in another
and efficiency to prosecute Polimaster’s claims in               location many thousands of miles away. The court
one jurisdiction and RAE’s in another. The arbitrator            recognized that its interpretation of the parties’
adjudicated both claims, rejecting all of Polimaster’s                                                CONTINUED ON PAGE 4

                                                                             Winter 2011 |                        3
BRIEFING                    Ninth Circuit Vacates Arbitration Award On
                            Grounds That Forum Selection Clause                               Second Circuit Affirms Trial Court
                            Was Not Followed                                                  Decision Granting Reinsurer Judgment
                            CONTINUED FROM PAGE 3                                             On The Pleadings Finding Follow-The-
                            agreements permitted an inefficient result, requiring             Fortunes Does Not Expand Reinsurance
                            parallel arbitrations in distant forums regarding related         Agreement’s Term Of Coverage
                            disputes. The court held, however, that its decision
                            should not be controlled by efficiency concerns. The              SUMMARY The U.S. Court of Appeals for the Second
  Insurance & Reinsurance

                            policy favoring arbitration guarantees the enforcement            Circuit recently affirmed the decision of a Connecticut
                            of private contractual arrangements even if the result is         federal trial court in Arrowood Surplus Lines Insurance
                            inefficient. A court cannot override the express terms of         Company v. Westport Insurance Company, holding that a
                            the parties’ agreement because they are free to agree to          reinsurance agreement’s follow-the-fortunes clause does
                            inefficient arbitration procedures. The parties effectively       not obligate a reinsurer to honor a claim falling outside the
                            removed the decision regarding “forum”from the                    term of the agreement’s coverage.We reported on the trial
                            procedural decisions delegated to the arbitrator.                 court’s ruling in an earlier edition of our Insurance &
                                                                                              Reinsurance Briefing.
                            The court observed that international arbitration is often
                            preferred to avoid the danger that a dispute may be
                            heard in a hostile forum. The language in the contracts at        Arrowood (as reinsured) and Westport (as reinsurer)
                            issue in this case suggests that the parties each decided         entered into a reinsurance agreement effective February
                            that neither would be required to defend itself except in         1, 1999 covering policies incepting on or after that date
                            a proceeding in its home forum.                                   for occurrences taking place before August 18, 2000. The
                                                                                              agreement included a provision providing for run-off
                            The court held that Polimaster established a defense              coverage, at Arrowood’s election, of policies incepting
                            under the New York Convention which provides that                 during the agreement’s term through the anniversary of
                            a court may refuse enforcement of an award if it is the           the policy’s effective date. The agreement also contained
                            result of procedures that are contrary to the parties’            an “annual period”provision that said insurance policies
                            agreement. In this case, the parties agreed to an                 issued for multiple years became “effective”on the
                            arbitration clause that required disputes to be arbitrated        anniversary of their inception. On December 15, 1999,
                            where the defendant is located. Since the procedures              Arrowood issued a one year general liability policy to
                            used in the arbitration of the counterclaim were “not in          Equity Residential. Arrowood elected under the
                            accordance with the agreement,”the district court erred           reinsurance agreement to maintain run-off coverage
                            in confirming the arbitral award for RAE.                         of the policy through December 15, 2000.
                            IMPORT OF DECISION Arbitration agreements often                   Equity sued Arrowood alleging that the Arrowood policy
                            provide that the situs of the arbitration is to be in a           provided not one, but three years of coverage. Arrowood
                            particular city or the “home office” of one of the parties.       agreed to pay Equity $4.1 million to settle the claims
                            The Polimaster decision stands for the proposition that           occurring after December 15, 2000. Arrowood asserted
                            if an arbitration panel refuses to hold an arbitration in         that it settled to avoid the risk that a court might hold the
                            the location specified in the arbitration agreement, a court      policy provided more than one year of coverage. After
                            may set aside the award if it is subject to the New York          settling with its insured, Arrowood sought reinsurance
                            Convention.This case also underscores that the intention of       coverage from Westport for the entire $4.1 million sum,
                            the parties to a contract governs.While one might question        plus $2.6 million in expense, arguing that its good-faith
                            the holding, thinking the result is inefficient and wasteful of   settlement obligated Westport to follow its fortunes.
                            time and resources, as the court noted, if the parties want
                            to structure their dispute resolution mechanism to require        When Westport refused to pay the claim, Arrowood
                            a party seeking affirmative relief to prosecute its claim on      sued, alleging Westport was liable for the portion of
                            the other side’s “home turf,” then a court will uphold their      Arrowood’s settlement with Equity that related to losses
                            agreement, however inefficient that result might be.              occurring after the reinsurance agreement had expired.
                                                                                              Arrowood asserted that its settlement with Equity
                                                                                              effectively modified the Arrowood-Westport reinsurance
                                                                                              agreement’s period of coverage by operation of the
                                                                                              agreement’s follow-the-fortunes clause. The district

            4               Philadelphia | Pittsburgh | Princeton | Wheeling
                                                                                                                               Insurance & Reinsurance
court disagreed, finding that the plain language of the
reinsurance agreement limited the coverage period and          New Jersey Supreme Court Holds There
that the follow-the-fortunes clause did “not make a            Must Be Substantial Nexus Between
reinsurer liable for risks beyond what was agreed upon”        Claim And Excluded Conduct For
in the reinsurance agreement.                                  Exclusion Of Claims “Arising Out Of ”
The Second Circuit affirmed the district court’s opinion       Excluded Conduct To Apply
in a summary order. On appeal, Arrowood argued that
                                                               SUMMARY In Flomerfelt v. Cardiello, the New Jersey
Westport’s reinsurance obligation extended to post-
                                                               Supreme Court recently held that policy language excluding
December 15, 2000 losses under the Arrowood policy
                                                               claims “arising out of” the use of controlled dangerous
that incepted December 15, 1999 by virtue of the
                                                               substances required there to be a “substantial nexus”
reinsurance agreement’s follow-the-fortunes provision.
                                                               between the excluded conduct and the claim in order for
The court noted, however, that the reinsurance
                                                               the exclusion to apply. Addressing an insurer’s duty to
agreement only applied to matters “falling under”the
                                                               defend for the first time since 1984, the court reaffirmed
agreement. Since the post-December 15, 2000 period of
                                                               that the duty obligates an insurer to defend its insured

coverage under the Arrowood policy fell outside the
                                                               against a claim that may arguably be outside the policy’s
reinsurance agreement’s time limitations, losses
                                                               coverage as long as some theories of liability alleged in the
attributable to that period were not subject to the
                                                               complaint would not be excluded from coverage.
agreement’s follow-the-fortunes provision.
The court cited Bellefonte Reinsurance Company v. Aetna
                                                               In Flomerfelt, plaintiff, a 21 year old female, sustained
Casualty & Surety Company, 903 F.2d 910 (2d Cir. 1990)
                                                               permanent partial hearing loss following a night in which
in support of the proposition that a follow-the-fortunes
                                                               she overdosed on drugs and alcohol and suffered acute
clause cannot expand the express limits of coverage
                                                               kidney and liver failure. Plaintiff alleged that her injuries
imposed by a reinsurance agreement. The court held
                                                               were caused by defendant, a 20 year old male, who had
that to the extent the underlying policy dispute involved
                                                               supplied her with drugs and alcohol at a party he had
periods of alleged insurance coverage beyond December
                                                               hosted at his parents’ house while they were away at
15, 2000, those periods were not covered by the
                                                               which drugs and alcohol were prevalent. Defendant found
reinsurance agreement because they fell outside its
                                                               plaintiff unconscious on his parents’ porch the day after
time limitations.
                                                               the party and, according to plaintiff, delayed contacting
Arrowood also argued that unresolved fact issues               emergency services to assist plaintiff while he attempted
concerning the interpretation of the reinsurance               to make other arrangements to get her to a hospital.
agreement precluded judgment on the pleadings.
                                                               Defendant tendered the defense of the lawsuit and
Arrowood contended that the underlying policy was not
                                                               sought indemnity from his parents’ homeowners’ carrier,
“issued”for multiple years and that a question, therefore,
                                                               Pennsylvania General Insurance Company (“PGIC”). The
existed concerning the applicability of the reinsurance
                                                               policy contained an exclusion for claims “arising out of
agreement’s “annual period”limitation to the policy.
                                                               the use, transfer or possession”of controlled dangerous
The court rejected this argument, holding that the
                                                               substances. PGIC denied the request for defense and
reinsurance agreement was not ambiguous.
                                                               indemnity, contending that the plaintiff’s claim arose
IMPORT OF DECISION While it is somewhat unusual                out of her use of illegal substances. Defendant argued
for a case such as this to be decided on a motion for          that the cause of plaintiff’s injuries was unknown and
judgment on the pleadings, the decision reinforces the case    could have been her prior drug abuse or a genetic
law that holds a follow-the-fortunes provision does not        predisposition to hearing loss. Defendant also pointed
override other terms of a reinsurance contract and cannot      to plaintiff’s allegations that the alcohol consumption
be used to obtain reinsurance coverage of a claim that falls   and defendant’s delay in seeking medical assistance
outside the coverage of the contract.                          contributed to her injuries, which, defendant argued,
                                                               were possible causes that were not within the scope of
                                                               the exclusion. Under these scenarios, defendant asserted,
                                                               PGIC was obligated to provide a defense.
                                                               The Supreme Court considered how the phrase “arising
                                                               out of”should be interpreted in a policy exclusion, noting
                                                               that such language is often the focus of dispute in
                                                                                                     CONTINUED ON PAGE 6

                                                                           Winter 2011 |                          5
BRIEFING                         New Jersey Supreme Court Holds There Must Be Substantial Nexus Between Claim And Excluded
                                 Conduct For Exclusion Of Claims “Arising Out Of ” Excluded Conduct To Apply
                                 CONTINUED FROM PAGE 5

                                 coverage cases. PGIC argued for an expansive application          all claims and causes until all potentially covered claims
                                 of the term such that the exclusion would apply if the            or causes were resolved.
                                 claim or injury was connected in any fashion to the
                                                                                                   Under the Supreme Court’s Flomerfelt decision, insurers
                                 excluded conduct. The court, however, held that such
                                                                                                   faced with questionable coverage claims in New Jersey
                                 an interpretation would be too broad and would lead
  Insurance & Reinsurance

                                                                                                   may do one of the following:
                                 to the exclusion applying when the claim or injury was
                                 connected in any fashion to the excluded conduct no                  1. provide a defense while asserting a reservation
                                 matter how remotely. Instead, the court found the                       of rights;
                                 exclusion to be ambiguous and held the interpretation                2. decline to defend, and then reimburse the insured
                                 needed to be consistent with the insured’s reasonable                   for his defense costs if the fact finder concludes
                                 expectations. The court noted that PGIC could have                      the claim was not excluded from the policy; or
                                 added additional language to the exclusion to more
                                 clearly indicate an intent to exclude coverage for any               3. litigate the coverage issue before the plaintiff’s
                                 injury in any way connected to the transfer, possession                 claim goes to trial.
                                 or use of controlled substances.                                  IMPORT OF DECISION The Flomerfelt decision is
                                 The court held that the “arising out of”language required         important for two reasons. First, the case rather narrowly
                                 there to be a “substantial nexus”between the claim or             construed policy exclusions employing “arising out of”
                                 injury and the excluded conduct. On the present record            language, although the Supreme Court did note that
                                 in Flomerfelt, however, the court held that the insurer’s         exclusions of claims arising from specific conduct are
                                 duty to indemnify could not be resolved because it was            enforceable if the language of the exclusion is clear, specific,
                                 not clear what led to or caused plaintiff’s injuries.             and unambiguous. Second, the court reiterated that an
                                                                                                   insurer has a duty to defend all potentially covered claims
                                 Turning to PGIC’s duty to defend, the court first noted           until all such claims are resolved.
                                 that an insurer’s duties to defend and indemnify must be
                                 analyzed separately. When coverage cannot be decided
                                 from the complaint, the insurer is obligated to defend
                                                                                                   Thorp Reed & Armstrong's Insurance and Reinsurance Practice
                                 until all potentially covered claims are resolved and             Group has an established reputation for its work in the global
                                 determined to not be covered by the policy. Doubts as             insurance and reinsurance industry.The firm represents major
                                 to whether a claim is covered are resolved in favor of            United States, London Market, European, and Bermuda insurers
                                 obligating the carrier to provide a defense.                      and reinsurers in commercial litigation, coverage disputes, and
                                                                                                   major business transactions. Our practice encompasses all types
                                 Applying the “substantial nexus”requirement, the court            of insurance, and every kind of underlying risk.We have the
                                 found that the policy at issue in Flomerfelt did not              capacity to efficiently handle any (re)insurance matter, from
                                 adequately exclude all of the potential causes of plaintiff’s     individual to class action claims, and each assignment undertaken
                                 injuries. Certain potential causes of plaintiff’s hearing loss,   by the firm is afforded the same personal attention of partners
                                                                                                   having expertise with respect to the issues.
                                 such as her alcohol consumption and the defendant’s
                                 alleged delay in rendering aid, were not so connected to                                   Philadelphia
                                 the plaintiff’s drug use to establish that there was a                                   Joseph M. Donley
                                 substantial nexus between her drug use and her injury.                      Insurance & Reinsurance Practice Group Leader
                                                                                                        Kimberly A. Brown                     Aditi J. Oakley
                                 The allegations of plaintiff’s complaint suggested that the          Christopher M. Brubaker               Deborah P. Powell
                                 cause of plaintiff’s alleged injuries was uncertain. Some                 William E. Cox                   William M.Wycoff
                                 potential causes of her injuries were covered under the                Christopher J. Day
                                 policy and others were not. Because the “arising out of”
                                 language rendered the exclusion ambiguous and since               For more information, please contact Joseph M. Donley at
                                 some theories of liability in the complaint were not    , or call 215.640.8500.
                                 excluded from coverage under the policy, the court                To subscribe to Insurance & Reinsurance Briefing, please contact
                                 held that PGIC was obligated to provide a defense for             Connie Lojewski at 215.640.8543 or

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