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Practical Tips for Optimizing Insurance Recovery in Litigation Arising from the Oil-Price Slump (Part I)

Earlier this month, the U.S. Energy Information Administration released its short-term energy outlook forecasting continued weakness in crude oil prices through 2016 and into 2017.[1]?á Already, the combination of historically high domestic production and declining demand at home and overseas has caused financial distress for domestic E&P companies.[2]?á In addition to lower than anticipated revenues and corporate downsizing, E&P companies can also expect increased litigation arising from the ongoing price distortions in energy markets.?á Disputes between landowners and lessees, employment-related claims, and corporate litigation with contracting parties, shareholders and regulators are each likely to increase as financial pressures mount.?á Fortunately, in the face of this surge in litigation, liability insurance may provide a much needed source of liquidity and protection for plaintiffs and defendants alike.?á Here is the first in a series of four practical tips for risk managers and in-house counsel to maximize recovery from insurance for defense costs,… Continue Reading

Recovering Insurance Proceeds for Tornado Loss and Damage: Five Tips for Maximizing Coverage

On December 26, 2015, a series of tornadoes and severe storms caused significant injuries and property damage across seven states, including Texas. In Garland and Rowlett, northeast of Dallas, wreckage from businesses and homes, trees, power lines, cars and other debris litter the streets for miles. Apart from the personal devastation felt by affected individuals, the economic cost of these storms, measured in lost revenue and replacement expense, may collectively amount to billions of dollars.?áFor those unfamiliar with pursuing significant insurance claims, it is important to seek professional advice before having substantive discussions with insurance carriers and adjusters. The terms of individual commercial or residential policies may contain complicated provisions, and coverage may be compromised by a failure to understand or comply with policy terms. In particular, as communities seek to recover from these destructive storms, commercial and residential policyholders should be familiar with the terms of their individual policies… Continue Reading

The Cost of Compliance: Can A ?Ç£Sue and Labor?Ç¥ Clause Offset The Price Of Enhanced Government Regulation?

This is the age of government regulation.?á Businesses pay millions of dollars each year to comply with ever-increasing regulatory requirements intended to avoid catastrophic loss to persons and property.?á While corporate America underwrites the lion?ÇÖs share of the cost associated with enhanced safety, the benefits are realized primarily by consumers, politicians and insurers.?á Yes, insurers.?á A dollar spent on preventing loss is a dollar saved by insurance companies. Historically, the economic realities of this inverse moral hazard were addressed in ocean marine insurance policies by the ?Ç£sue and labor?Ç¥ clause. ?áIf, for example, a ship owner repaired a breach in a vessel?ÇÖs hull thereby preventing the loss of the ship and cargo, the cost of repairing the hull would be reimbursed under a ?Ç£sue and labor?Ç¥ clause.?á While the earliest ?Ç£sue and labor?Ç¥ provisions date back as early as the seventeen century, most modern commercial property policies have a ?Ç£sue… Continue Reading

Five Tips For Lenders Seeking Insurance Coverage For Defense Costs In Foreclosure Actions

While the worst of the housing crisis may be over, a significant number of existing foreclosures remain, and new foreclosures continue apace.?á According to RealtyTrac, there were 122,060 new foreclosure filings in March 2015,[1] and there are 842,773 properties in the U.S. in some stage of foreclosure.[2]?á For those properties that are subject to judicial foreclosure, many will involve borrowers, who have asserted a variety of counterclaims against the mortgagee.?á These counterclaims may include allegations of breach of contract, fraud, misrepresentation, unjust enrichment, breach of duty of good faith and fair dealing, and the violation of numerous statutes, such as the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA), among others.?á Lenders have paid millions in attorneys?ÇÖ fees defending against such counterclaims. Fortunately, many mortgagees are protected by lender title insurance policies, which not only insure against defects in title, but also cover the cost of… Continue Reading

Five Insurance Tips for Deal Makers: What Every Corporate Counsel Should Know

Insurance is a part of virtually every transaction.?á Lenders want the security for a credit facility appropriately insured.?á Lessors and lessees alike want real and personal property protected by insurance.?á Buyers and sellers look to first party and third party policies to insure items sold and support the allocation of risk in indemnity provisions. For all its pervasiveness and importance, when it comes to drafting agreements, insurance terms may be treated as boilerplate when, in fact, the circumstances of a particular transaction may warrant a more careful and nuanced approach.?á In order to avoid future disputes, fulfill the intents and expectations of the parties, and add value to the transaction, corporate counsel should be familiar with the following five insurance tips: 1. ?á Additional Insured v. Loss Payee.?á Lenders will often require borrowers not only to maintain appropriate insurance protecting the security for a credit facility, but to name the… Continue Reading

Texas Supreme Court Limits BP?ÇÖs ?Ç£Additional Insured?Ç¥ Coverage For Deepwater Horizon Liability

The Texas Supreme Court has looked to the drilling contract between Transocean and BP to limit BP?ÇÖs ?Ç£additional insured?Ç¥ coverage for liability arising out of the Deepwater Horizon disaster. Since the April 2010 explosion and ensuing spill, oil-field developer BP American Production Company and its affiliated companies (?Ç£BP?Ç¥) have sought ?Ç£additional insured?Ç¥ status under $750 million of primary and excess liability policies issued to the Deepwater Horizon rig owner Transocean Offshore Deepwater Drilling, Inc. and its affiliates (?Ç£Transocean?Ç¥).?á Transocean and its insurers have argued that BP was only entitled to ?Ç£additional insured?Ç¥ coverage for above-surface pollution liability since the drilling contract between BP and Transocean required BP to indemnify Transocean for subsurface pollution risk. In March 2013, the Fifth Circuit Court of Appeals ruled that, as long as the indemnity agreement between BP and Transocean and the insurance coverage provision in the drilling contract are ?Ç£separate and independent,?Ç¥ only the… Continue Reading

Denton’s Fracking Ban: Will “Civil Authority” Insurance Coverage Apply To Lessees’ Loss Of Natural Gas Revenues?

On November 4, 2014, voters in Denton made that city the first in Texas to ban hydraulic fracturing within city limits.?á Within a day, lawsuits were filed by the Texas General Land Office and the Texas Oil and Gas Association, and state lawmakers and regulators voiced strong opposition to the ballot measure.?á Whatever the outcome of these legal challenges, lessees holding interests in the more than 270 natural gas wells affected by the ban potentially stand to lose significant revenues in the interim while litigation remains pending. For energy companies, whose operations may be curtailed by Denton?ÇÖs ?Ç£Fracking Ban Initiative,?Ç¥ one alternative source of relief may be found in insurance.?á Most commercial property policies contain some form of ?Ç£civil authority?Ç¥ coverage, which generally insures against the loss of business income sustained by an insured when, as a result of covered physical loss or damage to other property, access to the… Continue Reading

Putting the Genie Back in the Bottle: Fifth Circuit Finds Breach of Express Warranty to Repair Not Excluded by the ?Ç£Contractual Liability?Ç¥ Exclusion

The Fifth Circuit Court of Appeals has held in Crownover v. Mid-Continent Casualty Company?áthat a contractor?ÇÖs breach of an express warranty to repair does not constitute an ?Ç£assumption of liability in a contract or agreement?Ç¥ for purposes of the ?Ç£contractual liability?Ç¥ exclusion found in most general liability policies. Once upon a time, insurers, insureds and courts understood that the ?Ç£contractual liability?Ç¥ exclusion, which applies to damages the insured is obligated to pay by reason of the ?Ç£assumption of liability in a contract or agreement,?Ç¥ is triggered only ?Ç£when the insured assumes responsibility for the conduct of a third-party?Ç¥ in an indemnity or hold-harmless agreement.[1]?á In Gilbert?áin 2010 and in Ewing?áin January of this year, the Texas Supreme Court adopted a new legal construct: ?Ç£?Çÿassumption of liability?ÇÖ means that the insured has assumed a liability for damages that exceeds the liability it would have under general law.?Ç¥[2] Since this new standard… Continue Reading

Sixth Circuit Clarifies Scope of Medicare Secondary Payer Liability for Non-Group Health Plans

On July 16, 2014, the Sixth Circuit Court of Appeals confirmed that a ?Ç£health care provider can bring the Medicare Secondary Payer Act?ÇÖs [?Ç£MSP?ÇÖs?Ç¥] private cause of action against a non-group health plan that denies coverage for a reason besides Medicare eligibility.?Ç¥?á In Michigan Spine & Brain Surgeons, PLLC v. State Farm Mutual Automobile Insurance Co., the Court clarified its prior holding in Bio-Medical Applications of Tennessee, Inc. v. Central States Southeast & Southwest Areas Health & Welfare Fund, 656 F.3d 277 (6th Cir. 2011), which had been construed to limit MSP?ÇÖs private cause of action against a ?Ç£primary plan?Ç¥ to claims involving discrimination against planholders on the basis of their Medicare eligibility.?á According to the Court, the statute?ÇÖs prohibition against taking Medicare eligibility into account applies only to group health plans and not non-group health plans. When a Medicare beneficiary has other sources of insurance coverage, healthcare providers are… Continue Reading

Creating Uniformity Among Primary And Excess Policies: Using Contract Principles To Bind Excess Carriers To Arbitrate

Arbitration is often thought of as a procedure favored by carriers to the disadvantage of the corporate insured, because the insured usually prefers to have its coverage claims heard by a jury.?á There may also be remedies sought by the policyholder, which may not be available in arbitration.?á Alternatively, in certain circumstances, arbitration can be a powerful tool for the insured.?á For example, for parties seeking coverage under a Commercial General Liability (CGL) policy, a speedy resolution of any coverage disputes in arbitration (while the underlying litigation is pending) may encourage insurers to defend and settle claims promptly, reducing the risk of a judgment against the insured.?á This particular strategy may have limited value, however, if the primary policy provides for arbitration, but the applicable excess liability policies do not.?á Unless the insured can also require the excess carrier(s) to arbitrate, even a successful arbitration may leave the insured without… Continue Reading

December 2022