Last Insurer Standing: Accounting for Policyholder Settlements in an “All Sums” World

Abstract

In 2016, New York became the latest state to interpret insurance policies with prior insurance or non-cumulation of liability clauses as permitting a policyholder to recover damages under “all sums” for long-tail liabilities, including environmental liabilities. But two major questions were left unanswered in New York, as in many other states, when a policyholder seeks all sums recovery from a non-settled insurer after the policyholder settles with other insurers: first, how to account for a policyholder’s prior settlements—through set-off, contribution, or both. Second, how to calculate any set-off or contribution—should it be pro tanto, pro rata, or something else. This article examines the arguments on both sides of these issues and looks ahead to how courts may resolve these questions going forward.     

Two “Wrongs” Make a Right to Coverage: When Waiver or Estoppel Precludes an Insurer's Breach of Cooperation Defense

Liability insurance policies almost always contain a provision requiring the policyholder to cooperate with the insurance company in various ways. An insured's failure to comply with such a condition may preclude coverage. When an insurer asserts a breach of the cooperation provision defense to a claim for coverage, however, the insured may counter that the insurer either waived, or is estopped from relying on, the cooperation provision. This article provides a brief outline of waiver/estoppel issues to be considered in evaluating an insurer's conduct when it asserts a non-cooperation defense.

“When you point your finger at someone, three fingers are pointing back at you.”

—Anonymous     

Contested Insurance Coverage Issues: The Role of Extrinsic Evidence on the Duty to Defend

In the modern era, either the insurer or the policyholder seeks to introduce or limit the use of extrinsic evidence to resolve the duty to defend. This article examines the competing interests of the insurer and the policyholder where the use of extrinsic evidence is advanced to prove or disprove the duty to defend and how different state laws and courts treat the issue of contested coverage.     

A Primer on State Insurance Guaranty Associations

In the wake of our nation's financial crisis, protection against insurer insolvency is more critical than ever to the insurance-buying public. All U.S. jurisdictions provide partial statutory protection in the event of insurer insolvency through the creation of various state insurance guaranty associations that are governed by statutes primarily based on a model act promulgated by the National Association of Insurance Commissioners. Guaranty associations are an integral part of each state's regulatory process for addressing insurer insolvency. Through a matrix of state-specific enabling statutes, state insurance guaranty associations levy and collect assessments from member insurers, pay statutorily defined “covered” claims, and defend against appropriate claims that are in litigation. Together with the domestic regulator of the insolvent insurer (usually the commissioner or superintendent of insurance) and the deputy liquidator (typically approved by the court presiding over the liquidation process and selected by the commissioner or superintendent of insurance as statutory liquidator), the guaranty association community (comprised of associations located in virtually each state in which a policyholder resides) functions as a unified system to manage and at least partially mitigate the impact of an insurer insolvency.     

Patent litigation insurance and R&D incentives

A major policy concern regarding patenting activity is related to the actual enforceability of the patents granted by Patent Offices. The risk of facing elevated legal costs to defend patent rights can affect ex-ante incentives to invest in R&D. This paper analyses whether the availability of insurance policies that cover legal expenditures for patent litigation could increase the appropriability of the innovation. We model a situation in which an incumbent innovator is endowed with a valid patent and an entrant imitator can either directly enter the market or try to apply for a patent, hoping that an error will be made by the Patent Office. The incumbent can accommodate the entrant, file a suit to a civil court or offer a settlement agreement. We model the presence of heterogeneity in the risk that the patents will face an error by both patent examiners at Patent Offices and judges at civil court. We analyse the changes in expected profits for the innovator when given the possibility of buying an insurance policy which will cover legal costs in the event of trial. We compare the cases in which (i) coverage is voluntary and the insurer can discriminate perfectly between risky patents; (ii) coverage is voluntary and the insurer cannot discriminate between patents, and (iii) coverage is compulsory. The model highlights a set of peculiar strategic characteristics of insurance for legal expenditures which contribute to singling out the reasons underlying the underdevelopment of this market. We suggest that the crucial reason for such a failure is not adverse selection; consequently, we challenge the benefits of making coverage compulsory.     

Invitation or Ambush: The Scope of an Insured's Duty to Cooperate and the Slippery Slope of Information Sharing

The policyholder's “duty to cooperate” is built into every liability insurance policy, either expressly or through the application of a state's common law. The scope of an insured's duty to cooperate is often difficult to discern, however, in terms of the type and extent of information that the insured should provide as part of the insurer's investigation of the underlying matter for which coverage is being sought. Traditionally, the duty to cooperate was intended to encourage information sharing to allow the insurer to afford the policyholder a comprehensive, informed defense to the underlying claimant's allegations. This article examines the scope of the duty to cooperate and how that duty impacts the insured's obligation to share some reasonable amount of information as part of the insurer's investigation and defense of the underlying claim, noting potential pitfalls and risks that may arise from information sharing.     

《保险法》中投保人如实告知义务条文的结构性解读及完善

结构主义法学视角下,我国《保险法》第16条具有双重结构,对双重结构进行"法律后果"等多层次设问及解析,可以获取投保人如实告知义务条款的立法以及法律适用层面的完善路径。第4款和第5款应当增加保险人行使合同解除权的适用前提;保险人在投保人履行告知义务之前与之订立保险合同的,保险人丧失解除权;发现投保人违反告知义务的,保险人有权选择下发拒赔通知书和行使保险合同解除权的顺序。"足以影响保险人决定是否同意承保或者提高保险费率"应当替换为"重要事项";"对保险事故的发生有严重影响"的实质是与保险事故发生具有因果关系。投保人故意违反告知义务的,未告知的事项应当与保险事故的发生存在因果关系,保险人才有权解除保险合同。     

论实现代位求偿权的条件

本文针对理论界存在的保险人对被保险人就非常保险责任范围内的赔偿可以取得代位求偿权的观点 ,对保险业中的代位求偿权和新合同法中规定的代位权的法律性质进行了分析研究。认为 ,保险业中的代位求偿权与新合法规定的代位权是两个不同的法律概念 ,作者提出非保险责任范围的赔偿依法不产生代位求偿权。     

Policyholder Litigation Challenging the Claims-Handling Conduct of Resolute Management

Over the past decade, Berkshire Hathaway has engaged in numerous “retroactive reinsurance” transactions whereby it takes on another insurer's long-tail environmental and asbestos coverage obligations in exchange for payment of a large sum of cash by the insurer. The cash that Berkshire receives from the insurer typically is the amount of cash that the insurer had reserved to pay policyholder claims on these coverage obligations. Warren Buffet has referred to these large sums received from an insurer as “float,” characterized as “money that doesn't belong to us but that we get to invest for Berkshire's benefit.” The lure of holding on to float for investment purposes has led to aggressive efforts by Berkshire's claims-handling unit, Resolute Management, to reduce and delay claims payments to policyholders. In response, a number of policyholders have initiated lawsuits and other proceedings against Berkshire entities and their related insurers.     

Insurance Coverage for Climate Change Suits: The Battle Has Begun

When it comes to climate change litigation, the stakes are almost as high for insurance companies as they are for the defendants they insure. Insurers therefore have strong incentives to closely parse their policies and pursue every possible basis for denying coverage, while policyholders, of course, have the opposite incentives. Given the novelty of the underlying claims, complex coverage issues involved, and high stakes, it is expected that the resulting insurance coverage disputes will be lengthy and hard-fought.

Climate change litigation has been slowly heating up, but the expected coverage battles have not materialized, until now that is. In July 2008 Steadfast Insurance Company filed the first coverage suit challenging an insurer's obligations to provide coverage for climate change-related suits against its insured: Steadfast Insurance Co. v. The AES Corporation, No. 2008-858 (Va. Cir. Ct.).

This article provides background on the Steadfast dispute, as well as the underlying climate change suit. It then examines each of the three coverage issues raised in the Steadfast suit: (1) whether the claims arise out of an “occurrence,” (2) whether the claims are barred by the “loss in progress” doctrine, and (3) whether the pollution exclusion applies. The article predicts that the outcome of Steadfast will likely turn on the pollution exclusion defense, but that even with respect to that issue, the insurer faces an uphill battle.     

An insurer's perspective on reform

Individual health insurance markets differ from state to state, and as a result approaches to individual market reforms need to be different. In evaluating approaches, policy makers need to remember that since the decision to purchase health insurance coverage is voluntary, the potential for adverse selection exists. In addition, rather than putting the focus of individual market reforms almost exclusively on access to health insurance for a small number of persons with high-cost health conditions, more attention needs to be put on how to decrease the number of uninsured persons. This includes making the premiums paid for individual health insurance 100 percent tax deductible, similar to those of employer-based health insurance. Finally, market reforms need to treat all types of coverage issued in the individual market the same, whether they are purchased direct for the insurer or through an out-of-state association.     

食品安全责任保险二元结构论

关于食品安全责任保险,应当结合食品科学的研究以及食品安全事故发生的概率、危险程度等因素,将转基因食品、儿童食品等纳入强制责任保险,不能笼统地将所有食品安全责任纳入强制责任保险。对食品安全责任保险实行强制保险和自愿保险二元结构。就食品安全责任强制保险而言,强制投保的对象应仅限于生产者,在认定保险人的除外责任时,应正确认定被保险人的“故意”。在食品安全责任自愿保险领域,针对投保率低的现状,应当在税收、食品营销等方面采取相应措施,来推动食品安全责任保险的发展。保险人的保险金给付义务仅限于损害补偿部分,惩罚性赔偿金的目的在于惩罚生产者、销售者,因此不能通过责任保险来分散风险。     

Bad debts and hospital rate-setting

This paper examines the economic foundations for mandatory discounts for insurers based on differences in bad debts experience. It considers critically the arguments Blue Cross plans use in several states. On both equity and efficiency grounds, discounts for actual bad debts are shown to be inappropriate. In contrast, it is shown that there are equity and efficiency reasons to grant a discount for insurance policies which avert bad debt, but that the appropriate discount is less than the amount of bad debt averted. The appropriate discount depends on the size of the subsidy needed to bring about purchase of debt-averting coverage. In some circumstances, this subsidy equals the underwriting loss on the coverage minus any tax subsidy the insurer receives.     

Natural Resource Damages for Climate Change—An Idea Whose Time Is Not Yet Come,Part II: Climate Change NRD Claims—Get Coverage

Climate change litigation is in its infancy. As it matures, one type of suit that may emerge is a climate change-based natural resource damages (NRD) claim under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). While it is unlikely that climate change-based NRD claims could succeed under current law, a policyholder sued for such claims should be entitled to a defense under its liability insurance policies. Against the backdrop of some recent climate change lawsuits, this article anticipates insurance industry arguments against coverage for climate change NRD claims, and examines counter arguments in favor of coverage for such claims.     

Busting the Myth of the Unavailability of Insurance Rule's Application to Loss Allocation for Pollution Liability Claims Since 1986

Tens of millions of dollars in pollution liability losses have been mistakenly allocated to general liability insurers under the “Unavailability of Insurance” rule in jurisdictions that employ it. Under this rule, a policyholder is not allocated losses for years when they claim that pollution liability was unavailable – mainly after the advent of the 1986 “absolute” pollution exclusion. Recent research has been compiled to include thousands of pages of evidence that by 1986 and to this date there was and has been a viable pollution liability insurance market that would not only underwrite a current year's risks, but also erase any prior pollution insurance coverage gaps by insuring decades of prior acts. This article looks at this rule and the enormous impact it could have on insurers' pollution liability reserves if it continues to be misapplied.     

The Ongoing Debate Regarding the Duty to Defend and the Use of Extrinsic Evidence

Most courts agree that the duty to defend is broader than the duty to indemnify. Many courts also agree that the duty to defend should be determined by the four or eight corners rule. There is not agreement, however, whether extrinsic evidence may be used to expand, narrow, or eliminate the duty to defend. This article provides an overview of the issue and contends that extrinsic evidence is only appropriate in circumstances where a policyholder seeks to establish a defense obligation or where the insurer is aware of information independent of the complaint that confirms a defense obligation.     

论我国海外投资保险制度的构建

海外投资保险制度是资本输出国为了保护本国海外投资、消除本国国民海外投资的政治风险而建立的一种保护制度。保险人和保险范围是构建海外投资保险制度中两个非常重要的问题。在我国，海外投资活动尽管开展得较晚，但其发展却极为迅速，然而，目前我国尚未建立起发达国家所普遍实行的海外投资保险制度。我国在建立海外投资保险制度中，保险人的资格应采取将直接投资的管理、审批机构与具体承办海外投资保险业务的保险机构分开成立的方式，保险范围除了各国一般承保的征收险、外汇险以及战争险，还应包括违约风险、恐怖主义风险以及营业中断风险。     

保险合同复效制度比较研究

我国规定保险合同复效须由投保人与保险人达成协议,这种模式容易导致保险人滥用同意权阻碍保险合同复效,宽松的可保主义模式能够平衡投保人与保险人之间的利益。衡量投保人提供的可保证明是否符合复效要求应当采取理性保险人标准。复效合同性质上应为原合同与新告知内容的特殊组合,对新告知内容,投保人应当履行告知义务,保险人对新告知内容的抗辩应自复效之时起算,而自杀免责期的起算则应从保险合同成立之时起算。在宽松的可保主义制度下,自动复效阶段的复效时点为投保人补缴保险费及其利息之时,可保复效阶段,保险合同复效的时点因情况不同各有差异。     

论保险代位求偿权行使的权利限制

保险代位求偿权虽然为保险人的一项法定权利,但并不意味着其行使该权利不受任何限制.首先,保险人因为弃权在行使代位求偿权时权利受到一定限制及至丧失该权利;第二,第三人可依法定事由或约定事由向保险人行使抗辩权;第三,对第三人加以限定会使保险人的代位求偿权受限;第四,保险人的代位求偿权不绝对排斥被保险人对第三人的损害赔偿请求权;最后,被保险人在代位权诉讼中优先于保险人受偿.     

论保险代位求偿权的法律性质

保险代位求偿权是财产保险的一项重要法律制度,源自赔偿合同原则。财产保险合同本质上是一种赔偿合同,如果被保险人所遭受的财产损失,已通过保险合同得到补偿,那么,被保险人因该损失而在法律上可获得的减轻或弥补损失的救济和利益便应归保险人,否则,被保险人就可能获得过量补偿而诱发道德风险。中国保险法在借鉴英国海上保险法保险代位求偿制度的基础上,将保险代位求偿权定性为法定债权转让,并考虑到中国的实际情况,通过最高人民法院的司法解释对保险代位求偿权作出了延伸保护。