March 2021 Newsletter

President's Message

By Sheri Pastor, McCarter & English, LLP

Dear ACCC Fellows:

Among the College’s missions is to enhance the civility and quality of the practice of insurance law. One way to do so is to connect with, and really get to know, other fellows. You can become active by joining a pop-up call or one (or more) of the substantive committees (listed on the website).

How well do you know our group?

1. This fellow was interrogated at the former Soviet Union border and accused of being in the CIA or a drug smuggler before ultimately allowed entry for a college study program.
2. This fellow was the Orange County (CA) spelling bee champion in 3rd grade.
3. This fellow spent a night sleeping on a park bench in Lucerne, Switzerland.
4. This fellow was born in Hong Kong and is a direct ancestor of Aaron Burr.
5. This fellow’s last long walk was 193-miles from the Irish Sea and to the North Sea.
6. She lived in a Hyde Park apartment across the hall from the one the Obamas would eventually take in the building.
7. This fellow is within the 1% of the population that is redheaded, blue eyed, and left handed.
8. She has three tattoos.
9. He was a sponsored skateboarder in high school.
10. A music fanatic (late 1970’s and current British indie/synthpop), this fellow is apt to be found browsing in used record stores.
11. This fellow is half Italian and half Australian.
12. He saw the Grateful Dead approximately 35 times before Jerry Garcia passed.
13. How many members have joined since January 1, 2021?

I hope you will get more actively involved in the work of the College. There are lots of important projects underway, and many upcoming events at which to connect. I look forward to seeing you at Trivia Night (March 25), our Annual Business Meeting (May 13) and the Annual Conference (September 22-24).

Best,

Sheri

Answers: 1. John Bonnie, 2. Mary McCutcheon, 3. Rhonda Tobin, 4. Michael Aylward, 5. Helen Michael, 6. Marion Adler, 7. Angela Elbert, 8. Carol Montoya, 9. John Mumford, 10. Lisa Pake, 11. Marialuisa Gallozzi, 12. Jason Mazer 13. Nine – Hon. Jerome B. Abrams (Minnesota Judicial Branch), Amy B. Briggs (Farella Braun + Martel LLP), Lisa M Campisi (Blank Rome), Michael S. Levine (Hunton Andrews Kurth LLP), Karen Libertiny Ludden (Dean & Fulkerson), Steven Schildt (Post & Schell, PC), E. Ford Stephens (Christian & Barton LLP), Monica T. Sullivan (Nicolaides Fink Thorpe Michaelides Sullivan LLP), Harold A Weston (Georgia State University - Robinson College of Business)

Will the “Reasonable Expectations” Doctrine Open the Door to to Continued COVID-19 Coverage Litigation?

By Michael Aylward, Morrison Mahoney LLP

Michael Aylward

The COVID-19 virus insurance litigation celebrated (if that is the correct term) its first anniversary on March 16, 2021. A year earlier, the Cajun Conti restaurant in New Orleans had become the first U.S. business to file suit against its property insurer seeking coverage for pandemic-related business interruption claims. Although that case ended last month after a Louisiana judge ruled in favor of Lloyds, the virus litigation rages on. 

As of press time, nearly 2,000 lawsuits have been filed across the United States and nearly 200 decisions have been rendered on dispositive motions. As reported in statistics maintained by the University of Pennsylvania Law School’s COVID Coverage Litigation Tracker, insurers are prevailing in over 90 percent of the cases decided in federal court but only half the time in state court. In these rulings, courts are generally finding that "direct physical loss of or damage" to property requires some actual physical alteration of the premises that is not satisfied by a mere loss of use of functionality caused by reduced business during the pandemic. Likewise, courts are overwhelmingly giving effect to virus and “microorganism” exclusions.

Buried among these opinions are considerations of the insured's reasonable expectations of coverage. Numerous policyholders have asserted that precluding coverage for a pandemic is contrary to their reasonable expectations, particularly with respect to policies that were issued after the virus became a matter of worldwide concern at the end of 2019 when the dimensions of the problems in Wuhan, China became clearer. In particular, policyholders have argued that any insurer that issued a commercial property policy without a virus exclusion after the looming presence of a worldwide pandemic became clear, implicitly intended to cover such losses.¹

For the most part, courts have refused to give consideration to these reasonable expectations arguments. In case after case, courts have repeated the mantra that an insured may not have a reasonable expectation of coverage in the face of unambiguous language precluding coverage. 

Not so in Philadelphia, however, where a federal judge has recently ruled in Humans and Resources, LLC v. Firstline National Insurance Company, No. 20-2152 (E. D. Pa. Jan. 8, 2021) that a local restauranteur mayproceed with its COVID-19 suit on the basis of a claimed reasonable expectation of coverage, even though the court had already concluded that the claims did not satisfy the policy’s requirement of “direct physical loss” to property and were clearly subject to a virus exclusion. The purpose of this article will be to analyze Judge Joyner’s analysis, consider the Third Circuit precedents that the District Court purported to rely on and assess whether this case is an outlier or an off ramp for courts looking to preserve these claims despite otherwise meritorious motions to dismiss by property insurers.

The claims at issue in Humans and Resources were brought by theowners of the Cadence Restaurant. The case was assigned to J. Curtis Joyner, an experienced jurist who served on the state Court of Common Pleas for five years before being appointed to the U.S. District Court in 1992. Judge Joyner took senior status in 2013.

As expected, the insurer moved to dismiss the restaurant’s suit, arguing that the COVID-19 virus does not physically damage property and that any coverage was subject to policy exclusions. Judge Joyner agreed. In his January 8 Opinion, he declared that the insured had not pleaded a viable claim for Business Income loss since it had been able to operate, even if at an extremely limited capacity. Further, the court ruled that any coverage would have been subject to the virus exclusion in the policy. The court also rejected the insured's "regulatory estoppel" argument, declaring that the memorandum that ISO provided to state insurance regulators when the virus exclusion was promulgated in 2006 was not “contradictory or contrary to the position which [insurer] takes here." 

Nevertheless, the District Court declined to grant the insurer's motion to dismiss, finding that Humans and Resources had alleged sufficient facts to support a potential claim for recovery under the "reasonable expectations" doctrine. Despite his findings with respect to the lack of any contractual basis for coverage, the court observed that Pennsylvania law will honor an insured’s expectation of coverage “even when the expectations are in direct conflict with the unambiguous terms of the policy and regardless of the plaintiff's status as a sophisticated purchaser of insurance." 

In this case, the court pointed to three paragraphs in the insured’s Complaint wherein Plaintiff alleged that it “had purchased the Policy with an expectation that it would be insured against losses, including, but not limited to, business income losses at its restaurant.” In light of the Pennsylvania Supreme Court’s admonition that courts should construe “reasonable expectations” based upon the "the totality of the insurance transaction” and not just based on the wording of the policy, Judge Joyner refused to grant the insurer’s motion to dismiss when there was absolutely no evidence in the record with respect to these circumstances. 

The District Court's holding in Humans and Resourcesis surprising, not least because “reasonable expectations” was a throw-away argument that only appeared in the concluding paragraphs of the insured’s brief, wherein Plaintiff asserted that the insurer’s “offering of the Policy instilled a reasonable expectation in Plaintiff that it was paying Policy premiums for Business Income and Extra Expense coverage and that if its business was forced to shut down, that the Policy would provide coverage for business interruption.”

In sustaining this argument, Judge Joyner cited three decisions of the Third Circuit: Bensalem Township v. International Surplus Lines Insurance Co., 38 F.3d 1303 (3^rdCir. 1994); Reliance Insurance Co. v. Moessner, 121 F.3d 897 (3^rdCir. 1997)and Liberty Mutual Insurance Co. v. Treesdale, Inc., 14 F.3d 330 (3^rdCir. 2005).

Bensalem Township involved a dispute over a "prior litigation" exclusion in a professional liability policy. Although it had insured the Township for several years with policy forms that contained conventional “prior litigation” exclusions, when ISLIC renewed the Township’s coverage in 1989, it added a new form of the exclusion that extended its scope to all prior claims even if they were completely unrelated to the present claim and regardless of whether the earlier litigation involved money damages. Although the District Court entered judgment for ISLIC, the Third Circuit declared that it should not have done so without allowing discovery on the issue of whether the new language that ISLIC had added was inconsistent with the insured's reasonable expectations of coverage. Idat 1308. In light of conflicting interpretations of the doctrine that the Pennsylvania Supreme Court had adopted over the years, the Third Circuit declared that it was at least fair that the court was concerned about insurers abusing their unequal bargaining strength and that even unambiguous policy language might not be given effect where it conflicted with an expectation of coverage that had been instilled by the actions of the insurer. In particular, "An insurer may not make unilateral changes to an insurance policy unless it notifies the policyholder of the changes and ensures that the policyholder understands their significance." Idat 1311.

The court reached the same conclusion four years later in Moessner. At issue was whether a CGL insurer could assert a total pollution exclusion to preclude coverage for carbon monoxide poisoning claims due a defect in the insured’s vaporator product. Although the District Court had granted summary judgment to Reliance based on the exclusion, the Third Circuit reversed in light of evidence that the insured had specifically requested that its policy cover injuries arising out of its products; (2) the predecessor policy had contained a different pollution exclusion that did not apply to products claims and (3) Reliance added this stricter new exclusion to the renewal policy without the knowledge of the insured. Under the circumstances, the Third Circuit found that there was a question of fact with respect to whether the insured had a reasonable expectation of coverage and remanded the case for further findings in the U.S. District Court. The Court observed that its conclusion that the reasonable expectation doctrine applies in cases where "the insurer unilaterally inserts the contested provision in the insurance Policy despite the insured's request for coverage" seemed "uncontroversial." 121 F.3d at 906.

In contrast to Bensalem TownshipandMoessner, in which the Third Circuit relied on the reasonable expectation doctrine to reinstate claims based upon the “reasonable expectations” doctrine, the court declined to do so in the third case cited by Judge Joyner. In Liberty Mutual Insurance Co. v. Treesdale, Inc., 14 F.3d 330 (3^rdCir. 2005), a product manufacturer had argued that, having paid premium to Liberty Mutual for ten years of CGL coverage, it had an expectation that all of these policies would respond to the asbestos liability claims against it, whereas Liberty Mutual was relying on a "non-cumulation" clause in these policies to limit coverage to a single year. In rejecting the insured’s argument, the Third Circuit emphasized that its opinion in Moessnerhad made clear that "[t]his aspect of the doctrine is only applied in very limited circumstances to protect non-commercial insureds from policy terms not readily apparent and from insurer deception."

In short, the legal authority that Judge Joyner relied on stands for the proposition that although an insured’s “reasonable expectations” must flow from the wording of the insurance contract, a limited exception exists where an insurer adds new policy terms that are not readily apparent and that are added without the insured’s knowledge or in cases where the insurer acts deceitfully in some manner. No allegations to this effect were brought forwards by the insured inHumans and Resourcesin its Complaint or Rule 12(b)(6) briefing. Nor is it apparent how a Moessner argument could have been made since the requirement of “direct physical loss” is hardly new language that the insurer in this case snuck into its renewal policy in 2019.

This authority also makes clear that this exception may not be applied to expand coverage just because the insured believes that it would be unreasonable not to do so. The Third Circuit’s holding to this effect in Treesdaleis on all fours with Madison Construction v. Harleysville Mutual Insurance Company, 735 A.2d 100 (Pa. 1999), in which the Pennsylvania Supreme Court refused to allow an insured to avoid an absolute pollution exclusion based on its claimed coverage expectations, as doing so "would entail a subsequent expansion of the reasonable expectations doctrine, heretofore applied in very limited circumstances."

Not only did Judge Joyner seem to overstate the scope of the Third Circuit decisions that he relied, he failed to cite or distinguish a recent cases in which the Third Circuit reversed him on this specific issue.

In Frederick Mutual Insurance Co. v. Hall, No. 15-3354, 2017 WL 4883157 (E.D. Pa. Oct. 30, 2017), rev’d, No. 17-3477 (3d Cir. Nov. 8, 2018), a masonry contractor told his insurance agent that he wanted “maximum,” “soup to nuts” liability insurance. The insured claimed surprise, therefore, when, after a customer sued it for substandard work, Frederick Mutual reserved rights on the basis of an exclusion for faulty workmanship and brought an action for declaratory judgment action to be relieved of any defense duties.

Following a bench trial, Judge Joyner agreed with Frederick Mutual that the faulty workmanship exclusion unambiguously precluded coverage for these claims. However, he declined to enter judgment for the insurer on this basis, finding that the insured had an enforceable expectation of coverage because the policy that was issued to his company did not match the coverage that he had asked for. The court cited insured’s trial testimony that when he had asked the agent for “soup to nuts” coverage, he expected that “he would be covered for ‘everything under the policy,’ such that if his business ‘did something and somebody made a claim against [his] business’ that he ‘might be liable for,’ he “would be covered.” (Slip op. at 24). 

Although the exclusions contained in the Frederick Mutual policy do, we find, clearly exempt defective workmanship and the type of damages sustained by Messrs. Fair and Hulko from coverage, we cannot give those exclusions effect in this case. The testimony is unrebutted that the policy containing those exclusions was never provided to Mr. Hall and that those exclusions were never mentioned or explained. We therefore cannot find that Mr. Hall’s expectation that he was covered for such losses/liability to have been unreasonable.

Judge Joyner concluded that “under Pennsylvania law it is the insurer which bears the burden of demonstrating that the insured did not have a reasonable expectation of coverage and after examining the dynamics and the facts underlying the insurance transaction between these parties, we cannot find that Frederick Mutual has sustained its burden here.”

On appeal, the Third Circuit reversed Judge Joyner and directed that judgment enter for the insurer. The court emphasized that Pennsylvania law only applies the doctrine to "objectively reasonable expectations" and that the contractor's "claim that he expected "maximum" "soup to nuts" liability to include workmanship coverage was not reasonable:

Hall’s claim that he expected Hallstone’s “maximum,” “soup to nuts” liability policy to include workmanship coverage is no more reasonable than if a purchaser of auto insurance expected his policy to cover repairs if his car breaks down, even if he asked for “soup to nuts” coverage. See id. (Holding that the insured was not reasonable to expect his basic homeowner’s insurance policy to provide coverage for intentional criminal acts). It is simply not the kind of coverage insurance agents and insurance companies expect to provide unless the insured explicitly requests such coverage.

The Third Circuit concluded by quoting the Pennsylvania Superior Court’s opinion on this issue in Miller's Capital Insurance Co. v. Gambone Brothers Development Co., 941 A.2d 706, 717-18 (Pa. Super. Ct. 2007):

If we were to allow an insured to override the plain language of a policy limitation any time he or she was dissatisfied with the limitation by simply invoking the reasonable expectations doctrine, the language of insurance policies would cease to have meaning and, as a consequence, insurer would be unable to project risks. The inability to project risks would dissuade insurance from doing business in the Commonwealth, and the net result would be an increase in premiums for consumers. We refuse to set such a deleterious sequence of events in its motion. 

Notwithstanding this recent admonition from the Third Circuit, it appears from Judge Joyner’s ruling in Humans and Resourcesthat he remains perfectly willing to set this sequence of events in motion in the context of the pandemic insurance litigation. Given the interlocutory nature of his ruling, any immediate appellate remedy is likely unavailable to Firstline National, although it does seem likely that it will be able to eventually obtain summary judgment once discovery concerning the procurement and issuance of the subject policy is complete.

What is less clear is whether other federal judges in Pennsylvania will find Judge Joyner’s analysis persuasive and defer ruling on dispositive motions until discovery of this sort can be developed. 

While the author’s view of this issue may be jaundiced by having represented insurers in similar disputes over the past 40 years, it is fair to state that a Rule 12(b)(6) should still prevail in most of these COVID-19 insurance disputes, even in the face of Humans and Resources, especially where the insured’s Complaint only sets forth conclusory assertions to support a claimed expectation of coverage. In light of well-established Pennsylvania precedent, the “reasonable expectations” doctrine may not be relied in the Keystone State on to confound long-standing and clearly worded limitations to coverage. Accordingly, its application to the COVID-19 insurance litigation will likely be limited to situations where new language is added to a policy without notice to the policyholder and confounds a specific and objectively reasonable expectation of coverage on the part of the insured. If this assumption is correct, these argument are unlikely to gain traction on the issue of “direct physical loss” and is only likely to be raised with respect to virus exclusions in cases where the applicable language was added to a renewal policy without notice to the insured.

¹See Legal Sea Foods v. Strathmore Insurance Co., No. 20-10850 (D. Mass.) (Arguing that restaurant chain reasonable expected coverage under policy issued on March 1, 2020 in light of the fact that insurer had not added a virus exclusion to its policy notwithstanding its knowledge of the emerging problems in China). 

It’s Just My Opinion But . . . : Coverage Counsel’s Liability and Professional Ethics Exposure for Faulty Coverage Advice

By Neil Posner, Much Shelist, P.C. and John Bonnie Weinberg Wheeler Hudgins Gunn & Dial (co-chairs of the ACCC’s Professionalism and Ethics Committee)

Neil Posner	John Bonnie

“Nothing is more conducive to peace of mind than not having any opinions at all.”

 ~ Georg Christoph Lichtenberg, 1742-1799

 For policyholders and carriers alike, coverage opinions are a mainstay of the meaningful and accurate assessment of obligations under an insurance policy. The insured wants the full benefit of the coverage it paid for; the carrier wants to provide the full scope of coverage due, while accounting for limitations on coverage reflected in the policy premium. Coverage opinions are a necessary vehicle for safely and successfully negotiating the busy roadway of coverage claims handling, and therefore present a real potential for accidents on the journey. 

By way of quick example, insurers have faced bad faith liability for obtaining an opinion from a lawyer who was unqualified to give it, see, e.g., Post v. St. Paul Travelers Insurance Co., 691 F.3d 500, 515 (3d Cir. 2012)(alleging the carrier “loaded the dice” for seeking a formal coverage opinion from counsel who was not a member of the bar and who was unfamiliar with the insurance law of the state which controlled the coverage question) and Hibbett Patient Care, LLC v. Pharmacists Mutual Insurance Co., 2017 WL 2062955 (S.D. Ala. 2017) (attempting to preclude testimony of carrier coverage counsel in bad faith litigation on basis of Daubert reliability standards and because he was a Michigan lawyer not admitted in Alabama, such that his testimony would constitute the unauthorized practice of law in Alabama), and for hiring a lawyer who acted unethically in coverage litigation, see, e.g., Great-West Life & Annuity Insurance Co. v. American Economy Insurance Co., 2013 WL 5332410 (D. Nevada, Sept. 23, 2013)(finding “that the ethics issue was largely a sideshow” and an absence of evidence of any ethical breach). 

Separate from the insurer’s risk, coverage counsel can face both liability and professional ethics inquiries in connection with the issuance of insurance coverage opinions. The cases in which this has occurred often involve unique factual circumstances, and so generalized takeaways are difficult. But a review of some these cases reveals not just the perils of giving coverage advice, but possible ways of avoiding professional exposure in the process of doing so.

Giving Faulty Coverage Advice in the Carrier’s Handling of a Claim

People v. McClung, 953 P.2d 1282 (Colo. 1998) involved a disciplinary proceeding against a lawyer hired by a property insurer to assist its investigation of a presumed arson. The lawyer “had no previous experience in the investigation and evaluation of a fire loss claim, and had not rendered an insurance coverage opinion before, [and] did not associate himself with someone experienced in handling such a case.”

The unqualified lawyer proceeded unwittingly to recommended that the carrier take actions constituting statutory unfair claims practices, first suggesting that the policyholder be required to submit to a polygraph examination, and then recommending a settlement that acknowledged liability on the policy, but which conditioned payment on the insured foregoing presumptively covered damages. In a subsequent ethics proceeding, the Court found a violation of the Colorado Rules of Professional Conduct precluding a lawyer from handling a legal matter he is not competent to handle; failing to provide competent representation to a client; engaging in conduct prejudicial to the administration of justice; and engaging in conduct that adversely reflects on the lawyer’s fitness to practice law and suspended him for 30 days. 

Commercial Union Insurance Co. v. Lewis and Roca, 902 P.2d 1354 (Ariz. App. 1995) involved malpractice by a coverage lawyer, which largely turned on the question of when an action for legal malpractice accrues. The underlying facts of the apparent negligence are instructive, however. There, Commercial Union insured a construction contractor that was sued by a homeowner for a poorly built home. The insured tendered to Commercial Union, and the carrier retained the defendant law firm for a coverage opinion. Coverage counsel concluded that coverage was absent based upon a policy exclusion¹, and Commercial Union therefore denied the claim and rejected a policy limits settlement demand. The liability action was tried, resulted in an excess judgment, and the involuntary bankruptcy of the insured. The bankruptcy trustee then sued Commercial Union for breach of contract and bad faith.

In the bad faith action, Commercial Union discovered that coverage counsel had overlooked an Arizona Supreme Court decision finding ambiguity in the exclusion Commercial Union relied upon to deny coverage. Commercial Union sued coverage counsel for malpractice, and the law firm’s motion for summary judgment in the malpractice action was denied. 

Giving Faulty Coverage Advice in Coverage Litigation 

InNational Grange Mutual Insurance Co. v. Goldstein, 142 Fed. App. 117 (3d Cir. 2005), a manufacturer insured by National Grange was sued in a products case, and sought coverage from the carrier. The assigned National Grange adjuster denied coverage without following company policy requiring a formal coverage opinion, causing the insured to settle the liability case and assign its rights to the underlying plaintiff.

The Complaint in the subsequent bad faith action was provided to the same National Grange employee who had previously denied coverage to the insured. She took no action even after learning of a default. National Grange eventually hired a lawyer after a judgment on the default, who discouraged filing a motion to open default in the underlying case, and who overlooked application of favorable Virginia law that significantly limited punitive damages in the bad faith case. The jury in the bad faith case found against National Grange and awarded substantial punitive damages. 

National Grange settled the bad faith case and sued its coverage counsel for not attempting to open the underlying default, and for failing to realize the application of Virginia law, which would have capped punitive damages. The court granted summary judgment to the law firm, finding that even if the lawyer had tried to open the default in the underlying case or invoke Virginia law in the bad faith case, neither effort would have succeeded because both were time-barred as a matter of law. 

Coverage counsel was similarly alleged to have given incorrect litigation advice to the carrier in Certain Underwriters at Lloyd’s of London v. Mandell, Menkes, & Surdyk, 2008 WL 4291160 (E.D. Cal., Sept. 18, 2008). There, Lloyd’s afforded employment practices liability insurance to two entities sued by an employee, which resulted in various crossclaims that revealed a handful of potentially covered theories of recovery and a significant number of causes of action for which coverage was not afforded. The insured entities tendered their defense to Lloyd’s.

Mandell Menkes recommended that Lloyd’s accept the defense, but also advised Lloyd’s to file a declaratory judgment action against the insured entities in California to recover defense costs for non-covered claims. That declaratory judgment action was revealed to be erroneous, however, pursuant to Buss v. Superior Court, 939 P.2d 766 (Cal. 1997), which required Lloyd’s to defend both potentially covered and non-covered causes of action. The decision to file the declaratory action furthermore led the insured entities to cease all communication with Lloyd’s about the underlying action, and this lack of communication significantly delayed Lloyd’s discovery of evidence which allegedly supported a right to rescind the policy. 

Lloyd’s brought a malpractice action against the law firm in Illinois to recover the fees and costs incurred in filing its “erroneous and fruitless” declaratory action. Lloyd’s also sought consequential damages for the improper declaratory judgment action arising from the insureds’ refusal to share discovery in the underlying action with Lloyd’s, which if received earlier would have established both a right to rescind and the lack of need to file a declaratory action at all. Despite the alleged missteps of the law firm, Lloyd’s malpractice action in Illinois failed on procedural grounds. Lloyds then asserted the same claims in a California action. By that time, however, the claims were untimely, and the California action was also dismissed. 

Not Asked to Give a Coverage Opinion; Not Conducting An Analysis of a Carrier’s Legal Rights and Incorrectly Assuming Those Rights

Homestead Insurance Co. v. Murphy, Pearson, Bradley & Feeney, 2002 WL 1382097 (Cal. Super. Ct. June 27, 2002) was another malpractice action against litigation coverage counsel for its handling of a declaratory judgment action against an insured. The dispute began when a security company insured by Homestead was sued for harassment by tenants of a home. Homestead agreed to defend the action by the tenants and hired counsel, but also subsequently denied a request to settle within the policy limits. The insured security company was served with requests for admission but they could not be answered adequately answered because the company’s corporate representative had fled the country. The requests for admission were ultimately deemed admitted by the trial court, and summary judgment was granted in favor of the tenants.

Homestead hired Murphy Pearson to file a declaratory judgment action against the insured security company and the tenants, based on the insured’s alleged failure to cooperate in its defense by admitting liability through the improperly answered discovery. Homestead’s general counsel did not request a written coverage opinion from the law firm about the viability of this non-cooperation position, even though he had reason to know from prior experience that a statute precluded the non-cooperation argument. The law firm nonetheless stated in in its written acceptance of the matter that it would “handle the case from a coverage standpoint and make our written opinion soon.” The law firm apparently did not consider that issue or provide an opinion on the viability of the non-cooperation claim.

The tenants filed a counterclaim in Homestead’s declaratory judgment action seeking to recover on the judgment they had received in the underlying action and for bad faith. Only then did coverage counsel in the declaratory judgment action seek to intervene in the underlying action to attack the judgment on the basis of the purported non-cooperation. The motion was denied, and Homestead ultimately settled the tenant’s claim.

Homestead then filed a malpractice action against the law firm, premised on the assumption that it could have settled the bad faith action for less than it ultimately paid. The law firm was granted summary judgment, with the court finding that the carrier’s evidence of what the tenants would have accepted to settle their claims was speculative and inadmissible. The California appellate court affirmed. 

Suggesting a Position or Course of Action That is Illegal or Contrary to Law

In Amica Mut. Insurance Co. v. Gibbs Armstrong Borochoff Mullican & Hart, P.C., 2011 WL 3268075 (N.D. Okla. July 28, 2011), a lawyer, who made an incorrect coverage determination, recommended actions contrary to the carrier’s obligations under the law, which exposed the carrier to a claim of bad faith. The lawyer was held to be potentially liable for legal malpractice and contribution after the carrier settled the bad faith claim. 

There, the estate of a police officer killed in a car accident while on duty sought uninsured motorist coverage under a personal auto policy. Amica sought coverage advice and direction on the investigation of the UM claim, and was incorrectly advised in a written coverage opinion that UM coverage did not apply. The error was corrected in a further written opinion, but that letter recommended a disclaimer on the basis that the tortfeasor was not more than 50 percent at fault for the accident due to the comparative fault of the insured police officer. Relying on this advice, Amica denied the UM claim. The lawyer furthermore recommended that Amica not further investigate the accident; not hire an accident reconstructionist; that it “close its file without communicating its denial decision to [the Estate]”; and that it “keep a low profile and let sleeping dogs lie.” 

The court in the bad faith action denied Amica’s motion for summary judgment, finding material questions of fact regarding the cause of the accident – facts “overlooked” by Amica and which could have been discovered with a more thorough investigation and the retention of its own accident reconstructionist. The court noted that potential evidence of bad faith included the closing of the file without communicating a coverage position. Amica then settled the bad faith claim and sued coverage counsel for malpractice. 

Coverage counsel moved to dismiss the malpractice action, which was denied. The court rejected coverage counsel’s argument that because Amica was denied summary judgment in the bad faith action, it was in pari delicto, having violated its statutory duty not to ignore the insured’s claim. It also denied the law firm’s motion to dismiss a claim by Amica for indemnity, finding that Amica could recover the portion of the bad faith settlement occasioned by coverage counsel’s conduct.

Takeaways

The improper conduct and missteps by coverage counsel varied in each of these cases, but generally involved acting outside of the lawyer’s expertise or experience; failing to determine the controlling law; missing a controlling case under the applicable law; misunderstanding the law of the controlling jurisdiction; foregoing or overlooking defenses in coverage litigation; and recommending claims activity expressly prohibited by the controlling law. People v. McClung, supra, well exemplifies the ethical obligations of a coverage lawyer in acting on behalf of a client (which may vary based upon the controlling state’s ethics rules). Chief among the ABA Model Rules of Professional Conduct that are implicated by the discussed cases is Rule 1.1, which dictates that

A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.

The comments to Rule 1.1 reveal some of the specific actions that counsel should undertake to fulfill the requirements of the Rule, including self-consideration of the lawyer’s experience relative to the complexity and specialized nature of the matter, counsel’s understanding of the controlling legal precedent, analysis of the involved legal elements, and keeping abreast of changes in the law. 

ABA Model Rule 1.3 also is implicated, which provides that:

            A lawyer shall act with reasonable diligence and promptness in representing a client. 

Among the requirements of reasonable diligence identified in the comments to this Rule are a commitment to the client’s interests; maintaining a reasonable work load so as to meet the duty of competence; and avoiding the “widely resented . . . professional shortcoming” of procrastination.

When handling a coverage matter, practical considerations will serve to keep liability issues at bay, and inform the lawyer’s ethical considerations under the Model Rules. A recent article identified key rules and recommendations in preparing an accurate and meaningful coverage opinion, and while many are fundamental, they are also easy to disregard in the press of business and in trying to meet client’s needs in the moment. These recommendations include not giving “informal” coverage opinions; knowing what you don’t know in terms of the controlling law; getting the entire claim file, policy and activity notes before rendering an opinion; and perhaps most importantly, not jumping to conclusions or letting preconceived ideas bias the objective exercise of forming a meaningful opinion. Michael F. Aylward, Ten Tips for Better Legal Writing, For the Defense, May 2019, at 80-83. 

As coverage lawyers, we assure compliance with our ethical obligations and best protect ourselves from potential liability by staying in our lane of professional experience and expertise, always considering the road behind and which lies ahead, and taking all necessary steps that the matter demands before driving in the fast lane.  

¹The precise exclusion is not revealed in the opinion but it was either an exclusion for contractually assumed liability with an exception for an incidental contract and for a warranty of fitness or warranty of performance in a workmanlike manner, or an exclusion for property damage to work performed by or on behalf of the named insured, arising out of the work, materials, parts or equipment furnished in connection therewith.  See Federal Insurance Co. v. P.A.T. Homes, Inc., 547 P.2d 1050, 1052 (Ariz. 1976).

Committee Profile: Membership

Compiled by Michael Aylward, Morrison Mahoney LLP and Mary Craig Calkins, Blank Rome LLP

Bob Allen	Jill Berkeley	Bruce Celebrezze
Ned Currie	Mary McCutcheon	Helen Michael
Lisa Pake	Koorosh Talieh	Wayne Taylor

As our College nears its 10th anniversary, we thought that it would be interesting to talk to the current chairs of the ACCC Membership Committee, Lisa Pake and Koorosh Talieh, the current chairs of the Membership Committee, as well as other Committee members who played a leading role over the past decade. We appreciate their insights and recollections with respect to how the College has grown, the membership process, and the challenges that we face today in recruiting the best of the best.

Ned Currie (founding member of the ACCC): This all got started in 2012 with eight lawyers who represented insurers in coverage and bad faith litigation. We agreed to each recruit the best policyholder-side lawyer that we knew. That gave us 16 people and that was the College’s first Board of Regents. And it grew from there.

Bruce Celebrezze: In the early days, it was pretty easy because there were so many obvious candidates. We didn’t get more formal until later.

Mary McCutcheon: At the beginning, Bruce, Ned, and I started brainstorming suggestions for new Fellows. The first person I nominated was Mary Craig Calkins. It was such a pleasure to think of and nominate all the terrific coverage attorneys (on both sides of the aisle) whom I had met throughout my practice. 

Jill Berkeley: Even in the beginning, we had our procedures. We had our forms and we created a formal vetting process. When I joined, most of the members were either from the East Coast or the West Coast and there was this dearth of Chicago members, so we played a lot of catchup.

Mary McCutcheon: Eventually, we appointed a formal Nominating Committee and added Bob Chesler, Jean Lawler, and Jill Berkeley. After a few uncomfortable situations dealing with disappointed nominees, we decided to develop a pre-vetting process where potential candidates were investigated before they were asked to apply. The process took longer but ran more smoothly. 

Wayne Taylor: Bruce and Mary recruited me to work on the Membership Committee soon after I joined the College in 2014 or 2015. It didn’t go well at first. During my first vetting assignment, the first person that I called about a candidate basically said, “I’m leaving the College if you let this person in.”

Jill Berkeley: In those first years, we would admit candidates so long as someone on the Membership Committee knew them. We developed a formal, rigorous process pretty soon after that. As I recall, it was in year three, when Bruce and Jill were our co-chairs.

Ned Currie: I remember that Bruce created a spreadsheet that was really user friendly. You could immediately look to who was in the pipeline and what their status was.

Bob Allen: We are still using a versio of it but we also have incredible intelligence that we get through our Executive Director Carol Montoya and her colleague Pearl Ford-Fyffe. Carol and Pearl are both top-notch. We couldn't do it without them.

ACCC: How does the vetting process work now? 

Helen Michael: I think everyone would agree that our current vetting process is very robust. We interview all of the ACCC Fellows who may know the candidate, look at their scholarship and the cases that they’ve handled. It's really exhaustive.

Koorosh Talieh: We start by looking at a candidate’s bio. Some of the bios are more detailed than others but you do get a good sense of how deeply involved they are in this stuff. And once that’s done, we start reaching out to other Fellows who may know them. And more often than not, the membership is very responsive. And if we’re not sure, we're not shy about rolling people over from one committee meeting to the next, until the group as a whole is comfortable with that candidate. We really do look under the hood.

Mary McCutcheon: When Ned Currie was President, we undertook the effort to identify potential Fellows in each of the 50 states. This goal tested our requirement that at least 70% of a candidate’s practice be devoted to coverage, as in many smaller states there wasn’t enough coverage work to justify a full-time practice. After much debate within the committee and the Board of Regents, we decided to relax but not eliminate the 70% requirement in smaller states. So we didn’t succeed in 50-state participation, but we came close.

Lisa Pake: There are still some states where we haven't been able to find someone who meets the 70% guideline. That’s a problem on the policyholder side because we don’t get the repeat business that lawyers representing insurers get.

Wayne Taylor: It raises an issue because we sometimes get a candidate who is the “go to” person for insurance coverage or bad faith issues in a particular state but doesn’t meet the 70% standard. We’ve tried to be flexible, but we couldn't get there with some of them. We also strive to get to 50/50 policyholder-insurer-side but we’re still stuck somewhere around 60/40 or 65/35. 

ACCC: In the early days, when people asked you what is the American College of Coverage and Extracontractual Counsel, what did you tell them?

Ned Currie: Most candidates who asked me that question already were familiar with the American College of Trial Lawyers. So I told them that in the field of insurance coverage litigation and bad faith litigation the ACCC was the equivalent of the ACTL.

Bruce Celebrezze: I emphasized that this was a group that was obviously new but was unique because we had both insurer-side and policyholder lawyers collaborating to advance the scholarship of insurance law. I remember our first meeting in 2013 that Gale White organized at the University Club in Chicago and practically our entire membership showed up. It was easier to talk about just how special this group was going to be after that first meeting.

Jill Berkeley: The backbone of the Membership Committee was that the people who served on the committee really had to trust each other. Not only to trust each other to be candid about who they were vetting but also to be trustworthy so that what was said in the committee stayed in the committee.

Wayne Taylor: It was the Get Smart cone of silence.

Michael Aylward: I think that Jill is absolutely right. Back when the College was quite small, the Membership Committee really set the tone for the rest of the us.

ACCC: Has that led to more congeniality?

Bob Allen: I think that there’s been collegiality on the committee since day one. I mean, that’s what the College is all about.

Wayne Taylor: I don’t know who came up with it but over time our litmus test became not only was a candidate great on paper but “do they play well in the sandbox?” If you don’t have that, the collegiality of the organization as a whole starts to deteriorate. 

Lisa Pake: You know, the difficult ones are when you may have feedback, say from six people, and five of them are all very positive and then one of them is extremely negative, because they had one particular bad experience with that attorney. So then you have to decide whether this is really a problem person, or was there just a clash in this particular case that isn't really representative. 

ACCC: What are the challenges the Membership Committee faces going forward?

Wayne Taylor: Diversity.

Koorosh Talieh: I would say that diversity is critical. It’s so important that the ACCC membership nominate diverse candidates that we can work with. The other problem is still the imbalance between the proportions of insurer-side and policyholder lawyers. If I was going to say that there's one thing that I’ve struggled with the most during my tenure as a co-chair of the committee, it’s not having been able to make more of a dent in balancing that out.

Jill Berkeley: One of the problems that we have is that many lawyers who represent policyholders, including the “go-to” coverage lawyers in some states, are with smaller firms where they are all handling commercial litigation and other cases and don’t meet the 70% insurance requirement.

ACCC: What has surprised you about the candidates that you’ve reviewed? 

Koorosh Talieh: I don't know if this is so much of a surprise, but I was really impressed how seriously everyone in the process is about vetting people. Other than that, it's dawned on me that insurance company coverage lawyers are nice people too, so that's been quite a surprise. 

ACCC: Any other surprises? 

Lisa Pake: It’s always a nice surprise when a candidate comes up who you may not have heard of but who really is a star, especially up and coming people who are involved in cutting edge coverage work.

Jill Berkeley: One thing that has surprised me is how many great coverage lawyers we have found who weren’t already active in established groups like the American Bar Association insurance committee or DRI.

ACCC: What plans does the Membership Committee have for the future?

Lisa Pake: We’re trying to get some younger members on the committee, so that we have good transition as the committee progresses over the years. And we may have continuing discussions within the committee and with the Board about creating more flexibility so that we can attract more excellent policyholder candidates.

Koorosh Talieh: The message that I’d like to send to the ACCC Fellows is to keep looking out for quality people and send those names to us. A few people do it regularly, but it would be really great to see more of it.

ACCC: Well, thank you all for your time today and for your service to our College over the years.

Use and Abuse of Claims Experts in Bad Faith Litigation

By Michael Huddleston, Munsch Hardt Kopf & Harr, P.C.,

Michael Huddleston

This article was also featured in 93 THE ADVOCATE 9 (Winter 2020). 

Almost all of the subtopics in these two basic types of cases involve treatment and analysis of both statutory and common law. Simply put, insurer conduct involves the analysis of the law, regulations, and statutes. The adjuster is sometimes a lawyer but most often not. Consequently, the use of experts in these cases presents a fundamental tension in that such testimony can devolve into the expert potentially invading the role of the judge in instructing the jury on the law. The appropriate target would appear to be discussion of the accepted standards and practices in the insurance industry for the treatment and analysis of such issues.

First-Party Cases

In first-party cases, testimony typically focuses on whether the carrier had a reasonable basis for denying coverage or delaying payment of the claim. The basis of denial may be a coverage interpretation. In that instance, the expert can explain how a reasonable carrier would go about dealing with and resolving this type of coverage dispute. For example, the expert can properly explain how a carrier could obtain the legal opinion of objective outside counsel on the particular coverage issue. If the carrier did not seek legal counsel’s opinion, then the expert can explain to the jury whether the experience level of the adjuster making the ultimate decision was sufficient and whether the adjuster utilized proper controlling standards, such as standards of contract construction, in reaching a decision. The expert can also identify types of conduct that may reveal a bias or pretext or “post-claim underwriting” in reaching the result.

Institutional bad faith is also an appropriate topic for expert testimony. The expert can assist the jury in determining whether the company had standards, practices, and training in place that reflect an attempt to assist adjusters in reaching sound and fair decisions. Additionally, the expert can identify the appropriate internal and external standards and practices and judge the actual conduct by those standards and practices. For example, an adjuster who uses an expert opinion from one claim to interpret the policy and coverage in another claim 

is not following either industry or internal standards. Mixing and matching opinions without consideration of the factual differences is a fundamentally flawed approach.

In describing whether a carrier had a reasonable basis for its decision, an expert should be permitted to explain to the jury what a carrier would look to and how it would properly assess applicable case law. As noted, that may involve seeking a coverage opinion from in-house counsel or from outside counsel.

Carrier experts will often opine as to whether the case was one of first impression, a very typical safe harbor for carrier decisions. A policyholder expert can point out the flaws in the analysis of the carrier. Often, the claim file material analyzing the coverage is objected to on the basis of privilege, which makes the task more challenging. The expert can explain to the jury how the carrier should have gone about its analysis. Of necessity, these topics require some discussion of how a carrier would treat and apply the law. The point of proper testimony should be to explain how a proper insurance company would evaluate the claim, not what the controlling legal interpretation should actually be. Otherwise, the expert will be in danger of invading the province of the court.

Experts in first-party cases are often asked to explain to the jury how the claims adjustment process works. A jury is not necessarily going to understand the ins and outs of, for example, appraisal. The policyholder expert will consider and discuss what things in the claim file and testimony indicate a pretext or set mindset on the part of the carrier that is indicative of bad faith. The expert can explain how a carrier should appropriately approach a claims decision, including the timing of the process and decision. Juries typically do not know how insurance companies internally operate. An expert can explain the different parts of the company that may be involved with a given claim, such as proper claims supervision, the use of large loss committees, the role of underwriters and/or actuaries, the process of setting reserves, the process of reporting to reinsurance companies, and the involvement and function of in-house legal departments.

Finally, experts can be used in first-party cases to explain to the jury about the proper selection and use of outside experts, such as engineers and roofing experts. Such experts are often used to explain what may or may not evidence a pretextual decision to deny coverage. Expert testimony can also involve analyzing the expert reports used for the claims decision, similar to a Daubert challenge, to point out why a reasonable carrier under industry practices would or would not rely upon that report or opinion.

Third-Party Liability Claims

In liability cases, the focus of expert testimony is typically on settlement practices. Again, the expert can be used to critique and/or explain the nature of the conduct revealed by the claim file and related testimony. Additionally, experts often address a number of other areas of testimony that impact extracontractual liability:

1. Assessment of adjuster/supervisor conduct, such as method of investigating, approach to assessing coverage issues, and compliance with internal policies

2. Application of liability standards to the conduct, such as ultimate issue testimony regarding when liability became reasonably clear and/or whether a reasonable carrier would have accepted a given settlement demand

3. Explanation of whether the demand for settlement from the claimant was one a reasonable carrier would accept, looking to things like whether a proper release was offered, protection from lienholders was provided, etc.

4. Assessment of whether a unilateral settlement by the insured, for example with a covenant not to execute, was subject to any of a variety of attacks, such as whether it was the result of collusion or the result of a fully adversarial trial

5. Discussion of whether coverage positions were timely and properly reserved and explanation of the nature and purpose of reservations

6. Discussion of the rules of contract construction applicable to insurance contracts, as used in insurance adjusting practice

7. Explanation of whether the coverage position was one that was bona fide or reasonably debatable or whether it had a reasonable basis

8. Explanation of the coverage dispute process and how things like declaratory judgments work and how they can be used to resolve coverage disputes

In short, opinions about contract interpretation cannot be a determination of who is right or wrong but instead should be focused on whether the use and application of legal principles were consistent with insurance industry standards and practices.¹

Lawyers as Claims Experts

The key for the lawyer expert is to have sufficient experience with the insurance industry and the claims process to be able to assess the reasonableness of the insurance company’s position on legal principles and the application of facts to those principles. Barren legal conclusions simply will not work.

Ashby. In State Farm Lloyd’s Insurance Co. v. Ashby AAA Automotive Supply Co., the court held that “an attorney who has been involved in handling insurance cases may be more qualified to testify as an expert concerning bad-faith claims than a licensed adjuster with limited expertise in the area.”²The court noted that an opinion on the standard of care regarding a licensed profession must come from one who is in fact licensed in that profession.³The court also recognized that adjusting must be done by someone licensed by the state.⁴The court noted that attorneys “are exempted from the license requirement to the extent they perform adjusting activities in the course of their practice of law.”⁵

The claimant offered the testimony of two lawyers as adjusting or bad faith experts. One had a mixed practice and had handled coverage cases and evaluated bad faith exposure for carriers on occasion. He had handled some suits involving fires, and he was now offering testimony in an arson case. He had never acted other than as a lawyer and thus had no experience as a claims manager or adjuster and had no experience from the insurer’s point of view. The other expert, also a lawyer, offered testimony regarding the interpretation of the insurance policy. The court noted that “[h]e had significant experience in the litigation of fire policies.”⁶The court ignored challenges to both experts’ testimony invading the province of the jury and improperly involving matters of law.

If the expert is a lawyer, attacks based on whether the testimony invades the province of the court to instruct the jury on the law will more likely be made. The interpretation of a contract and thus the determination of whether a contract is ambiguous are typically questions of law.⁷A so-called insurance expert generally may not testify as to the interpretation or ambiguity of a policy.⁸

. . . 

Click here for the full article. 

¹Insurance Co. of N. Am. v. Morris, 928 S.W.2d 133 (Tex. App. 1996) (upholding the admission of testimony by an insurance expert regarding the nature of suretyship in insurance law; also approving of the admission of testimony regarding the duty of an agent to explain material aspects of coverage in the context of taking applications for coverage), aff’d in part & rev’d in part, 981 S.W.2d 667 (Tex. 1998).

²No. 05-92-01354-CV, 1995 WL 513363, at *15 (Tex. App. Aug. 28, 1995) (Barber, J.).

³Id.(citing Prellwitz v. Cromwell, Truemper, Levy, Parker & Woodsmale, 802 S.W.2d 316, 317 (Tex. App. 1990)).

⁴Id. (citing Tex. Ins. Code Ann. art. 21.02, § 2(a) (Vernon Supp. 1995)).

⁵Id.(citing Tex. Ins. Code Ann. arts. 21.02, 21.07-4, § 1(1)(b)(1) (Vernon Supp. 1995)).

⁶Id.

⁷Tex. Farm Bureau Mutual Insurance Co. v. Sturrock, 146 S.W.3d 123, 126 (Tex. 2004) (citing, among others, Kelley-Coppedge, Inc. v. Highlands Insuarnce Co., 980 S.W.2d 462, 464 (Tex. 1998)).

⁸See, e.g.,Cluett v. Med. Protective Co., 829 S.W.2d 822, 827 (Tex. App. 1992) (upholding inadmissibility of expert testimony interpreting the policy based on the “usual and ordinary construction of insurance policies” and “industry custom and practice”); St. Paul Insurance Co. v. Rahn, 641 

A Journal of the Plague Years: Texas Litigation in Times of Pandemic and Epidemic

 By Stephen Pate, Cozen O’Connor

This article was also featured in 93 THE ADVOCATE 9 (Winter 2020). 

Fines for not wearing a mask in a pandemic? Forced quarantines? Mandatory vaccinations? Riots while a disease rages? Courthouses closed for fear of spreading a virus? Jury trials paused—even in the middle of a criminal trial? Those all sound familiar—but they are episodes from over a century ago in Texas. The Covid-19 pandemic has stretched on and on. Courthouses are shuttered, and most lawyers cannot regularly go to their own offices. How much of today’s crisis is a repetition of what came before? With some extra time, many Texas litigators with a sense of history have looked for past historical parallels that may guide them regarding how this crisis will play out. Most have read about the Spanish Flu Pandemic of 1918-1920.

There were major outbreaks of cholera in 1833 and 1849, the latter outbreak killing approximately 500 people in San Antonio. Worse than cholera, the most dangerous and recurrent disease to hit Texas was yellow fever—the dreaded “Yellow Jack”—so called because a victim’s skin would turn yellow because of the liver failure the disease produced. That disease caused epidemic conditions in only two weeks, killing many in a horrible death that arrived about a week after infection. It caused a systematic breakdown of the clotting system, causing a body’s organs to hemorrhage. Galveston, which was Texas’ largest city during the nineteenth century, experienced at least nine major yellow fever epidemics between 1839 and 1867, and smaller outbreaks until 1905. Another outbreak in 1873 caused Victoria, Corpus Christi, Beaumont, and San Antonio to be quarantined. Texas has also seen major outbreaks of smallpox, encephalitis, polio, dengue fever, and measles. Smallpox was especially prevalent, with a notable outbreak occurring in Laredo in 1898.

What effect did these “plagues” have upon Texas lawyers and litigation? Were courts shuttered, as many are now? Today, we have seen an early raft of Coronavirus lawsuits over lockdowns and mask mandates. Moreover, many claims against insurance carriers have been filed because of business closures. Did comparable litigation arise from these outbreaks?

The answers we have are often incomplete. We have a fair idea of court closures during the Spanish flu. Before that, it is difficult to find a complete picture of how lawyers were affected. The historical records reflect that some epidemics—especially yellow fever—ground commerce to a standstill. Quarantines were in place, but more importantly, people were afraid to congregate. Given this, courts must have been shuttered and trials non-existent. Many of these epidemics occurred when Texas was still a frontier society, with only a nascent legal practice. Events unrelated to epidemics would also have affected court operations. For example, the worst yellow fever epidemic to hit Galveston was in 1867, in the midst of Reconstruction. This was a time when famed early Texas attorney W.P. Ballinger described Texas courts as disorganized and barely functioning. “Yellow Jack” and other diseases certainly kept courts from opening—but they were already limited.

The Spanish Flu Pandemic of 1918-1920 provides a much clearer picture. When the flu struck, courts began to close in October 1918—but not all of them, and some with much reluctance. In Fort Worth, lawyers themselves forced the issue. On October 21, 1918, the Tarrant County Bar Association met and unanimously passed a resolution to adjourn all courts until the influenza epidemic had subsided. A committee of three then notified all four state judges of the resolution—and all four recessed their courts. One court was impaneling a jury when it received the resolution, and immediately adjourned. The criminal district court dismissed a venire panel of 200. On October 25, 1918, Travis County District Judge George Calhoun announced a postponement of jury trials in Austin for a week, based on advice from the Health Board and different physicians. Judge Calhoun did this despite having been told (quite wrongly) that “the epidemic is beginning to wane[.]” He said that “the fact remains those who have had [the influenza] are yet carrying and it would be next to impossible for the crowd that will assemble at the courthouse Monday should court be held to be free altogether as carriers.” Both federal and state courts in El Paso also adjourned. Smaller counties were not exempt. In Ballinger, a murder trial was already under way when the trial judge adjourned it until the next term because of the influenza outbreak. In rural Bowie County, trials were adjourned from October until November.

Yet strangely, some courts remained defiantly open. Some federal courts remained open even as state courts closed. In Dallas County, jurors already hearing cases were allowed to vote regarding whether to recess the trials in light of the pandemic. They voted to continue by the narrow margin of 27-24.

Even so, many courts that wanted to go forward simply could not. In San Antonio, just before the quarantine, both the fact that potential jurors were in the army and others were sick depleted the venire panels. Obviously, many summoned for jury duty were not reporting because of fear of contagion. In El Paso, Judge W.D. Howe solemnly warned a jury panel not to dodge jury duty. The Dallas Morning News wrote “there was little activity in any court. Judges find it difficult to get cases to trial. Often witnesses cannot be found. At other times, lawyers cannot be present.” By late 1918, courts opened again, and despite flare-ups in 1919 and 1920, they remained open.

. . . 

Click here for the full article. 

ACCC Fellow Spotlight: William T. Barker

William T. Barker

William T. Barker recently retired from his position of Senior Counsel at Dentons. William worked in the firm’s Chicago office and had a nationwide practice in the area of complex commercial insurance litigation, including coverage, claim practices, sales practices, risk classification and selection, agent relationships, and regulatory matters. 

William was a member of the joint defense briefing team that won In re Katrina Canal Breaches, 495 F.3d 191 (5th Cir. 2007), and Chauvin v. State Farm Fire and Casualty Co., 495 F.3d 232 (5th Cir. 2007), the major federal cases on insurance coverage for damage caused by the flooding of New Orleans. He also contributed to the joint defense effort in the parallel cases in the Louisiana Supreme Court, including Sher v. Lafayette Insurance Co., 2008 WL 928486 2008 WL 928486 (La. April 8, 2008) (flood exclusion bars coverage for Hurricane Katrina flooding).

Over the course of his career, he has litigated a number of cases regarding the constitutional rights of insurers and others. 

College Regent Bob Allen recently interviewed William so we could get to know him better.

Where are you from; where did you grow up?

I was born in Pittsburgh, Pennsylvania and lived in the suburbs until just after starting the seventh grade. My father then suffered prolonged job instability because his employers kept suffering financial reverses. We moved to a suburb of Cleveland, then to Stamford, Connecticut, then to a suburb of Louisville, Kentucky, where I finished high school.

What steered you to a career in the law?

I am a child of the Sputnik era, and I wanted to be a scientist. After taking my first lab course in physics, I switched to math. But, as I approached my M.S., I came to feel that I wasn’t going to be as good a mathematician as I’d want to be. In thinking about other careers, I considered an interest kindled in grade school in the U.S. Constitution, an interest I had pursued with a lot of outside reading in college. So, I decided to become a lawyer (with a brief detour into computer programming to seek a draft deferment).

Where did you go to college and law school?

I got a B.S. in Economics and an M.S. in Mathematics from Michigan State University, both in 1969.

What did you do after law school; what was your first job as a lawyer?

I got my J.D. from the University of California (Berkeley) in 1974, clerked a year for the Supreme Court of Pennsylvania, and then became an associate at what was then Sonnenschein Levinson Carlin Nath & Rosenthal, which has morphed several times and is one of the legacy firms that formed Dentons, from which I am now retired.

How did you come to specialize in insurance law? Tell us about your first big insurance coverage case?

As a new associate, I got a mix of assignments, but a number of them involved class actions against an insurer client regarding personal lines policies. I liked those cases and kept working on them. When I was a fifth-year associate, I noticed that I was, among other things, an insurance lawyer.

My first major coverage case was actually a complex of cases under the Pennsylvania no-fault motor vehicle insurance statute. That statute provided for four types of benefits: medical and funeral expenses; work loss benefits for lost earnings of the accident victim; essential services benefits for the cost of replacing unpaid services of the accident victim; and survivor’s benefits for loss of the support and unpaid services which a deceased accident victim would have contributed to his or her family. 

For several years after the statute was initially implemented, the general understanding by the Insurance Department, the industry, the bar, and the trial courts that interpreted the statute was that earnings lost on account of an accident victim’s death (so-called “post-mortem work loss”) were compensable only in the form of survivor’s benefits and not also under the more generous limits applicable to work loss benefits. However, the Pennsylvania appellate courts ultimately found that both work loss benefits and survivor’s benefits were payable with respect to a deceased accident victim’s lost earnings if the victim would have had sufficient earnings to exceed the limits available for survivor’s benefits. There then ensued nearly a decade of litigation over the circumstances in which post-mortem work loss benefits were payable and the extent to which older claims were barred by the statute of limitations. Plaintiffs also asserted an anticompetitive conspiracy among insurers to conceal and withhold benefits from their insureds.

I was lead counsel for a major auto insurer in these cases, some of which we won and some of which we settled.

What is the biggest change you have seen over your career with respect to bad faith litigation?

When I started dealing with bad faith issues, the law was relatively new and still rapidly developing. The law has become more settled, though now more complex and still quite variable from jurisdiction to jurisdiction.

How many jurisdictions have you handled coverage or bad faith litigation? 

I have not kept count, but I believe I have handled bad faith or coverage matters in over 30 states, possibly over 40.

What is it like practicing in the world's largest law firm?

The various combinations with firms in other countries have not had very much impact on my practice. Insurance litigation is not nearly as extensive in other countries as it is in the United States. And Dentons’ United Kingdom region does not have a very extensive insurance practice. I have had involvement in a few cross-border matters, but they have not been much different from purely domestic matters.

Any plans for the future?

I am retired, with no active practice. I remain available for expert witness or consultant matters. I continue to update William T. Barker & Ronald D. Kent, New Appleman Insurance Bad Faith Litigation, Second Edition. Additionally, I write and speak on insurance law and the law of lawyering. I also have lots of non-legal activities.

Upcoming and Recent Oral Arguments of Note

The Texas Supreme Court will rule on whether a claims handler can be deposed in uninsured/underinsured motorist coverage cases prior to the legal determination of the tortfeasor’s liability.On March 24, 2021, the Texas Supreme Court will hear oral arguments in the fourth UM/UIM case of the term (the first three have been argued; but not yet decided) in In Re USAA General Indemnity Co. 

The principal issues are: (1) whether the trial court abused its discretion by compelling deposition of USAA corporate representatives before the injured driver got a judicial determination of preconditions establishing the insurer’s liability and, if not, (2) whether the requested deposition topics are overly broad.

Briefs | Court of appeals opinion | The oral argument will be simulcast on the Texas Supreme Court’s YouTube page. 

Member News

Fellows Named as Insurance Trailblazers

The National Law Journal’s inaugural 2021 list of Insurance Trailblazers included several Fellows of the College. Keith Edwards, Vice President, Legal Market Leader, The National Law Journal, wrote: “In such a trying time, we feel that now, more than ever, it is important to shine a light on those who have taken extra measures to contribute to positive outcomes. . . . We are proud to spotlight a handful of individuals that are truly agents of change. Fellows included on the list are:

John G. Buchanan, III, Covington & Burling LLP

Nancy Sher Cohen, Lathrop GPM LLP

Linda Kornfeld, Blank Rome LLP

John H Mathias, Jr., Jenner & Block LLP

Sherilyn Pastor, McCarter & English, LLP

Rhonda J. Tobin, Robinson+Cole LLP

Click here for the full list.

Robinson+Cole Elects  Tobin Managing Partner

Rhonda Tobin

Robinson+Cole’s partnership has elected Rhonda J. Tobin as its Managing Partner, effective March 1. Rhonda will be the first woman to lead the 175-year-old AmLaw 200 firm, and will succeed Stephen E. Goldman, who has led the firm since the beginning of 2016. 

Click here for more. 

Spevacek Named Lawyer of the Year

Charles Spevacek

 
Charles Spevacek, Meagher + Geer, has been selected as the 2021 “Lawyer of the Year” for Mass Tort Litigation/Class Actions – Defendants in Minneapolis by Best Lawyers®. Chuck was also previously named Minneapolis Insurance Law “Lawyer of the Year” in 2014 and 2019. He also earned Minneapolis “Lawyer of the Year” for Mass Tort Litigation/Class Actions – Defendants in 2016.

Allen Quoted in Law360

Bob Allen

Regent Bob Allen was quoted in Law360’s article, “Allstate Asks Texas Justices To Ax Fee Award In Crash Suit.” He commented on a case where Allstate Insurance Co. is urging the Texas Supreme Court to overturn a jury verdict granting a policyholder more than $45,000 in attorney fees in connection with his claim for underinsured motorist benefits, saying the policyholder impermissibly brought his case as a declaratory judgment action to obtain the fee award. Click here for the full article.

Call For Volunteers

Want to become more involved in the ACCC? Join a committee! We are actively seeking volunteers to join our committees:

ADR

CGL/Excess Liability Insurance 

Communications

Cyber Insurance and Computer Crime

D&O and Management Liability

Emerging Risks

Extracontractual and Bad-Faith Claims Litigation

First-Party Insurance

Outreach

Professional Liability

Professionalism and Ethics

Regional Meetings 

Click here to volunteer.

Insurance Law Writing Competition

Please Share With Law School Contacts

The American College of Coverage Counsel is pleased to again sponsor its annual writing competition for students of insurance law. The competition, which is intended to measure the analytic and writing skills of law students studying insurance, comes with a cash prize and the opportunity to attend the ACCC’s Annual Meeting in Chicago in September 2021.

This year’s writing competition asks students to choose a client from the parties in a case involving claims of sexual harassment and abuse, as well as negligent hiring, training, and supervision practices. Students may submit a response as part of a team or as individuals. Submissions will be judged on the creativity of their proposed solutions and the quality of the writing and analysis.

Three winners will be selected by a panel of ACCC Fellows. The winners will receive a cash prize and an invitation to attend the College’s Annual Meeting in Chicago, September 22-24, with a travel stipend. This will present a wonderful opportunity for these students to meet and network with some of the top insurance lawyers in the United States. Indeed, prior competition winners were third-year students who are now practicing at excellent coverage firms around the country. 

The competition materials can be downloaded here.

We request that you inform students of this competition and encourage them to participate. If they plan to participate, they should notify us of their intention to do so (via email to [email protected]). Final submissions are due April 16, 2021.

Upcoming Events

ACCC Trivia Night & Networking

Thursday, March 25, 2021, 7:30 pm ET / 4:30 pm PT

Join other ACCC Fellows for camaraderie and competition. The program for the evening will kick-off with a few rounds of trivia and conclude with casual networking (and maybe a victory lap by the trivia winners).  

This event is open only to ACCC Fellows, and not open to clients or non-members. Advance registration is required.

Click here to register.

ACCC 2021 Annual Business Meeting

Thursday, May 13, 2021, 5:00 pm ET / 2:00 pm PT

Join us for our annual business meeting. The program will include the report of the Nominating Committee and turnover of officers, state of the Association remarks, and announcement of the 2021 Thomas Segalla Award winners.  

This event is open only to ACCC Fellows, and not open to clients or non-members. Advance registration is required.

Click here to register.