Thursday, October 26, 2006

The Duty to Defend and Insurance Law Blogs

My latest column for the Legal Intelligencer is now online here.

I give a beginner's course in what the duty to defend is and how it works, and then turn to two insurance law bloggers to illustrate the principles in practice. They are Marc Mayerson of Insurance Scrawl, whose practice, like mine, stresses the policyholder's rights, and David Rossmiller of the Insurance Coverage Law Blog, who represents both insurance companies and policyholders.

Here's Mayerson's explanation of what the "duty to defend" means:

A liability insurer’s promise to defend its insured is at the core of the protection purchased by policyholders and, in most states, the insurer will be required to defend any suit alleging facts that possibly could result in a judgment against the insured that would be covered by the policy’s duty to indemnify. A duty to defend will be found where the undisputed facts surrounding a claim – typically the language of the policy and the allegations of the complaint – permit proof of a claim potentially covered by the duty to indemnify. The complaint-allegations test, or what some jurisdictions term the eight-corners rule, results in the duty to defend being found by courts easily, commensurate with the broad contract language and the policy’s intention to afford the insured “litigation insurance” protecting against the risk and burden of litigation.

In any given liability case, the insured defendant might win, in which event no indemnity would be required, or the insured defendant might lose the case on a ground that is outside the scope of coverage; nothwithstanding the possibility of results where the insurer will not have a duty to indemnify the policyholder, the insurer still has a duty to assume the defense, which matures at the outset of the liability case. Because the duty to defend arises based on the possibility of the duty to indemnify a complaint, rather than based on a prediction of the likely outcome or indeed the actual outcome, we typically say that the duty to defend is broader than is the duty to indemnify.

Although an insurer's duty to defend will be triggered if the allegations raise the possibility of a duty to indemnify, sometimes the complaint is unclear whether nestled within the allegations is a potentially covered claim.
Mayerson points to the Eleventh Circuit’s October 16 decision, Hartford Acc. & Indem. Co. v. Beaver, in which an insurance company was required to provide a defense to a putative class action prior to class certification, where there was only a possibility that there would be class members whose claims would be potentially covered. Because “the fight over class certification is often the whole ball game,” the purpose of litigation insurance would be defeated if the policyholder were left “without a defense until after a decision on class certification.”

Rossmiller's post looks at the case of a man named Cook who fatally shot a man named Barber in the stomach with a shotgun. New York's highest court ultimately decided that Cook's insurance company was required to defend him in a civil action brought by Barber's estate, even though Cook admitted that he intended to shoot Barber (just not fatally). As Rossmiller puts it: “Not surprisingly and probably solely to try to draw in insurance coverage, the Barber estate’s complaint alleged that Cook negligently killed Barber, as an alternative to a claim for intentional killing.”

Because accidents are generally covered by liability insurance, and the complaint standing alone did not rule out an accident, the policy’s intentional acts exclusion could not relieve the insurance company of its duty to defend.

These seemingly extreme cases help ensure that insurance companies honor their policyholders' expectations that when they buy litigation insurance, they get a defense when they are drawn into litigation.

Tuesday, October 24, 2006

Hell and Back

Chris Rose from the Times-Picayune in New Orleans has written a heart-wrenching and personal chronicle of his struggle with depression. Worth the read.

Majority of Americans Support Impeachment of Bush

Greg at the Talent Show spotted this little tidbit in Newsweek:
Other parts of a potential Democratic agenda receive less support, especially calls to impeach Bush: 47 percent of Democrats say that should be a “top priority,” but only 28 percent of all Americans say it should be, 23 percent say it should be a lower priority and nearly half, 44 percent, say it should not be done. (Five percent of Republicans say it should be a top priority and 15 percent of Republicans say it should be a lower priority; 78 percent oppose impeachment.) Rolling back some of the Bush tax cuts would be contentious too: 38 percent of Americans say the Dems should make that a top priority; 28 percent say it should be a lower priority; and 28 percent say it shouldn’t be done at all.
Did you catch that? Greg did:
Now wait a second...doesn't 28% plus 23% equal 51%? I'd think that a poll showing the majority of Americans favor impeaching the President would be pretty newsworthy, especially considering that this far exceeds the numbers of a President that actually was impeached.

Exploding the Myth of the Ticking Time Bomb

As part of his continuing On Torture series, Arthur Silber provides the definitive takedown of the morally repugnant "ticking time bomb" justification for legalizing torture.

Why is the Republican Party trying to Terrorize America?

So asks Keith Olbermann in last night's hard-hitting Special Comment. And what are they doing using Osama Bin Laden and Ayman al-Zawahiri as their spokesmen? See the video here.

Thursday, October 19, 2006

It isn't terrorists who have the power to destroy this Nation

Olbermann's Special Comment on the habeas-stripping torture bill:

We have lived as if in a trance.

We have lived as people in fear.

And now—our rights and our freedoms in peril—we slowly awake to learn that we have been afraid of the wrong thing.

Therefore, tonight have we truly become the inheritors of our American legacy.

For, on this first full day that the Military Commissions Act is in force, we now face what our ancestors faced, at other times of exaggerated crisis and melodramatic fear-mongering:

A government more dangerous to our liberty, than is the enemy it claims to protect us from.
There's a lot more, including a "Your words are lies, Sir."

Video available at Crooks & Liars.

Wednesday, October 18, 2006

'Sweet are the uses of adversity'

Eugene R. Anderson, the founder of my firm, Anderson Kill & Olick, and William G. Passannante, the co-chair of our insurance recovery practice, explain how, despite the insurance industry's constant cries of "wolf!" following disasters, "a simple formula protects insurance industry profits: raise rates, reduce coverage and deny claims":

According to media reports, the industry is "reeling from an estimated $56 billion of hurricane-related losses" (Wall Street Journal); "still reeling from the aftermath of 2005's record setting storms" (Best's Review); "reeling from the scale of the disaster (Washington Post), etc., etc.

Yet in calm sessions of sweet silent thought, insurance executives might agree with Shakespeare: "Sweet are the uses of adversity, which like the toad, ugly and venomous, wears yet a precious jewel in his head." From the venomous head of the hurricanes, the insurance industry has reaped the "precious jewel" of outsized profits.

The Insurance Information Institute (III) reports that property-casualty insurance
carriers in 2005 earned a record $48.8 billion and increased their surplus to over $427 billion. Industry experts are forecasting a $60 billion industry profit in 2006, and the III boasts that current underwriting performance -- the profit derived from premiums minus claims payouts, excluding investment income -- is "the best in a generation (or two)." See Industry Financials and Outlook here.

If anyone's reeling, it's policyholders.

Tuesday, October 17, 2006

Habeas-Stripping Torture Bill ("the very essence of tyranny") Signed Today

The President signed the much-discussed-around-here bill that purportedly outlaws "torture" but which actually gives the President the power to define torture and takes away any ability to challenge torture or even the "enemy combatant" designation. This law is an affront to everything this country stands for. Hopefully the courts don't allow this travesty to stand. Even getting to the point where a court can review the law may be tricky, because the bill itself strips detainees' right to petition the courts. Here's a helpful explanation from Prof. Balkin:
The bottom line is simple: The MCA preserves rights against torture and cruel, inhuman and degrading treatment, but it severs these rights from any practical remedy.

This means that the President can have his "alternative sets of procedures"-- i.e., torture lite-- if he can persuade CIA personnel to violate the law with the promise that they will never be prosecuted or punished for doing so. When Rickard suggests that someday CIA officials will have to answer to judges and juries, he assumes precisely what the new bill acts to forestall-- judicial inquiries into the conduct of CIA interrogations.

This is the great irony (and chutzpah) of the President's repeated claim that he only wanted to clarify the law so that the CIA and other officials wouldn't have to break it. The CIA will still be violating the law if it does what the President wants it to do. However, because the Military Commissions Act severs rights from remedies, the Executive branch has the sole power of enforcement. The President decides whether he thinks people in the Executive branch are violating the law, and even if he believes they are violating the law, the President also decides whether he will order them to stop. By now we know the answer to this question. He will not order them to stop. Quite the contrary: the President has made clear in his repeated endorsement of these "alternative" techniques (techniques that he will not name in public) that he will push CIA officials to break the law. Because the Executive branch holds all enforcement powers within itself, the only thing that prevents cruel, inhuman and degrading treatment is the conscience of CIA personnel and executive branch lawyers.

And we know from the fiasco over the torture memo that the conscience of executive branch lawyers has not always been sufficient.

There are many things that are deeply distressing about the Military Commissions Act of 2006. One of the most distressing is its deeply cynical attitude about law. The President has created a new regime in which he is a law unto himself on issues of prisoner interrogations. He decides whether he has violated the laws, and he decides whether to prosecute the people he in turn urges to break the law. And all the while he insists that everything he does is perfectly legal, because, the way the law is designed, there is no one with authority to disagree.

It is a travesty of law under the forms of law. It is the accumulation of executive, judicial, and legislative powers in a single branch and under a single individual.

It is the very essence of tyranny.

Ken Lay's conviction posthumously vacated

Via U.S.A. Today:
As a matter of law, a conviction against a criminal defendant is not final until the defendant has had the chance to appeal the verdict. Therefore, Lay's death short-circuited the full legal process to which he was entitled.
The real impact is on collection of approximately $40 million that the Justice Department intended to seize in criminal forfeiture proceedings. The Justice Department explained in a statement that it still plans to seek the funds in civil court:
Today's ruling does not change the fact that Mr. Lay was found guilty after a four-month jury trial and a separate bench trial. We will continue to pursue all remedies available for restitution on behalf of the victims of the fraud at Enron.

Hamdan's Lawyer Fired

The details are at Balkinization
MSNBC reported on Saturday that Lt. Cmdr. Charles Swift, the lawyer for Salim Ahmed Hamdan, was notified two weeks after the Supreme Court ruled in favor of his client that he would not be promoted to commander. His supervisor said Swift "has obviously done an exceptional job" and noted that the denial of his promotion soon after the Supreme Court ruling was "quite a coincidence." Pursuant to the military's "up or out" system, Swift will retire next March or April.

Spying on "the Enemy"

Not too long ago, after scandals where the government was caught spying on anti-war protestors and political opponents, Congress created FISA, a law that only allows domestic spying with court supervision. Nevertheless, under the Bush Administration, the government spied secretly and illegally on Americans, deliberately keeping the FISA courts out of the loop, despite their long-earned reputation as a rubber stamp. When the secret domestic spying was revealed, the President and his men immediately claimed that it was necessary to fight the enemy. They claimed that the President didn't have the right "tools," and that the FISA legislation was outdated, despite repeated and recent amendments to FISA, amendments that he claimed at the time to be sufficient (see, e.g. the PATRIOT Act). They claimed the spying was so secret and sensitive that they couldn't even tell Congress about it, because then the terrorists would find out. They claimed that only "terrorists" were involved in the illegal spying. They lied.

Digby, riffing on this New York Times piece which reports that the domestic spying programs have been (surprise) targeting anti-war groups (again) for surveillance, writes
I can't believe we even have to have this argument or even need this kind of proof. There was never a good reason for the administration to be so stubborn about this issue unless they were doing something nefarious. The FISA court is a notoriously rubber stamp court --- it's designed to be. They always had the ability to spy first and get warrants later and the congress would no doubt have willingly extended the period in between or even enhanced the meaning of probable cause if they'd been asked. They didn't ask and they have resisted any kind of rational accomodation ever since the program was revealed.

The only logical reason they have adamantly insisted on maintaining this power to freely spy on Americans without any oversight is because they know that even the most rubber stamp court in the land would object to them spying on their political opponents. It's the only thing that ever made any sense.

Friday, October 13, 2006

An end to the Insurance Industry's Anti-Trust Exemptions?

I wouldn't hold my breath, but if it happens, it would be big news. Take a look at the New York Times' report on Sen. Trent Lott's (R-MS) response to the insurance industry's miserly handling of Hurricane Katrina claims. Here's the lede:
Sometimes, political connections come in handy. Ask Senator Trent Lott of Mississippi.

Mr. Lott, a Republican and former majority leader, is one of thousands of homeowners on the Gulf Coast who have been fighting with their insurers over payments for damage in Hurricane Katrina. In an interview yesterday, he said he was angry about the insurers’ “insensitivity and outright meanness” in rejecting many homeowners’ claims.

He said he inserted a provision into legislation, signed by President Bush last week, directing the Department of Homeland Security to investigate potential fraud by the insurance industry. Mr. Lott said he was also drafting legislation to challenge the industry’s exemptions from antitrust laws and had asked his staff to investigate the industry’s tax rates.

“I am outraged,” he said. “I’m concerned there are lots of abuses in the aftermath of the hurricane.”

Mr. Lott’s claim for the loss of his $400,000 house in Pascagoula was rejected by State Farm.
It's like an attorney at my firm quipped: "You know how a conservative is a liberal who's been mugged? A federal insurance regulator is a free-market republican whose claim is denied."

Saturday, October 07, 2006

More on courts

Carolyn Elefant at the Legal Blog Watch:
It's been a long time since I've heard someone opine that courts, through their ability to resolve disputes, serve as enablers of business rather than impediments. But MacEwen is right on -- and the proof is in the amazing success of the top 100 firms.

Buying the courts?

Here's the lede of a new post from St. Johns law prof Brian Tamanaha at Balkinization:
The New York Times recently reported on the scandalous degree to which Ohio Supreme Court judges have issued rulings that favor parties who gave them campaign contributions.
An examination of the Ohio Supreme Court by The New York Times found that its justices routinely sat on cases after receiving campaign contributions from the parties involved or from groups that filed supporting briefs. On average, they voted in favor of contributors 70 percent of the time. Justice O'Donnell voted for his contributors 91 percent of the time, the highest rate of any justice on the court.In the 12 years that were studied, the justices almost never disqualified themselves from hearing their contributors' cases. In the 215 cases with the most direct potential conflicts of interest, justices recused themselves just 9 times.
Although the article focuses on Ohio, this is a national pattern, with millions of dollars now flowing into state judicial elections around the country. A statistical study of the Alabama Supreme Court by Andrew Ware also found a "striking" correlation between campaign contributions and the judges' votes.

Bush Judges Confirm Opponents' Fears

So says People for the American Way in their new report.

News of the Weird

Police taser anti-Santorum protesters tailing Jeb Bush. Jeb Bush runs and hides in closet.

Josh Marshall: "When I said Republicans were on the run, this isn't quite what I had in mind."