Contractual Indemnity Claims

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PART 4: The Interaction Between Purchase Agreement Remedies and RWI Coverage

Introduction

Representations and warranties insurance (“RWI”) has changed the way buyers and sellers allocate post-closing risk.  In many transactions, RWI allows sellers to significantly limit their post-closing indemnification obligations while providing buyers with a separate source of recovery for breaches of representations and warranties.

But RWI does not necessarily replace the remedies available under the purchase agreement.  Seller indemnification, escrows, purchase price adjustments, covenant claims, fraud remedies, and other negotiated rights may continue to exist alongside the insurance policy.  When a post-closing issue arises, understanding how those remedies interact with RWI coverage can be critical to developing an effective recovery strategy.

For buyers and deal professionals, that means considering the purchase agreement and RWI policy together—not only when structuring the transaction, but also when determining how to proceed following a breach.

Continue Reading RWI in Practice: A 7-Part Series for Deal Professionals

When a general contractor or project owner tenders a claim under a subcontractor’s Commercial General Liability (CGL) policy for additional insured coverage, the insurer’s first basis for denying coverage is often to argue that the CG 20 10 endorsement covers only the additional insured’s vicarious liability for the named insured’s negligence, and that any independent fault on the additional insured’s part extinguishes coverage entirely. However, the endorsement’s text and the weight of judicial authority suggest otherwise. This article examines the “caused, in whole or in part, by” language that ISO has included in every edition of its CG 20 10 endorsement since July 2004, traces the key judicial decisions interpreting that language, and explains why a national consensus has develop that rejects the vicarious-liability-only limitation that insurers continue to press.

Continue Reading The CG 20 10 Endorsement and the Fight Over Additional Insured Coverage on Construction Projects

A recent decision by a federal court in the Eastern District of New York illustrates how directors and officers (“D&O”) policies can provide valuable insurance coverage for defense costs and potential liabilities arising from False Claims Act (“FCA”) litigation.  In Northern Metropolitan Foundation for Healthcare, Inc. v. RSUI Indemnity Company, Case No. 20-CV-2224 (EK)…

On June 6, 2024, the Supreme Court issued its opinion in Truck Insurance Exchange v. Kaiser Gypsum Co., No. 22-1079, conferring broad standing to debtors’ pre-bankruptcy liability insurers to appear and be heard in Chapter 11 bankruptcy proceedings. The ruling eliminates the “insurance neutrality” doctrine that previously constrained the participation of insurers in Chapter 11, greatly expanding insurers’ capacity to influence the reorganization process.

Continue Reading Shifting Gears on Insurer Participation in Chapter 11 Proceedings: U.S. Supreme Court Rejects Longstanding “Insurance Neutrality” Doctrine

In May 2022, the Illinois Supreme Court heard oral arguments in Cothron v. White Castle System, Inc. — a case that will have a substantial impact on the liability for violating the Illinois Biometric Information Privacy Act (“BIPA”).  BIPA is considered to be among the most robust law in the U.S. governing biometric privacy, and Illinois is among the few jurisdictions permitting private suits for the unlawful collection, storage of such data.  Since its inception in 2008, BIPA has been the source of a flurry of lawsuits, many of which have resulted in substantial settlements.  The court is set to determine how to calculate the number of individual BIPA violations, whether damages accrue each time an employee scans her fingerprint, or whether the first recorded scan is the sole violation.  If the Illinois high court determines that damages accrue with each scan and BIPA violations are ongoing, then the potential damages for BIPA lawsuits would increase exponentially and open a flood of new claims.  Fortunately, insurance policyholders have had recent success arguing that coverage exists for BIPA violations under Commercial General Liability (“CGL”) policies.  A plaintiff-friendly ruling in the Cothron case would make the ability to recover under these policies even more important, and potentially open additional avenues for recovery.  In anticipation of this important ruling, this article provides a brief background on BIPA and summarizes the key decisions relating to insurance recovery of BIPA damages.
Continue Reading Update on Case Law Developments for BIPA Damages and Insurance Recovery for BIPA Claims

In two recent decisions, the Texas Supreme Court defined the limited parameters in which Texas courts can look beyond the “four corners” of the complaint against the policyholder and the “four corners” of the insurance policy (i.e., the “eight-corners rule”) when determining whether an insurer’s “duty to defend” is triggered.

Permitting exceptions to the “eight-corners rule” and, in limited instances, allowing the use of extrinsic evidence to determine whether the duty to defend applies, requires policyholders to pay extra care to whether their insurers are properly accepting or denying defense of a suit. Application of fact-intensive tests like the Texas Supreme Court just announced varies from state to state.Continue Reading Beyond the Eight Corners: Determining Whether a Liability Insurer’s Duty to Defend Is Triggered