CALIFORNIA EPL/Wage and Hour Exclusions

The California Court of Appeal has ruled that a trial court erred in sustaining an EPL insurer’s demurrer on the basis of an exclusion for violations “wage and hour or overtime law(s).” Whereas the trial court had interpreted this exclusion as extending to the entire California Labor Code, the Fourth District declared in Southern California Pizza Co. v. Certain Underwriters at Lloyd’s, G056243 (Cal. App. Sept. 20, 2019) that it only applied to law regarding duration worked and/or remuneration received in exchange for work. While therefore finding that certain of the underlying claims were not subject to this exclusion, including claims that the insured had failed to reimburse pizza delivery drivers for certain work-related expenses, the Court of Appeal declined to go further as urged by the insured and find that the exclusion was limited to claims which allege a wage, hour or overtime law violation and also seek wages as relief.

ILLINOIS Late Notice/Choice of Laws

An insured’s failure to give timely notice of the National Hockey League’s claim that it was counterfeiting trademarked Stanley Cup items has doomed its ability to obtain reimbursement for its costs of defending the NHL’s suit. Applying New York law, as being the location of the principal insured risk even though the policy was issued in Illinois, Judge Bucklo in Frankenmuth Mut. Ins. Co. v. The Hockey Cup, No. 18-8142 (N.D. Ill. Sept. 2019) found that the insured’s failure to give notice until 2018 was untimely as a matter of law. The court observed that “A&R knew of the trademark claims asserted in the NHL Suit at least by July of 2016 and learned of the counterfeiting claims in March of 2017, when the NHL Suit plaintiffs sent cease-and-desist letters in conjunction with A&R’s activities.”

NEW YORK Environmental/Late Notice

A federal district court has granted summary judgment to Travelers with respect to numerous CGL policies that it issued to Northrop-Grumman between 1968 and 1985, declaring that the insured’s failure to give timely notice of soil and groundwater contamination in and around its manufacturing facility on Bethpage, Long Island precluded coverage for class action claims by local residents who claimed to have suffered injury as a result of toxic exposures. In Travelers Ind. Co. v. Northrop-Grumman Corp., No. 16-8778 (S.D.N.Y. Sept. 19, 2019), Judge Schofield found that Northrop-Grumman was aware of groundwater contamination in June 1976 but waited six months to alert Travelers and waited 13 months to give notice of its discovery of soil contamination in 2001. The court rejected Northrop-Grumman’s claim that it did not appreciate at the time that it might face liability, nor had any clams been made against it by then. The District Court also refused to find that each of the exposed individuals was a separate “occurrence” such that the insured’s notice obligations did not run until it was aware of each claimant’s alleged injuries. The court separately ruled, however, that the insured’s notice was timely under a few “minority” primary policies and umbrella policies that keyed the insured’s notice obligations to its knowledge of alleged bodily injury.

PENNSYLVANIA Property Insurance/Vandalism/Animals

A federal district court in Pittsburgh has refused to require a commercial property insurer to pay for property damage caused by raccoons. In Capital Flip, LLC v. American Modern Select Ins. Co., No. 19-180 (W.D. Pa. Sept. 20, 2019), Judge Stickman rejected the insured’s argument that the damage fell within the policy’s coverage for “vandalism and malicious mischief,” declaring that raccoons, however ornery they may be, are incapable of forming an intent to injure, much less a malicious one. The fact that these terms were not defined was not, in the court’s view, a basis for finding ambiguity or for declining to grant American Modern’s motion to dismiss.

TEXAS Duty to Defend/Eight Corners Rule

Following on his August 24, 2018 that a broker was not entitled to coverage for a settlement that it entered into with a client whose funds it mistakenly wire transfer to a bogus offshore account, Judge Bennett has nevertheless ruled in Quality Sausage Company, Inc. v. Twin City Fire Ins. Co., No. 17-111 (S.D. Tex. Sept. 19, 2019) that Twin City should have provided a defense. Although the District Court had refused to impose an indemnity obligation because the underlying claims were clearly barred by the statute of limitations and therefore did not create any liability on the part of the insured for which coverage might be required, Judge Bennett ruled that there was nonetheless a duty to defend in light of language in the policy requiring a defense even if a case is false, groundless or fraudulent. In light of the Fifth Circuit’s recent certification of “eight corners” issues to the Texas Supreme Court, Judge Bennett declared that he had erred in his 2018 ruling in not granting judgment to the insured on the duty to defend.


* * * Inside the Insurance Industry * * *

Lloyd’s reported last week that it earned a pre-tax profit of approximately $2.7 billion during the first six months of 2019.

Zurich Insurance Group has named Peter Giger to serve as it new group chief risk officer, succeeding Alison Martin, who will be CEO for Europe, Middle East and Africa.

* * * New Coverage Litigation * * *

Del Monte Fresh Produce has sued Nationwide Mutual in Florida seeking a declaration of coverage for the 2018 multistate outbreak of cyclosporiasis that was linked to Del Monte Fresh Produce Vegetable Trays.

* * * IBNR Dept. * * *

The State of New Jersey filed suit against Darling Ingredients last week seeking to close operations from a rendering plant that have filled the City of Newark for years with the smell of carcasses. According to state regulators, the smell is so bad that some local residents have given up all hope and relocated to New York City.