Catlin Specialty Insurance issued two consecutive claims-made Professional and Pollution Legal Liability Insurance policies to AMSC and its subsidiary Windtec. The first policy had a policy period of April 1, 2010 to April 1, 2011.
On December 6, 2010, Ghodawat notified the insured that it was terminating a 2008 license agreement between the two due to technical problems with the wind turbine that was the subject of the agreement and that the insured had supplied and installed. Ghodawat leveled an accusation of gross negligence and stated that it would pursue a claim unless an amicable resolution was reached. Settlement discussions followed in February 2011.
In the meantime, the insured submitted an application for a second year of coverage with Catlin. In the application it denied any claim, suit, notice or action had been brought or that it was aware of any other circumstances or incidents which may result in a claim being filed against it. A new policy was issued without Catlin being informed of the Ghodawat allegations.
On May 12, 2011 Ghodawat commenced arbitration proceedings against the insured. The insured requested coverage from Catlin.
In Catlin Specialty Is. Co. v. Am. Superconductor Corp., 2014 WL 840693 (Mass. Super.), the Superior Court held that there was no coverage for the claim under either policy because the policy provided coverage only if a claim was both made and reported during the same policy period. The claim was made in the first policy period and reported in the second policy period.
The court noted that the purpose of the requirement that notice of a claim be given within the policy period is fairness in rate setting. Therefore an inquiry into whether an insurer has been prejudiced with respect to the particular claim, relevant to an occurrence policy, is irrelevant to a claims-made policy.
AMCS argued that under New York law coverage can be denied for breach of the notice provision only if there is prejudice. The court did not reach that issue because it held that under Massachusetts conflict of law doctrine Massachusetts law applies to the coverage dispute.
The court held that a choice of law clause in the policies, providing that the "policy shall be subject [to] interpretation under the law of the State of New York" did not apply because the disputed issue is not one of policy interpretation but the validity of the policy clause requiring that claims be made and reported in the policy period.
Showing posts with label Choice of law. Show all posts
Showing posts with label Choice of law. Show all posts
Tuesday, May 6, 2014
Wednesday, February 17, 2010
U.S. District Court discusses choice of law issues
Last week I posted about Stonewall Ins. Co. v. Travelers Cas. & Sur. Co., __ F. Supp.2d __, 2010 WL 6395 (D. Mass.), in which Judge Harrington applied the Texas law of equitable contribution.
I have said before that Massachusetts choice of law rules as they apply to insurance coverage disputes amount to so much gibberish. Choice of law issues are even less clear when the dispute is not between an insurer and an insured--who entered a contract with each other and, at least in theory, had reasonable expectations about which state's law should interpret the contract--but between insurers of the same insured, who have no contract with each other.
In Stonewall, a dispute between insurers over allocation of defense costs, Judge Harrington summed up the choice of law doctrine: "Determining which jurisdiction's laws should control is not a technical analysis according to Massachusetts' choice-of-law doctrine; instead, the court takes a broader view, and considers the interests and facts relevant to the particular matter before the court." Now I totally get how to determine what state's law to apply--don't you?
Judge Harrington held that Texas law applied for three reasons. "First, the claims arise from products manufactured by the Key Houston Company, a Texas-based division of Jacksonville Shipyards, Inc. Second, the majority of the claims for which S & S paid defense costs are from Texas. Third, most importantly, Texas law firms generated the overwhelming majority of the defense costs."
I have said before that Massachusetts choice of law rules as they apply to insurance coverage disputes amount to so much gibberish. Choice of law issues are even less clear when the dispute is not between an insurer and an insured--who entered a contract with each other and, at least in theory, had reasonable expectations about which state's law should interpret the contract--but between insurers of the same insured, who have no contract with each other.
In Stonewall, a dispute between insurers over allocation of defense costs, Judge Harrington summed up the choice of law doctrine: "Determining which jurisdiction's laws should control is not a technical analysis according to Massachusetts' choice-of-law doctrine; instead, the court takes a broader view, and considers the interests and facts relevant to the particular matter before the court." Now I totally get how to determine what state's law to apply--don't you?
Judge Harrington held that Texas law applied for three reasons. "First, the claims arise from products manufactured by the Key Houston Company, a Texas-based division of Jacksonville Shipyards, Inc. Second, the majority of the claims for which S & S paid defense costs are from Texas. Third, most importantly, Texas law firms generated the overwhelming majority of the defense costs."
Thursday, September 24, 2009
Determining what state's law applies to a coverage dispute
In a coverage dispute the first question is what state's law will determine the coverage issue. That, in turn, is decided by the choice of law rules in the state where the lawsuit is filed.
As described in Clarendon Nat'l Ins. Co. v. Arbella Mut. Ins. Co., 60 Mass. App. Ct. 492, 495 (2004), Massachusetts uses a "functional choice-of-law approach that responds to the interests of the parties, the states involved, and the interstate system as a whole." In this approach Massachusetts courts rely on the Restatement (Second) of Conflict of Laws, sections 193, 188, and 6.
As described by the court in Clarendon, Section 193 "provides that the rights created by a contract of casualty insurance are to be determined by the local law of the State that the parties to the insurance contract understood would be the principal location of the insured risk, unless some other State has a more significant relationship under the principles of § 6."
The principal location of a homeowners policy insuring one house is the state where the house is located and the insured resides. The principal location of an auto policy issued for a single car is the state where the car is garaged and usually driven.
The issue becomes more complicated when a policy insures risks in many states. For example, a general liability policy may insure a business that has factories in several states. A motor vehicle policy could be issued to a trucking company that transports products all over the country.
In such instances a Massachusetts court turns to Section 6 of the Restatement, which lists seven factors to consider:
My opinion is that taken as a whole those factors add up to gibberish. They give permission to a judge to apply the law of whatever state he or she feels like applying. The only caveat is that the location or locations of the underlying insured events is not a factor. See W.R. Grace & Co. v. Hartford Accident and Indem. Co., 407 Mass. 572 (1990); Michaud v. U.S. Fire Ins. Co., 2000 WL 16767.
As described in Clarendon Nat'l Ins. Co. v. Arbella Mut. Ins. Co., 60 Mass. App. Ct. 492, 495 (2004), Massachusetts uses a "functional choice-of-law approach that responds to the interests of the parties, the states involved, and the interstate system as a whole." In this approach Massachusetts courts rely on the Restatement (Second) of Conflict of Laws, sections 193, 188, and 6.
As described by the court in Clarendon, Section 193 "provides that the rights created by a contract of casualty insurance are to be determined by the local law of the State that the parties to the insurance contract understood would be the principal location of the insured risk, unless some other State has a more significant relationship under the principles of § 6."
The principal location of a homeowners policy insuring one house is the state where the house is located and the insured resides. The principal location of an auto policy issued for a single car is the state where the car is garaged and usually driven.
The issue becomes more complicated when a policy insures risks in many states. For example, a general liability policy may insure a business that has factories in several states. A motor vehicle policy could be issued to a trucking company that transports products all over the country.
In such instances a Massachusetts court turns to Section 6 of the Restatement, which lists seven factors to consider:
a) The needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied.
My opinion is that taken as a whole those factors add up to gibberish. They give permission to a judge to apply the law of whatever state he or she feels like applying. The only caveat is that the location or locations of the underlying insured events is not a factor. See W.R. Grace & Co. v. Hartford Accident and Indem. Co., 407 Mass. 572 (1990); Michaud v. U.S. Fire Ins. Co., 2000 WL 16767.
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