LENNAR CORP LENNAR CORP v. v. MARKEL AMERICAN INS. MARKEL - - PowerPoint PPT Presentation

LENNAR CORP LENNAR CORP v. v. MARKEL AMERICAN INS. MARKEL AMERICAN INS.

• R. Brent Cooper
• R. Brent Cooper

Tarron Gartner Tarron Gartner Cooper & Scully, P.C. Cooper & Scully, P.C. 900 Jackson Street, Suite 100 900 Jackson Street, Suite 100 Dallas, TX 75202 Dallas, TX 75202 Telephone: 214 Telephone: 214-

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712-

• 9501

9501 Telecopy: 214 Telecopy: 214-

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9540

APIE v. GARCIA APIE v. GARCIA

  1994 TEXAS SUPREME COURT

1994 TEXAS SUPREME COURT

  MEDICAL MALPRACTICE CASE

MEDICAL MALPRACTICE CASE

  FROM 1980 TO 1982 DR. GARCIA

FROM 1980 TO 1982 DR. GARCIA PRESCRIBED HALDOL AND NAVANE PRESCRIBED HALDOL AND NAVANE

  ALLEGED TO HAVE CAUSED TARDIVE

ALLEGED TO HAVE CAUSED TARDIVE DYSKINESIA DYSKINESIA

  1980 ICA $100K OCCURRENCE

1980 ICA $100K OCCURRENCE POLICY POLICY

  1981

1981-

• 82 ICA $500K OCCURRENCE

82 ICA $500K OCCURRENCE POLICIES POLICIES

APIE v GARCIA APIE v GARCIA

  1983 APIE $500K CLAIMS MADE

1983 APIE $500K CLAIMS MADE POLICY POLICY

  1983 NOTICE OF CLAIM SENT

1983 NOTICE OF CLAIM SENT

  JULY 1985 SETTLEMENT DEMAND

JULY 1985 SETTLEMENT DEMAND FOR $100K ICA LIMIT AND $500 FOR $100K ICA LIMIT AND $500 APIE; LATER INCREASED TO $1.1M APIE; LATER INCREASED TO $1.1M AND $1.6M AND $1.6M

  $2.2M JUDGMENT

$2.2M JUDGMENT

APIE v GARCIA APIE v GARCIA

  “

“THE THE CONSECUTIVE CONSECUTIVE POLICIES, POLICIES, COVERING DISTINCT POLICY COVERING DISTINCT POLICY PERIODS, COULD NOT BE PERIODS, COULD NOT BE ‘ ‘STACKED STACKED’ ’ TO MULTIPLY COVERAGE FOR A TO MULTIPLY COVERAGE FOR A SINGLE CLAIM INVOLVING SINGLE CLAIM INVOLVING INDIVISIBLE INJURY INDIVISIBLE INJURY. .” ”

APIE v GARCIA APIE v GARCIA

  “

“IF A SINGLE OCCURRENCE TRIGGERS IF A SINGLE OCCURRENCE TRIGGERS MORE THAN ONE POLICY, MORE THAN ONE POLICY, COVERING COVERING DIFFERENT POLICY PERIODS DIFFERENT POLICY PERIODS, , THEN THEN DIFFERENT LIMITS MAY HAVE APPLIED AT DIFFERENT LIMITS MAY HAVE APPLIED AT DIFFERENT TIMES. IN SUCH A CASE, THE DIFFERENT TIMES. IN SUCH A CASE, THE INSURED INSURED’ ’S INDEMNITY LIMIT SHOULD BE S INDEMNITY LIMIT SHOULD BE WHATEVER LIMIT APPLIED AT THE WHATEVER LIMIT APPLIED AT THE SINGLE POINT SINGLE POINT IN TIME DURING THE IN TIME DURING THE COVERAGE PERIODS OF THE TRIGGERED COVERAGE PERIODS OF THE TRIGGERED POLICIES WHEN THE INSURED POLICIES WHEN THE INSURED’ ’S LIMIT S LIMIT WAS HIGHEST WAS HIGHEST… …

APIE v GARCIA APIE v GARCIA

  …

…THE INSURED IS GENERALLY IN THE INSURED IS GENERALLY IN THE BEST POSITION TO IDENTIFY THE BEST POSITION TO IDENTIFY THE POLICY OR POLICIES THAT THE POLICY OR POLICIES THAT WOULD MAXIMIZE COVERAGE. WOULD MAXIMIZE COVERAGE. ONCE THE APPLICABLE LIMIT IS ONCE THE APPLICABLE LIMIT IS IDENTIFIED, ALL THE INSURERS IDENTIFIED, ALL THE INSURERS WHOSE WHOSE POLICIES POLICIES ARE TRIGGERED ARE TRIGGERED MUST ALLOCATE FUNDING OF THE MUST ALLOCATE FUNDING OF THE INDEMNITY LIMIT AMONG INDEMNITY LIMIT AMONG THEMSELVES ACCORDING TO THEIR THEMSELVES ACCORDING TO THEIR SUBROGATION RIGHTS. SUBROGATION RIGHTS.” ”

DON DON’ ’S BUILDING S BUILDING

  2008 TEXAS SUPREME COURT

2008 TEXAS SUPREME COURT

  GL COVERAGE WITH ONEBEACON

GL COVERAGE WITH ONEBEACON FROM 1993 FROM 1993-

• 96

96

  SUED FOR DAMAGE FROM EIFS

SUED FOR DAMAGE FROM EIFS INSTALLATION ON HOMES INSTALLATION ON HOMES

  SUITS CLAIMED PROPERTY DAMAGE

SUITS CLAIMED PROPERTY DAMAGE BEGAN BEGAN “ “WITHIN SIX MONTHS TO WITHIN SIX MONTHS TO ONE YEAR AFTER APPLICATION ONE YEAR AFTER APPLICATION” ”

DON DON’ ’S BUILDING S BUILDING

  ALL HOMES INVOLVED

ALL HOMES INVOLVED INSTALLATION DURING ONEBEACON INSTALLATION DURING ONEBEACON POLICIES POLICIES

  ISSUE BEFORE THE COURT WAS

ISSUE BEFORE THE COURT WAS WHAT TRIGGER THEORY TO WHAT TRIGGER THEORY TO ADOPT ADOPT— —MANIFESTATION OR MANIFESTATION OR ACTUAL INJURY ACTUAL INJURY

  COURT ADOPTED ACTUAL INJURY

COURT ADOPTED ACTUAL INJURY TRIGGER TRIGGER

DON DON’ ’S BUILDING S BUILDING

  COURT LEFT OPEN THE ISSUE OF

COURT LEFT OPEN THE ISSUE OF IMPACT OF CONTINUING INJURY IMPACT OF CONTINUING INJURY

  FOOTNOTE 45

FOOTNOTE 45 “ “BECAUSE AS TO ALL BECAUSE AS TO ALL OF THE UNDERLYING CLAIMS, THE OF THE UNDERLYING CLAIMS, THE EIFS WAS INSTALLED DURING THE EIFS WAS INSTALLED DURING THE THREE THREE-

• YEAR POLICY PERIOD OF THE

YEAR POLICY PERIOD OF THE ONEBEACON POLICIES, ONEBEACON POLICIES, SEE SUPRA SEE SUPRA NOTE 2 AND ACCOMPANYING TEST, NOTE 2 AND ACCOMPANYING TEST,

DON DON’ ’S BUILDING S BUILDING

  THIS CASE DOES NOT REQUIRE AN

THIS CASE DOES NOT REQUIRE AN ANALYSIS OF COVERAGE ANALYSIS OF COVERAGE QUESTIONS IN CIRCUMSTANCES QUESTIONS IN CIRCUMSTANCES WHERE PROPERTY DAMAGE WHERE PROPERTY DAMAGE OCCURRED IN THE COURSE OF A OCCURRED IN THE COURSE OF A CONTINUING PROCESS, BUT BEGAN CONTINUING PROCESS, BUT BEGAN BEFORE THE INCEPTION OF THE BEFORE THE INCEPTION OF THE TERM OF THE POLICY IN ISSUE. TERM OF THE POLICY IN ISSUE.

DON DON’ ’S BUILDING S BUILDING

  NOR DO WE UNDERSTAND THE FIFTH

NOR DO WE UNDERSTAND THE FIFTH CIRCUIT TO HAVE ASKED HOW CIRCUIT TO HAVE ASKED HOW ONEBEACON ONEBEACON’ ’S INDEMNITY OBLIGATIONS S INDEMNITY OBLIGATIONS ARE DETERMINED IF THE FACTS ARE DETERMINED IF THE FACTS ULTIMATELY SHOW THAT THE PROPERTY ULTIMATELY SHOW THAT THE PROPERTY DAMAGE BEGAN DURING THE DAMAGE BEGAN DURING THE ONEBEACON POLICY PERIOD BUT ONEBEACON POLICY PERIOD BUT CONTINUED BEYOND THAT PERIOD, CONTINUED BEYOND THAT PERIOD, PERHAPS INTO PERIODS COVERED BY PERHAPS INTO PERIODS COVERED BY OTHER POLICIES. OTHER POLICIES.

DON DON’ ’S BUILDING S BUILDING

  WE EXPRESS NO OPINION ON THESE

WE EXPRESS NO OPINION ON THESE QUESTIONS, QUESTIONS, BUT SEE BUT SEE AM. AM. PHYSICIANS PHYSICIANS’ ’S INS. EXCH. V S INS. EXCH. V GARCIA, 876 S.W.2D 842, 855 (TEX. GARCIA, 876 S.W.2D 842, 855 (TEX. 1994) 1994)

DON DON’ ’S BUILDING S BUILDING

  (

(“ “IF A SINGLE OCCURRENCE IF A SINGLE OCCURRENCE TRIGGERS MORE THAN ONE POLICY TRIGGERS MORE THAN ONE POLICY . . . ALL INSURERS WHOSE POLICIES . . . ALL INSURERS WHOSE POLICIES ARE TRIGGERED MUST ALLOCATE ARE TRIGGERED MUST ALLOCATE FUNDING OF THE INDEMNITY LIMIT FUNDING OF THE INDEMNITY LIMIT AMONG THEMSELVES ACCORDING AMONG THEMSELVES ACCORDING TO THEIR SUBROGATION RIGHTS. TO THEIR SUBROGATION RIGHTS.” ”) )

LENNAR v MARKEL LENNAR v MARKEL

  HOMEOWNERS

HOMEOWNERS’ ’ SUITS BASED ON SUITS BASED ON APPLICATION OF EIFS APPLICATION OF EIFS

  ALL INSURERS DENIED COVERAGE

ALL INSURERS DENIED COVERAGE

  LENNAR REPLACED EIFS ON SOME

LENNAR REPLACED EIFS ON SOME 465 HOMES THAT SUSTAINED 465 HOMES THAT SUSTAINED WATER DAMAGE WATER DAMAGE

  ALL INSURERS SETTLED EXCEPT

ALL INSURERS SETTLED EXCEPT MARKEL MARKEL

LENNAR v MARKEL LENNAR v MARKEL

  JURY FOUND FOR LENNAR

JURY FOUND FOR LENNAR PREJUDGMENT INTEREST PREJUDGMENT INTEREST $1,227,476.03 $1,227,476.03 ATTORNEYS FEES ATTORNEYS FEES $2,421,825.89 $2,421,825.89 CREDIT FOR SETTLEMENT CREDIT FOR SETTLEMENT WITH OTHER INSURERS WITH OTHER INSURERS $425,000.00 $425,000.00 ACTUAL DAMAGES ACTUAL DAMAGES $2,965,114.16 $2,965,114.16

LENNAR v MARKEL LENNAR v MARKEL

  COURT OF APPEALS REVERSED ON

COURT OF APPEALS REVERSED ON TWO GROUNDS: TWO GROUNDS:

• NO CONSENT TO SETTLE BY MARKEL

NO CONSENT TO SETTLE BY MARKEL

• NO SEGREGATION OF DAMAGES TO

NO SEGREGATION OF DAMAGES TO SHOW COSTS OF REPAIR AS OPPOSED SHOW COSTS OF REPAIR AS OPPOSED TO COSTS TO REMOVE EIFS TO SEE IF TO COSTS TO REMOVE EIFS TO SEE IF PROPERTY DAMAGE EXISTED PROPERTY DAMAGE EXISTED

LENNAR v MARKEL LENNAR v MARKEL

  ISSUES BEFORE SUPREME COURT:

ISSUES BEFORE SUPREME COURT:

• 1) NOT HAVING CONSENTED TO THE

1) NOT HAVING CONSENTED TO THE HOMEBUILDER HOMEBUILDER’ ’S REMEDIATION S REMEDIATION PROGRAM, IS THE INSURER PROGRAM, IS THE INSURER NEVERTHELESS RESPONSIBLE FOR THE NEVERTHELESS RESPONSIBLE FOR THE COSTS IF IT SUFFERED NO PREJUDICE COSTS IF IT SUFFERED NO PREJUDICE AS A RESULT? AS A RESULT?

LENNAR v MARKEL LENNAR v MARKEL

• 2) IS THE INSURER RESPONSIBLE FOR

2) IS THE INSURER RESPONSIBLE FOR (i) COSTS INCURRED TO DETERMINE (i) COSTS INCURRED TO DETERMINE PROPERTY DAMAGE AS WELL AS TO PROPERTY DAMAGE AS WELL AS TO REPAIR IT, AND (ii) COSTS TO REPAIR IT, AND (ii) COSTS TO REMEDIATE DAMAGE THAT BEGAN REMEDIATE DAMAGE THAT BEGAN BEFORE AND CONTINUED AFTER THE BEFORE AND CONTINUED AFTER THE POLICY PERIOD? POLICY PERIOD?

LENNAR v MARKEL LENNAR v MARKEL

  CONSENT TO SETTLE

CONSENT TO SETTLE-

• 

 BREACH MUST BE MATERIAL

BREACH MUST BE MATERIAL

  MATERIALITY MUST SHOW

MATERIALITY MUST SHOW PREJUDICE PREJUDICE

  JURY FOUND THAT MARKEL NOT

JURY FOUND THAT MARKEL NOT PREJUDICED BY SETTLEMENTS PREJUDICED BY SETTLEMENTS

  CONCURRENCE BY BOYD

CONCURRENCE BY BOYD

  QUESTION

QUESTION-

• WAS REAL PREJUDICE

WAS REAL PREJUDICE SETTLEMENT WITH OTHER INSURER SETTLEMENT WITH OTHER INSURER

LENNAR v MARKEL LENNAR v MARKEL

  PROPERTY DAMAGE?

PROPERTY DAMAGE?

• “

“AS WE HAVE EXPLAINED, WATER AS WE HAVE EXPLAINED, WATER DAMAGE FROM EIFS OCCURS WITHIN DAMAGE FROM EIFS OCCURS WITHIN THE WALLS OF HOMES TO WHICH IT IS THE WALLS OF HOMES TO WHICH IT IS APPLIED AND THUS IS OFTEN HIDDEN APPLIED AND THUS IS OFTEN HIDDEN FROM SIGHT. LENNAR FROM SIGHT. LENNAR’ ’S EVIDENCE AT S EVIDENCE AT TRIAL WAS THAT THE EXTENT OF TRIAL WAS THAT THE EXTENT OF DAMAGE TO A HOME CANNOT BE DAMAGE TO A HOME CANNOT BE DETERMINED WITHOUT REMOVING ALL DETERMINED WITHOUT REMOVING ALL THE EIFS. THE EIFS.

LENNAR v MARKEL LENNAR v MARKEL

  ACCORDINGLY, THE ONLY COST

ACCORDINGLY, THE ONLY COST EVIDENCE LENNAR PRESENTED WAS EVIDENCE LENNAR PRESENTED WAS FOR REMOVING ALL THE EIFS FROM FOR REMOVING ALL THE EIFS FROM DAMAGED HOUSES, REPAIRING THE DAMAGED HOUSES, REPAIRING THE DAMAGE, AND RECOVERING THE DAMAGE, AND RECOVERING THE HOUSE WITH CONVENTIONAL HOUSE WITH CONVENTIONAL STUCCO STUCCO… …

LENNAR v MARKEL LENNAR v MARKEL

  WE HAVE NOTED THAT THE PHRASE,

WE HAVE NOTED THAT THE PHRASE, “ “BECAUSE OF BECAUSE OF” ”, USED IN , USED IN DETERMINING A COVERED LOSS DETERMINING A COVERED LOSS UNDER A COMMERCIAL GENERAL UNDER A COMMERCIAL GENERAL LIABILITY POLICY, LIABILITY POLICY, “ “IS SUSCEPTIBLE IS SUSCEPTIBLE TO A BROAD DEFINITION. TO A BROAD DEFINITION.” ” BUT IT BUT IT NEED NOT BE READ BROADLY TO NEED NOT BE READ BROADLY TO REACH ALL OF LENNAR REACH ALL OF LENNAR’ ’S S REMEDIATION COSTS. REMEDIATION COSTS.

LENNAR v MARKEL LENNAR v MARKEL

  UNDER NO REASONABLE

UNDER NO REASONABLE CONSTRUCTION OF THE PHRASE CONSTRUCTION OF THE PHRASE CAN THE COST OF FINDING EIFS CAN THE COST OF FINDING EIFS PROPERTY DAMAGE IN ORDER TO PROPERTY DAMAGE IN ORDER TO REPAIR IT NOT BE CONSIDERED TO REPAIR IT NOT BE CONSIDERED TO BE BE “ “BECAUSE OF BECAUSE OF” ” THE DAMAGE. WE THE DAMAGE. WE ARE NOT CONFRONTED WITH A ARE NOT CONFRONTED WITH A SITUATION IN WHICH THE SITUATION IN WHICH THE EXISTENCE OF DAMAGE WAS EXISTENCE OF DAMAGE WAS DOUBTFUL. DOUBTFUL.

LENNAR v MARKEL LENNAR v MARKEL

  MARKEL CONCEDES THAT EACH OF

MARKEL CONCEDES THAT EACH OF THE 465 HOMES FOR WHICH THE 465 HOMES FOR WHICH LENNAR SOUGHT TO RECOVER LENNAR SOUGHT TO RECOVER REMEDIATION COSTS WAS REMEDIATION COSTS WAS ACTUALLY DAMAGED. ACTUALLY DAMAGED.

LENNAR v MARKEL LENNAR v MARKEL

  SEGREGATION BY POLICY PERIOD

SEGREGATION BY POLICY PERIOD-

• 

 “

“ACCORDING TO THE EVIDENCE AT ACCORDING TO THE EVIDENCE AT TRIAL, WATER DAMAGE FROM EIFS TRIAL, WATER DAMAGE FROM EIFS BEGINS WITHIN SIX TO TWELVE MONTHS BEGINS WITHIN SIX TO TWELVE MONTHS AFTER HOME CONSTRUCTION IS AFTER HOME CONSTRUCTION IS COMPLETED AND CONTINUES UNTIL IT IS COMPLETED AND CONTINUES UNTIL IT IS

• REPAIRED. LENNAR STOPPED USING EIFS
• REPAIRED. LENNAR STOPPED USING EIFS

IN 1998. MARKEL IN 1998. MARKEL’ ’S POLICY WAS IN S POLICY WAS IN EFFECT THROUGHOUT 1999 AND UNTIL EFFECT THROUGHOUT 1999 AND UNTIL OCTOBER 2000. OCTOBER 2000.

LENNAR v MARKEL LENNAR v MARKEL

  A FAIR INFERENCE FROM THE RECORD IS

A FAIR INFERENCE FROM THE RECORD IS THAT MOST OF THE DAMAGE TO THE THAT MOST OF THE DAMAGE TO THE HOMES BEGAN BEFORE OR DURING HOMES BEGAN BEFORE OR DURING MARKEL MARKEL’ ’S POLICY PERIOD AND S POLICY PERIOD AND CONTINUED AFTERWARD. MARKEL CONTINUED AFTERWARD. MARKEL AGREES THAT ALL THE HOMES FOR AGREES THAT ALL THE HOMES FOR WHICH LENNAR CLAIMS REMEDIATION WHICH LENNAR CLAIMS REMEDIATION COSTS SUSTAINED SOME DAMAGE COSTS SUSTAINED SOME DAMAGE DURING THE POLICY PERIOD, BUT DURING THE POLICY PERIOD, BUT INSISTS THAT ONLY THE COSTS FOR INSISTS THAT ONLY THE COSTS FOR

LENNAR v MARKEL LENNAR v MARKEL

  REMEDIATING THE DAMAGE IN

REMEDIATING THE DAMAGE IN EXISTENCE DURING THE POLICY PERIOD EXISTENCE DURING THE POLICY PERIOD ARE COVERED LOSSES. LENNAR ARE COVERED LOSSES. LENNAR CONCEDES THAT IT DID NOT ATTEMPT TO CONCEDES THAT IT DID NOT ATTEMPT TO PROVE THE SPECIFIC AMOUNT OF PROVE THE SPECIFIC AMOUNT OF DAMAGE TO EACH HOUSE DURING THE DAMAGE TO EACH HOUSE DURING THE POLICY PERIOD BUT CONTENDS THE IT POLICY PERIOD BUT CONTENDS THE IT WOULD BE PRACTICALLY IMPOSSIBLE TO WOULD BE PRACTICALLY IMPOSSIBLE TO DO SO AND THAT THE POLICY DOES NOT DO SO AND THAT THE POLICY DOES NOT REQUIRE IT. REQUIRE IT.” ”

LENNAR v MARKEL LENNAR v MARKEL

  “

“COVERAGE UNDER MARKEL COVERAGE UNDER MARKEL’ ’S S POLICY IS LIMITED TO PROPERTY POLICY IS LIMITED TO PROPERTY DAMAGE THAT OCCURS DURING THE DAMAGE THAT OCCURS DURING THE POLICY PERIOD BUT EXPRESSLY POLICY PERIOD BUT EXPRESSLY INCLUDES DAMAGE FROM A INCLUDES DAMAGE FROM A CONTINUOUS EXPOSURE TO THE CONTINUOUS EXPOSURE TO THE SAME HARMFUL CONDITIONS. FOR SAME HARMFUL CONDITIONS. FOR DAMAGE THAT OCCURS DURING THE DAMAGE THAT OCCURS DURING THE POLICY PERIOD, COVERAGE POLICY PERIOD, COVERAGE

LENNAR v MARKEL LENNAR v MARKEL

  EXTENDS TO THE

EXTENDS TO THE “ “TOTAL AMOUNT TOTAL AMOUNT” ” OF LOSS SUFFERED AS A RESULT, OF LOSS SUFFERED AS A RESULT, NOT JUST THE LOSS INCURRED NOT JUST THE LOSS INCURRED DURING THE POLICY PERIOD. DURING THE POLICY PERIOD.” ”

  “

“ULTIMATE NET LOSS ULTIMATE NET LOSS” ” MEANS THE MEANS THE TOTAL AMOUNT OF DAMAGES FOR TOTAL AMOUNT OF DAMAGES FOR WHICH THE INSURED IS LEGALLY WHICH THE INSURED IS LEGALLY LIABLE IN PAYMENT. . . LIABLE IN PAYMENT. . .

LENNAR v MARKEL LENNAR v MARKEL

  A. INSURING AGREEMENT

• A. INSURING AGREEMENT-
• ”

”WE WILL PAY WE WILL PAY ON BEHALF OF THE INSURED FOR THAT ON BEHALF OF THE INSURED FOR THAT PORTION PORTION “ “ULTIMATE NET LOSS ULTIMATE NET LOSS” ” IN IN EXCESS OF THE EXCESS OF THE “ “RETAINED LIMIT RETAINED LIMIT” ” . . . . . .

  “

“THIS INSURANCE APPLIES TO THIS INSURANCE APPLIES TO …” …”PROPERTY DAMAGE PROPERTY DAMAGE” ”..BUT ONLY IF: ..BUT ONLY IF: THE THE …” …”PROPERTY DAMAGE PROPERTY DAMAGE” ” OCCURRED OCCURRED DURING THIS POLICY PERIOD OF THIS DURING THIS POLICY PERIOD OF THIS POLICY. POLICY.” ”

LENNAR v MARKEL LENNAR v MARKEL

  “

“THIS READING OF THE POLICY IS THIS READING OF THE POLICY IS CONFIRMED BY OUR DECISION IN CONFIRMED BY OUR DECISION IN AMERICAN PHYSICIANS INSURANCE AMERICAN PHYSICIANS INSURANCE EXCHANGE V. GARCIA. . . . EXCHANGE V. GARCIA. . . . WE WE REJECTED THE PLAINTIFF REJECTED THE PLAINTIFF’ ’S S STACKING ARGUMENT, EXPLAINING STACKING ARGUMENT, EXPLAINING INSTEAD: INSTEAD: ‘ ‘IF A SINGLE IF A SINGLE OCCURRENCE TRIGGERS MORE OCCURRENCE TRIGGERS MORE THAN ONE POLICY, COVERING THAN ONE POLICY, COVERING DIFFERENT POLICY PERIODS, DIFFERENT POLICY PERIODS,

LENNAR v MARKEL LENNAR v MARKEL

  THEN DIFFERENT LIMITS MAY HAVE

THEN DIFFERENT LIMITS MAY HAVE APPLIED AT SUCH DIFFERENT APPLIED AT SUCH DIFFERENT

• TIMES. IN SUCH A CASE, THE
• TIMES. IN SUCH A CASE, THE

INSURED INSURED’ ’S INDEMNITY LIMITS S INDEMNITY LIMITS SHOULD BE WHATEVER LIMIT SHOULD BE WHATEVER LIMIT APPLIED AT THE SINGLE POINT IN APPLIED AT THE SINGLE POINT IN TIME DURING THE COVERAGE TIME DURING THE COVERAGE PERIODS OF TRIGGERED POLICIES PERIODS OF TRIGGERED POLICIES WHEN THE INSURED WHEN THE INSURED’ ’S LIMIT WAS S LIMIT WAS THE HIGHEST. THE HIGHEST.

LENNAR v MARKEL LENNAR v MARKEL

  THE INSURED IS GENERALLY IN THE

THE INSURED IS GENERALLY IN THE BEST POSITION TO IDENTIFY THE BEST POSITION TO IDENTIFY THE POLICY OR POLICIES POLICY OR POLICIES THAT WOULD MAXIMIZE COVERAGE. ONCE THE APPLICABLE LIMIT IS IDENTIFIED, ALL INSURERS WHOSE POLICIES ARE TRIGGERED MUST ALLOCATE FUNDING OF THE INDEMNITY LIMIT

LENNAR v MARKEL LENNAR v MARKEL

  AMONG THEMSELVES ACCORDING

AMONG THEMSELVES ACCORDING TO THEIR SUBROGATION RIGHTS. TO THEIR SUBROGATION RIGHTS.’ ’ MARKEL DISMISSES THIS AS DICTA, MARKEL DISMISSES THIS AS DICTA, BUT HAVING SAID WHAT THE BUT HAVING SAID WHAT THE POLICY LIMITS WERE NOT, IT WAS POLICY LIMITS WERE NOT, IT WAS IMPORTANT FOR US TO SAY WHAT IMPORTANT FOR US TO SAY WHAT THEY WERE AND WHY THEY WERE AND WHY” ”

LENNAR v MARKEL LENNAR v MARKEL

  “

“MARKEL ARGUES ALTERNATIVELY MARKEL ARGUES ALTERNATIVELY THAT IT SHOULD BE RESPONSIBLE THAT IT SHOULD BE RESPONSIBLE ALONG WITH LENNAR ALONG WITH LENNAR’ ’S OTHER S OTHER INSURERS ONLY FOR ITS PRO RATA INSURERS ONLY FOR ITS PRO RATA SHARE OF THE TOTAL REMEDIATION SHARE OF THE TOTAL REMEDIATION EXPENSES.

• EXPENSES. GARCIA

GARCIA REJECTS THIS REJECTS THIS APPROACH, LEAVING UP TO APPROACH, LEAVING UP TO INSURERS TO ALLOCATE IT AMONG INSURERS TO ALLOCATE IT AMONG THEMSELVES ACCORDING TO THEIR THEMSELVES ACCORDING TO THEIR SUBROGATION RIGHTS. SUBROGATION RIGHTS.” ”

INTERPRETATIONS INTERPRETATIONS

  MID

MID-

• CONTINENT CAS. CO. v.

CONTINENT CAS. CO. v. ACADEMY DEVELOPMENT ACADEMY DEVELOPMENT – – “ “MID MID-

• CONTINENT CONTENDS DEFENSE

CONTINENT CONTENDS DEFENSE COSTS SHOULD BE APPORTIONED COSTS SHOULD BE APPORTIONED PRO RATA PRO RATA ACROSS ALL FIVE OF THE ACROSS ALL FIVE OF THE

• POLICIES. DEFENDANTS COUNTER
• POLICIES. DEFENDANTS COUNTER

THEY ARE ENTITLED INSTEAD TO THEY ARE ENTITLED INSTEAD TO CHOOSE ANY ONE OF THE POLICIES CHOOSE ANY ONE OF THE POLICIES UNDER WHICH MID UNDER WHICH MID-

• CONTINENT

CONTINENT

INTERPRETATIONS INTERPRETATIONS

  IS TO PROVIDE A COMPLETE DEFENSE.

IS TO PROVIDE A COMPLETE DEFENSE. AS STATED, THE POLICIES FOR THE LAST AS STATED, THE POLICIES FOR THE LAST THREE YEARS CONTAINED HIGHER THREE YEARS CONTAINED HIGHER DEDUCTIBLE AMOUNTS, AND THE DEDUCTIBLE AMOUNTS, AND THE DEDUCTIBLE ALSO APPLIED TO DEFENSE DEDUCTIBLE ALSO APPLIED TO DEFENSE COSTS COSTS… …ACCORDINGLY THE COURT DID ACCORDINGLY THE COURT DID NOT ERR BY PERMITTING DEFENDANTS NOT ERR BY PERMITTING DEFENDANTS TO SELECT ANY ONE OF THE TRIGGERED TO SELECT ANY ONE OF THE TRIGGERED POLICIES FOR THEIR DEFENSE. POLICIES FOR THEIR DEFENSE.” ”

INTERPRETATIONS INTERPRETATIONS

  LSG TECHNOLOGIES v U.S.FIRE

LSG TECHNOLOGIES v U.S.FIRE INS.CO. INS.CO. -

• “

“HORIZONTAL HORIZONTAL EXHAUSTION CANNOT BE EXHAUSTION CANNOT BE RECONCILED WITH THE HOLDING IN RECONCILED WITH THE HOLDING IN GARCIA.

• GARCIA. UNDER

UNDER GARCIA GARCIA EVEN EVEN WHEN A SINGLE OCCURRENCE WHEN A SINGLE OCCURRENCE TRIGGERS SEVERAL POLICIES, TRIGGERS SEVERAL POLICIES, CONSECUTIVE CONSECUTIVE, NON , NON-

• OVELAPPING

OVELAPPING POLICIES CANNOT BE COMBINED POLICIES CANNOT BE COMBINED--

INTERPRETATIONS INTERPRETATIONS

  OR STACKED

OR STACKED— —TO CREATE A POLICY TO CREATE A POLICY LIMIT THAT EQUALS THE LIMIT THAT EQUALS THE AGGREGATE OF THE INDIVIDUAL AGGREGATE OF THE INDIVIDUAL POLICIES POLICIES’ ’ LIMITS. IT WOULD,

• LIMITS. IT WOULD,

THEREFORE, BE INCONSISTENT THEREFORE, BE INCONSISTENT WITH SUCH A RULE TO REQUIRE WITH SUCH A RULE TO REQUIRE THAT THE LIMITS OF THAT THE LIMITS OF CONSECUTIVE CONSECUTIVE, , NON NON-

• OVERLAPPING BE EXHAUSTED

OVERLAPPING BE EXHAUSTED BEFORE THE EXCESS INSURER BEFORE THE EXCESS INSURER’ ’S S

INTERPRETATIONS INTERPRETATIONS

  OBLIGATIONS ARE TRIGGERED

OBLIGATIONS ARE TRIGGERED… … HORIZONTAL EXHAUSTION WOULD HORIZONTAL EXHAUSTION WOULD SERVE TO RAISE THE CAP SERVE TO RAISE THE CAP ESTABLISHED IN AN INDIVIDUAL ESTABLISHED IN AN INDIVIDUAL POLICY IN CONTRAVENTION OF POLICY IN CONTRAVENTION OF GARCIA.

• GARCIA. ADMITTEDLY, THE

ADMITTEDLY, THE GARCIA GARCIA CASE DID NOT INCLUDE AN EXCESS CASE DID NOT INCLUDE AN EXCESS INSURER; HOWEVER, THE INSURER; HOWEVER, THE GARCIA GARCIA COURT CONTEMPLATED THAT COURT CONTEMPLATED THAT ‘ ‘MULTIPLE POLICIES MAY PROVIDE MULTIPLE POLICIES MAY PROVIDE

INTERPRETATIONS INTERPRETATIONS

  AN AGGREGATE LIMIT UNDER CERTAIN

AN AGGREGATE LIMIT UNDER CERTAIN CIRCUMSTANCES, CIRCUMSTANCES, SUCH AS IF THE SUCH AS IF THE INSURED PURCHASED INSURED PURCHASED CONCURRENT CONCURRENT EXCESS LIABILITY INSURANCE EXCESS LIABILITY INSURANCE. .’… ’…THE THE AGGREGATION OF CONCURRENT AGGREGATION OF CONCURRENT POLICIES, SUCH AS A PRIMARY POLICY POLICIES, SUCH AS A PRIMARY POLICY COUPLED WITH AN EXCESS POLICY, COUPLED WITH AN EXCESS POLICY, COMPORTS WITH VERTICAL EXHAUSTION COMPORTS WITH VERTICAL EXHAUSTION AND NOT WITH HORIZONTAL AND NOT WITH HORIZONTAL EXHAUSTION. EXHAUSTION.” ”

RULES WE KNOW RULES WE KNOW

  1) IN A CONTINUING INJURY CASE,

1) IN A CONTINUING INJURY CASE, THERE IS NO STACKING OF THERE IS NO STACKING OF CONSECUTIVE CONSECUTIVE POLICIES POLICIES-

• ”

”CONSECUTIVE POLICIES, CONSECUTIVE POLICIES, COVERING DISTINCT POLICY COVERING DISTINCT POLICY PERIODS, COULD NOT BE PERIODS, COULD NOT BE “ “STACKED STACKED” ” TO MULTIPLY COVERAGE TO MULTIPLY COVERAGE FOR A SINGLE CLAIM INVOLVING FOR A SINGLE CLAIM INVOLVING INDIVISIBLE INJURY. INDIVISIBLE INJURY.” ” APIE APIE

  2) STACKING IS ALLOWED FOR

2) STACKING IS ALLOWED FOR CONCURRENT COVERAGE CONCURRENT COVERAGE-

• ”

”MULTIPLE MULTIPLE POLICIES MAY PROVIDE AN POLICIES MAY PROVIDE AN AGGREGATE LIMIT UNDER CERTAIN AGGREGATE LIMIT UNDER CERTAIN CIRCUMSTANCES, SUCH AS IF THE CIRCUMSTANCES, SUCH AS IF THE INSURED PURCHASED CONCURRENT INSURED PURCHASED CONCURRENT EXCESS LIABILITY COVERAGE. EXCESS LIABILITY COVERAGE.” ” APIE APIE

RULES WE KNOW RULES WE KNOW

  3) THE INSURED IS ALLOWED TO

3) THE INSURED IS ALLOWED TO PICK THE PICK THE POLICY PERIOD POLICY PERIOD THAT THAT PROVIDES THE GREATEST PROVIDES THE GREATEST RECOVERY RECOVERY-

• ”

”THE INSURED IS THE INSURED IS GENERALLY IN THE BEST POSITION GENERALLY IN THE BEST POSITION TO IDENTIFY THE POLICY OR TO IDENTIFY THE POLICY OR POLICIES THAT WOULD MAXIMIZE POLICIES THAT WOULD MAXIMIZE COVERAGE. COVERAGE.” ” APIE APIE

RULES WE KNOW RULES WE KNOW

  4) THE INSURER(S) SELECTED ARE

4) THE INSURER(S) SELECTED ARE LIABLE FOR THE LOSS UP TO THEIR LIABLE FOR THE LOSS UP TO THEIR POLICY LIMITS POLICY LIMITS-

• ”

”IN SUCH A CASE, IN SUCH A CASE, THE INSURED THE INSURED’ ’S INDEMNITY LIMIT S INDEMNITY LIMIT SHOULD BE WHATEVER LIMIT SHOULD BE WHATEVER LIMIT APPLIED AT THE SINGLE POINT IN APPLIED AT THE SINGLE POINT IN TIME DURING THE COVERAGE TIME DURING THE COVERAGE PERIODS OF TRIGGERED POLICIES PERIODS OF TRIGGERED POLICIES WHEN THE INSURED WHEN THE INSURED’ ’S LIMIT WAS S LIMIT WAS THE HIGHEST. THE HIGHEST.” ” APIE APIE

RULES WE KNOW RULES WE KNOW

  5) THE EXHAUSTION FOR THE

5) THE EXHAUSTION FOR THE POLICY PERIOD THAT IS SELECTED POLICY PERIOD THAT IS SELECTED IS VERTICAL RATHER THAN IS VERTICAL RATHER THAN HORIZONTAL HORIZONTAL-

• ”

”MULTIPLE POLICIES MULTIPLE POLICIES MAY PROVIDE AN AGGREGATE LIMIT MAY PROVIDE AN AGGREGATE LIMIT UNDER CERTAIN CIRCUMSTANCES, UNDER CERTAIN CIRCUMSTANCES, SUCH AS IF THE INSURED SUCH AS IF THE INSURED PURCHASED CONCURRENT EXCESS PURCHASED CONCURRENT EXCESS LIABILITY INSURANCE. LIABILITY INSURANCE.” ” APIE APIE

RULES WE KNOW RULES WE KNOW

  6) THE VERTICAL EXHAUSTION

6) THE VERTICAL EXHAUSTION MUST BE FOR THE SAME POLICY MUST BE FOR THE SAME POLICY PERIOD PERIOD-

• ”

”IN SUCH A CASE, THE IN SUCH A CASE, THE INSURED INSURED’ ’S INDEMNITY LIMIT S INDEMNITY LIMIT SHOULD BE WHATEVER LIMIT SHOULD BE WHATEVER LIMIT APPLIED AT THE APPLIED AT THE SINGLE POINT SINGLE POINT IN IN TIME DURING THE COVERAGE TIME DURING THE COVERAGE PERIODS WHEN THE INSURED PERIODS WHEN THE INSURED’ ’S S LIMIT WAS THE HIGHEST. LIMIT WAS THE HIGHEST.” ” APIE APIE

RULES WE KNOW RULES WE KNOW

  7) THE INSURER(S) MAY THEN SEEK

7) THE INSURER(S) MAY THEN SEEK SUBROGATION FROM OTHER SUBROGATION FROM OTHER INSURERS IN THEIR LAYERS INSURERS IN THEIR LAYERS-

• ”

”ONCE ONCE THE APPLICABLE LIMIT IS THE APPLICABLE LIMIT IS IDENTIFIED, ALL INSURERS WHOSE IDENTIFIED, ALL INSURERS WHOSE POLICIES ARE TRIGGERED MUST POLICIES ARE TRIGGERED MUST ALLOCATE FUNDING OF THE ALLOCATE FUNDING OF THE INDEMNITY LIMIT AMONG INDEMNITY LIMIT AMONG THEMSELVES ACCORDING TO THEIR THEMSELVES ACCORDING TO THEIR SUBROGATIONS RIGHTS. SUBROGATIONS RIGHTS.” ” APIE APIE

RULES WE KNOW RULES WE KNOW

  8) THE INSURED MUST SELECT THE

8) THE INSURED MUST SELECT THE SAME POLICY PERIOD FOR BOTH SAME POLICY PERIOD FOR BOTH DEFENSE AND INDEMNITY DEFENSE AND INDEMNITY-

WHAT WE DON WHAT WE DON’ ’T KNOW T KNOW

  HOW ARE UNINSURED PERIODS

HOW ARE UNINSURED PERIODS TREATED? TREATED?

  HOW ARE PERIODS WITH

HOW ARE PERIODS WITH COVERAGE EXCLUSIONS TREATED? COVERAGE EXCLUSIONS TREATED?

  HOW DO WE TREAT LARGE SIR

HOW DO WE TREAT LARGE SIR’ ’S? S?

  WHO HAS THE BURDEN OF

WHO HAS THE BURDEN OF IDENTIFYING THE POLICY PERIODS IDENTIFYING THE POLICY PERIODS TRIGGERED? TRIGGERED?

WHAT WE DON WHAT WE DON’ ’T KNOW T KNOW

  HOW DOES SUBROGATION WORK?

HOW DOES SUBROGATION WORK?

• What is the appropriate allocation formula?

What is the appropriate allocation formula?

• Other insurance?

Other insurance?

• What is

What is the burden the burden of proof on targeted

• f proof on targeted carrier?

carrier?

  WHAT IF THE INSURED DOES NOT SELECT?

WHAT IF THE INSURED DOES NOT SELECT?

• What act constitutes

What act constitutes selection? selection?

  WHAT IF THE INSURED FAILS TO TENDER TO ALL

WHAT IF THE INSURED FAILS TO TENDER TO ALL CARRIERS? CARRIERS?

• Does the selected tender have a

Does the selected tender have a “ “cooperation cooperation” ” defense? defense?

  IS TENDER BY A TARGETED INSURER TO OTHER

IS TENDER BY A TARGETED INSURER TO OTHER INSURERS SUFFICIENT? INSURERS SUFFICIENT?

• Does this impose a duty on the carrier to tender?

Does this impose a duty on the carrier to tender?

• How would this be reconciled with

How would this be reconciled with Crocker Crocker? ?

What We Don What We Don’ ’t Know t Know

  DOES THE SELECTION RULE APPLY TO DEFENSE

DOES THE SELECTION RULE APPLY TO DEFENSE?

?

• How does subrogation work on defense costs

How does subrogation work on defense costs when the insured (i.e. a general contractor) is when the insured (i.e. a general contractor) is an AI on multiple policies issued to different an AI on multiple policies issued to different insureds insureds (i.e. subcontractors) given that each (i.e. subcontractors) given that each carrier must defend the carrier must defend the “ “entire suit. entire suit.” ”

  WHAT HAPPENS IF INSURED SETTLES

WHAT HAPPENS IF INSURED SETTLES PAST PAST DEFENSE COSTS WITH OTHER INSURERS DEFENSE COSTS WITH OTHER INSURERS

APPLICATION APPLICATION

$5M $5M $5M $5M $5M Insurer

• No. 5

Insurer

• No. 4

Insurer

• No. 4

Insurer

• No. 4

Insurer

• No. 4

$1M $1M $1M $1M $1M Insurer

• No. 3

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• No. 2

Insurer

• No. 2

Insurer

• No. 1

Insurer

• No. 1

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