A liability insurer found to have “breached its duty to defend…may not later rely on policy exclusions to escape its duty to indemnify the insured for a judgment against him.” This is the latest pronouncement from the New York Court of Appeals in K2 Inv. Group, et al. v. Am. Guar. & Liab. Ins. Co., No 106 (June 11, 2013). A copy of the opinion is available here. …
Read More Caution to Insurers – New Duty to Defend Opinion Issued by New York’s High Court

On June 11, 2013, the New York Times reported that New York Superintendent of Financial Services Benjamin Lawsky joined the debate on the increasingly-popular use of captives and Special Purpose Vehicles (“SPVs”) to reinsure “XXX and “AXXX” reserve redundancies. Mr. Lawsky believes that life insurers are engaging in “shadow insurance” by taking advantage of the laws in other jurisdictions to use what he calls “hollow assets” to support reserves that would traditionally not be approved in New York, such as parental guarantees and conditional letters of credit. …
Read More NY Times Reports Comments by NY Superintendent on Reinsurance Transactions within Life Insurance Industry

On June 11, 2013, the New York State Court of Appeals reinstated a policyholder’s claim for coverage for a $160 million “disgorgement” payment to the SEC. The decision, J.P. Morgan Securities v. Vigilant Insurance, No. 113 (June 11, 2013), is available here. …
Read More New York’s Highest Court Delivers Important Disgorgement Decision

This updates our May 17, 2013 blog post.

On June 3, 2013, Connecticut Governor Dannel Malloy signed into law HB 5072 (the “Bill”), restricting insurance companies and affiliated entities from influencing insureds into using specific automotive glass repair establishments. …
Read More UPDATE: Connecticut Enacts Auto Glass Repair Disclosure Bill

Late last month, Rep. Gary Miller, R-Calif., and Rep. Carolyn McCarthy, D-N.Y., introduced the “Insurance Capital and Accounting Standards Act of 2013” (H.R. 2140 or the “Act”) into the U.S. House of Representatives. The Act is in response to last year’s proposal by the Federal Reserve Board to apply certain capital requirements for financial institutions (i.e., Basel III global capital standards) to insurance companies that are part of depository holding companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). …
Read More U.S. House Introduces Legislation Regarding Capital Requirements For Insurers Subject To Dodd-Frank

On June 4, 2013, the Second Circuit Court of Appeals in Ali v. Federal Insurance Company, et al., No. 11-5000-cv, affirmed a lower court’s decision declaring that the coverage obligations of excess D&O insurers are not implicated until the underlying insurance has been exhausted by actual payment of loss, even when the underlying carriers are insolvent. The appeal was taken from the United States District Court for the Southern District of New York. …
Read More Second Circuit: Excess D&O Coverage Not Triggered Until Underlying Limits Exhausted by Actual Payment

The DRI Bad Faith conference concluded on Thursday afternoon with a presentation by Sarah M. Thorpe of Gordon & Rees LLP and Donald M. Carley of State Farm Insurance. The panel began with a discussion of the latest developments in strategies for defending bad faith claims. The panel observed that, when faced with an actual or potential bad faith case, counsel is advised to know the facts of the case by reviewing the claims file, interviewing key witnesses, identifying the undisputed and disputed issues, and reviewing the relevant case law.
Read More Live Blog: DRI Insurance Bad Faith & Extra Contractual Liability Conference (Boston): Thursday Late Afternoon Panel

Martin Lister, a Hong Kong-based partner in Edwards Wildman’s Insurance and Reinsurance Department, discussed how Hong Kong will be establishing a new independent super regulator for the insurance industry in Global Reinsurance. In the article, “How Hong Kong is Preparing for its New Super-Regulator,” Lister said, “There will be some discomfort in the industry because these guys have got to do something. They may have 200 employees and 120 of them will be new. …
Read More Edwards Wildman’s Martin Lister Analyzes How the Hong Kong Insurance Industry is Preparing for a New Super-Regulator in Global Reinsurance

On a call held this morning, the Captives and Special Purpose Vehicle Use (E) Subgroup of the Financial Condition (E) Committee of the National Association of Insurance Commissioners (“NAIC”) adopted a draft of the Captives and Special Purposes Vehicles White Paper. The White Paper is now being referred to the Financial Condition (E) Committee for review and further consideration. …
Read More NAIC Subgroup Approves Draft White Paper On Life Insurers’ Use of Captives and SPVs for Reinsurance Transactions