As I said in part one of my blog on captive insurance companies, the exploding popularity of captives cannot be denied, and it is not difficult to understand why. A business that forms a captive insurer often enjoys lower premium costs simply by virtue of eliminating the middleman. In addition, up to $1.2 million in annual insurance premiums paid to a captive subsidiary are tax-deductible.
More than 90 percent of all Fortune 500 companies use captives, according to Forbes. Captives are popular because, when structured properly, these insurance entities can create substantial financial benefits for their corporate owners.
First and foremost, captives can provide substantial cost savings on insurance premiums for most lines of business insurance, including commercial general-liability coverage, workers’ compensation insurance, directors and officers’ risks and many others. To sweeten the pot, tax laws permit companies to deduct up to $1.2 million in insurance premiums paid to captives from their corporate tax bill.
Today’s Wall Street Journal front page features an article titled, “Travelers Doesn’t Want to Share its Umbrella,” about Travelers Insurance threatening suit against virtually every company that uses an umbrella as part of its logo – including Totes Isotoner Corp., the maker of…umbrellas.
According to the article, written by Wall Street Journal reporter Leslie Scism, Travelers — the $27 billion insurance giant — “has challenged at least 30 trademark applications across a range of industries, according to U.S. Patent and Trademark Office records.”
In a recent decision issued by the Supreme Court of New Hampshire, losses caused by a persistent odor can be considered a “physical loss” and thus covered under a homeowner’s insurance policy if the smell distinctly and demonstrably changes the condition of the property. While some jurisdictions may disagree, the decision serves as an important guide for courts dealing with policy interpretation issues. Continue Reading
A recent decision by the Supreme Court of Georgia is an important reminder to businesses and individuals whose policy contains a “consent-to-settle” clause – make sure you have the insurer’s approval before proceeding with a settlement; otherwise the insurer can deny coverage and refuse to pay the settlement amount on your behalf.
The case is Piedmont Office Realty Trust, Inc. v. XL Specialty Insurance Company, 2015 WL 1773620 (2015), in which Piedmont Office Realty Trust filed suit against its insurer alleging breach of an excess insurance policy and bad faith for refusing to pay the full amount of a settlement Piedmont had agreed to in a separate matter. Piedmont had an excess policy that provided an additional $10 million in coverage beyond its primary policy’s limits.
The excess policy was issued to Piedmont by XL Specialty Insurance Company, and included a “consent to settle” provision that required Piedmont to obtain XL’s consent for the settlement of any securities claim that Piedmont became “legally obligated” to pay. According to the clause, XL’s consent could “not be unreasonably withheld.” The policy also contained a “no action” provision, which precluded Piedmont from suing XL unless it was in “full compliance with all of the terms” of the policy.
With the curfew in Baltimore now lifted, and the riots behind us, many local small businesses should now be filing insurance claims to rebuild what they have lost.
Some businesses will file claims for theft as the result of looting. Others will file claims for damage done to their property by fire or other vandalism. Still more will file claims for loss of income as the result of the protests, police barricades, closed streets and especially the mandatory curfew. Continue Reading
As reported by The Daily Record, The Equal Employment Opportunity Commission filed a class-action suit last week against the Maryland Insurance Administration, claiming the agency is “willfully” paying its female insurance investigators and enforcement officers less than their male counterparts.
In a press release dated April 20, the EEOC says it attempted to reach a pre-litigation settlement with the agency before filing the suit. The case, filed April 15 in the U.S. District Court for the District of Maryland, Northern Division, is captioned EEOC v. Maryland Insurance Administration, Civil Action No. 1:15-cv-01091-JFM).
According to the press release, a spokesman for the Maryland Insurance Administration said the MIA strongly disputes the allegations and assured that “the case will be vigorously defended.”
Could it be that Maryland courts have finally started empowering policyholders in lawsuits against insurers, alleging bad faith and fraud? Successfully prosecuting such cases against insurers has historically been difficult in Maryland, which makes District Judge Deborah Chasanow’s recent ruling in Charter Oak Fire Insurance Company, et al. v. American Capital, Ltd., et al., all the more worthy of attention.
In Charter Oak, Charter Oak’s parent company, Travelers Insurance of America, is accused of acting in bad faith in its dealing with a policyholder. The case has been kept largely out of public view for the past six years, with many of the records sealed and much of the discovery deemed “protected.” But that is about to change.
Last month, highly respected U.S. District Judge Deborah Chasanow ordered that the case against Travelers can proceed and she also ordered unsealed several filings that have been kept out of public domain since 2009. She rejected what she called “boilerplate issues” being used by the parties to frustrate the proceedings going forward. Continue Reading
What would happen if Maryland’s rule of construction for insurance policies was turned on its head and Maryland courts construed policy language against insurers, rather than granting insurers deference? We may never know. When faced with the question recently, Maryland’s highest court, in an unusual move, dismissed People’s Insurance Counsel Division v. State Farm Fire and Casualty Co. as “improvidently granted.” Despite the case’s potential to impact thousands of Marylanders, the Court’s majority declined to decide the case on its merits without explanation, generating a strong and heated dissent.
The case arose from the collapse of Gregory and Moira Taylor’s carport from the weight of snow during the blizzard of 2010. The Taylors’ State Farm insurance policy contained a clause covering “the sudden collapse of a building,” so the Taylors thought they were covered. State Farm denied the claim, arguing that the term “building,” which was not defined in the policy, only applies to structures with walls. The Taylors’ carport, of course, did not have walls, and was thus deemed by State Farm not to be a “building,” and thus, not covered by the policy. Continue Reading
One recent appellate decision puts manufacturers on notice that they must take care in purchasing commercial insurance policies to ensure that their general liability policies provide the coverage they expect. A California appeals court has just handed down a verdict siding with insurer Lloyds of London in the insurance company’s denial of a claim involving $3 million in recalled beef used in frozen tacos and burritos. In Windsor Food Quality v. Underwriters of Lloyds, et al., the appellate court found that the policy underwritten by Lloyds covered the products made with the beef, but not the beef itself. The recalled beef was used in frozen tacos and burritos manufactured by Windsor Food Quality Company and marketed under the brand name, “Jose Ole.”
Windsor Food, which had a $4 million “Products Contamination Insurance” policy with Lloyds that covered “Accidental Product Contamination” and “Malicious Product Tampering,” had filed the claim shortly after the beef was recalled in 2008, as part of the largest beef recall in US history. Lloyds rejected Windsor’s claim on the grounds that it did not insure the beef, just the products in which the beef was used, and that there had been no accidental product contamination or malicious-product tampering of the product itself.