Diana Shafter Gliedman, an insurance recovery partner at Anderson Kill PC who is also not involved in the case, told Law360 that the case is interesting because it addressed multiple principles, namely notice and consent provisions.
"I think this case is interesting and important because it serves to remind policyholders that they have to be incredibly mindful of the language in their insurance policies," she said. "There are certain formalities written into every insurance policy, which many policyholders are not aware of, that can serve to eliminate coverage."
Policyholder attorney William Passannante of Anderson Kill PC applauded the Hawaii high court justices' succinct opinion and said it could continue the trend of rulings in favor of policyholders in disputes over a carrier's right to recoup defense costs.
"If you were going to write an opinion that made the most straightforward arguments on why recoupment should not be permitted, that's what the Supreme Court of Hawaii did," he told Law360. "They're exactly what policyholders have said elsewhere."
He went on to say, "One of the issues that the Hawaii Supreme Court identifies, which I think is a little bit deeper than some of the headline arguments, is that if you permit this quasi-equitable right to reimbursement, in essence, what you're doing is making the duty to defend coextensive with the duty to indemnify."
Insurance recovery attorney Robert M. Horkovich, a partner at Anderson Kill PC who is not involved in the case, told Law360 the decision is important, because securing a defense in a talc coverage dispute can be significant. Horkovich said the duty to defend is broader than an insurer's duty to indemnify and that, in most cases, judges are only looking at the four corners of an underlying complaint to determine if the possibility of coverage exists.
Horkovich said securing a defense from an insurer is important due to the expense of responding to an injury suit and that frequently defense costs are outside a policy's coverage limits.
Policyholder attorney Cort Malone, a partner at Anderson Kill PC, told Law360 that he found the ruling interesting based on how the court "locked in" on the so-called eight corners rule, which involves examining the language of the triggered policies and the underlying lawsuits.
"I think that dictated some of their decision as far as the illusory coverage issue goes, because the majority determined that so long as there's something left remaining to be covered, even in light of an exclusion that knocks out an entire category of a certain type of claim for a certain type of coverage, then that exclusion does not create an illusory coverage issue," he said.
Malone also said policyholders should have concerns as a result of the decision based on how the Fifth Circuit interpreted Texas law and the language in the exclusions.
"What the majority basically held was that if you have an enumerated list of advertising injury items that are covered, you can then have an exclusion that basically says of all of the enumerated items listed, we exclude all but one, and therefore, so long as you've retained any piece of the initial coverage grant, you can essentially exclude every other piece," he said.
Malone went on to say that the ruling is "a bit of a red flag, not because we don't see exclusions that do that all the time on a somewhat regular basis, but because of the idea that insurance policies are already drafted giving a broad insurance grant ofcoverage, and then another 30 pages of a policy with various limitations that chop away at that broad coverage."
Anderson Kill's Malone said the dissenting judge's opinion demonstrates the ambiguity in the policy language.
"When you have two courts that come to two distinct interpretations of the same policy language or provisions, how is that not an ambiguity?" he said.
Anderson Kill's Passannante said the ruling is an example of how "hard cases make bad law" and disagreed with how the Fifth Circuit panel analyzed what constitutes an occurrence.
"I think the court got the analysis wrong," he said. "Knowing that there is a positive test is not the same as knowing that you're causing injury. For what I would consider the proper occurrence analysis, you would expect a court to analyze the intention to cause resulting injury rather than the intentional act of doing your duty as a director or officer, which the policy covers explicitly."
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