Declaratory Judgment Actions and Bad Faith Defense

Our Insurance Coverage Practice Group attorneys are experienced in litigating insurance cases through declaratory judgment actions. The members of the LGWM Insurance Coverage Practice Group are aware of the advantages of resolving insurance coverage cases early. When litigating insurance coverage declaratory actions, our team always has an eye towards reducing costs and attorney’s fees, through limited discovery, and providing early resolution opportunities for insurers, rather than waiting for insureds to take peremptory action. Our attorneys have experience litigating declaratory judgment actions in state and federal courts and are knowledgeable of certain local law and practices which make declaratory judgment actions more or less favorable to insurers in different jurisdictions.

The Insurance Coverage Group at LGWM also advises and defends insurance companies in bad faith actions. Bad faith cases may expose insurers to significant punitive or exemplary damages where the insured claims the insurer failed to satisfy the duties of good faith and fair dealing. Our coverage team assists carriers by reviewing and monitoring underlying litigations, opining on the potential for bad faith recovery as a result of the claims handling of underlying claims, and providing a thorough defense to insurers in the event a bad faith suit is filed.

Cases of Note

• Represented insurer in arbitration involving extent to which insured was entitled to D&O coverage for a dispute between the insured and its umbrella carrier. Case was resolved for a fraction of the insurer’s policy limit.
• Represented insurer in coverage litigation involving equitable subrogation claims between two insurance carriers providing legal malpractice coverage to the same law firm over consecutive policy periods. Case was successfully mediated.
• Represented insurer joined in medical malpractice lawsuit under Louisiana’s direct action statute. Identified and analyzed coverage defenses for underlying medical malpractice claim including argument for reduced limits based on endorsements applicable to policy. Represented insurer at mediation with insured and plaintiff in order to negotiate reasonable resolution of claim.
• Represented insurer in large scale coverage litigation and mediations involving coverage available to insured private equity firm for lawsuits filed after insured’s bankruptcy. The bankruptcy, and subsequent lawsuits and insurance claim, arose out of the collapse of the market for investments in residential mortgage-backed securities in heavily leveraged transactions financed by repurchase loan agreements. Representation of insurer included analysis of manuscript professional services exclusion, the filing of a successful motion to dismiss based on same, and the defense of insurer’s position on appeal.
• Represented insurer in an intervention action to set aside a $1.5 million default judgment against an insured after determining there was insufficient service of process. The default judgment ultimately was set aside.
• Represented insurer against third-party complaint filed by an oil-well owner in connection with explosion of an oil well. Several workers were severely injured with one fatality. The oil-well owner sued the insurer seeking additional insured status and also asserted bad faith claims. Case was successfully mediated, with the insurer contributing less than 10% to the global settlement.
• Represented D&O insurer in arbitration with insured who was arrested and indicted on ten counts of securities fraud under the Alabama Code. Insured sought coverage for multi-million settlement reached in the underlying action. After identifying numerous coverage defenses, the coverage case was resolved for a fraction of the insurer’s policy limit at mediation.
• Represented insurer in dispute involving an insured temporary employment agency and client-employer after injury to worker on client’s job site. Representation required analysis of limitations on scope of additional insured coverage available to client-employers with whom temp employees are placed, analysis of the client-employer’s own insurance policy, and negotiation with client-employer’s carrier for contribution to resolve claim.
• Represented excess insurer in connection with $193 million tower limits demand made against insured executive under professional indemnity insurance policy regarding alleged fraud to conceal trading losses. Case was successfully resolved through mediation.
• Represented D&O insurer in connection with claims resulting from the collapse of a failed casino project. Provided coverage advice to insurer under directors and officers liability and run off insurance policies following insured’s bankruptcy. Successfully negotiated a global settlement with the bankruptcy trustee.
• Advised insurer on complex insurance claim by insured financial services company after multiple claims were asserted against the insured by national banking institutions following the U.S. mortgage crisis. Identified and analyzed significant coverage issues including late reporting, trigger of prior policy years, interrelation, misrepresentation on insurance applications, and prior knowledge defenses. Represented insurer in subsequent coverage litigation and assisted insurer in negotiating favorable settlement.
• Represented excess carrier regarding claim made against insured private equity fund for disgorgement of dividend payment based on insured’s alleged involvement in fraudulent merger and buy-out. Case was successfully resolved through mediation.
• Represented insurer in a judgment creditor garnishment action. Claimants obtained a $5.1 million judgment against an insured securities broker-dealer. Successfully obtained summary judgment in favor of the insurer after asserting numerous coverage defenses.
• Represented insurer in vacating void $5 million default judgment. The insured and claimant entered into a consent judgment and the claimant pursued the insurer under Alabama’s judgment creditor statute without ever serving the insurer. After identifying procedural defects, successfully obtained an order vacating the void default judgment.
• Represented insurer that was sued by another insurer for equitable contribution in a wrongful death claim. Successfully filed a motion to dismiss, asserting the other insurer only offered conclusory allegations that the policy of the client insurer afforded coverage. Also presented evidence from the underlying lawsuit demonstrating the client’s policy did not cover the claim.
• Represented carrier in Declaratory Action involving coverage under a Pollution Liability policy for gasoline contamination resulting from spill at service station.
• Represented carrier in Declaratory Action involving coverage under a Premises Pollution Liability policy and a Casualty Premises Pollution policy to obtain judgment for no duty to defend or indemnify for multiple class actions arising from tanker release of Dipropylamine.
• Represented carrier in Declaratory Action involving coverage under insurance company errors and omissions policy where insured settled bad faith claim for millions of dollars without carrier’s consent.
• Represented carrier in coverage arbitration in New York under Broker Dealer errors and omissions policy where insured sought compensatory and punitive damages exceeding $1,000,000.
• Represented carrier in Declaratory Action by insured for defense and indemnity under a Public Officials Professional Liability policy for underlying claims of discrimination against insured.
• Represented carrier in Declaratory Action by insured for indemnity under Securities Broker Dealer Policy for trade errors by insured.