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Insurance - Featured Products 10/1/2009 4:49:26 PM EST New Appleman Current Critical Issues in Insurance Law-Spring Issue The Spring 2009 issue of New Appleman on Insurance: Current Critical Issues in Insurance Law consists of three articles. The first article is entitled “AIG’s Financial Distress: How Credit Default Swaps and the Lack of Regulation Brought Down an Insurance Giant and Implications for the Insurance Industry.” It was written by Paul Walker-Bright and Timothy P. Law of Reed Smith LLP. It answers the question it seems everyone is asking: How, could AIG, one of the largest insurance organizations in the world, fall so far and so quickly, to the point of bankruptcy and eventual bailout by the federal government? It discusses the causes of AIG’s financial distress, including a discussion of the credit default swaps that are at the root of the collapse, how they caused AIG’s downfall, and what the federal government has done to rescue (or at least to ease the transition of) AIG. Next, the article explores the implications of AIG’s fall for the insurance industry. It describes the relationship among AIG and its insurance subsidiaries and explains how that relationship, along with AIG’s announced plan for paying back the federal government’s massive loan (plus interest), may affect the ability of the insurance subsidiaries to operate in the future. The article also explores the effect on the broader insurance industry, including the real possibility of comprehensive federal regulation of insurance for the first time in the history of the United States.
The second article, “Tick, Tock: Time-Restricted Settlements and Insurance Bad Faith” is by Douglas R. Richmond, Senior Vice President in the Global Professions Practice of Aon Risk Services. It discusses a technique used by some plaintiffs’ attorneys to establish that an insurer is acting in bad faith and thus is potentially liable for an amount that greatly exceeds the insurance policy’s limits. Bad faith allegations permeate insurance litigation. In a common bad faith scenario, an insured or its assignee alleges that a liability insurer unreasonably failed to settle a claim or suit within its policy limits, thus exposing the insured to excess liability. In the vast majority of jurisdictions, an insurer must be presented with a settlement offer or demand within its policy limits to be potentially liable for damages exceeding those limits. When a plaintiff’s damages exceed all available coverage, the plaintiff is unlikely to be satisfied by a policy-limits settlement, and is therefore motivated to artificially expand those limits. A time-restricted settlement offer is the plaintiff’s lever for attempting to do so. The plaintiff’s lawyer sends the insurer a settlement offer that expires in a relatively short time. The plaintiff’s settlement deadline is arbitrary. The plaintiff hopes that the insurer will not accept the offer before it expires, thus supporting a future bad faith claim. The author analyzes the cases on point and finds that time-restricted settlement offers are rarely reasonable; most are litigation ploys that should not support bad faith allegations.
The third article, “Insurance Coverage Issues That Emerged from the World Trade Center Attacks” by Mitchell L. Lathrop, who is Of Counsel to Duane Morris LLP, analyzes the wide range of court cases that sprung from this unique event in American history. Well over 100 reported decisions have been rendered in connection with the WTC attacks. The litigation continues today. This article examines some of the many issues under litigation, including: (1) Issues surrounding the election of remedies provided by Title IV of the Air Transportation Safety and System Stabilization Act (ATSSA); (2) Issues as to the scope of ATSSA with respect to the phrase “arising out of” the WTC attacks, specifically, bodily injuries suffered within what date and what geographical area would be deemed “arising out of” the WTC attacks?; (3) Issues as to whether business interruption claims made by businesses far removed from the WTC disaster came within the scope of ATSSA; (4) Issues as to the scope of “as a result of” or what constituted “wounds or injury” within the Victims of Terrorism Tax Relief Act of 2001; (5) Issues as to how many “occurrences” of property damage the two plane crashes caused under the terms of pertinent insurance policies; (6) Valuation of loss issues; (7) Allocation between triggered policies when a business was destroyed in the September 11th attacks; (8) Issues as to whether a tenant breached its lease by obtaining insurance coverage expressly excluding acts of “terrorism”; (9) Errors and omissions issues as to building design and the safety of leasehold improvements; (10) Issues surrounding products liability claims; and (11) Issues surrounding workers’ compensation death benefits. Create an account or login to post comments.
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