The tentacles of the current “subprime mortgage crisis” are destined to reach into every corner of financial institutions in the United States and abroad, including components of the insurance industry. In a three-part series, insurance coverage litigation expert Matthew R. Wildermuth, Esq. explores the extent to which the claims arising out of this crisis ─ and the current attempts to “cure” these problems – will implicate coverage under, respectively, commercial general liability policies, directors and officers policies and professional liability/errors and omissions policies. The author warns that “[s]ome yet to be determined percentage of borrowers . . . in these groups inevitably will file suit against any participant in the mortgage lending food chain that can be held accountable and is capable of responding to a judgment for damages. Here is where it gets interesting for liability insurers.” The first of these articles focuses on potential exposures under traditional commercial general liability policies and explores, among other topics:

·        Will the majority of claims expected to arise from the subprime mortgage crisis seek the type of damages that fall within the coverage grant (i.e., “property damage,” “bodily injury” and “personal injury/advertising injury”);

·        To the extent the claims do assert such damages, can such claims reasonably be characterized as “arising out of an ‘occurrence’”?; and

·        If so, what effect will policy exclusions have in prohibiting or substantially limiting coverage?

Drawing on parallels from coverage litigation over similar scenarios in the past, this commentary projects the likely outcome of the majority of cases where coverage is sought for the financial and related damages arising from the respective parties’ defeated expectations in connection with these transactions (and the upset party may not be who we have come to expect!)

The tentacles of the current “subprime mortgage crisis” are destined to reach into every corner of financial institutions in the United States and abroad, including components of the insurance industry. In a three-part series, insurance coverage litigation expert Matthew R. Wildermuth, Esq. explores the extent to which the claims arising out of this crisis ─ and the current attempts to “cure” these problems – will implicate coverage under, respectively, commercial general liability policies, directors and officers policies and professional liability/errors and omissions policies. The author warns that “[s]ome yet to be determined percentage of borrowers . . . in these groups inevitably will file suit against any participant in the mortgage lending food chain that can be held accountable and is capable of responding to a judgment for damages. Here is where it gets interesting for liability insurers.” The first of these articles focuses on potential exposures under traditional commercial general liability policies and explores, among other topics:

·        Will the majority of claims expected to arise from the subprime mortgage crisis seek the type of damages that fall within the coverage grant (i.e., “property damage,” “bodily injury” and “personal injury/advertising injury”);

·        To the extent the claims do assert such damages, can such claims reasonably be characterized as “arising out of an ‘occurrence’”?; and

·        If so, what effect will policy exclusions have in prohibiting or substantially limiting coverage?

Drawing on parallels from coverage litigation over similar scenarios in the past, this commentary projects the likely outcome of the majority of cases where coverage is sought for the financial and related damages arising from the respective parties’ defeated expectations in connection with these transactions (and the upset party may not be who we have come to expect)!