Goldberg Segalla’s Environmental Coverage Quarterly provides summaries of and access to the latest environmental coverage developments nationwide, and is published quarterly. Cases are organized by court and date. In addition, we provide the latest information regarding news in the environmental coverage industries. For a free copy, please click here.

If you have any questions or would like to receive the newsletter via email, please contact Paul Steck at psteck@goldbergsegalla.com or Joanna M. Roberto at jroberto@goldbergsegalla.com.

Cases provided courtesy of LexisNexis.

Barney Greengrass, Inc. v. Lumbermens Mut. Cas. Co.

Bay Farms Corp. v. Great American Alliance Ins. Co.

Egan Marine Corp. v. Great American Ins. Co. of New York

Emergency Billing v. Allstate

Figuli v. State Farm

GreatAmer v. JWRConst

Hirschhorn v. Auto-Owners Ins. Co.

Looking Good Lawns v. SecuraInsCo

National Union Fire Ins. Co. of Pittsburgh v. Everest Reinsurance Co.

Penn. Nat. Mut. Cas. Ins. Co. v. Roberts

QBE Ins. Co. v. Estes Heating & Air Conditioning, Inc.

Racetrac Petroleum, Inc. v. Ace American Ins. Co.

Scottsdale Ins. Co. v. Pursley

Scottsdale v. Village of Crestwood

Sierra Recycling & Demolition, Inc. v. Chartis Specialty Lines Ins. Co.

State Automobile Mut. Ins. Co. v. Flexdar, Inc.

Sua Ins. Co. v. S&O Invest. LLC

Sunnyside Development Co. LLC v. Chartis Specialty Insurance Co.

Travco Ins. Co. v. Ward

Universal Image Productions, Inc. v. Federal Ins. Co.

People v. Greenberg (N.Y. App. Div. 1st Dep’t May 8, 2012)

On March 8, 2012 New York’s Appellate Division, First Department, denied summary judgment motions filed by two former executives of American International Group, Inc. (“AIG”), ex-CEO Maurice “Hank” Greenberg and ex-CFO Howard Smith, and New York’s Attorney General (“AG”), clearing the way for the now seven-year-old case to go to trial.

The case against the two former executives alleges violations of Executive Law § 63(12) and the Martin Act, General Business Law § 352 et seq.  The case alleges statutory violations against the former executives based upon their role in fraudulent transactions designed to portray an unduly positive picture of the insurer’s loss reserves and underwriting performance.  The insurer, formerly the largest insurance company in the world, entered into a settlement agreement with the AG.  The AG and both the former executives filed summary judgment motions.  In its motion, the AG argued that the executives knew of, and participated in, two unlawful reinsurance schemes.  For their part, the executives argued that the AG’s enforcement powers under the Martin Act and Executive Law are preempted by federal law.

The trial court denied summary judgment to the executives, finding that there was no evidence that Congress intended to preempt the claims, and granted partial summary judgment to the AG based on a finding that the executives had knowledge of, and participated in, one of two challenged transactions, and that this behavior constituted violations of the Executive Law § 63(12) and General Business Law § 352-c(1)(a) and (c).  

On appeal, the First Department found that the record evidence presented triable issues of fact as to whether the executives knew of, or participated in, the fraudulent aspects of both schemes given the nature and degree of their personal involvement in both of the challenged transactions. The appeals court ruled that summary resolution of the executives’ knowledge and participation in the two challenged schemes was not determinable as a matter of law.  Therefore, partial summary judgment in favor of the AG was inappropriate.

With regard to federal preemption issue, the appeals court agreed that there was no evidence that Congress intended to preempt the claims: “[N]othing in the language or legislative history of the cited legislation indicates Congress intended to preempt this civil enforcement action under the Martin Act and the Executive Law.”  In their motions, the executives had sought dismissal of the entire suit, arguing that the AG’s case was “expressly” barred by the Securities Litigation Uniform Standards Act of 1998.  They also claimed that the suit conflicted with Congress’s intent to create a uniform federal standard for securities litigation, pointing to the Private Securities Litigation Reform Act of 1995 and the National Securities Markets Improvement Act of 1996.  However, the First Department came to the opposite conclusion, writing: “In fact, the cited statutes, their legislative histories and the case law presuppose an important role for state attorneys general in investigating fraud and bringing civil actions to enjoin wrongful conduct, vindicate the rights of those injured thereby, deter future fraud and maintain the public trust.”

 On May 14, 2012 the executives sought permission on to appeal the Third Department decision to the Court of Appeals, New York’s highest court. 

For a copy of the decision click here

Matthew Cabral and Jeffrey Kingsley

People v. Greenberg (N.Y. App. Div. 1st Dep’t May 8, 2012)

On March 8, 2012 New York’s Appellate Division, First Department, denied summary judgment motions filed by two former executives of American International Group, Inc. (“AIG”), ex-CEO Maurice “Hank” Greenberg and ex-CFO Howard Smith, and New York’s Attorney General (“AG”), clearing the way for the now seven-year-old case to go to trial.

The case against the two former executives alleges violations of Executive Law § 63(12) and the Martin Act, General Business Law § 352 et seq.  The case alleges statutory violations against the former executives based upon their role in fraudulent transactions designed to portray an unduly positive picture of the insurer’s loss reserves and underwriting performance.  The insurer, formerly the largest insurance company in the world, entered into a settlement agreement with the AG.  The AG and both the former executives filed summary judgment motions.  In its motion, the AG argued that the executives knew of, and participated in, two unlawful reinsurance schemes.  For their part, the executives argued that the AG’s enforcement powers under the Martin Act and Executive Law are preempted by federal law.

The trial court denied summary judgment to the executives, finding that there was no evidence that Congress intended to preempt the claims, and granted partial summary judgment to the AG based on a finding that the executives had knowledge of, and participated in, one of two challenged transactions, and that this behavior constituted violations of the Executive Law § 63(12) and General Business Law § 352-c(1)(a) and (c).  

On appeal, the First Department found that the record evidence presented triable issues of fact as to whether the executives knew of, or participated in, the fraudulent aspects of both schemes given the nature and degree of their personal involvement in both of the challenged transactions. The appeals court ruled that summary resolution of the executives’ knowledge and participation in the two challenged schemes was not determinable as a matter of law.  Therefore, partial summary judgment in favor of the AG was inappropriate.

With regard to federal preemption issue, the appeals court agreed that there was no evidence that Congress intended to preempt the claims: “[N]othing in the language or legislative history of the cited legislation indicates Congress intended to preempt this civil enforcement action under the Martin Act and the Executive Law.”  In their motions, the executives had sought dismissal of the entire suit, arguing that the AG’s case was “expressly” barred by the Securities Litigation Uniform Standards Act of 1998.  They also claimed that the suit conflicted with Congress’s intent to create a uniform federal standard for securities litigation, pointing to the Private Securities Litigation Reform Act of 1995 and the National Securities Markets Improvement Act of 1996.  However, the First Department came to the opposite conclusion, writing: “In fact, the cited statutes, their legislative histories and the case law presuppose an important role for state attorneys general in investigating fraud and bringing civil actions to enjoin wrongful conduct, vindicate the rights of those injured thereby, deter future fraud and maintain the public trust.”

 On May 14, 2012 the executives sought permission on to appeal the Third Department decision to the Court of Appeals, New York’s highest court. 

For a copy of the decision click here

Matthew Cabral and Jeffrey Kingsley

Western World Ins. Co. v. Markel American Ins. Co. 10th Cir. (Okla.) May 8, 2012

In what may be the most fun the Tenth Circuit has had authoring an Opinion on a coverage matter, an insurer was stripped of its victory and held responsible for its share of the defense costs of the underlying action. In a must-read Opinion fraught with puns, the Court decided that an escape clause added to a commercial liability policy by an endorsement was unclear and therefore the reasonable expectations of the insured governed.

The clause at issue stated:

This insurance shall not apply to any entity that is already an insured under any other insurance provided by any company or that would be an insured but for the exhaustion of its limits of insurance.

Under the Oklahoma doctrine of equitable contribution, where two insurers cover the same risk, the loss will be apportioned so that each insurer pays its fair share of a common obligation. The co-insurer argued that the policy’s “escape clause” allowed it to escape liability in this case. The Court found that the clause was not clear in that its broad language did not clarify what “this insurance” or “any entity” refer to.

The Court also cited to the policy provision titled “Other Insurance” finding that this provision stated that the insurance policy provides primary coverage and that if another insurance policy also provides primary coverage, the two carriers will share the cost of coverage. Reading the escape clause as the insurer urged would make the “Other Insurance” provision a dead letter.

The Court found that the provision was unclear and awarded the tie to the insured using the “reasonable expectations” test. The Court stated that “Applying the reasonable expectations doctrine to this case, we have no doubt a reasonable insured in Brewer Entertainment’s shoes would have expected coverage from Markel.” After making this statement the Court acknowledged that this action involved only two co-insurers, both sophisticated parties, but stated that Oklahoma law does not currently have an exception to the “reasonable expectations” test that would allow a different standard to be applied here.

The Court reversed the grant of summary judgment to the co-insurer finding that “there is no escape for either of them” and remanded the case to determine the share of the costs that are attributable to the co-insurer.

For a copy of the decision click here

Fallyn Reichert and Sarah Delaney

Pin-Pon Corporation v. Landmark American Insurance Co. , case number 2009 0320 CA 03, consolidated with Pin-Pon Corporation v. Lexington Insurance Co., case number 31 2009 CA 01 2244, May 3, 2012 (Indian River County, FL)

Lexington Insurance Co. and Landmark American Insurance Co., were found by a Florida state jury to be liable to Gloria Estefan’s Pin-Pon Corp. in the amount of $6.7 million for failing to provide coverage for hurricane damage.

The insurers had made some payments, but the jury found that the insurers failed to provide the coverage that they owed for damage to the company’s Vero Beach hotel. Hurricane Frances hit the hotel in August 2004 and Hurricane Jeanne hit again in September 2004, causing extensive damage. The jury found that the insurer’s had failed to pay for building damages, code upgrade damages and costs while the hotel was unable to operate as repairs were being made.

Gloria Estefan’s hotel company had a primary policy with Lexington and an excess policy with Landmark at the time that the Hurricanes hit.  Both policies provided coverage for windstorm damage and business interruption coverage. The hotel company provided documentation of its losses but the insurers refused to pay the full amount. The insurers argued that the hotel company was renovating the hotel and much of the repairs and business interruption were due to the renovation and not the storm damage.

The jury found that the insurers were obligated to indemnify the hotel for the costs it incurred in having to restore the hotel before it could be renovated in the first place. Moreover, the jury found that the insurers had to indemnify the hotel for the damages it incurred in bringing the hotel up to code after the damage caused by the Hurricanes.

The hotel reopened in 2008, and the hotel company is going to seek prejudgment interest on the $6.7 million for the time between 2008 and this jury decision.

For a copy of the decision click here

Clay Waterman and Joanna Roberto

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To receive this publication for free each month, please contact Jeff Kingsley at jkingsley@goldbergsegalla.com.

For a free copy of this month's edition, click here.

To receive this publication for free each month, please contact Jeff Kingsley at jkingsley@goldbergsegalla.com.

For a free copy of this month's edition, click here.

To receive this publication for free each month, please contact Jeff Kingsley at jkingsley@goldbergsegalla.com.

For a free copy of this month's edition, click here.

To receive this publication for free each month, please contact Jeff Kingsley at jkingsley@goldbergsegalla.com.