2015 Insurance Law Section Annual Meeting. Table of Contents I. TOP TEN INSURANCE DECISIONS IN NORTH CAROLINA AND ACROSS THE NATION IN

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1 2015 Insurance Law Section Annual Meeting Table of Contents I. TOP TEN INSURANCE DECISIONS IN NORTH CAROLINA AND ACROSS THE NATION IN Theodore B. Ted Smyth Raleigh NORTH CAROLINA DECISIONS... I-1 Lunsford v. Mills, N.C., 766 S.E.2d. 297 (2014)... I-1 North Carolina Farm Bureau Mutual Insurance Company v. Paschal, N.C.App., 752 S.E.2d. 775 (2014)... I-3 Integon National Insurance Company v. Helping Hands Specialized Transport, Inc., -N.C.App.-, 758 S.E.2d. 27 (2014)... I-3 Federal Insurance Company v. Southern Lithoplate, Inc., 7 F.Supp.3d. 579 (E.D.N.C. 2014)... I-4 Christmas v. Nationwide Mutual Insurance Company, 30 F.Supp.3d 435 (E.D.N.C. 2014)... I-5 Forshaw Industries, Inc. v. Insurco, Ltd., 2 F.Supp.3d. 772 (W.D.N.C.) (2014)... I-6 OUT OF STATE CASES... I-7 In re Deepwater Horizon, S.W.3d. (Tex. 2015) [2015 WL ]... I-7 Travelers Indemnity Company of America v. Portal Healthcare Solutions, LLC, 35 F.Supp.3d. 765 (E.D.Va. 2014)... I-8 St. Paul Mercury Insurance Company v. FDIC, 774 F.3d. 702 (11th 2014)... I-9 Hartford Casualty Insurance Company v. Swift Distribution, Inc., 59 Cal.4th 277, 326 P.3d. 253 (2014)... I-10 Travelers Indemnity Company of America v. Portal Healthcare ALSO RANS... I-12 North Carolina... I-12 Out-of-State... I-12 II. INTERPLAY OF ADDITIONAL INSURED AND CONTRACTUAL LIABILITY COVERAGE Deborah J. Bowers Greensboro INTRODUCTION...II-1 Additional Insured...II-1 Contractual Liability Coverage...II-1

2 TWO TYPES OF COVERAGE BASICALLY INDEPENDENT OF EACH OTHER BEFORE II-3 Insured Contract...II-4 Limitations on Contractual Liability coverage in North Carolina...II-4 Additional insured status did not have the limitations applicable to Insured contracts at least before the 2013 revisions....ii-9 DOES THE NEW AI LANGUAGE COUPLED WITH THE NEW DEFINITION OF INSURED CONTRACT MAKE WHAT WERE FORMERLY TWO SEPARATE COVERAGES INTO ONE?...II-10 New Insured Contract Definition...II-10 New ISO form for Additional Insured....II-11 DEEPWATER HORIZON AN EXAMPLE OF A COURT USING AN UNDERLYING CONTRACT TO DETERMINE THE SCOPE OF COVERAGE TERM FOR AN ADDITIONAL INSURED....II-13 CONCLUSION....II-15 POWERPOINT SLIDES.... IIB-1 III. DEPOSING THE INSURER REPRESENTATIVE (ADJUSTER, UNDERWRITER, EXECUTIVE): TIPS AND TRAPS FOR BOTH SIDES Brian O. Beverly Raleigh Alan M. Ruley Winston-Salem WRITTEN DISCOVERY... III-1 All claim files (home, regional, local and field offices) and any Other documents (including ESI) concerning or relating to the claim.. III-2 Claim handling and best practices manuals, procedures, policies, guides, directions... III-2 Training documents/videos/seminars/presentation/programs... III-3 Personnel files of claims professionals... III-3 Underwriting files.... III-4 Reserves... III-4 Cost Control/Case Evaluation Programs/Software... III-5 Document retention and storage... III-5 DEPOSITIONS... III-6 Deposition of Adjuster/Claims Handler... III-6 Preparation... III-7 Agree on basic fair claims handling practices... III-7 The adjuster s background, experience, training... III-8 How the claim was handled, start to finish... III-8 Underwriter... III-9

3 Defense counsel in third party bad faith cases... III-9 30(b)(6) deposition... III-10 Potential 30(b)(6) topics... III-10 30(b)(6) tips... III-11 Defense of the 30(b)(6) deposition... III-11 Preparing the witness(es) for the 30(b)(6) deposition... III-12 APEX DEPOSITION DOCTRINE: SHIELDING HIGH RANKING CORPORATE OFFICERS... III-12 IV. E&O/D&O COVERAGE - GOVERNMENT INVESTIGATIONS, SUBPOENAS, EXCLUSIONS AND MORE Joshua D. Davey Charlotte SCOPE NOTE... IV-1 TYPES OF GOVERNMENTAL INVESTIGATIONS THAT MAY TRIGGER COVERAGE... IV-2 POLICIES THAT MAY RESPOND TO GOVERNMENTAL INVESTIGATIONS... IV-5 Director s & Officer s Liability... IV-5 Errors & Omissions / Professional Liability... IV-6 Employment Practices Liability... IV-7 Cyber Liability... IV-7 COMMON COVERAGE ISSUES... IV-7 What Constitutes a Claim?... IV-7 Notice and Consent Issues... IV-11 Fraudulent/Intentional Acts Exclusion... IV-12 Illegal Profit or Advantage Exclusion... IV-13 Pending & Prior Litigation and Prior Notice Exclusions... IV-14 Billing Errors/Disputes... IV-14 Allocation... IV-15 Defense Agreements... IV-15 What Costs Are Covered?... IV-16 V. OBSERVATIONS ON INSURANCE LITIGATION FOUR PERSPECTIVES Judge Martha A. Geer Raleigh David N. Allen Charlotte Josephine H. Hicks Charlotte Wayne P. Huckel Charlotte

4 A FUNNY THING HAPPENED ON THE WAY TO SUMMARY JUDGMENT: DERAILED BY A QUESTION OF FACT... VA-1 Summary... VA-1 Determining Employment Status... VA-2 Divergent Approaches... VA-4 Conclusion... VA-12 EFFECTIVE APPELLATE ADVOCACY... VB-1 General Appellate Considerations... VB-1 Anticipating the Appeal at the Trial Level... VB-2 Record on Appeal... VB-4 The Brief: The Most Important Document (Other than the Order)... VB-5 Correcting Rules Violations... VB-12 Mediation... VB-12 Oral Arguments.... VB-12 Miscellaneous... VB-13 LITIGATING INSURANCE COVERAGE DISPUTES: PRACTICAL CONSIDERATIONS FROM THE POLICYHOLDER S PERSPECTIVE... VC-1 Initial Review of Documents.... VC-2 Potential Claims and Potential Defendants.... VC-3 Timing for filing a lawsuit.... VC-4 Venue/Forum Selection.... VC-4 Choice of Law.... VC-5 Key Substantive Law Issues that Often Turn on Choice of Law.... VC-7 Procedural Concerns.... VC-11 Settlement Details.... VC-12 Conclusion... VC-15 MEDIATING INSURANCE RELATED DISPUTES... VD-1 Some Basics.... VD-1 General Thoughts on the Mediation Process.... VD-1 Mediations with Insurance Issues... VD-2 VI. AMERICAN LAW INSTITUTE S ANTICIPATED RESTATEMENT ON INSURANCE Michael F. Aylward Boston A PRINCIPLED APPROACH TO COVERAGE? THE AMERICAN LAW INSTITUTE AND ITS PRINCIPLES OF THE LAW OF LIABILITY INSURANCE... VI-1 Introduction... VI-1 The American Law Institute... VI-1

5 The Law of Liability Insurance Project... VI-2 Outline... VI-5 Chapter One (Basic Liability Insurance Contract Principles)... VI-5 Chapter Two: Management of Potentially Insured Liability Claims (Sections 12-23)... VI-14 Forthcoming Sections... VI-38 Conclusion... VI-43 POWERPOINT SLIDES... VIB-1 VII. LESSONS LEARNED IN A FOUR-YEAR COVERAGE BATTLE COLONY INSURANCE V. PETERSON James W. Bryan Greensboro BACKGROUND... VII-1 Pre Fire... VII-1 Insurance Application... VII-2 The Insurance Policy and Colony's Inspection... VII-2 Fire at 501 Hamilton Road and Filing of Lawsuit... VII-2 Lesson #1: Colony Was Too Trigger Happy In Filing Suit So Quickly... VII-3 Changed Strategy... VII-4 Lesson #2: Invoke the Right to Appraisal Early On, or the Right Is Likely Waived... VII-4 The Law... VII-5 Lesson #3: A Lender May Have Extra Insurance Protection If the Insured Acts Improperly, But the Protection Disappears If the Lender Is Not Innocent... VII-5 Business personal property coverage... VII-5 Building Coverage... VII-6 Rejected Argument Sort Of... VII-6 Bank Wasn t Responsible for the Misrepresentation... VII-7 Lesson #4: It Is Quite Difficult to Settle Property Coverage Disputes Between Insured, Mortgagee, and Insurer... VII-8 Borrower/Insured... VII-8 Lender... VII-8 Insurer... VII-9 Agent/Broker... VII-9 Settlement Unlikely... VII-9 Lesson #5: Interrogatories That Mimic Policy Wording Are Helpful But Not Dispositive... VII-10 The Light Turns On... VII-10 Another Lesson on Interrogatories... VII-11 And a Corollary on Ambiguity... VII-11

6 Lesson #6: Proving Material Misrepresentation in an Insurance Application Is a Daunting Task But Can Be Done.... VII-12 The Law... VII-12 The Facts... VII-13 Key Written Discovery... VII-13 Different Outcome at Trial... VII-14 Lesson #7: An Insured s Breach of a Policy Condition Does Not Guarantee an Insurer a Clear Path To Denying Coverage..... VII-15 Was the Breached Condition the Cause of the Fire?... VII-15 Increase in Risk.... VII-16 Lesson #8: Waiver and Estoppel Can Be the Achilles Heel for Insurers... VII-16 Waiver... VII-17 Estoppel... VII-17 Durham v. Cox and the Plantation Analogy... VII-18 Fourth Circuit Speaks..... VII-19 Fourth Circuit Speaks Again... VII-20 A Word of Caution... VII-20 Lesson #9: Fall on Your Sword If Your Client Sends an That Asks Do You Have a Match?... VII-20 Lesson #10: Federal Courts Give Wide Latitude for an Appraiser Expert Witness Who Opines on Property Value.... VII-22 The Law..... VII-22 Valuation Opinions... VII-23 Pre-trial Motion..... VII-23 Outcome at Trial.... VII-24 Lesson #11: There Is No Such Thing as Being Over-Prepared for a Jury Trial in Federal Court, and an Insurance Case Is No Different VII-24 Three Suits in One... VII-25 Outnumbered?... VII-25 High Tech/Low Tech... VII-25 Lesson #12: Never Underestimate Your Adversary s Ability to Make Strong Arguments on Appeal.... VII-26 The Big Picture VII-26 Briefing... VII-26 Oral Argument... VII-28 En Banc Petition.... VII-28 The Win VII-28 Conclusion... VII-28 POWERPOINT SLIDES... VIIB-1 VIII. *ETHICAL DILEMMAS FACING INSURER AND INSURED COVERAGE COUNSEL Douglas J. Brocker Raleigh

7 Crystal S. Carlisle Raleigh ETHICAL DILEMMAS IN THE COVERAGE CONTEXT TRIPARTITE AND DISCOVERY... VIII-1 ETHICAL DILEMMAS PRESENTED BY THE TRIPARTITE RELATIONSHIP... VIII-2 Definition of tripartite relationship:... VIII-2 Privileged Information in a Tripartite Relationship... VIII-2 CONFLICTS WHEN REPRESENTING MULTIPLE PARTIES... VIII-12 Conflicts Generally... VIII-12 Conflicts Involving Minors... VIII-13 ETHICAL DILEMMAS AND ISSUES ARISING DURING DISCOVERY... VIII-14 Social Media Issues... VIII-14 Ex Parte Communications... VIII-16 ETHICAL DUTIES REGARDING LIENS... VIII-23 Lawyer s Ethical Responsibility to Address Liens... VIII-23 Types of Liens... VIII-23 Manage Client Expectations Regarding Liens... VIII-23 Disbursements and Liens... VIII-24