Insurance Twofer
July 13, 20141. No conflict-of-interest. In Graper v. Mid-Continent Casualty Co., No. 13-20099 (June 24, 2014), the Fifth Circuit revisited the potential conflict-of-interest issues relating to counsel selected by an insurance carrier, previously addressed in Downhole Navigator LLC v. Nautilus Insurance, 686 F.2d 325 (5th Cir. 2012). Reminding that a problematic conflict would only arise if “the facts to be adjudicated in the underlying lawsuit are the same facts upon which coverage depends,” the Court found no disqualifying conflict in either: (a) the facts of when a claim accrued for limitations purposes, as opposed to when it occurred under the policy, or (b) the facts about an alleged willful copyright infringement occurs, as opposed to a “knowing” act for coverage purposes.
2. No exhaustion. The excess carriers in Indemnity Ins. Co. of N. Am. v. W&T Offshore, Inc. contended that they had no coverage obligation when the underlying policies had been exhausted. No. 13-20512 (June 23, 2014). Distinguishing Westchester Fire Ins. Co. v. Stewart & Stevenson Services., Inc., 31 S.W.3d 654 (Tex. App.–Houston [1st Dist.] 2000, pet. denied), the Court disagreed, finding that the policy “merely outlines what will happen if the underlying insurance is entirely exhausted by claims covered under the policy; it says nothing about what will happen if the Retained Limit is exhausted by non-covered claims.” A deftly-written footnote 5 explains how the excess carriers’ argument relies on the logical fallacy of “affirming the consequent.”
