Course / Program Material 2007 TIPS 15th Annual Insurance Coverage Litigation Committee Program - Tucson AZ
Ann first looks at allocation issues within the context of D&O policies. She starts with an explanation of the two competing rules for allocation -- the "larger settlement rule" and the "relative exposure rule", providing explanations of how the rules are applied, which party has the burden to prove the allocation and what factors to consider when arguing the relative exposure rule. And, within the context of these rules, she looks at the leading cases that discuss why a corporation's liability should not be allocated where it is derivative of the officers or director's conduct. Finally, she addresses how courts have responded to insurer's use of allocation clauses in the policies.
Ann's paper next looks at allocation issues arising out of CGL policies and the issues created by the "all sums" language of the insuring clause. Some of the questions addressed include: What does a policyholder have to prove when it disputes liability in order to obtain coverage for the settlement of a claim? Under what circumstances can an insurer contest the reasonableness of a settlement? Can an insurer fund a settlement (contesting coverage) and seek reimbursement? What are the consequences of an insurer's refusal to fund a settlement within the policy limits?
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