1. California Policyholders Seek End Run Around Limita ons Period

Rosenberg-Wohl v. State Farm, Case No. S281510 (California Supreme Court)

Takeaway: California policyholders argued last week before the California Supreme Court to

escape a shortened contractual limitations period by bringing claims under California’s Unfair

Competition Law, which applies a four-year limitation period. The debate turns on whether

the suit is “on the policy.” UCL suits challenge claims handling policies and practices across

policyholders rather than seeking policy benefits for the plaintiff policyholder alone.

At oral argument, the California Attorney General, as amici curiae, argued that an insured may

sue the carrier for unfair claims handling practices after the shorter limitations period has

expired. The Attorney General reasoned, "Plaintiff's UCL action is not on the policy because it

does not seek to enforce the terms of the insurance policy . . . rather it seeks to enforce a

statutory prohibition on unfair business practices that exist independently of any contract." The

policy’s one-year contractual limitation deadline does not apply since she is not seeking policy

benefits. The Plaintiff was rather seeking injunctive relief. The AG, however, argued to expand

the holding to include UCL claims seeking monetary damages as well.

Opposing the end around, State Farm pointed out that "[t]here's no duty to investigate, absent

a policy . . . so when you say you're seeking an injunction to have better investigations, you're

seeking policy benefits." State Farm also argued that allowing the Homeowner’s claim to proceed

would go against Insurance Code Section 2071’s goal of avoiding “stale” claims. The Justices did

not signal which way they are leaning but are poised to rule on the issue within the next 90 days.

2. What Privilege?

In re: Hill Hotel Owner LLC v. Hanover Insurance, Case No. 24SA113 (Colorado Supreme Court)

Takeaway: Insurers must carefully define the roles of their coverage lawyers and experts as

policyholder counsel increasingly argue they are acting as co-adjusters, risking privilege.

Experts advising on factual matters material to a claim determination (e.g., causation) should

assume communications are not privileged, and fact investigation separated from legal advice.

Hanover denied coverage to Hill Hotel, relying in part on the advice from outside coverage

counsel and retained engineers. In the subsequent coverage litigation, the Colorado trial court

1 Serving up your favorite coverage li ga on updates from the bar, best enjoyed with coffee or tea.

ordered Hanover to disclose communications between its counsel and the engineers. The trial

court concluded the communications were not prepared in anticipation of litigation and,

therefore, not privileged. The discovery order was appealed to the Colorado Supreme Court and

briefs are now pending. A decision is expected this summer.

Regardless of the outcome, carriers should be cautious as privilege in the claim-handling context

is under increased attack. To preserve privilege, carriers should take definitive precautions, e.g.:

• Establish clear roles for outside vendors and ensure they stay in that lane. For example,

coverage lawyers should separate legal advice from underlying fact investigations.

• Decide which communications are intended to be privileged and which are not. For

example, an engineer’s advice on causation intended for use in a final coverage decision

is probably not privileged, and those communications should be conducted in a manner

that anticipates full disclosure.

• Take corresponding measures to preserve privilege. For example, claim handlers should

own the file, direct fact investigations, and make coverage decisions. Preserve the line

between the outside expert advice and the internal claim decision.

3. Reasonable Cannot Wait

New York City Housing Authority v. Admiral, Case No. 2023-00733 (NY App. Div. May 7, 2024)

Takeaway: In bodily injury claims, New York law imposes a strict waiver rule for late denials,

even against excess carriers not yet triggered. An excess carrier should keep up with claim

developments to determine the impacts on coverage where there is a reasonable possibility

that the excess coverage might be reached and issue prompt denials.

New York Insurance Law 3420(d)(2) requires a disclaimer or coverage or denial of liability “as

soon as is reasonably possible” for death or bodily injury arising out of an accident in the state.

Once excess insurance carriers become aware of an applicable exclusion in the excess policy, the

excess insurer owes the same obligation to disclaim as a primary insurer.

Recently, a New York appeals court held an excess insurer’s disclaimer untimely because the

carrier knew of the claim in 2016 disclaimed under a primary policy but did not disclaim on a

similar exclusion in the excess policy until August 2018. The court found the excess insurer’s

obligation arises once “there was a reasonable possibility that the excess coverage might be

reached,” here triggered by defense counsel’s litigation plan received in 2016. The trial court

also found the insurer’s disclaimer untimely because it did not investigate the claim after

receiving notice. Had it done so, it would have learned of facts that would likely have resulted in

the excess policy being triggered.

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