Insured Must Fulfill Policy Conditions
Barry Zalma
Jan 23, 2024
Read the full article at https://lnkd.in/gMM68H4K and see the full video at https://lnkd.in/gDXXvzMc and at https://lnkd.in/g_FCS-m6 and at https://zalma.com/blog plus more then 4700 posts.
Post 4718
Pharmacia Corporation appealed the District Court’s order granting summary judgment declaring that one of its excess insurers, Twin City Fire Insurance Company, did not owe a duty to pay Pharmacia’s settlement and defense costs from a shareholder class action.
In Pharmacia Corporation n/k/a Pfizer, Inc. v. Arch Specialty Insurance Company; Twin City Fire Insurance Company; Liberty Mutual Insurance Company, No. 22-2586, United States Court of Appeals, Third Circuit (January 19, 2024) the conditions were applied.
FACTS
Pharmacia, a pharmaceutical drug manufacturer, purchased a $200 million directors and officers insurance tower from thirteen companies through an insurance broker. The first layer of the tower consisted of a $25 million primary policy issued by National Union Fire Insurance Company of Pittsburgh, Pa (the “Primary Policy”). The next twelve policies provided excess insurance totaling $175 million. Twin City sold Pharmacia the eighth-layer excess policy (the “Policy”), which provided $10 million in coverage and specified that “liability for any loss shall attach to [Twin City] only after the Primary and Underlying Excess Insurers shall have [(1)] duly admitted liability and [(2)] . . . paid the full amount of their respective liability.”
Pharmacia shareholders sued seeking class action qualification against the company, alleging that it artificially inflated its stock by misrepresenting the results of a clinical drug study. After ten years of litigation, the case settled, and Pharmacia incurred approximately $207 million in defense and indemnity costs. Pharmacia then provided Twin City proof that the excess carriers ahead of it in the insurance tower paid their policy limits and asked Twin City to provide coverage. Twin City declined.
Pharmacia sued Twin City. The District Court granted Twin City’s motion for summary judgment and dismissed the case with prejudice. The Court found that: (1) the plain language of the Policy required the other excess insurers to admit liability as a condition precedent for coverage to attach; (2) six of them had disclaimed liability, and (3) as a result, a condition for coverage was not satisfied. Pharmacia appealed.
POLICY INTERPRETATION
The Third Circuit concluded that no conflict exists here. Specifically, courts:
1 Give effect to the intent of the parties as expressed in the clear language of the contract, and the plain language of the contract is the cornerstone of the interpretive inquiry.
2 May not make a different or better contract than the parties themselves saw fit to enter into.
3 Courts should refrain from rewriting the agreement to accomplish their notions of abstract justice or moral obligation.
4 May avoid a literal construction of the words of a contract only if that interpretation defies all bounds of common sense.
ANALYSIS
When the intent of the parties is plain and the language is clear and unambiguous, a court must enforce the agreement as written, unless doing so would lead to an absurd result.
Applying these principles, the Policy unambiguously imposed two distinct conditions precedent for coverage to attach. Specifically, Pharmacia must show both that the insurers ahead of Twin City in the tower have:
1 duly admitted liability and
2 paid the full amount of their respective liability.
Pharmacia failed to show that both conditions to trigger Twin City’s coverage were met since six insurers refused to admit liability.
Regardless of whether the other insurers in the tower paid their policy limits, the record does not demonstrate that all of those insurers admitted liability and the court is not required to accept the error of the six insurers refusing to admit liability who still paid. Because Pharmacia failed to establish at least one condition precedent, the District Court correctly declined to declare that Twin City owes Pharmacia coverage. The trial court was affirmed.
ZALMA OPINION
Conditions precedent in an insurance policy must be met or the insurer has no obligation to provide defense or indemnity under the policy. Twin City established that six insurers in Pharmacia’s tower below Twin City did not admit liability and that, therefore, it failed to prove compliance with the condition precedent. Pharmacia luckily received contributions from insurers accepting coverage and insurers who did not but decided not to litigate. After reading this case, if the six had the same condition, they have explanations to make to their shareholders.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://barryzalma.substack.com/publish/post/107007808
Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01
Go to X @bzalma; Go to the podcast Zalma On Insurance at
; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://lnkd.in/gcZKhG6g
Follow me on at X @bzalma; Barry Zalma on YouTube- https://lnkd.in/g2hGv88; Go to Newsbreak.com https://lnkd.in/g8azKc34;
Go to the Insurance Claims Library – https://lnkd.in/gwEYkxD.
Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
Injury at Massage Causes Suit Against Therapist
Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.
Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
See the full video at and at
Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
No Coverage if Home Vacant for More Than 60 Days
Failure to Respond To Counterclaim is an Admission of All Allegations
Post 5085
See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.
In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.
BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
Plaintiff filed suit ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.
This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...
