CA1: Insurer was noticed too late for products liability policy to benefit plaintiff that prevailed against bankrupt manufacturer

Edwards v. Lexington Insurance, No. 07-1414.  This is one of my favorite areas of law: insurance coverage litigation. So, let’s lay out the facts.  In a first lawsuit, the plaintiff claimed that he was injured by a defective protect.  He serves the insurance company (but out of time), but still obtains a default judgment and the insured party (or so the defendant thinks) goes into bankruptcy.  The he sues the insurer under Maine's reach and apply statute, 24-A M.R.S.A. § 2904 (2000) seeking to collect from them.

If you were really committed to working at a firm such as this you would have read on by now.

There are a few policies at issue.  As to one of them – a claims-made policy – the plaintiffs could not show that they provided notice during the “claim period.”  The court rejects the arguments that the insurer could raise an estoppel argument (because it breached the initial duty to defend) because the plaintiff isn’t a party to the insurance policy.  The First holds, instead that the “Reach and Apply” statute “places Edwards in Game Tracker's shoes to the extent he seeks whatever indemnification might have been owed to Game Tracker under its insurance policies.”

Applying Elliott v. Hanover Ins. Co., 711 A.2d 1310, 1311 (Me. 1998), the court notes that “insurer that breaches its duty to defend . . . is not estopped from asserting noncoverage as a defense in a subsequent action brought by the insured or the insured's assignee."  But, the First throws plaintiffs a bone by saying that if they had proved that the insurers breached a duty to defend the burdens of proof would shift.  But, this doesn’t help this plaintiff.

The First also discusses the “Eight Corners Rule” doesn’t apply where “determinative event is the timing of the claim.”  The Eight Corners Rule, in case you were wondering, determines coverage in a lawsuit “...by comparing the allegations in the underlying complaint with the provisions of the insurance policy. If a complaint reveals a potential . . . that the facts ultimately proved may come within the coverage, a duty to defend exists.”  The First also rejects the argument that there was retroactive coverage.  Also, there is some argument that because the premium was so high (not supported by other data) that the court should look beyond the policy.

Coverage under another policy doesn’t apply because of a specific exclusion for the kind of claim made.  (Plaintiff claims it was ambiguous, but it wasn’t.)