Insurance Coverage Exclusions for Known Loss, Prior Knowledge, and Prior Notice: Evolving Judicial Standards

Advocating Scope of the Exclusions From the Policyholder and Insurer Perspectives

A live 90-minute CLE video webinar with interactive Q&A


Tuesday, March 23, 2021

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

The CLE webinar will address liability policy exclusions designed to preclude coverage for potential liabilities known to the insured when applying for coverage. The panel will provide insights into the evolving standards for how courts construe such provisions, whether such exclusions apply to innocent insureds, and the tools savvy counsel can deploy to limit client exposure.

Description

Insurance coverage is premised on the concept of fortuity--a loss that occurs by chance or accident. When an insurance company issues a policy, it insures against the risk of possible loss, not a certainty. Insurance carriers do not intend to provide coverage for a loss that has occurred, is in progress, or is substantially certain to occur. But situations inevitably arise where policyholders try to obtain insurance coverage for a prior loss.

While insurers can avoid these problems by either excluding coverage for known losses in the insuring agreement or requesting information about known losses during the application process, it is not always practicable to seek this information across all business lines. And courts continue to recognize the known-loss rule and refuse to allow insurance coverage for a loss that has already occurred.

Many courts interpreting exclusions for prior loss, or losses as to which the insured had prior notice or knowledge, have found them clear and unambiguous and adequate to support summary judgment. To cite but one example, in First Horizon Nat'l Corp. v. Houston Cas. Co., (6th Cir. July 10, 2018), the court affirmed summary judgment for the insurers where the insured bank concealed critical facts about a government investigation until the eve of settlement. The court held that the insured failed to provide timely notice of, or adequate notice of, a potential claim.

Sometimes policyholders argue that the exclusions do not apply because the insured lacked notice of the right or lacked knowledge that the facts they knew could result in a covered claim. E.g., Greene v. Westfield Ins. Co., 963 F.3d 619 (7th Cir. June 25, 2020). On the other hand, some courts have found that the prior knowledge exclusion does not apply or that issues of material fact exist that prevent the court from granting an insurer summary judgment.

Listen as our panel of veteran coverage counsel discusses these exclusions and highlights their benefits and shortcomings as useful tools for both the insured and insurer to identify and manage specific categories of risk that will--or will not--be included in the underlying policy.

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Outline

  1. Introduction to prior knowledge exclusions
    1. Known loss
    2. Prior knowledge
    3. Prior notice
  2. Analysis of recent case law
  3. Best practices for limiting client exposure

Benefits

The panel will review these and other contentious questions:

  • What is the elusive key to determining the difference between known and unknown losses?
  • What is considered to be a claim that is "reasonably foreseeable"?
  • When do the insured's subjective impressions and opinions play a dispositive role?
  • When do judges find that the prior knowledge exclusion does not apply or that issues of material fact exist that prevent the court from granting an insurer summary judgment?
  • What are the most recent case law developments on the scope and applicability of these exclusions?

Faculty

Byrne, Jane
Jane M. Byrne

Partner
McDermott Will & Emery

Ms. Byrne focuses her practice on insurance litigation. She advises an array of well-known domestic and international...  |  Read More

Guyon H. Knight
Guyon H. Knight

Partner
McDermott Will & Emery

Mr. Knight represents insurers and reinsurers in high-stakes coverage and bad faith disputes across the country. He has...  |  Read More

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