Negative Trend For Insureds In Federal Courts

A case from the Eleventh Circuit Court of Appeals involved an $8.5 million liability claim against Wellons Inc., resulting from the failure of some boiler-type equipment the company was responsible for. Wellons’ claim under a CGL policy was denied by Lexington Insurance Company, and a dispute ensued over the effect of a reservation of rights letter and some related coverage issues. Barnes & Thornburg attorneys James J. “Jim” Leonard and Kara Cleary analyze the appeals court decision and its implications both for Georgia insurance law and with regard to the national landscape. Federal and state courts are diverging on a number of important coverage issues, and as a result the choice of forum is becoming increasingly important to both insurers and insureds. In particular insured parties, they conclude, “should look for creative ways to have state law applied to claims, regardless of whether the litigation is in state or federal court,” and they suggest some strategies for doing just that.