Presenting a live 90-minute webinar with interactive Q&A Insurance Estoppel and Waiver Amid Conflicting Case Law: Safeguarding Coverage, Navigating Insurer and Insured's Duties TUESDAY, JUNE 7, 2016 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Kevin F . Buckley, Partner, Mound Cotton Wollan & Greengrass , New York Sherilyn Pastor , Partner, McCarter & English , Newark, N.J. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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INSURANCE ESTOPPEL AND WAIVER Sherilyn Pastor Kevin F. Buckley Partner Partner McCarter & English Mound Cotton Wollan & Greengrass LLP 100 Mulberry St 1 New York Plaza Newark, NJ 07102 New York, NY 10004 (973) 639-2070 (212) 804-4242 SPastor@mccarter.com Kbuckley@moundcotton.com
ESTOPEL & WAIVER - IN GENERAL • waiver 1. The voluntary relinquishment or abandonment — express or implied — of a legal right or advantage . . . . • estoppel 1. A bar that prevents one from asserting a claim or right that contradicts what one has said or done before or what has been legally established as true. . . . 3. An affirmative defense alleging good-faith reliance on a misleading representation and an injury or detrimental change in position resulting from that reliance. Black's Law Dictionary (10th ed. 2014). 6
ESTOPPEL & WAIVER: BLURRED LINES • The distinction between the two has been blurred by many courts; specifically, the prejudice/detrimental reliance element. • See, e.g., Rapid Park Indus. v. Great N. Ins. Co., 502 F. App'x 40, 42 n. 2 (2d Cir. 2012) (noting that the lower court grouped waiver and estoppel claims together, and only analyzed waiver claims; “[t]his is incorrect, as [w]aiver and estoppel are distinct in New York Insurance law”) (internal quotation marks and citations omitted); Ray v. Prudential Ins. Co. of Am., No. C 09- 05598 RS, 2010 WL 4704258, at *4 (N.D. Cal. Nov. 12, 2010) (“the distinction between [the two] in California has been blurred in the insurance context”), aff'd. 488 F. App'x 234 (9th Cir. 2012); Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341, 1347, n. 5 (11th Cir. 1994) (“[t]he terms ‘waiver’ and ‘estoppel’ have been so frequently confused and abused in decisions on insurance law that it seems preferable to define those terms accurately in the inception of this discussion. ”) (internal quotation marks and citation omitted); W. Cas. & Sur. Co. v. Brochu, 122 Ill. App. 3d 125, 134, 460 N.E.2d 832, 839 (1984) (“the two issues are frequently intertwined and confused”), aff'd. 105 Ill. 2d 486, 475 N.E.2d 872 (1985). 7
ESTOPPEL: ELEMENTS AND BURDEN OF PROOF • Under New York law, estoppel arises “where an insurer acts in a manner inconsistent with a lack of coverage, and the insured reasonably relies on those actions to its detriment. Thus, estoppel requires a showing of prejudice to the insured. ” Cont'l Cas. Co. v. Marshall Granger & Co., LLP, 6 F. Supp. 3d 380, 394 (S.D.N.Y. 2014) (internal quotation marks and citations omitted); see Sulner v. G.A. Ins. Co. of New York, 224 A.D.2d 205, 206, 637 N.Y.S.2d 144, 145 (1st Dept. 1996) (“estoppel is limited to those instances in which the insured has been prejudiced by the insurer’s conduct. ”) (citations omitted), lv. denied 88 N.Y.2d 805 (1996). • The burden of proof is also on the party claiming estoppel, usually the insured. Provencal, LLC v. Tower Ins. Co. of New York, 138 A.D.3d 732 (1st Dept. 2016) (“Because the plaintiff failed to make the requisite showing of prejudice, there was no basis to estop the defendants from relying on policy exclusions not detailed in their letter disclaiming coverage. ”) . 8
ESTOPPEL: ELEMENTS AND BURDEN OF PROOF • Most other jurisdictions’ elements of estoppel, including CA, FL, IL, and TX, are similar to New York, and also require the insured to prove estoppel. • See, e.g., Guerrette v. Farmers Grp., Inc., No. B237819, 2012 WL 5936702, at *9 (Cal. Ct. App. Nov. 28, 2012) (proof of estoppel requires a showing of detrimental reliance by the injured party); City of Pleasanton v. Bd. of Admin. of the California Pub. Employees' Ret. Sys., 211 Cal. App. 4th 522, 543-44, 149 Cal. Rptr. 3d 729, 748 (2012) (party claiming estoppel bears the burden of proving it); United States Life Ins. Co. in the City of New York v. Logus Mfg. Corp., 845 F. Supp. 2d 1303, 1318 (S.D. Fla. 2012) (discussing elements of estoppel, and that the party claiming estoppel must prove it); Am. States Ins. Co. v. Nat'l Cycle, Inc., 260 Ill. App. 3d 299, 307-08, 631 N.E.2d 1292, 1298-99 (1994) (discussing elements of estoppel); Clarendon Nat. Ins. Co. v. All Modes, Inc., 2011 IL App (2d) 110302-U, ¶ 15 (2011) (burden of proof is in the party asserting estoppel); Texas Farmers Ins. Co. v. Kurosky, No. 02-13-00169-CV, 2015 WL 4043278, at *8 (Tex. App. July 2, 2015) (discussing elements of estoppel, and holding that the burden is on the party asserting estoppel). 9
WAIVER: ELEMENTS AND BURDEN OF PROOF • Waiver is an equitable doctrine, it requires proof of a voluntary relinquishment of a known right. E.g., West Jersey Title v. Industrial Trust Co., 27 N.J. 144, 152 (1958). • Waiver most often arises when an insurer does not demand strict compliance with the terms of its policy. E.g., Illinois Union Ins. Co. v. Intuitive Surgical, Inc., No. 13-cv-04863-JST (N.D. Cal. May 27, 2016). • The doctrine is designed to preclude the waiving party from lulling the other party into a belief that compliance with a contractual duty is not required, and then later using the non-compliance for the purpose of avoiding the contract. E.g., Greenpoint Bank v. Sec. Mut. Ins. Co., 247 A.D.2d 583, 583-84 (N.Y. App. 1998). • Waiver need not be stated expressly, it can be implied from an insurer’s acts, words, conduct or knowledge, demonstrating the insurer knew of a right and then abandoned it either by design or indifference. E.g., Anderson v. Holy See, 878 F. Supp. 2d 923, 933 (N.D. Ill. 2012); Brown v. State Farm Mut. Auto Ins. Co., 776 S.W.2d 384 (Mo. 1989); Chen v. Vigilant Ins. Co., 2009 WL 2341444 (N.J. App. Div. July 31, 2009). • Some courts have held that waiver can be implied as a result of the mere passage of time (akin to estoppel in pais). See, e.g., Gibraltar Ins. Co. v. Varkalis, 263 N.E.2d 823, 827 (Ill. 1970). 10
WAIVER: ELEMENTS AND BURDEN OF PROOF • The party asserting waiver bears the burden of proof at trial. Where it moves for summary judgment, it bears the initial burden of producing evidence entitling it to summary judgment. • Where the party moving for summary judgment would not bear the burden of proof at trial, it bears the initial burden of producing evidence that negates an essential element of the non- moving party’s waiver claim. It must demonstrate that the party asserting wavier cannot carry its ultimate burden of persuasion at trial. If the moving party satisfies its initial burden of production, then the non-moving party must produce admissible evidence to show that a genuine issue of material fact exists as to its wavier claim. • Many states require clear and convincing evidence of an intent to waive. E.g.,Waller v. Truck Ins. Exchange, Inc., 900 P.2d 619, 636 (Cal. 1995). 11
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