New York's highest court delivered one of the most notable opinions in years when it put a dent in the pro-rata regime for allocation of loss that occurs over multiple policy periods. If the policy contains a non-cumulation provision that contemplates reduction of limits due to loss occurring outside the policy period, New York will now apply an all sums approach, allowing the insured to recover its liability within a single policy period, subject to policy limits. In addition, numerous decisions were issued in a variety of areas, including the following:
- Coverage for additional insureds that is based on the policy requirement for a written contract with the named insured will be strictly interpreted.
- Advertising injury coverage for intellectual property claims is unavailable where the insured is simply selling knockoffs, even if they violate another's copyright.
- An attorney general's request for documents and information constitutes a demand for purposes of a prior notice exclusion in a D&O liability policy.
- Defense costs incurred in a class action alleging misconduct over a period of time affecting different individuals are not susceptible to allocation.
- An exclusion of electronic data from the definition of property damage resulted in no coverage for a hacking incident that lifted users' credit card information.
- An omission of a coverage defense from a declination letter does not automatically result in a waiver, the court must look at all other factors regarding the defense.
Looking ahead, we anticipate decisions from New York's highest court that also may be of interest, including: a case involving significant policy interpretation to determine whether a tower crane being used to build luxury condominiums in midtown Manhattan that collapsed during Hurricane Sandy constitutes covered property; the interpretation of additional insured endorsements, and, in particular, the degree of causation required in relation to the named insured's operations and the injury; the question of whether a reinsurance certificate that purports to cap the reinsurer's liability to the ceding insurer for loss is inclusive of the original insured's defense costs paid by the ceding insurer as outside its limits; and the he scope of permissive use under an auto liability policy.
The following is a summary of some of the most noteworthy insurance-related decisions in New York for 2016.
NOTABLE CASES AND DECISIONS
Gilbane Building Co. v. St. Paul Fire and Marine Insurance Co., 143 A.D.3d 146 (Appellate Division, September 15, 2016). An entity is not an additional insured if there is no contract between it and the named insured requiring insurance procurement, as required by the policy. In connection with the construction of the hospital laboratory, the prime contractor (the named insured) entered into a contract with the project owner, which required the insured to procure additional insured coverage for various entities, including the construction manager for the project. The construction manager tendered the owner's claim for structural damage incurred by adjacent buildings to the named insured's carrier as an additional insured. The policy, however, extended such coverage only to an entity "with whom" the named insured agreed to add as an additional insured by written contract. Since there was no contract between the named insured and the construction manager, there was no basis for additional insured coverage. The contract between the insured and the project owner did not otherwise satisfy the policy's requirement.
Cumberland Farms, Inc. v. Tower Group, Inc., 137 A.D.3d 1068 (Appellate Division, March 23, 2016). A franchisor was deemed an additional insured under its franchisee's liability policy but only with respect to its liability as a grantor of the franchise. A personal injury lawsuit alleged the additional insured was negligent in the ownership and operation of the gas station franchise. The insurer argued that the allegation was insufficient for coverage. The court disagreed, noting that liability of the additional insured may hinge on the scope of its obligations as a franchisor. Since the complaint suggested a reasonable possibility coverage, a defense was owed.
Dryden Mut. Insurance Co. v. Goessl, 27 N.Y.3d 1050 (Court of Appeals, June 7, 2016). The determination of employment status may be trumped by an agreement between the insured and a third party. While not an additional insured case, the decision is analogous to issues arising in those types of cases. At issue was the liability policy of the insured plumber, which limited coverage to his conduct as an independent contractor. The insured performed plumbing services for another plumbing company pursuant to an oral agreement that he was an independent contractor. The insurer argued that the common law factors for determining an employer/employee relationship, including control over the means and methods, established its insured was in fact an employee for the other company. The Court deferred to the lower court's conclusion that the weight of the evidence showed an employment relationship, disregarding the insurer's argument that it merely showed a self-serving classification of independent contractor status for tax purposes. As a result of the holding, the liability insurer for the plumbing company, whose policy provided coverage for its employees, did not have any coverage obligation.
Aspen Specialty Ins. Co. v. Ironshore Indem. Inc., 144 A.D.3d 606 (Appellate Division, Nov. 29, 2016). The named insured need not be negligent in order to trigger coverage for an additional insured. An elevator repairman was injured when he fell down a hotel stairway. His employer's liability policy provided additional insured coverage to the hotel for losses caused by the named insured's acts or omissions. There is no requirement to show the named insured's causal conduct was at fault.
United States Fidelity and Guaranty Co. v. Fendi Adele S.R.L., 823 F.3d 146 (2d Cir., May 17, 2016). The sale alone of luxury good knockoffs will not implicate advertising injury coverage for copyright and/or trade dress infringement claims, which typically requires that the infringing activity occur in the insured's advertising. The insured engaged in the purchase and sale of off-price branded handbags and other luxury goods, which were counterfeits that displayed Fendi trademarks and otherwise mimicked the appearance of genuine Fendi products. But since the insured did not engage in any advertising of the counterfeit goods, the mere use of the Fendi mark did not satisfy that requirement. The court opined that there is a common sense difference between using a counterfeit mark on a fake product and soliciting customers through printed advertisements or other media. Thus, the seller's use of the Fendi logo was merely to identify the product, not an advertisement in and of itself. Furthermore, having profited from the sale of knockoffs, the insured could not have reasonably expected any insurance for the return of its ill-gotten gains pursuant to well-settled law prohibiting insurance for such illicit profits.
Matter of Viking Pump, Inc., 27 N.Y.3d 244 (Court of Appeals, May 3, 2016). In a landmark decision, the New York Court of Appeals adopted an all sums allocation among general liability policies for continuous injury claims which contain an anti-stacking or similar provision. The case involved claims arising from long-term exposure to asbestos from the insured's pump manufacturing business. The question was how to allocate the indemnity obligation among successive policies, which obligated the insurers to pay all sums because of bodily injury occurring during the policy period. Pursuant to the Court's 2002 opinion in Consolidated Edison, 98 N.Y.2d 208, the pro-rata method of allocation controlled since indemnity applied to liability incurred as a result of an occurrence "during the policy period" only. The all-sums method of allocation permits the insured to recover its total liability under any policy in effect when the damage occurred (subject to limits), whereas the pro-rata approach adopted in Con Edison limits the insurer's liability to sums incurred by the insured during the policy period. The court held that the pro-rata allocation it endorsed in Con Edison did not apply since the policies contained non-cumulation provisions which adjust the policy's limit if the insurer made any payment for the same injury under a prior policy concerning the same incident, thus preventing the insured from stacking the limits of consecutive policies. These provisions made the policies at issue distinguishable from those in Con Edison. The court found that these provisions, which would be superfluous if not given meaning, undermined the premise upon which pro-rata allocation is based. Finally, the court held that the insured would only be required to vertically exhaust its coverage, thus allowing it to access each excess policy once the immediately underlying policies' limits are exhausted — even if other underlying policies during different policy periods are not exhausted.
Keyspan Gas East Corp. v. Munich Reinsurance America, Inc., 143 A.D.3d 86 (Appellate Division, September 1, 2016). A few months after the Viking Pump decision, a lower appellate court adhered to the pro-rata rule enunciated in Con Edison where the insured had gaps in insurance coverage because no such coverage was available in the market. The insured owned manufacturing gas plants that generated hazardous waste, which had polluted the soil and groundwater in the area since 1901. The insurer provided general liability coverage over a 16--year period. For about 70 years during which the gradual contamination occurred, there was no insurance in the marketplace to cover the risk. The court rejected the idea that an exception to proration should be made in such situations, which would only result in free insurance coverage for the policyholder. And, noting that the policies at issue had no anti-stacking provisions as in Viking Pump, the court upheld a pro-rata allocation based on time on the risk.
Millennium Holdings LLC v. The Glidden Company, 27 N.Y.3d 406 (Court of Appeals, May 5, 2016). The anti-subrogation rule does not apply to non-insured parties. New York's highest court reversed an appellate court's decision that barred the insurer's subrogation claim against a manufacturer of lead paint for indemnification relating to personal injury claims. The lower court barred the claim pursuant to the anti-subrogation rule pursuant to earlier Court of Appeals precedent that applied the anti-subrogation rule even where the party against whom the subrogation claim was alleged was not a named or additional insured (in that case, a permissive user under an auto policy). Here, however, the subrogation defendant was not an insured and there was otherwise no policy reason to bar the claim, such as a conflict of interest, which may be present in a subrogation claim against the insured's employee, its real estate manager or the top officer in a closely-held corporation.
Barba v. Allianz Global Risks U.S. Ins. Co., 2016 WL 6236324 (S.D.N.Y., October 25, 2016). An owned-aircraft exclusion is enforceable against two separate insureds, even if one of them did not own or entrust the aircraft. While decided under another state's law, this case is included since aviation coverage cases are not frequent in New York and the principles and issues are not unique to a particular jurisdiction. The insured owned a helicopter which it leased to a tour operator in Arizona. The claimant was injured in a crash and sued the owner and its president. The aviation policy contained an owned-aircraft exclusion which precluded coverage for bodily injury arising out of the use or entrustment to others of any aircraft owned by any insured. The claim against the owner fell squarely within the exclusion. As to the claim against the president, even though he was not an owner, the exclusion still applied to any claim arising from the entrustment of the aircraft by any insured, which was the case here. The court rejected the argument that the separation of insureds provision made the exclusion inapplicable to the president, and that this interpretation did not render the separation clause superfluous.
Claims and Demands
Weaver v. Axis Surplus Insurance Co., 639 Fed. Appx. 764 (2d Cir., March 7, 2016). An attorney general's request for documents and information constitutes a demand for purposes of a prior notice exclusion. The insured requested a defense in a criminal prosecution brought by the U.S. Department of Justice. That prosecution was related to an earlier letter the insured received from the Maryland Attorney General's office requesting documents and information and demanding that it stop promoting candy vending machine opportunities in the state and that failure to respond could result in legal action. The policy precluded coverage for any claim involving the same facts and circumstances as any demand against the insured prior to a specified date. The Attorney General's letter was such a "demand" because it set forth requests under a claim of right and put the insured on notice of legal consequences. Thus, coverage was unavailable under the policy.
Selective Ins. Co. of America v. County of Rensselaer, 26 N.Y.3d 649 (Court of Appeals, February 11, 2016). Challenged strip searches pursuant to a common policy over a four-year period constitute separate occurrences, and defense costs incurred in a class action will not be apportioned to each claimant in the class. In this case, the insured county was sued for conducting strip searches of persons admitted to its jail. The policy did not allow the grouping of multiple individuals who were harmed by the same condition. Accordingly, each strip search of the class members constituted a separate and distinct occurrence subject to a single deductible. But the Court stopped short of allocating the defense costs among the deductibles. The policy was silent on the issue, and the Court found that since there was just one defense team for all class members, the costs could be reasonably allocated to the named plaintiff only.
Consent to Settle
J.P. Morgan Securities, Inc. v. Vigilant Insurance Co., 2016 WL 3943731 (N.Y. Sup. Ct., July 7, 2016). An insured may be excused from its contractual obligation to obtain its insurer's consent to settle a claim following a coverage denial by the insurer. This decision was unique because the insurer was only found to have "effectively" disclaimed coverage prior to the investment bank's settlement with government regulators. While the insurer's communications contained reservations of rights and did not explicitly decline coverage, other statements by the insurer "left no doubt" that coverage was unavailable on the grounds that the regulatory proceedings against the insured did not constitute a "claim," as that term was defined by the policy and if there was a claim, any payment thereunder was uninsurable disgorgement.
Contractual Limitations Period
T.N. Metro Holdings v. Commonwealth Insurance Co., 2016 WL 7243554 (S.D.N.Y., Dec. 14, 2016). Contractual limitation periods continue to be fully enforced, even where the court might find some ambiguity in the wording. A severe hail storm caused damage to the insured's properties on April 24, 2007. The property insurance policy prohibited any lawsuit against the insurer unless commenced within 12 months "next after the occurrence which gives rise to the claim." The term occurrence was defined as any one loss, disaster or casualty or series of such losses, disasters or casualties arising out of one event. Under Second Circuit precedent, the clock did not start ticking on April 24, 2007 (date of the storm) since the policy did not use the "magic" words "inception of the loss." Instead, the time limitation used "generic" language, which created an ambiguity due to a provision allowing the insured to recover lost rent for a period limited to 12 months after the date of damage. Since that claim did not accrue until April 24, 2008, the insured had until April 24, 2009, to file a lawsuit. Nonetheless, its August 2011 lawsuit was time-barred.
RSVT Holdings, LLC v. Main Street America Assur. Co., 136 A.D.3d 1196 (Appellate Division, February 18, 2016). An intrusion into the insured's computer network does not implicate property damage coverage. In this case, credit card information belonging to a fast-food chain's customers was stolen by hackers who used it to incur fraudulent charges. The policy specifically excluded electronic data from the definition of property damage and further excluded from coverage any damages arising out of the loss of such data. Accordingly, any claim arising from the insured's negligent handling of the data did not constitute a claim for property damage.
Estee Lauder Inc. v. OneBeacon Insurance Group, LLC, 28 N.Y.3d 960 (Court of Appeals, September 15, 2016). The mere omission of a coverage defense from a disclaimer does not automatically result in a waiver. In this brief opinion, the Court of Appeals reiterated the importance of examining "all factors" in analyzing the circumstances under the common law waiver standard, which requires a clear and manifest intent to abandon a defense. The Court held that merely because a disclaimer letter failed to specifically identify a defense did not mean the insurer intended to waive the defense given that the issue had been raised in prior communications with the insured.
Provencal, LLC v. Tower Insurance Co. of N.Y., 138 A.D.3d 732 (Appellate Division, April 6, 2016). In a similar opinion to the one above, where the underlying claim does not concern bodily injury, the heightened disclaimer requirements of Insurance Law § 3420 do not apply. Thus, the insured must show that the insurer waived a defense, although it cannot create coverage where none existed in the first instance. Absent waiver, the insurer may seek to estop the insurer from asserting a defense. But this theory requires the insured to show it suffered prejudice, which, as in this case, is difficult to establish where the insurer's conduct did not lull the insured into sleeping on its rights.
Rapid-American Corp. v. Travelers Cas. and Surety Co., 2016 WL 3292355 (S.D.N.Y., June 7, 2016). Excess policies requiring actual payment of underlying policy limits before the excess policies attach will be enforced literally. The insured manufacturer of asbestos-containing products settled its insurance claims against multiple lower-level insurers for less than their full limits, in connection with underlying personal injury actions. The excess policies were triggered upon payment of the underlying limits. The insured relied on the Second Circuit's 1928 case in Zeig for the argument that the excess policies are triggered where the insured settles with and releases the underlying insurer even though the insurer paid less than its limits. The court rejected the insured's argument, relying on the more recent Second Circuit opinion in Ali, which departed from Zeig in the context of third-party liability policies. In upholding the actual payment of limits provision, the court also rejected the insured's argument that the "no drop down" or bankruptcy protection clauses in the excess policies created any ambiguity in the operation of the exhaustion provisions.
Sea Tow Services International, Inc. v. St. Paul Fire & Marine Insurance Co., 2016 WL 6092486 (E.D.N.Y., September 29, 2016). There is no bad faith when an insurer settles a case that might still leave the insured exposed to an extraneous and hypothetical liability. The insured ran a marine assistance, towing and salvage business through franchises. The plaintiff was injured in a work-related boating accident and sued its employer, a franchisee, as well as the insured. The franchisor's insurer settled the claim against its insured, against its insured's wishes to pursue a global settlement that would release its franchisee, which had its own liability coverage, although it was partially depleted. The court rejected the claim that the settlement was made in bad faith, noting that in New York, where an insurer has a right to settle a claim without the insured's consent, it does not act in bad faith even if the settlement has disastrous business consequences for the insured. Here, the court rejected the insured's speculative argument that the insurer would have left it personally exposed to a claim by its franchisor, given that it failed to present any evidence of a "gross disregard" of the insured's interests, as required for a viable bad faith claim. The court noted that if the insured was so concerned about facing backlash from its franchisees in the event its insurer settled out the franchisor only, it should have negotiated an insured's consent provision for settlements in its policy.
25 Bay Terrace Associates, L.P. v. Public Serv. Mut. Insurance Co., 144 A.D.3d 665 (Appellate Division, Nov. 2, 2016). A bad faith claim against a property insurer remains viable in New York for purposes of the pleading stage. The insured's property sustained water damage during Hurricane Irene in August 2011. The insurer's adjuster reported that water infiltrated the building and the damage was "completely covered." The insurer subsequently sent an engineer to the building to prepare a report, which was factually inaccurate. Based on the evidence, the court denied the insurer's motion to dismiss.
Certain Underwriters at Lloyd's v. New Dominion, LLC, 2016 WL 4688866 (S.D.N.Y., September 7, 2016). Forum selection clauses in policies continue to be upheld. The insured was sued as a result of a series of earthquakes allegedly caused by its hydraulic fracturing operations (fracking) in Oklahoma. It sued its pollution insurer in Oklahoma notwithstanding a forum selection clause designating New York as the proper jurisdiction. The court held that the coverage action belongs in New York since the forum selection clause was presumptively enforceable per three criteria: (1) it was reasonably communicated; (2) it was mandatory and not permissive; and (3) the claims and the parties are subject to the clause. The court rejected the insured's argument that a service-of-suit clause providing the insurer will submit to any U.S. jurisdiction when it fails to pay an amount claimed by the insured allows the Oklahoma lawsuit, since it applied only in narrow situations and did not waive the insurer's right to enforce the forum selection clause.
National Fire Ins. Co. of Hartford v. E. Mishan & Sons, Inc., 2016 WL 3079958 (2d Cir., June 1, 2016). Notwithstanding fairly incriminating allegations of intentional misconduct, a knowing violation exclusion may be limited in scope depending on the nature of the causes of action. Class actions against the insured alleged that it trapped credit customers into recurring credit card charges and misused their confidential information in the process. The policies provided personal and advertising injury coverage subject to an exclusion for knowing violation of another's rights. Even though the underlying claims alleged generally that the insured acted knowingly and intentionally, the court could not rule out the possibility that the insured acted without an intent to harm. Further, certain claims against the insured (breach of contract, unjust enrichment) would not require a showing of knowledge or intent.
Infrassure, Ltd. v. First Mutual Transp. Assur. Co., 842 F.3d 174 (2d Cir., Nov. 16, 2016). From time to time, a dispute arises about how to construe policy headings. In this case, parties to a reinsurance contract disagreed about which arbitration provision applied. The reinsured argued that one provision applied, even though its heading referred to London and Bermuda insurers only. It argued that a "titles clause" in the certificate, providing that headings cannot limit or affect the provisions to which they relate, allowed the court to essentially ignore the heading. The court disagreed, noting that if headings were ignored in that way, other provisions would have a cryptic meaning.
Notice of Claims
Rockland Exposition, Inc. v. Marshall & Sterling Enterprises, Inc., 138 A.D.3d 1095 (Appellate Division, April 27, 2016). The insured, which managed automotive trade shows, was advised by a trade show association that it filed an action against it for infringement after it promoted its own competing tradeshow. It did not notify its insurer until 52 days later. The court held that the notice was late as a matter of law. It rejected the excuse that the insured was justifiably ignorant of its available insurance since it made no inquiries as to the possibility of coverage, and its good faith belief that it was not liable was irrelevant to its delay in providing notice.
Spoleta Construction, LLC v. Aspen Insurance UK Ltd., 27 N.Y.3d 933 (Court of Appeals, March 24, 2016). A vaguely worded notice by an additional insured to its named insured subcontractor seeking defense and indemnity may satisfy a policy's notice requirements. The general contractor tendered the defense and indemnity of a personal injury claim to its subcontractor, who was required to make it an additional insured under its liability policy. The notice sought policy and contact information for its insurer and asked that it put its insurer on notice of the claim. The insurer argued that in this notice, the contractor framed itself only as an indemnitor, not as an additional insured of the insurer. The court disagreed, noting that the notice did not specify the capacity in which it was made, referenced the insurer and provided details of the injury. As such, it satisfied the notice requirements of the policy.
Pollack v. Scottsdale Insurance Co., 143 A.D.3d 794 (Appellate Division, October 12, 2016). Notice of a claim by the injured party must be treated as if it was provided by the insured. In this case, the claimant slipped and fell on snow outside her condominium. She sued the insured, who was responsible for snow removal services. In response to notice of the claim by the claimant, the insurer denied coverage to the insured based upon late notice, but failed to address the claimant's notification of the claim. Accordingly, the court held that the insurer was precluded from subsequently disclaiming coverage on the basis of late notice by the claimant.
Lantheus Medical Imaging, Inc. v. Zurich American Ins. Co., 2016 WL 3006869 (2d Cir., May 25, 2016). An exclusion for corrosion may be triggered by gradual wearing away. The insured's diagnostic medical imaging products incorporated a radioactive isotope supplied by a nuclear reactor, which shut down for 15 months due to the failure of an interior aluminum wall separating a gas-filled space from the reactor vessel. The insured sought coverage for the resulting supply-chain disruption when it had to suspend production runs for one of its products. The policy provided coverage for direct physical loss, including "machinery breakdown," but excluded coverage for loss resulting from "corrosion." The insured argued that the thinning of the interior wall was not sufficiently gradual to constitute corrosion. The court disagreed, finding that the exclusion applied, even if the gradual corrosion took place over a 29-day period and even if there was a concurrent involvement in the breach of the wall by other factors.
Cincinnati Ins. Co. v. Roy's Plumbing, Inc., et al., 2016 WL 3212458 (W.D.N.Y., June 10, 2016). The insured plumbing company was not entitled to coverage for damage caused by a sewer spill pursuant to the pollution exclusion. The insured's negligent refurbishment of a sewer system near the Love Canal waste site caused the discharge of hazardous chemicals onto adjoining property, including chlorinated compounds, halogenated hydrocarbons and other "signature" Love Canal contaminants. Even though the insured did not fit the mold of a "traditional industrial polluter," and even though sewage was not specifically listed in the definition of a pollutant, it qualified as a contaminant or irritant which could cause injuries, which is the primary issue in determining whether a substance falls within the scope of the exclusion. Here, the leaked substances showed a polluting character that gave rise to the underlying claim.
Town Plaza of Poughquag, LLC v. Hartford Insurance Co., 2016 WL 1322440 (S.D.N.Y., March 31, 2016). The circumstances of a claimant's injury outside the insured's pharmacy raised fact questions precluding a summary ruling on indemnity. The claimant was injured when he tumbled off the sidewalk to avoid a pallet of construction materials about 15 steps from the entrance to the insured's pharmacy in a shopping center. The landlord was an additional insured under the tenant's policy with respect to liability arising out of the named insured's ownership, maintenance or use of the part of the premises at issue. The sidewalk was not part of the leased premises, but the construction pallet may have been left by the named insured who was doing work on it. The court found that fact issues prevented a finding of indemnity (but not a duty to defend) since the mere fact that the claimant was on a sidewalk leading away from the pharmacy is insufficient to hold that the injury arose out of its maintenance, use or operation and the sidewalk construction occurred after the risk was underwritten, which therefore made it unanticipated and thus not part of the bargain.
Global Reinsurance Corp. of America v. Century Indem. Co., 843 F.3d 120 (2d Circuit, December 8, 2016). In a closely watched case, the issue of whether a reinsurer owes the ceding company coverage for defense costs paid, in addition to loss, will be decided by New York's highest court pursuant to the Second Circuit's certification. The reinsurance certificate at issue provided that the "reinsurance accepted" was a fixed amount. The certificate also provided that "in addition" to settlements, the reinsurer shall pay its proportion of the reinsured's defense costs. Among other issues that New York's Court of Appeals will grapple with in construing the extent of the reinsurer's liability is whether the follow-the-fortunes doctrine of reinsurance law implicates additional coverage for the defense costs. Interestingly, the Second Circuit noted that industry custom and practice might help interpret how the certificate is supposed to work, although such evidence was not before it.
Joseph v. Interboro Insurance Co., 144 A.D.3d 1105 (Appellate Division, November 30, 2016). The insured's representation on a policy application that the insured property would be his primary residence was material. After a fire destroyed the insured house, the insured sought coverage under his homeowner's policy. The insurer's rescission of the policy was upheld, based on the insured's misrepresentation on the policy application that the property would be owner-occupied. Furthermore, it did not matter that the misrepresentation was willful or innocent.
Settlement and Release
Intelligent Digital Systems, LLC v. Beazley Insurance Co., 2016 WL 5390390 (E.D.N.Y., September 16, 2016). Even if the plaintiffs agree to forbear collection against the insured pursuant to the terms of their settlement agreement, the insured is still legally obligated to pay the settlement sum. The insureds were sued for securities fraud. They entered into consent judgments with the plaintiffs, who agreed to forbear collection of the judgments in exchange for an assignment of the insureds' rights under their liability policy, which only paid loss that the insured was "legally obligated to pay." The court held that the policy covers consent judgments that assign the right of the insured to a third party so long as the assignment does not contain a release of the insured from liability. Because there was no such release, the underlying settlement satisfied the "legally obligated to pay" requirement, even if the plaintiffs agreed never to execute on the judgment.
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