I’m currently preparing to try another coverage case.  This one involves the question of whether an insurance company, having denied a defense outright, can later second-guess the amount of defense costs and settlement paid by the policyholder out of its own pocket. 

In preparing the case, I came across an interesting opinion written by the sometimes-controversial Judge Richard Posner of the Seventh Circuit, Charter Oak Insurance Company v. Color Converting Industries Company, 45 F.3d 1170 (7th Cir. 1995).  (The case coincidentally involves the same insurance company as in my case.  I won’t bore you with the details, but the issues are slightly different.)   Whatever you may think of Judge Posner, the guy can write.  Here’s how he concisely defines the competing interests of the policyholder and the carrier when it comes to settlement with the underlying plaintiff:

“The principal contractual duty that an insurer’s delay in coming to terms with the insured’s tort victim can violate is the implied duty…to manage the defense of the liability claim in such a fashion as will minimize the risk to the insured of an excess judgment. Because insurance policies have limits, a liability insurance company might prefer to roll the dice and litigate with its insured’s tort victim, knowing that its liability was capped at the policy limit and that if it was lucky and won the case it would not have to pay anything. The insured would prefer the insurance company to pay right up to the policy limit if by doing so it could eliminate the danger of a judgment above that limit, since any difference between the judgment and the policy limit would be payable out of the insured’s own pocket. It is entirely reasonable to suppose that had the parties to the insurance policy thought about this conflict of interest between insurer and insured, they would have agreed that the insurance company was not to exploit it, and was instead to act as if there were no policy limit when it came to decide whether to settle or to litigate.” 

(By the way, I’m not sure that a policyholder would always want the full limits paid out.  That might not be helpful at renewal time, for example, and might also create the impression among the plaintiffs’ bar that the policyholder is an easy mark.  But I do understand the Court’s point.)

As to the ability of a carrier to deny coverage, and later to take the position that the policyholder had made “voluntary payments” and was therefore not entitled to insurance, Judge Posner wrote:

“If the insured does settle and then turns around and seeks reimbursement from the insurance company, it will have to prove that the settlement was reasonable. …[There] are cases in which an insured settled in circumstances where, because the insurance company had not conceded coverage, the insured’s personal assets were at risk. They are analytically similar to cases in which the insurance company’s foot-dragging  places the insured at risk of an excess judgment.”

Posner’s reasoning is similar to that of the New Jersey Supreme Court in Fireman’s Fund Ins. Co. v. Security Ins. Co. of Hartford, 72 N.J. 63, 73 (1976), where the Court wrote:  “If the insurer delays unreasonably in investigating and dealing with a claim asserted against its insured, the insured may make a good faith reasonable settlement and then recover the settlement amount from the insurer, despite the policy provision conditioning recovery against the insurer on the prior entry of a judgment or acquiescence by the insurer in the settlement.”  

Bottom line:  If the insurance company denies or delays coverage, courts say that the policyholder can settle with the underlying plaintiff and, as long as the settlement is reasonable, can successfully claim reimbursement from the insurance company.  The “voluntary payments” provision does not apply.

So here’s a frustrating aspect of coverage work.  The underlying plaintiff sues the policyholder based on a complaint that was inartfully drafted (which, in some instances, is a nice way of saying that the complaint looks like it was written while the lawyer was tripping on mescaline).  The carrier denies coverage because nothing in the complaint seems specifically to trigger coverage.  And now the policyholder is in a dogfight with the carrier. 

I admire the plaintiffs’ bar.  Most of them are truly terrific lawyers.  But how can they draft complaints without even considering the insurance coverage aspects of what they’re saying?  Are they trying to punish the defendant by making it hard to tap into applicable policies?  If so, how are they complying with RPC 1.3, which requires the exercise of “reasonable diligence” in representing a client? 

This issue now rears its ugly head again before the New Jersey Supreme Court.  The case is Abouzaid v. Mansard Gardens Associates, and the facts are unpleasant.  (By the way, I’m not suggesting that the plaintiffs’ lawyer in Abouzaid was tripping on mescaline.  There was definitely a nuance of insurance law that may have been missed, though.)  A pilot light in a stove ignited vapors from a paint thinner that had been applied to a kitchen floor by the underlying defendant’s employees.  Three kids were horribly burned. 

Count one of the underlying complaint specifically addressed the claims of the minor children only, asserting a conventional theory of negligence.  Count two incorporated the allegations of the first count and also added a negligence claim under the theory of res ipsa loquitur. In count three, the plaintiffs alleged that the kids’ parents were “forced to endure emotional distress and suffering resulting from watching . . . their sons becoming engulfed by flames.”

The carrier of course denied coverage for count three, arguing that its policy provided coverage only for “bodily injury,” which under New Jersey insurance law does not include emotional distress without physical manifestations.

Later, apparently realizing the error of their ways insurance-wise, the underlying plaintiffs’ counsel amended count three to state that the adult plaintiffs “had to incur the cost of medical treatment for the physical impact caused by their emotional distress and suffering.”

In a slightly snarky opinion, the Appellate Division held that there was no duty to defend count three in the original complaint, but that there WAS (barely) a duty defend count three in the amended complaint.  The panel wrote, for example:

“The third count merely recounted the adult plaintiffs’ grievance of ‘hav[ing] been forced to endure emotional distress and suffering.’ On its face, this allegation does not constitute the type of harm that triggers coverage for a ‘bodily injury, sickness or disease.’ This stands in stark contrast with the plaintiffs’ amended complaint and newly minted third count claiming that the adult plaintiffs ‘had to incur the cost of medical treatment for the physical impact caused by their emotional distress and suffering.’ Although not couched in the most graceful language, these statements were enough to impel [the carrier] to intercede and thereafter provide a defense to Mansard. The differences in language are not mere semantic nitpicking; they go to the heart of the definitional linchpin required for coverage–and a defense–under the insurance policy.” 

I should note that in SL Indus., Inc. v. Am. Motorists Ins. Co., 128 N.J. 188, 198-99, 607 A.2d 1266 (1992), the New Jersey Supreme Court specifically held that the determination of the duty to defend does not depend on the writing skills of the underlying plaintiffs’ counsel. (“To allow the insurance company ‘to construct a formal fortress of the . . . pleadings and to retreat behind its walls, thereby successfully ignoring true but unpleaded facts within its knowledge that require it, under the insurance policy, to conduct the putative insured’s defense,’ would not be fair.” (internal citations omitted)). 

Both sides in Abouzaid appealed to the New Jersey Supreme Court.  The carrier contends that there should be no duty to defend even the amended count three, because the original complaint demonstrated that the only injuries at issue with respect to the parents were “intangible emotional injuries.”  The policyholder contends that the duty to defend should relate back to the original complaint, because the emotional harm caused a physical impact, which the amended complaint merely clarified.   Policyholder counsel argues that his clients suffered from post-traumatic stress disorder, which, he says, is definitely a “bodily injury.”

Arguments were held before the Supremes a couple of weeks ago.  Trying to discern the eventual outcome of the case based upon oral argument is reading tea leaves, of course.  But during the argument, Justice Barry Albin asked the carrier’s lawyer whether the carrier had done anything in its investigation to elicit any information about physical injuries suffered by the adult plaintiffs.  “I don’t know,” said the lawyer. “I assume they did not.” Albin said that was “problematic.” 

Stay tuned…

Got an e-mail from my friend John Denton at Marsh Risk Consulting about The English & American Underwriting Agency Pools (“EAU”) and their Scheme of Arrangement closure. Any historic London excess placements probably would have included one or more of the EAU companies as carriers. There are actions necessary to safeguard any outstanding claims, whether known or unknown (“IBNR” losses).  

Failure to act by  the April 11, 2011 Claim Bar Date will mean that the EAU shares of any outstanding or future claims will be lost forever.

To prevent this from happening, John recommends that those with legacy liabilities that impact historical policies (e.g. asbestos, pollution, historical health hazards, etc.), act now to assess the amount of exposure they have to the proposed EAU Scheme.

John can be reached at john.denton@marsh.com or 212-948-2036.

That is all.  For today, anyway.

In commercial accounts, retrospective rating is a fairly common concept. A retrospective premium program is exactly what its name suggests: a method to calculate the policyholder’s premiums for liability insurance “retrospectively.”  While the formulae for calculating retro premiums can get pretty involved, the basics are as follows. 

A retrospective premium policy, unlike a standard insurance policy, provides for retrospective determination of the policyholder’s premium obligations according to a  formula based on the cost of claims actually paid by the insurance company under the policy.  Conversely, a standard liability policy requires only the payment of a fixed premium. The retrospective policy establishes maximum and minimum premiums to be paid, and it states the “standard” premium that would be charged under an equivalent standard policy. (The policyholder pays the “standard” premium up front.) The minimum premium is computed as a fraction of the standard premium.

Retrospectively rated policies usually also contain “loss limitations.” A loss limitation modifies retrospective premium coverage by limiting the amount of a claim to be assessed to the policyholder for purposes of calculating the retrospective premium.  If, for example, the loss limitation is $100,000, and the claim amount is $125,000, only $100,000 gets passed through the formula. 

Depending upon the specific language of the program (and how good you and your broker are at negotiating), claims can be assessed on a “paid” basis or on an “accrued” basis.  If assessed on a paid basis, only claims actually paid by the carrier get passed through the system (after they’re paid).  If assessed on an accrued basis, then the claim gets passed through the system once the carrier reserves against it.  That’s why, if you’re a policyholder, you need to monitor the carrier’s claim reserves very carefully.

In a couple of recent liability insurance claims I’ve handled, the carrier has tried to use a retro program as a defense to coverage in the first instance.  In other words, the carrier has said, “we owe you X, but we get to deduct the retro premium BEFORE we pay you.”  That’s not the way retro coverage is supposed to work.  If the program is written on a “paid” basis, the policyholder is entitled to the cash flow protection built into the program – the carrier pays the claims and then the policyholder provides reimbursement after the annual (or periodic) review.

The key to controlling costs under a retro program is simple.  Trust but verify. Read your program through in advance (despite the fact that it’s mind-numbingly boring) and make sure that all billing adjustments are proper and are properly applied.   Don’t just blithely write checks to the carrier, because you may be waiving arguments you could make later. Use your broker, and if your broker won’t take the time to do things properly, get a new broker.  Otherwise, you could be leaking a lot of money.

Needless to say, it can be very dangerous for insurance companies to “roll the dice.”  Over at the Michigan Auto Lawyers Blog, Steve Gursten tells the story of an adjuster who showed up 40 minutes late for a mediation, and then wouldn’t go north of $1 million in a catastrophic truck accident case involving serious personal injury.  The carrier rep obstinately told Gursten that no jury would “ever return a verdict of more than a million dollars for pain and suffering.”  Well, the guy was at least partly correct – the jury didn’t come back with a million.  They came back with $3.5 million.  Ouch.   

A couple of lessons about negotiation here.  First, always treat your opponent with respect.  Showing up 40 minutes late for a meeting is really not a good idea.  To paraphrase a former law partner of mine, never give the other side something to put on their locker room bulletin board. And second, instead of making an obnoxious statement like “no jury will ever return a verdict of more than a million dollars,” always resort to objective fact.  As in, “we’ve looked at the case carefully, and based on similar cases, we think this one should be valued at about a million.”  Show your opponent some verdicts from similar cases and say something like:  “We want to do the right thing here.   Have a look at these and tell us how your case is different and why you think we’re wrong.”  Will this strategy always work?  No.  Sometimes your opponent will be unreasonable and you’ll have to take your chances with a judge or jury.  But you’ll know that you approached the situation intelligently and gave yourself the best chance to succeed.     

Most lawyers brag about the cases they’ve won.  I prefer to pick apart the ones I’ve lost.  It’s cathartic.

The subject of general liability insurance coverage for supposed intellectual property offenses is hotly contested.  Depending on the “personal injury” and “advertising injury” coverage forms used in a particular policy, for example, insurance may exist for claims of patent or trademark infringement.   Generally and not surprisingly, insurance companies disagree.

So, here are the facts from a recent case we handled.  Companies A and B manufactured food preservatives overseas.  Our client –  Company C – approached the two manufacturers and offered to become the U.S. distributor for the products.  The parties signed a letter of intent, which included a confidentiality agreement as to the trade secrets of Companies A and B.

A and B alleged that C later “improperly associated itself with [the products] and promoted itself as the distributor of [the products] in the U.S., manufactured using [A and B’s] patented process and promoted itself as knowledgeable in the use of [A and B’s] trade secrets.”  A and B also alleged that C “began selling its own version of [the product] to the same customers.”

Companies A and B sued for (1) patent infringement, (2) unfair competition, and (3) theft of trade secrets. 

We then went after C’s liability insurance carrier for coverage under the “personal and advertising injury” form in the general liability policy.  In relevant part, the policy defined “advertising and personal injury” as injury arising out of “[c]opying, in your ‘advertisement,’ a person’s or organization’s ‘advertising idea’ or style of ‘advertisement.’”  The policy defined “advertising idea” as “any idea for an ‘advertisement.’”  Finally, the policy defined “advertising” as “the widespread public dissemination of information or images that has the purpose of inducing the sale of goods, products or services through…(1) Radio; (2) Television; (3) Billboard; (4) Magazine; (5) Newspaper; or…[a]ny other publication that is given widespread public distribution.”

Seizing on the last phrase (“any other publication that is given widespread distribution”), we moved for summary judgment on the duty to defend.  As you know if you’re an insurance aficionado, the carrier’s duty to defend is supposed to be triggered if there’s any possibility that coverage may ultimately exist.  We figured that the allegations in the underlying complaint (for example, that C “improperly associated itself with [the products] and promoted itself as the distributor of [the products] in the U.S.”) should suffice.

The judge didn’t buy what we were selling, though, holding in part: “The policy requires ‘widespread’ public dissemination…in order to constitute an advertisement…[T]he underlying complaint provides no support for the notion that the dissemination of information at issue was widespread.”

This (in my humble opinion) is a dopey ruling.  Under the law relating to the duty to defend, the proper question is whether there existed any possibility of widespread dissemination of information.  If so, the duty to defend should have been triggered.  I personally would like to have taken this one up to the Third Circuit for review, but we’d negotiated a high/low agreement with the carrier, so we settled following the court’s decision.  (A decent result for the client, since a less-than-perfect settlement is almost always better than a protracted litigation.  But I feel like I got cut off from dinner after the shrimp cocktail.) 

 

It’s amazing how, when the economy tanked, construction defects began to multiply exponentially.  I’m not (necessarily) trying to ascribe purely financial motives to the plaintiffs in these cases, but there’s no doubt that, at my firm at least, we’ve seen a marked increase in the amount of coverage litigation over construction defects.

So, what’s the coverage fight all about?  A lot of it involves the so-called “your work” exclusion contained in general liability policies.  (In the ongoing game of words, insurance companies like to refer to this as the “business risk” exclusion, even though the words “business risk” don’t actually appear in the policy forms.)  Boiled down to its essence, this type of exclusion says that if you get sued for damage to your “own work,” there’s no coverage.  So if you’re a builder, and you install stucco on a building, and the stucco falls apart, and you get sued as a result, there’s no coverage under your general liability policy  for repairing the stucco.

This begs the question:  What if the crummy stucco falls on somebody else’s truck (or head) and totals it?  If you’re the general contractor and you get sued, you’re not covered for the repair of the stucco – but how about the replacement cost of the truck (or head)?   

Lots of cases say that faulty workmanship that causes damage to other property is a covered “occurrence” under a general liability policy.  See Weedo v. Stone-e-Brick, Inc., 81 N.J. 233 (1978) (a contractor’s general liability policy typically does not cover an accident of faulty workmanship but rather faulty workmanship which causes an accident); Firemen=s Insurance Company of Newark v. National Union Fire Insurance Co., 387 N.J. Super. 434 (App. Div. 2006) (drawing a distinction between economic loss to faulty workmanship and faulty workmanship that causes damage to other property); Hartford Insurance Group v. Marson, 186 N.J. Super. 253 (App. Div. 1982) (noting that claim against policyholder for damage done by its defective workmanship to metal panels installed by another contractor is not excluded).

A few years ago, in United States Fire Insurance Company v. J.S.U.B., 979 So.2d 871 (Fla. 2007), the Florida Supreme Court provided a detailed history of the evolution of the “your work” exclusion, which is useful to anyone dealing with one of these claims.  The Court noted that the 1986 version of the standard form commercial general liability policy contained language specifically stating that that the exclusion for faulty workmanship did not apply to work within the products-completed operation hazard.  The 1986 policy also added a new “your work” exclusion – with an express exception for work done by subcontractors.  The exception was later removed from certain standard forms.

The takeaways here:

  1. If you’re in a business (or if you’re representing a business) where products/completed operations coverage may be an issue, carefully examine the exclusions for “your work” and “your product” and make sure you have adequate protection before problems happen.
  2. Broad disclaimers of coverage based upon so-called “business risk” exclusions generally aren’t appropriate.  Remember, for example,  that the “your work” exclusion is designed to preclude coverage for damage to “your work” – and only “your work.”  If defective work causes damage to other property, coverage exists.   
  3. If a property damage claim is brought against a policyholder and the complaint lists “breach of contract” as the source of the claim, the insurance company should examine the facts of the incident carefully and not simply assume that  breach-of-contract claim is never covered by a general liability policy.

 

The subject of invasion of privacy has been in the news (pretty tragically) lately with the terrible suicide death of a Rutgers University freshman.   Classmates allegedly had been spying on his personal life through a webcam, which upset him to the point that he took his own life. 

I don’t mean to seem insensitive or disrespectful  by leading off this post with such a heart-wrenching case.  But it’s a stark reminder of the facts:  With the proliferation of electronic gadgetry and the ever-expanding reach of cyberspace, the environment is right for invasion of privacy cases to increase exponentially.  From a risk management perspective, these cases frequently generate insurance issues under the “personal injury” coverage part of general liability policies.  Personal injury insurance coverage generally protects the policyholder against liability arising from claims of false arrest, detention or imprisonment, or malicious prosecution; libel, slander, defamation, or violation of right of privacy; and wrongful entry, eviction, or other invasion of right of private occupancy.   As the years have gone by, this type of coverage has gotten more and more restrictive.  Some coverage forms limit “invasion of privacy” to situations where a landlord actually interferes with a tenant’s privacy in a rented room, for example.  So you need to read the coverage form carefully.

In any event, a Pennsylvania school district and its insurance company have just settled a case of first impression over whether the personal injury provisions of a commercial general liability policy cover claims stemming from secret video surveillance inside a home.  Settlement details were not included in court papers, and an attorney for the insurance company, Graphic Arts Mutual Insurance Co., declined to shed light on the agreement in the press.

The facts of the case are, well…weird.  Lower Merion School District, outside of Philadelphia, issued laptops to students that were equipped with webcams. For reasons known only to school authorities and the Almighty, school administrators remotely activated the cameras to take pictures of students in their homes, and the photos were later used in disciplinary proceedings against the students.

For you “Get Smart” fans out there, this sounds like something K.A.O.S. would have pulled.  But one of the students, upon learning of the spying activities, understandably was not amused. The student brought a putative class action against the school district, alleging invasion of privacy, wiretapping violations and intellectual property theft against the district. Graphic Arts agreed to defend the case under a reservation of rights, and filed a declaratory judgment action alleging no coverage.

(By the way, I sometimes close my e-mails with a quote from the American lawyer and statesman Elihu Root [1845-1937], who once said:  “About half the practice of a decent lawyer consists in telling would-be clients that they are damned fools and should stop.”  Spying on students in their homes would have fallen within that category had anyone from the school district asked me.)

In the DJ action. Graphic Arts argued that the claims in the underlying complaint did not fit into any of the defined offenses included in the personal injury coverage, and moved for judgment on the pleadings.

Graphic Arts and the school district  settled before the judge had a chance to rule on the motion. R. Bruce Morrison, an attorney for Graphic Arts, is quoted in the press as follows:  “Recognizing the existence of these issues is the most significant feature going forward, but we don’t have a judicial decision. I don’t know that it is likely to arise again in this exact context, but given the advances in technology, I’m confident that we’re going to see variations of this issue going forward.”

The insurance settlement came shortly after the underlying case ended.  The district court issued a permanent injunction preventing the school district from remotely activating the webcams and restricting its access to student-created files on the laptops.  The school district also agreed to pay $610,000 in settlements.

The insurance case is Graphic Arts Mutual Insurance Co. v. Lower Merion School District et al., case number 10-1707, in the U.S. District Court for the Eastern District of Pennsylvania.

The underlying case is Robbins et al. v. Lower Merion School District et al., case number 10-665, in the U.S. District Court for the Eastern District of Pennsylvania.

 

From the “no good deed goes unpunished” department:  Over at Claims Magazine, they recently published an article called “The Hidden Risks of Green Buildings.”  “Green” (or “sustainable”) buildings involve processes that are supposedly environmentally responsible and resource-efficient throughout a building’s life-cycle: from siting to design, construction, operation, maintenance, renovation, and deconstruction.  So, for example, while standard buildings stress hydrocarbon-based materials, “green” buildings are supposed to stress carbohydrate-based materials.   The EPA has a portion of its website devoted to this subject.

But the authors of the Claims article (J. David Odom, Richard Scott and George H. Dubose) argue that “the very concepts intended to enhance a building’s performance over its entire lifetime are many of the same things that make a building highly susceptible to moisture and mold problems during its first few years of operation.”

For purposes of risk management, the two main points raised in the article are:

(1)               Green buildings are supposed to incorporate innovative, locally produced products.  Problem:  The potential failure of new products to meet promised performance levels (more likely with new materials than with proven materials found in traditional buildings).

(2)               Green building standards reward the introduction of more outside air, which can lead to indoor humidity problems and mold growth.

The authors contend that green buildings will result in increased litigation and insurance costs, as a result of the buildings’ failure to perform to expectations. Targets for lawsuits include designers and building owners. 

This situation reminds me of the numerous environmental problems associated with the Toyota Prius, the car of choice for the environmentally conscious. The Prius’s battery contains nickel, which is mined in Ontario, Canada. The plant that smelts this nickel is nicknamed “the Superstack” because of the amount of pollution it puts out; the area for miles around it is a wasteland because of acid rain and air pollution.

That smelted nickel then has to travel (via container ship) to Europe to be refined, then to China to be made into “nickel foam,” then to Japan for assembly, and finally to the United States. All this shipment for each tiny step in the production process costs a great deal, both in dollars and in pollution.  What was supposed to be an environmental dream begins to look more like an environmental nightmare.

In any event, if you’re thinking of “going green” in your business, it would be wise to develop a detailed green building risk management plan.  Such a plan needs input from green building specialists, moisture control specialists, construction attorneys, and your insurance broker. 

Remember:  Many problems involving mold will be excluded under standard insurance policy forms.  See, for example, the Environmental Risk Resources Association website.

 

My father-in-law (who worked for DeLorean Motors long ago) once told me that success in business was simply a process of accumulating whip marks.  Succeeding in the law is no different.  Here’s a whip mark I got a few months ago, and which you can avoid by always paying your insurance premiums on time. 

I generally don’t handle personal lines cases, but I did handle this one for the estate of an executive who worked for a corporate client of our firm. “Bob” was a 40-year-old officer with a major beer distributorship.  He had a $3 million life insurance policy through Jackson National Life (JNL), with his wife as the beneficiary.  He failed to pay his annual premium by the scheduled date.  JNL sent him a lapse notice, which said that if he paid the premium in 30 days, he wouldn’t have to go through medical underwriting again.  He still failed to pay his premium.  Two weeks after the extension granted by JNL ran out, Bob paid the premium by electronic funds transfer.  JNL held the money for a month, then returned it by snail mail with a reinstatement application.  By that time, Bob had become ill, and he died shortly thereafter of a ventricular fibrillation, leaving a widow and two small children.   Naturally, JNL denied coverage on the ground the policy had lapsed.

I argued that by holding the premium for a month with no further communication to the policyholder, and enjoying the float on the policyholder’s funds, the carrier had waived its right to contest coverage and to require underwriting.  I cited a line of authority to that effect, including Provident Life and Cas. v. Fein, 310 N.J. Super. 110, 123 (App. Div. 1998) (an insurance company must provide “the earliest reasonable notice that the insurance company is not simply accepting the overdue premium payment and reinstating the policy as a matter of course”);  John Hancock Mutual Life Ins. Co. v. Hefner, 134 N.J.Eq. 336, 338 (1944) (to prevent unconditional acceptance, insurance company must notify policyholder promptly that it is not accepting the premium payment); and N.J.S.A. 17:29-B(4)(9) (making it an unfair claims settlement practice for insurance companies to fail to respond in a prompt  fashion to all communications from policyholders).

Whatever, said both the trial court and the appeals court, reasoning as follows (I’ve changed my client’s name for purposes of this post):

“The District Court stated expressly that ‘[t]here is no bright line rule for determining the reasonableness of the time period that a premium has been retained,’ and that ‘[the Court in Glezerman v. Columbian Mutual Life Insurance Co., 944 F.2d 146 (3d Cir. 1991)] indicated that a more in-depth examination of the circumstances is warranted.’  Indeed, we explained in Glezerman that an insurer’s extended retention of an overdue premium payment was simply ‘evidence that a policy has been reinstated.’ We did not purport categorically to find a waiver for any particular length of time during which an insurer retains an overdue payment; instead, the delay is but a factor bearing on the ‘intentional-relinquishment’  standard set forth by well-settled New Jersey law. Here, JNL placed Smith on notice time and again that his failure to remit payment before the end of the grace period — and later, before April 28, 2006 — would result in a lapsed Policy. In such an event, unless and until a reinstatement application had been completed by Smith and accepted by JNL, the Policy would be in default and no coverage would be available in the interim. Based on its prior communications to Smith, therefore, we conclude that JNL did not waive its right to enforce the Policy as written.” 

Do I think this ruling is wrong?  Shockingly, yes.  In this day and age, holding an electronic funds payment for over a month without so much as an e-mail to the policyholder seems like waiver to me.  But I don’t wear a black robe.  So pay your premiums on time.