Insurance & Reinsurance

Insurance Coverage 

Pepper represents insurance carriers in addressing coverage issues arising under primary and excess liability, first-party property and other specialty insurance policies that involve: 

  • exposure to asbestos, silica, lead, chemicals and other harmful substances
  • exposure to pharmaceuticals, implants and other medical devices
  • insolvency/bankruptcy of the policyholder or related entities
  • directors and officers' liability
  • cybersecurity
  • advertising injury
  • business torts
  • insurance sales practice.

Pepper lawyers prosecute and defend "high stakes" coverage litigation in federal, state and bankruptcy courts in all phases of pretrial, trial and appellate litigation. Additionally, we represent our clients in alternative dispute resolution proceedings, including direct party negotiations, mediation and arbitration. We have successfully litigated, on a national basis, some of the highest-exposure cases our clients face. 

While Pepper's insurance coverage practice is composed first and foremost of litigators, we also counsel clients on coverage questions, policy drafting and coverage-in-place or defense agreements in an effort to avoid litigation. 

Pepper's experience in insurance coverage, reinsurance, bad faith, insurance regulation and transactional practices meet the diverse needs of clients in the insurance industry. 

Bad Faith Litigation 

Increasingly, statutory and common law bad faith claims against insurers have become a common component of insurance coverage disputes. Such claims can pose significant extra-contractual exposure to an insurance company regarding its day-to-day claims handling conduct, or otherwise call into question policies and practices which apply beyond the individual policyholder. 

Over the years, Pepper Hamilton LLP has counseled insurance companies on the proper method of responding to and handling claims, as well as defended numerous carriers against claims of bad faith arising from accident and health, life, property, casualty, and reinsurance products in numerous jurisdictions. 

Pepper's ability to provide service in this particular area arises not only from knowledge of the legal and regulatory framework within which insurance carriers must conduct themselves, but also from regular involvement in the investigation, adjustment, and defense of insurance claims generally. 

For example, past and current representations of "bad faith" claims have included the representation of Aetna Casualty and Surety Company, Gerling America Insurance Company, Legion Insurance Company, Stonewall Insurance Company, The Hartford Insurance Company, various pools of underwriting facilities in connection with fronted policies for several major domestic carriers, and several primary and excess British insurance companies exposed to loss by virtue of claims asserted by Pennsylvania, New Jersey and Michigan insureds. We have also handled bad faith claims in a number of other jurisdictions. 

Our experience goes beyond simply defending bad faith claims for a purported refusal to defend, failure to properly or completely investigate the underlying loss (thereby leading to an incomplete and delayed claim review), or a refusal to settle within policy limits (although we have defended these charges in complicated and difficult factual scenarios, such as environmental claims and asbestos losses). Our defense of bad faith claims has also included more "creative" claims of bad faith, such as the defense of insurance carriers for a claimed withholding of information relating to the defectiveness of the product as part of its insurance review (thus leading to the claim of continuing injury and damage to mass tort plaintiffs), failure to cooperate with the insured, asserted conflicts of interests arising from claims arising from multiple insureds, purported bad faith due to the time taken to collect "lost policies," allegations that the insurance carrier "pressured" the insured to contribute to a settlement, and charges of bad faith arising from an antitrust conspiracy with other carriers to drive the insured from its business. 

One such "creative" claim, tried to a successful jury verdict in our client's favor, entailed a claim that the insurance carrier settled an underlying case over the insured's objections. Novel factual and legal issues related to alleged conflicts of interest arising from a retrospectively rated policy with a large loss limit (deductible) were raised by the insured in the litigation. Working cooperatively with the client, successful defense strategies were developed to rebut all allegations of bad faith, conflict of interest and breach of contract, resulting in a complete vindication of our client's position. 

Mergers and Acquisitions 

The restructuring of the insurance industry is continuing. Mergers and acquisitions, the formation of new risk financing entities, transfers of in-force business, contractions through insolvencies and reorganizations of insurance companies, and restructuring of companies are expected to transform the dynamics of the marketplace. 

Pepper is experienced in the insurance and reinsurance industry. In the area of restructuring transactions in particular, we provided legal counsel on contract, tax, regulatory and financing issues. Our capabilities in this area are further supported by our general merger and acquisition teams, which include general corporate and transactional lawyers and, as needed, lawyers concentrating in securities, tax, ERISA, labor, real estate, environmental, antitrust, intellectual property and other areas. The firm has acted as litigation counsel in a number of lawsuits following restructuring transactions. 

Pepper can support clients in all commercial transactions as a result of our involvement in takeover contexts, leveraged buyout situations, capital formation activities, private placements and non-insurance company bankruptcies. These activities have been conducted on a large and small scale, for foreign, domestic and cross-border clients. 

Insurance Regulation 

Under the McCarran-Ferguson Act, the regulation of insurance companies is controlled by each state. Along with federal legislation in select areas and recommendations by the National Association of Insurance Commissioners, the insurance departments of the 50 states supervise the formation, licensing, operations, investments and practices of all companies involved in "the doing of any insurance business" within that state, and promulgate extensive legislation, including statutes, regulations, bulletins and informal opinions, on insurance-related conduct. 

The impact of insurance regulation is complex and technical. Pepper is experienced in the legal and the practical issues, and provides advice on: 

  • applications for authorization to carry on insurance business, including securing certificates of authority
  • licensing and regulation of agents, brokers, third-party administrators, managing general agents/underwriters
  • authorized investments for insurance companies
  • regulatory aspects of insurance-related mergers, acquisitions and restructurings
  • insurance holding company act transactions, including form filings and disclosures
  • various issues relating to the presentation and adequacy of actuarial reserves
  • formation of health maintenance organizations
  • fronting arrangements
  • insurance accounting issues
  • regulation of reinsurance through credit and security regulations
  • establishing letters of credit and financial security trust funds
  • clarification of product restrictions
  • insurance company insolvency matters, including liquidations and rehabilitations (including domestic implications of U.K. Schemes of Arrangement under Section 304 of the U.S. Bankruptcy Code)
  • bulk reinsurance transfers and assumption transactions
  • rates and ratings
  • drafting commutation and buy-out agreements
  • allowable conduct in "rebating"
  • formation and operations of federal risk purchasing groups and risk retention groups
  • unfair insurance practices laws.

We have advised various insurance companies and a start-up distribution company on electronic commerce and the telemarketing of insurance in compliance with state laws and regulations. To this end, we have monitored rapidly developing laws and regulatory initiatives governing plans to market insurance and other financial products nationwide through direct marketing, or through the use of the internet. For example, we have advised on the extent to which various states require licensing for customer service representatives or underwriters, as well as the viability of providing insurance applicants with declination notices by electronic means. 


Reinsurance is a burgeoning area of concern and conflict within the insurance industry. Increasingly, technical reinsurance issues confront the domestic and international insurance markets, affecting the fundamental relationships among the parties to the reinsurance and the operation of the business. Over the years, Pepper has been called upon to counsel our insurance industry clients on the full range of reinsurance issues. We have experience in the commercial property and casualty, life, health, self-insurance and financial guarantee contexts, serving as adviser and, if necessary, as trial or arbitration counsel for our clients. The firm has represented ceding companies, reinsurers, intermediaries and underwriting managers. 

Our ability to respond to our clients' needs is further enhanced by access to the substantial resources available throughout the firm, both in size and practice area. In this era of globalization of the reinsurance industry and contraction and expansion through merger, acquisition and divestiture, Pepper's International, Corporate and Environmental Practice Groups provide useful additional support to our reinsurance attorneys, when necessary. 

Our representation in the reinsurance area has covered the following subject matters:

  • rehabilitation, insolvency and liquidation matters, including offset and proceedings before regulators
  • trust agreements and letters of credit
  • adverse loss development reinsurance
  • assumption reinsurance
  • drafting reinsurance contracts
  • reinsurance claims audits
  • interpreting pertinent clauses and endorsements (such as "follow the fortunes," "extra-contractual liability," "excess of policy limits" and "direct access clauses")
  • reinsurance intermediaries, managing general agents, contract underwriters, third-party claims agents, and their respective rights and obligations
  • claims reporting and cooperation obligations, including "notice" requirements, documentation of loss and reinsurance billing issues
  • "dropdown" issues
  • liability of reinsurers for bad faith and punitive damage awards rendered against the ceding insurer
  • reserving and actuarial issues
  • run-off operations
  • financial reinsurance and loss portfolio transfers
  • disclosure issues and the concept of "utmost good faith"
  • use of reinsurance in self-insurance, as well as in captive and fronting contexts
  • commutations
  • efforts to rescind contracts based upon such grounds of mistake, fraud, or violations of underwriting guidelines
  • cancellation of coverage
  • collection of reinsurance
  • various regulatory issues, including the adequacy of security and credit for reinsurance.

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