Short Answer Portion:

Please write no more than one paragraph to address the topic in the short answer.

1. When a client seeks your advice on the defense of a civil matter, in Texas, do you have an obligation to inquire about possible insurance coverages and advise? Why or why not?
2. Please briefly describe the difference between the Duty to Defend and the Duty to Indemnify.
3. Please briefly describe how Lloyds of London worked in its inception.
4. What are the three basic axioms of construing coverage and resolving ambiguities?
5. If purchasing life insurance on another individual's life, what would give you and insurable interest?

Essay Portion:

1. Answer the following question:

Given the changes recently in legislation, new regulatory enforcement and court decisions regarding small captive insurance companies making an 831(b) tax election, how would you advise a client seeking alternative risk transfer today? Please address specifically a recommendation regarding the below fact pattern.

Client is a health services provider based in New Jersey. "HealthToYou, LLC" provides mobile testing for various health markers. Client has come to you seeking review and recommendations of how to more efficiently operate it's captives.

HealthToYou has commercial coverage from a third-party carrier. The coverage is for standard line risks including General Liability, Worker's Compensation and Commercial Auto. Total coverage on all lines is $100,000,000. Premium is $1,500,000 and deductibles range from $50,000 to $250,0000.

Client formed 4 captives over a 3 year period (2018-2021), all making an 831(b) election. In 2023, the client paid a premium of $2,000,000 to each captive for a total of $8,000,000 and the captives wrote a total of $60,000,000 in coverage for non-traditional risks such as brand and reputation damage, violation of HIPAA, employment practices liability and excess cyber. Each captive maintains one line of risk. These 831(b) captives are located in Delaware. There is a captive manager overseeing the captives. The manager offers clients the ability to participate in a risk pool to share 30% of premium and risk to other captive clients. HealthToYou's Delaware captives participate in the risk sharing arrangement. The captives cede 30% of the premium to unrelated parties and they receive 30% of premium from the same unrelated parties.

The client formed another captive in 2020 with different captive insurance manager. The captive is located in Bermuda. The coverage provided by this captive is deducible reimbursement for commercial lines. Premium has been $5,000,000/year for the last 3 years with coverage written at $15,000,000. The Bermuda captive does not participate in a third-party risk sharing arrangement nor has it made any U.S. Federal Income Tax elections. There have been no claims made or paid in this captive.

Management's main considerations are: Cost savings, regulatory compliance and putting money aside for a rainy day. Discuss the history, benefits, drawbacks, and status of the alternative risk transfer market and how it applies to these facts. How would you advise HealthToYou,LLC? What recommendations/considerations would you address with the client?

1. Answer the following question:

Question:

You are a new associate at a thriving, yet small, personal injury law firm, named Bocelli & Cleese. As the new guy you are given an opportunity to sit second chair in a new complicated personal injury case. The facts and procedural history are described below.

The case is full of challenges and problems to consider; including, low liability limits, multiple claimants, settlement demands in excess of the policy limits, the corresponding difficulties associated with collecting any jury award in excess of the policy limitations, and consideration of post judgment direct legal actions against the tortfeasors insurance carrier.

Please outline your recommended course of action, the specific causes of action, and the remedies available should you prevail.

Facts:

Your client, Mr. E. Morse, was involved in a motor vehicle accident on June 1, 2021 in Johnson County, Texas. The driver of the other vehicle, Mr. W.L. Weller, was intoxicated, over the speed limit, and not able to keep his vehicle in his traffic lane. Mr. Morse and his wife, C. Morse, and two children, A. Morse & B. Morse were in his car. All were injured. Mr. Morse and his wife both suffered broken bones and significant neck and back injuries. Both will require surgery. Each of them has incurred medical bills at this time of greater than $25,000 and those bills are growing. Surgery has been recommended for each of them. Each child incurred an ER bill of $5,000 for transport and diagnostic testing and no further bills. They each had soft tissue injuries that have resolved with rest and conservative care.

A second automobile was also struck by the at-fault driver and, unfortunately, both occupants, Mr. & Mrs. Smith, died of their injuries. The heirs of Mr. & Mrs. Smith have filed personal injury/wrongful death claims against Mr. W.L. Weller.

After forwarding your medical claim information to Mr. Weller's insurance carrier, Washington Indemnity & Liability Company, also known as "WILCO", offered to settle your clients' claims for $60,000 as follows: $25,000 each for the parents and $5,000 each for the two sons in exchange for a full and final release. At the urging of your clients you rejected the WILCO offer and countered with a $100,000 demand. The carrier rejected your demand. You filed your lawsuit on behalf of your clients, the Morses, against Mr. Weller and the matter proceeded to litigation.

Upon receipt of Mr. Weller's responses to your Request for Disclosures you learned that Mr. Weller's insurance policy was a state mandatory-minimum-limits policy with a liability limitation of 30/60/30, which was in full force and effect at the time of the loss as such... You did not know this at the time you rejected WILCO's settlement offer of $60,000. However, $60,000 was the maximum WILCO could offer your clients to settle. You relayed this information to your clients and in light of the new information Your clients have authorized you to accept Mr. Weller's insurance company's last settlement offer, $60,000.

Mr. Weller's carrier informed you that in the interim they had settled the wrongful death claims of Mr. and Mrs. Smith for $5,000 each, which left a mere $50,000 for your clients. You consulted with your clients who authorized you to accept. As such, you conveyed an acceptance of WILCO's $50,000 offer.

While reviewing the settlement documents and preparing for the "Friendly Suit" prove ups on the two minor children you came across some unacceptable language in the release that constituted an indemnity agreement so unconscionable that it would mean your client would have to pay back the settlement in the event of the discovery of any other collateral source of funds (for instance from your client's health insurance). This language was inserted into the Release document by a young lawyer representing WILCO. You protested the offensive language to WILCO, but they refused to drop the offensive language.

The matter proceeds to trial.

At trial you win big and the jury awards your clients $800,000. The judge signs a judgment based on the verdict and your clients receive a judgment for $800,000. WILCO pays its $50,000 and wishes you luck on getting the remaining $750,000 from their deadbeat policyholder, W.L. Weller.

What now? Follow the path and lay out the course of action you recommend.