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A senior living provider is suing its insurance companies for undermining the company in the middle of a class action suit by reversing course on a previous decision to pay its defense claims.

Wall Township, NJ-based Springpoint Senior Living filed a lawsuit last month against National Union Fire Insurance Co. of Pittsburgh, Columbia Casualty Company of Chicago and Ironshore Indemnity of New York.

“Springpoint filed a lawsuit against several of its insurance carriers asking the court to declare its rights concerning insurance coverage and defense costs for a pending consumer fraud class action claim,” a Springpoint spokeswoman told McKnight’s Senior Living. “While Springpoint is vigorously defending itself against the class action, it is the responsibility of the carriers to pay the cost of that defense.

“Springpoint feels that it is caught in the middle of conflicting positions taken by its different insurers. We will continue to cooperate with the insurance companies to resolve these issues amicably.”

In the complaint, Springpoint alleges that despite the existence of two liability insurance policies that provide overlapping primary coverage, its defense in an almost decade-long class action suit “is being undermined” by National Union. Springpoint was sued in 2013 in a class action suit over entrance fee refunds

Springpoint alleges National Union reversed course on its 2013 agreement to cover the provider’s defense costs in the class action suit, including invoices that remain outstanding going back to November. Springpoint is seeking relief for each insurer’s coverage obligations, as well as damages for breach of contract, promissory estoppel, and breach of covenant of good faith and fair dealing / bad faith.

According to the complaint, National Union initially agreed to cover 75% of Springpoint’s defense costs in the DeSimone action. The insurer required Springpoint to use its panel counsel, Morgan Lewis & Bockius, alongside Clark Michie in the class action defense case. Columbia Casualty, also known as CNA, also accepted coverage.

In 2020, however, Springpoint alleges, National Union expressed “confusion” over coverage under the CNA policy. Springpoint stated that the two insurers entered into an agreement in 2021 in which CNA assumed responsibility for paying 75% of Morgan Lewis’ fees. Springpoint also alleges that neither insurer is paying its defense costs in the class action suit.

Springpoint’s complaint alleges that it is only responsible for paying any deductible of self-insured retention under its policies, whereas National Union, CNA and Ironshore are responsible for paying the defense and indemnity costs arising out of the class action suit. 

National Law Review contributor Hunton Andrews Kurth LLC of Richmond, VA, called Springpoint’s experience not unique and said it is “emblematic of a growing trend among insurers taking drastic measures to avoid coverage” in response to a looming recession and tightening economic conditions.

“Springpoint is a prime example of how policyholders can become collateral damage” as insurers heighten scrutiny of claims and “look for new ways to avoid coverage for existing claims,” according to the National Law Review contributor, which recommended that policyholders be proactive in submitting claims and communicating with insurers about coverage while “being prepared to fight back.”

The law firm recommended that companies use experienced coverage counsel to help maximize available coverage before the issuance of a policy, and to rely on that counsel as a safety net when insurers do not honor their contractual obligations after a loss.