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Remember the “good” ol’ days when the run-of-the-mill theft involved someone physically taking something tangible? That is so 20th century. Now, thieves and fraudsters are able to use computers iStock-682285434-cards-300x200and the internet to carry out much more complex schemes. The insurance industry has attempted to keep up with the technological evolution in the coverage it provides, but insurers have also used unclear policy language and the complexity and individualized nature of today’s fraudulent schemes to avoid covering the resulting losses. A slew of courts over the past few years have decided whether crime policies—particularly those with a computer fraud coverage component—cover complex, technology-related fraudulent schemes. The Eleventh Circuit recently joined the fray and ruled that computer fraud coverage did not apply to a policyholder’s $11 million loss.

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Developers need to keep an open mind to protect themselves against construction defect claims. Insurance is a vital tool, but it should not be the only one in a developer’s risk management toolbox.iStock-645199404-apartments-300x203

Another useful tool—the ability to disclaim all liability for future construction defect claims when the property is sold to a third party and converted to condominiums—was recently upheld in South Carolina. In Long Grove at Seaside Farms, LLC et al. v Long Grove Property Owners’ Association Inc. et al., the South Carolina Supreme Court dismissed a previously accepted writ of certiorari as improvidently granted, thereby upholding the decisions of the trial and appellate courts dismissing defective construction claims brought by a condominium association against the original developer of an apartment complex.

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Insurance agreement language that precludes coverage in CGL policies for “expected or intended” injuries has been analyzed in nearly every jurisdiction, and courts have consistently held that bodilyiStock-696254566-train-300x200 injury or property damage is excluded only if the insurer can demonstrate resulting damage was expected or intended by the insured. In Certain Underwriters at Lloyd’s, London v. Connex Railroad LLC, an insurer-friendly variation of these provisions was called into question in possibly the worst texting and driving scenario imaginable. Still, a California Court of Appeal applying New York law refused to bar coverage.

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Recently the Eleventh Circuit spent a lot of ink discussing how the marketing and sale of sashimi-grade tuna is affected when myoglobin iStock-164867924-fish-300x300reacts with oxygen to produce oxymyoglobin, and with carbon monoxide to form carboxymyoglobin before oxidizing into metmyoglobin—or, in other words, how quickly raw tuna meat turns from bright red (good) to brown (not so good). In the end, the court held, it doesn’t really matter—at least as to insurance coverage for advertising injury—unless the insurance company is given proper notice. And not just notice of a claim, but notice of the specific claim for which coverage is requested.

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It is axiomatic that in order to obtain insurance coverage a policyholder must first establish that a claim falls within a policy’s insuring agreement before coverage under the policy is triggered. iStock-687501466-engineering-300x200For construction claims brought under CGL policies, that frequently means showing that the damages at issue constitute “property damage” caused by an “occurrence” (where “occurrence” is generally defined as “an accident”). While this requirement may often seem like a simple factual question, in the context of a subcontractor’s faulty workmanship, the analysis has proven more difficult. Where alleged faulty work causes damage only to the insured’s own work product, is the property damage accidental?

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iStock-623269348-ai-robotics-thumbs-down-300x175Artificial Intelligence (AI) is a hot topic in industries from manufacturing to the medical profession. Developments in the last ten years have delivered AI technology, once a fiction reserved for the movies, to private corporations and even to everyday homes. Examples include:

  • 2004 Defense Advanced Research Projects Agency (DARPA) sponsors a driverless car grand challenge. Technology developed by the participants eventually allows Google to develop a driverless automobile and modify existing transportation laws.
  • 2005 Honda’s ASIMO humanoid robot can walk as fast as a human, delivering trays to customers in a restaurant setting. The same technology is now used in military robots.
  • 2011 IBM’s Watson wins Jeopardy against top human champions. It is training to provide medical advice to doctors. It can master any domain of knowledge.
  • 2012 Google releases its Knowledge Graph, a semantic search knowledge base, likely to be the first step toward true artificial intelligence.
  • 2013 BRAIN initiative aimed at reverse engineering the human brain receives $3 billion in funding by the White House, following an earlier billion euro European initiative to accomplish the same.
  • 2014 Chatbot convinced 33% of the judges it was human and by doing so passed a restricted version of a Turing Test.

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As the adage goes, don’t make a promise you cannot keep. An insurance policy, like any other contract, involves a commitment from both sides. For third-party liability policies, an insurer typically iStock-614326426-on-the-hook-300x200commits to a broad duty to defend the policyholder against any suits alleging claims that have a potential for coverage under the insurance policy. However, when a claim arises, insurers have a financial interest in trying to get off the hook. At times, policyholders need to turn to the courts for help reeling insurers in and forcing them to follow through with their commitments.

Recently, in Hanover Insurance Company v. Paul M. Zagaris, Inc., the Ninth Circuit ruled that an insurer had to defend its insured, a real estate brokerage firm, in a proposed class action suit because there was a potential for coverage for at least one of the alleged claims. The plaintiffs alleged that the real estate brokerage firm had received undisclosed kickbacks from the sale of natural-hazard disclosure reports to its clients. Specifically, they claimed that the firm breached its fiduciary duties, deceived its clients by omission, engaged in constructive fraud, and was unjustly enriched, among other things.

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A critical step in a property insurance claim is the investigation undertaken by the insurer to gather information about the claim. Insurers generally have obligations and rights to conduct a prompt iStock-614037306-300x174investigation of claimed losses, but policyholders often do not fully understand the investigation process or coverage issues it raises. They may not review the policy requirements to understand their obligations with respect to the claims process. This post addresses insurance coverage considerations when the insurer wishes to investigate your claim for loss under a property policy.

Of course, you can’t change the unfortunate fact that you’re facing a loss, but there are certain steps that you can take before, during and after an investigation to put yourself in the best possible position for coverage under your policy.

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Regular readers of the Policyholder Pulse know that we often frame coverage issues with a lighthearted or (hopefully) humorous theme, but there’s nothing funny about the opioid crisis that iStock-900309188-opioid-crisis-300x206continues to devastate lives and communities across the United States. The extent and impact of opioid addiction are being examined and explained by experts in the field, and we aren’t trying to tackle that subject on an insurance blog. Instead, this post outlines the expanding breadth of opioid liability claims at every level of the industry, and insurance coverage considerations raised by these claims.

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In a previous blog post we discussed a New York trial court decision in which the court granted additional insured status to entities that did not contract with the named insured, but were referenceiStock-801340876-two-directions-300x200d by category in the named insured’s subcontract. But before concluding you’ve got additional insurance, there’s another opinion you should know about. Around the same time, the U.S. Court of Appeals for the Second Circuit came to the opposite conclusion holding that an Additional Insured endorsement did not cover the University of Rochester Medical Center, even though the subcontract specifically provided that the University would be an additional insured, and Harleysville Insurance Co. therefore had no obligation to defend or indemnify it in a suit filed by an injured construction worker.

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