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GettyImages-874461172-300x200Rep and Warranty Insurance (RWI) generally provides coverage for financial losses resulting from breaches of representations and warranties made by target companies or sellers in company purchase agreements. Like all insurance policies, RWI policies have exclusions. However, those exclusions, like RWI insurance, are highly specialized.

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GettyImages-173203881-gavel-300x200Last month, the U.S. Court of Appeals for the Ninth Circuit awarded Pillsbury client Northrop Grumman a significant appellate victory, reversing an adverse decision from the U.S. District Court for the Central District of California on a question of first impression within the circuit. The court’s decision in AXIS Reinsurance Company v. Northrop Grumman Corporation not only restores Northrop Grumman’s access to millions of dollars in insurance coverage; it provides stability and predictability in insurance law by rejecting an excess insurer’s assertion of wide-ranging authority to “second-guess” coverage decisions made by underlying insurers.

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GettyImages-1190580076-wildfire-300x200One word that aptly describes the devastation that is 2020 is “relentless.” The COVID-19 pandemic has caused both personal and economic suffering throughout the world for over six months. Against the backdrop of the already devastating effects of COVID-19, several regions in the United States have recently experienced powerful storms and historically large wildfires. The wildfires in the western United States and Canada have been especially catastrophic this year—burning millions of acres, forcing evacuations, damaging air quality, and creating blankets of smoke extending over much of the country. The fires have destroyed homes and businesses and will lead to hundreds or thousands of insurance claims under homeowners, commercial property, and business interruption policies.

What happens under First Party Property/Business Interruption insurance when more than one arguably covered cause of loss impacts a business at the same time?

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GettyImages-1150199388-movie-scaled-e1601649667239-300x226His daughter missing and a secret government program uncovered

Ben Affleck’s detective thriller Hypnotic was next in line to be on the actor’s list of blockbuster films. That is, until the COVID-19 pandemic halted the film while it was still in pre-production. To insure against such business interruption risks and delay, Hypnotic’s production company, Hoosegow (Hypnotic) Productions Inc., had purchased a Film Producer’s policy from Chubb National Insurance Company.

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GettyImages-1251456135-covid-justice-e1600885125952-300x201We have been carefully monitoring the litigation filed across the country, where businesses are seeking coverage for the business interruption losses arising from the government closure orders issued to address COVID-19. Some of the Closure Orders expressly refer to property damage, but it is important to actually plead facts that address the language in the relevant insurance policy and the insured losses sustained. In all the trial court decisions we have reviewed so far, the policies generally cover property coverage and related business interruption where there has been a “direct physical loss or damage” to the insured premises. Many also include separate civil authority coverage for business interruption losses sustained if the premises are ordered shut or partially shut down due to properties within a defined radius of the insured premises suffering from “covered causes of loss”—again, generally physical loss or damage. Some of the policies also include virus exclusions, but early motions to dismiss have focused on the question of whether COVID-19 has caused physical loss or damage to the premises insured.

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GettyImages-1214025398-coronavirus-300x200Businesses buy property insurance to protect their bottom line in the event that something bad results in lower sales or increased costs. Insurance companies seek to improve their bottom line by increasing sales and reducing their largest cost item, claim payments.

In their effort to improve sales, we see insurance companies rely on spokespeople. For example, Farmers Insurance Company has long engaged the talented actor J.K. Simmons to help sell insurance. His spots involve humorous and unexpected accidents that Farmers says it covered. For example, “Coupe Soup” shows a wave inundating a beachside SUV, while “Billy Goat Ruffians” depicts a Bighorn sheep crashing headlong into its reflection on the side of a pickup. Another spot depicts Mr. Simmons warning that the more you learn about coverage, the more you might find hiding in your coverage.

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With hundreds of cases now pending nationwide involving insurance coverage claims for business interruptions stemming from the COVID-19 pandemic, a federal panel has been considering the prospect of consolidating the litigation into one multidistrict litigation (MDL) to promote their efficient resolution. On August 12, 2020, the panel issued a decision ruling out a single nationwide MDL, but leaving open the possibility of smaller, insurer-specific MDLs.

In “COVID-19 Business Interruption Litigation May Be Consolidated for a Select Few,” Sandra Kaczmarczyk and David F. Klein examine this decision and its implications more closely.

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As the COVID-19 public health crisis continues to surge globally, insurers have closed ranks behind the position that commercial property policies are “not designed” to cover pandemic-related losses, including business interruption. But the various justifications they advance for this assertion often collapse under scrutiny of the relevant policy language. Insurers have taken an early stand on the threshold issue of whether the actual or threatened presence of coronavirus and/or COVID-19 can even trigger coverage as a matter of law, telling both their insureds and the courts that the virus’s presence does not constitute “physical loss of or damage to property,” the event typically required for property policies to respond.

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Back-to-office-costs-300x200As businesses around the world continue to assess when and how to reopen their offices, the marketplace has become saturated with innovative “back to office” products and services. Whether a business chooses to invest in the latest body temperature scanner (such as Kogniz, a thermal security platform that uses AI to track fevers from a distance), room occupancy monitor (such as Density, which measures the depth and body patterns of people walking through doors to ensure social distancing is enforced), or UV light sanitizing stations and self-sanitizing keyboards (such as the Cubby and Defender), the decision may be influenced, in part, by the availability of insurance coverage for the additional investment. At a more basic level, businesses may provide workers with personal protective equipment (PPE), such as masks, gloves and hand sanitizer, or make changes to their workspaces such as social distancing signage.

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GettyImages-470318916-liu-disgorgement-300x200Late in June, the U.S. Supreme Court issued a decision in Liu v. SEC, a closely watched case in which the Court in an 8-1 opinion curtailed the authority of the Securities and Exchange Commission (SEC) to seek disgorgement of profits from private parties in judicial enforcement proceedings. The Court articulated restrictions on the SEC’s disgorgement power, including (1) limiting disgorgement amounts to the net profits from wrongdoing, (2) limiting the SEC’s ability to seek disgorgement of profits on a joint and several basis, and (3) directing the SEC to return disgorged monies to aggrieved investors rather than depositing them in the U.S. Treasury. Although it does not address insurance issues directly, the Court’s analysis of the disgorgement remedy is bound to revive discussion of the issue of insurability of losses suffered as a result of settlements or judgments characterized as disgorgement.

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