As the cliché saying goes: “When it comes to love, never settle for less than you deserve.” But when it comes to insurance coverage, sometimes settling for less than the full limits of a policy is an effective compromise that saves time and avoids costly litigation. However, if losses may reach excess policies, then policyholders should take a second look before signing on the dotted line. Excess liability policies often include a limitation requiring the “exhaustion” of underlying policy limits before excess coverage is triggered. If the policyholder settles with an underlying insurer for less than the underlying policy limits, excess insurers may dispute whether the settlement qualifies as “exhaustion.”
Every single industry or business in this day and age has either been the victim of a cyber attack or is concerned they will be next. A few examples from the last couple of months show how widespread the problem is. In June, a global ransomeware attack quickly spread across 64 countries, impacting organizations from law firms, banks and governments to food producers and hospitals. The attackers demanded $300 in Bitcoin—approximately $977,000 U.S. dollars in total—from each victim to unlock their data. At the annual DefCon computer security conference in late July, hackers took less than 90 minutes to hack voter-ballot machines and at least one hacker even broke into the system wirelessly, suggesting that U.S. computer-ballot boxes may be susceptible to attack.
The costs and penalties associated with a cyber attack or data breach should not be underestimated. For example, NPR recently calculated the average cost of a health care breach at more than $2.2 million, “not to mention the reputation damage.” And the FCC recently ordered AT&T to pay $25 million in connection with the exposure of more than 250,000 U.S. customers’ information.
Cyber insurance continues to be one of the hottest topics in the insurance industry. In the last several years it has evolved from a little-known specialty product to a standard purchase for some corporate risk departments. By now, most companies generally are aware that cyber attacks present substantial risks. Many unfortunately have first-hand experience as victims of an attack. But many companies still do not necessarily view cyber insurance as a “must-have” type of insurance, like general liability or property insurance. Some companies may believe their potential cyber exposure is minimal or simply think that cyber coverage is cost prohibitive. A recent D.C. Circuit decision is a sobering reminder that cyber insurance should at least be considered in connection with a company’s risk management plan, and is probably a “must-have” for companies that maintain records containing a substantial amount of personal information.
It’s now accepted wisdom that virtually all public company mergers and acquisitions will be challenged with at least one lawsuit—over 95% of them are. A less well-publicized form of challenge—and one that is both fascinating and perplexing for those interested in securities litigation—is the unique creature of Delaware law known as the appraisal proceeding. Under Delaware General Corporation Law §262, shareholders dissenting from a merger on grounds that the share price they’ll receive is inadequate “shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder’s shares of stock.” If the court finds that the deal price is lower than fair market value, the acquiring corporation must pay the difference to the dissenting shareholders, plus interest. The court may also award their attorneys’ and experts’ fees, which can be significant. This process has created a cottage industry of “appraisal arbitrage,” in which hedge funds purchase shares in hopes of securing a higher price for those shares through appraisal. Fortunately, D&O insurance might be available to cover the acquired company’s defense and other costs.
The startup guys in the hit television series Silicon Valley might be surprised to learn that the California legislature has expanded the scope of mandatory Workers’ Comp coverage to include their corporate officers, directors and working partners. The new law, effective January 1, 2017, sweeps in a broad range of individuals, unless they file a written opt-out. These changes to the California Labor Code are creating confusion for some businesses regarding which employees must now be included on workers’ comp insurance coverage. The consequences of noncompliance can be severe, and businesses would be well-advised to ensure that they have secured the necessary additional coverage or obtained the necessary opt-outs from affected officers, directors, and working partners.
Fashion is sexy; insurance is not. So it’s easy to think of the two separately. But there are many points of intersection. Some of those intersections are not industry-specific: like other industries, fashion—design houses, retailers, textile manufacturers, modeling agencies—carries property, D&O, cyber, and many other lines of insurance. But unique aspects of the fashion world, and recent litigation trends affecting it, underscore the importance for the fashion industry to understand insurance in order to maximize successful recovery of insurance assets. Here, we comment briefly on three areas: IP, employment, and antitrust.
The news has been rife of late with announcements of intended mergers, including Amazon and Whole Foods, Sprint and Comcast, and the National Enquirer and Time Inc., to name a few. Although such deals are nothing new, the use of representations and warranties insurance (R&W insurance) is increasingly becoming a key component in the decision-making process for buyers and sellers alike. R&W insurance provides coverage for breach of representations or warranties contained in deal documents in addition to, or as a replacement for, indemnity provisions. R&W policies allow buyers and sellers to shift enough of the risk to third-party insurers to provide the certainty necessary to close the deal.
In a typical transaction, the seller agrees to indemnify the buyer for losses resulting from breaches of reps and warranties, usually subject to a cap. The seller will often commit to placing an agreed upon amount in escrow to secure its indemnification obligation. However, tying up funds in escrow can sometimes present a significant obstacle to closing the deal.
A great deal of premium exchanges hands to buy the Difference in Condition (DIC) or “drop-down” component of excess Side A DIC coverage. Yet policyholders, brokers, and to a large extent, D&O liability carriers have surprisingly little understanding of just how that standard coverage feature is triggered—or how it works in practice. Recent experience with the drop-down provision suggests that it can be a highly valuable tool to help resolve disputes in which one or more carriers is refusing to meet its coverage obligations. But triggering the coverage is fraught with difficulties.
If the White Rabbit in Alice in Wonderland bought insurance and suffered a loss he almost certainly would be an unhappy customer. Why? Recall his famous opening line in the Disney version of the story: “I’m late, I’m late for / A very important date. / No time to say hello, good-bye, / I’m late, I’m late, I’m late.” In the world of insurance claims—often compared to Wonderland—being late is an increasingly intolerable trait. Indeed, even the diligent may find themselves upside down and out of luck.
Policyholders today usually are aware that insurance policies contain some form of notice provision. Nonetheless, the many different forms of timing provisions and the varying requirements the law places upon them can be bewildering and can lead to unexpected and unsatisfactory results.
We are pleased to share with our readers the recent awards and accolades Pillsbury’s Insurance Recovery & Advisory group has earned:
The practice was ranked in Washington, DC for Insurance: Policyholder, and we had several individual rankings, including:
Insurance: Policyholder; Washington, DC:
- Peter Gillon
- David F. Klein
- Mark J. Plumer
Insurance: Dispute Resolution: Policyholder; Nationwide:
- Mark J. Plumer
Insurance: Dispute Resolution: Policyholder; New York:
- Joseph Jean
- Tamara Bruno
- Vincent E. Morgan (Band 1)