As cybercrimes and data breaches continue to cause significant damage to companies of all types, policyholders are looking to their various insurance policies for coverage to help weather the storm and recoup losses. A recent decision by the U.S. Court of Appeals for the Fifth Circuit highlights the need for companies to review all of their policies for potential cyber-related coverage, including their CGL policies.
A feature of most corporate liability insurance programs is the tower system of coverage: a primary policy with several overlying excess policies stacked atop one another collectively providing coverage up to a desired (or available) limit of liability. Depending on the size and liability exposures of a policyholder, a tower can consist of dozens of policies providing limits totaling hundreds of millions of dollars. Adding to this complexity, excess policies often share layers of coverage in quota share arrangements, sometimes subscribing to the same policy but more often issuing separate policies for a stated percentage of the quota share whole. To avoid as much as possible an impenetrable web of conflicting coverage terms, excess policies often “follow form” to the underlying coverage (usually to the primary policy) providing the insurer certainty and providing the policyholder a consistent tower of coverage. It is not always possible, though, to obtain clarity and certainty in tower placements. Insurance companies issuing excess coverage may not wish to agree to all the terms included in the underlying policies, and so may offer additional or differing terms, creating inconsistencies in an otherwise monolithic tower. For example, a primary insurer may refuse to cover punitive damages whereas an excess insurer may agree to do so, or vice versa.
For both good and ill, the COVID-19 pandemic has altered every facet of personal and professional life. For example, many employees have enjoyed unprecedented freedom to work remotely. However, with vaccines becoming more readily available, the time is soon approaching when people will return to their offices and places of work. With this return comes the potential for workplace-related disputes and, in their aftermath, claims for insurance coverage for the actions of employees, such as sexual harassment.
The Biden administration has hit the ground running with executive orders, regulatory and legislative priorities, and cabinet-level and other top posts being announced on a daily basis. Our public policy colleagues have been closely tracking many of the policy priorities of the new administration and highlighting important regulatory and legislative developments that businesses can expect coming down the pipeline.
As coverage counsel, we witness firsthand the precarious positions policyholders are often left in due to the actions (or inactions) of their insurance carriers. A prime example of such a catch-22 scenario is when an insurer refuses to consent to a settlement offer while defending under a reservation of rights.
Times of crisis can bring out the best in people. Unfortunately, times like this can also be an opportunity for exploitation of inexpensive, and potentially forced, labor. As America reopens its economy, it is likely that we will begin to see a surge in many industries. The resulting demand for labor, coupled with unprecedented unemployment and related desperation not only in America, but worldwide, could lead unscrupulous individuals and companies to exploit American and foreign workers. We saw this with previous disasters, such as Hurricane Katrina, where foreign laborers were exploited in the rebuilding process with false promises of citizenship. Now, to be clear, exploitation occurs even during times of economic prosperity; however, it can be even more pronounced and egregious when people must deal with uncertainties and hardships never before experienced in their lifetimes.
Must an insurer consider the possibility that putative class members (i.e., potential class members not named in the complaint) other than the proposed class representatives (i.e., the plaintiffs named in the complaint to represent the proposed class) have claims within the proscribed policy period in determining whether its duty to defend has been triggered? Many insurers answer “no,” arguing putative class members’ claims—many of which would otherwise be barred by the applicable statute of limitations—are too speculative to trigger coverage. But courts across the country have disagreed, repeatedly answering the question in the affirmative. Last year, the Northern District of Indiana was the latest court to decide this issue in favor of policyholders.
In recent years, Wisconsin generally has been a pro-policyholder jurisdiction when it comes to long-tail environmental coverage cases. That trend continues with a decision by a Wisconsin appellate court in a case involving coverage for environmental cleanup costs at a former manufactured gas plant site. In Superior Water, Light & Power Co. v. Certain Underwriters at Lloyd’s, London Subscribing to Policy Nos. K22700, CX2900, and CX2901, the court reversed a lower court and held that there may be coverage under historic policies if there was damage to groundwater during the policy period, notwithstanding that site operations had ceased years earlier. This is an important decision, as the same historic London Market “occurrence” definition was used in many policies issued to other policyholders by London Market Insurers during the same time frame. (A description of some of the unique aspects of the London insurance market can be found here.)
A little under two years ago, we wrote about the fatal Oxford comma—you know, the one that comes before “and” in a list—and the impact of its omission on a court’s interpretation of a Maine employment statute. The court effectively gave a $10 million lesson in grammar and ambiguity, but its holding was not revolutionary to a coverage attorney.
The world of patent defense insurance is evolving. What once was governed by a routine part of the “advertising liability” section of the Commercial General Liability policy is now the focus of specialized insurance products, the contours of which are still being defined.