As the old adage goes, “the devil is in the details.” Insurance policy terms do not always apply in ways that policyholders expect. For this reason, it is imperative to understand how coverages, definitions and exclusions work together to avoid surprise gaps in coverage. The Fifth Circuit found a coverage gap in a recent case holding that settlement contributions from co-defendants met an excess policy’s broad definition of “Other Insurance,” preventing the policyholder from securing coverage for a significant part of its losses.
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 commits 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.
America is facing a reckoning. Many brave individuals have stepped forward over the last several months to speak truth about sexual harassment and assault in workplaces, in entire industries, and even in Congress. For a very long time, companies dealt with sexual assault and harassment allegations quietly and in backrooms, and these allegations often were not taken seriously. However, thanks to the turning tide, more companies are reexamining their internal policies, encouraging change in corporate culture, and addressing sexual assault, harassment, and discrimination claims more directly. As part of this effort, companies should also look at their corporate insurance programs to confirm insurance is in place should any such claim arise.
Only about 41 percent of companies with more than 1,000 workers report having some kind of insurance plan to cover sexual harassment and discrimination, and only about 33 percent of companies with at least 500 employees carry any insurance coverage for claims resulting from sexual harassment or assault. The numbers are even starker for startup companies, with only three percent of companies with fewer than 50 employees carrying such coverage. Therefore, while more and more companies are instituting anti-sexual harassment and anti-discrimination policies, many companies remain ill-prepared to handle the inevitable challenges that await individuals, executives, and companies alike, as a result of this watershed moment in American culture.
In two posts earlier this year—South Carolina May No Longer Hold Insurers’ Reservations and The Insurer’s Mixed-Coverage Burden—we told you about an important decision issued by the South Carolina Supreme Court in Harleysville Group Insurance v. Heritage Communities, Inc. Those posts were written shortly after the court issued its original opinion on January 11, 2017. But on July 26, 2017, the court issued a new opinion replacing the original. So what has changed? Not much … and that’s a good thing for policyholders.
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.”
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.
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.
We put lights on the front of trains so we can see them approaching in a tunnel. And we buy insurance for the accidents that occur despite such precautions. General contractors try to manage their project risks by taking precautions to avoid accidents, but they also require subcontractors to name them as “additional insureds” on their general liability or project-specific insurance should an accident happen. Suppose you’ve done that. An accident follows: Your subcontractor injures a person on the project site as a result of your own workers’ failure to warn. You’re covered, right? Better slow down.
Barely removed from the Super Bowl, football fans have begun their long hibernation in anticipation of next season. But the Patriots’ incredible comeback reminds me that it coincided with the tenth anniversary of one of the great NFL coach rants, courtesy of the late Dennis Green of the Arizona Cardinals. Coach Green was interviewed after his team blew a 20-0 halftime lead to my beloved Chicago Bears. Using some other choice words, Green said about the comeback kids: “the Bears are who we thought they were!”
So what does this have to do with insurance? Well, unlike Coach Green, not all policyholders can say that their insurance policies are exactly what they thought they were. A recent Fifth Circuit case, Richard v. Dolphin Drilling Ltd., is such a case. There, the policy exclusions were so broadly construed that 99 percent of the insured’s operations were excluded from coverage.
Say you want to make a reservation for a nice dinner. Do you call the restaurant and simply say you plan to come sometime in the next two weeks? Of course not. If you want your reservation to do any good, you give the restaurant a date, time, and number of people. So why should insurers be able to issue reservations of rights where they quote half the policy and say they may deny coverage at some time, based on some unspecified provision? The South Carolina Supreme Court was presented with that question and decided that insurers need to provide greater specificity or risk losing their reservations completely.