Although it has become common for corporate directors and officers to face claims seeking to hold them personally liable for alleged damages resulting from actions taken in their official capacity, it wasn’t always this way. There was a time when such lawsuits were so rare that corporations were not even allowed to indemnify their directors and officers. But with the emergence and rapid growth of lawsuits against officers and directors—often fueled by a cottage industry of class action plaintiffs’ firms—corporate indemnification and Directors & Officers (D&O) liability insurance programs have become integral to a company’s ability to attract and retain strong management.
Experts are full of advice about the importance of designing and implementing a robust cyber breach response plan. They opine frequently on its key components, such as identifying the roles and responsibilities of the response team, steps for investigating and containing the breach, internal and external communications regarding the breach and the response, and applicable legal requirements. For the most part, however, their advice focuses on the information-technology aspects of the plan, with some attention given to the roles of senior management and the legal department. But few commentators offer tips on one of the most consequential components of a cyber response plan: insurance.
As outside coverage counsel for corporate policyholders, we see firsthand how corporate risk management and legal departments interact and work together—or don’t. Some risk management and legal departments are in sync. They tackle intersecting insurance and legal issues through a unified front, to the company’s benefit. But others seem to operate in silos. This can present a number of coverage pitfalls—from failing to pursue coverage in the first place to jeopardizing claims that have been made. Here are a few of the most common problems we see when risk management and legal departments are not working in harmony, and some practical tips for avoiding them.
Cannabis is now fully legal in ten states plus the District of Columbia, and medical marijuana is legal in 23 states. Despite growing acceptance among states, cannabis remains illegal federally under the Controlled Substances Act of 1970 as a Schedule 1 substance, which has made oversight and regulation of the industry decentralized and in some instances non-existent. The psychoactive effects of cannabis, coupled with limited regulation, imposes increased risk of product liability claims. To mitigate this risk, industry members should take steps to self-regulate.
Your factory is flooded and manufacturing line destroyed. A hacker breaks into your computer system and erases customer data even though you paid the ₿1,000 ransom in bitcoins. A jury just returned a $5 million verdict against your company and an employee who got into an accident while texting and driving to a client meeting. These may all be insured events, but how long can your business survive while you wait until your insurance company decides whether to pay your claim? Continue reading →
It’s a familiar story to anyone involved in insurance claims. A policyholder is sued and tenders the claim to its insurer. The insurer agrees to defend subject to a reservation of rights, but it also asserts that policy exclusions may ultimately preclude coverage. While the underlying litigation is ongoing, the insurer files suit against the policyholder seeking a declaration that it does not have a duty to indemnify if liability is established against the policyholder in that litigation.
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.
When adding new or additional layers to an insurance program, policyholders are often asked to sign a “warranty letter” providing comfort to the prospective insurer that the policyholder is not aware of impending claims. Typical warranty letters include both subjective and objective representations, indicating that the policyholder has both no actual (or subjective) knowledge of any impending claims and no reasonable (or objective) expectation that such a claim will arise. If a claim later arises, these warranties may provide a basis for full rescission of a policy or create an exclusion for claims that the policyholder knew or should have known would be filed. And when a warranty is poorly worded or overly broad, it may give rise to a morass of coverage litigation.
The Supreme Court of Texas delivered good news to policyholders insured under a “Joint Venture Provision” endorsement commonly used in the oil and gas industry. In Anadarko Petroleum Corp. v. Houston Casualty Co.—a case arising from the 2010 Deepwater Horizon disaster—the court held that insurers assumed the obligation to reimburse the full amount of a joint venture partner’s defense costs, rejecting the insurers’ argument that their obligation was reduced by the “scaling” language of a Joint Venture Provision. As a result, the court held the insurers liable to Anadarko for over $100 million in defense costs, not just the $37.5 million they had already paid.