Since 2008, Minnesota has had a bad-faith statute that penalizes an insurance company for its unreasonable denial of a first-party insurance claim. But it was only earlier this month that a Minnesota appellate court interpreted the statute to require insurance companies to conduct a reasonable investigation and fairly evaluate its results to establish a reasonable basis for denying the claim. In so doing, the court rejected the interpretation offered by the insurance company: that the policyholder must prove there are no facts or evidence upon which the insurance company could rely to deny coverage. That interpretation would have allowed insurers to rely on post hoc justifications for denying coverage. The court’s rejection of that argument is an important development in bad-faith law that will likely affect both suits brought in Minnesota and those in other jurisdictions where courts might look to this decision for guidance in connection with many types of insurance claims. Continue reading →
Insurers have recently argued that environmental property damage claims for “closure” costs arising out of historic pollution are not covered, because the claimed damages are just “ordinary costs of doing business.” Policyholders should strongly resist denials based on this argument, which is unsupported custom and practice in the insurance industry and contradicts the terms of standard-form third-party liability policies, applicable environmental laws, and insurance law in nearly all jurisdictions.
Recently, the Board of Governors of the Federal Reserve System has indicated it may move forward with enhanced cybersecurity standards for large financial institutions and the third-party vendors that serve them. Over on Pillsbury’s SourcingSpeak blog, colleagues Andrew L. Caplan, Meighan E. O’Reardon and Curtis A. Simpson examine just what those standards might be in “The Fed May Increase Cybersecurity Standards for Large Financial Institutions and their Service Providers.”
As coverage counsel, we see the situation arise time and again: facing down substantial potential liability in a pending lawsuit, a policyholder engages in good-faith settlement discussions with the plaintiff. After animated negotiations between the parties, the plaintiff finally makes a reasonable offer, only for the policyholder’s insurance carrier to throw up a roadblock by refusing to fund or consent to the settlement. But policyholders need not always resign themselves to continuing costly and time-consuming litigation—a “covenant not to execute” may be the switch to put the settlement back on track.
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.