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A critical step in a property insurance claim is the investigation undertaken by the insurer to gather information about the claim. Insurers generally have obligations and rights to conduct a prompt iStock-614037306-300x174investigation of claimed losses, but policyholders often do not fully understand the investigation process or coverage issues it raises. They may not review the policy requirements to understand their obligations with respect to the claims process. This post addresses insurance coverage considerations when the insurer wishes to investigate your claim for loss under a property policy.

Of course, you can’t change the unfortunate fact that you’re facing a loss, but there are certain steps that you can take before, during and after an investigation to put yourself in the best possible position for coverage under your policy.

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Regular readers of the Policyholder Pulse know that we often frame coverage issues with a lighthearted or (hopefully) humorous theme, but there’s nothing funny about the opioid crisis that iStock-900309188-opioid-crisis-300x206continues to devastate lives and communities across the United States. The extent and impact of opioid addiction are being examined and explained by experts in the field, and we aren’t trying to tackle that subject on an insurance blog. Instead, this post outlines the expanding breadth of opioid liability claims at every level of the industry, and insurance coverage considerations raised by these claims.

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In a previous blog post we discussed a New York trial court decision in which the court granted additional insured status to entities that did not contract with the named insured, but were referenceiStock-801340876-two-directions-300x200d by category in the named insured’s subcontract. But before concluding you’ve got additional insurance, there’s another opinion you should know about. Around the same time, the U.S. Court of Appeals for the Second Circuit came to the opposite conclusion holding that an Additional Insured endorsement did not cover the University of Rochester Medical Center, even though the subcontract specifically provided that the University would be an additional insured, and Harleysville Insurance Co. therefore had no obligation to defend or indemnify it in a suit filed by an injured construction worker.

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As James Taylor might say, I’ve seen fire and I’ve seen rain, but will my insurance cover the damage? California has certainly seen plenty of fire and rain. In the aftermath of the state’s most recent iStock-175506009-mud-slide-300x200devastating events, damages are estimated to top $5 billion. As Californians file insurance claims to cover their losses, coverage for flooding and mudslide damage has come into focus.

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Most states apply the rule of contra proferentem, resolving ambiguous policy language against the insurer and in favor of coverage. Insurers, after all, have control over their policy language and it isiStock-922518158-desert-lost-300x200 their responsibility to ensure the language is clear. Some states require the use of extrinsic evidence before resolving ambiguous language in favor of the policyholder, and many consider the reasonable expectations of the parties in interpreting policy language.

Arizona courts have applied a variant of contra proferentem. They first view the language from the standpoint of the average layman untrained in insurance. If the language can be interpreted in more than one way, courts will attempt to determine its meaning by examining (1) the language of the provision, (2) the purpose of the transaction, and (3) public policy considerations. If after that analysis the provision language is still ambiguous, the courts will construe the language in favor of coverage.

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Living a life in 0.1 hour increments! Most law firm lawyers begrudgingly accept the necessity of meticulously counting their time, and most in-house lawyers are relieved when they no longer have toiStock-667055484-225x300 think about their days six minutes at a time. But as more in-house legal departments take on their company’s own defense, they are well advised to have time-keeping programs and procedures in place to recover the maximum amount from the insurance companies that have accepted a duty to defend or agreed to indemnify the company for defense costs.

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The stopwatch is running. Companies are scrambling to figure out how the EU’s General Data Protection Regulation (GDPR)—due to go into effect on May 25, 2018—will affect how they do business.iStock-638619558-300x200 Uncertainty and speculation abound; no one knows exactly how the law will be enforced, particularly with respect to companies domiciled outside the EU, with no EU footprint, who process and hold the personal data of EU residents. But while publications are awash with advice regarding compliance, few tackle the question whether your business is protected against loss in the event of a data breach or other unintentional failure to comply. We strongly suggest that your due diligence include a review of your insurance coverage for GDPR non-compliance, especially for fines, penalties and lawsuits (individual or class action). Qualified coverage counsel should assist in the review, but key areas of focus include:

Coverage for Costs of Compliance

Many costs that companies will incur to comply with GDPR simply will not be covered by any insurance. Insurance is designed to respond to fortuitous loss or liability, not ordinary costs of doing business. Thus, for example, coverage likely is unavailable for expenses to adopt and implement data security measures, maintain required records, respond to individuals’ requests to access or delete their data, or hire a Data Protection Officer.

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Sometimes you just can’t win.

Under the law of most states, the doctrine of rescission provides that when a policyholder gives a materially misleading answer on an application for insurance, the court may hold it void ab initio,iStock-867667916-yes-no-recission-300x200 meaning the policy is unenforceable from the outset, as if there had never been any coverage. But in Western World Insurance Co. v. Professional Collection Consultants, a split panel of the U.S. Court of Appeals for the Ninth Circuit put a new twist on the doctrine. It rescinded a D&O policy when the policyholder gave an answer that the panel majority considered misleading—even though it was factually the truth.

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Any construction professional working in Florida likely is familiar with the state’s notice and opportunity to repair statute (“chapter 558”) that creates a process for trying to resolve construction defect claims without litigation. As the first step in this mandatory process, a property owner must serve a chapter 558 notice on the construction professional, which notice describes the alleged defects and damages. Construction-image-300x200Many construction professionals submit chapter 558 notices to their general liability insurers and request a defense. But it has always been an open question whether the chapter 558 process is a “suit” triggering an insurer’s duty to defend—until now. In Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Company, the Florida Supreme Court decided that the chapter 558 process is a “suit” but left open the possibility that the process is only a “suit” when an insurer says it is. In a per curiam opinion in the original federal case, the U.S. Court of Appeals for the Eleventh Circuit relied on the Florida Supreme Court’s opinion to vacate the district court decision holding that the chapter 558 process is not a “suit” and remanded the case for further proceedings.

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iStock-612401378-gavel-money-300x206Returning to the work routine after the winter holidays can certainly be a drag—but some new case law from the past year should put policyholders in higher spirits as 2018 begins. In two decisions with the potential for broad impact, courts expanded the ability of policyholders to recover attorney’s fees from actions against their insurers and to obtain independent counsel in cases where the insurer accepts the defense under a reservation of rights.

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