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While our brains may feel like they are fused with the computers, smart phones, and other devices we use on a constant basis, a direct connection between these machines and our brains is still (mostly) a thing of the future. So, even as companies continue to strengthen and refine their network security systems against cybercrime, the human brain can remain a weak link for criminals to Mad professor laboratory illustrationexploit. Unfortunately for some policyholders, this time-honored tactic of targeting the human element involved with a technology may actually fall right into a gap in companies’ insurance coverage, as highlighted in the Fifth Circuit’s decision this month in Apache Corporation v. Great American Insurance Company.

 

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Global-ishInsurance is not only a risk transfer tool, but also a valuable asset. Certain coverages, however, are not purchased or pursued by multinational companies transacting business in the United States because there are nuanced differences between international and U.S. insurance programs and law. These companies, often with global offices, will be best served by having counsel experienced in such nuances conduct a diagnostic review of their insurance policies. Not only may potential coverage gaps be identified, but a company will be better able to plan ahead and negotiate more favorable coverage terms before a loss arises.

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When an insurance company pays a claim by its insured, the insurance company acquires a legal right to pursue a so-called “subrogation” claim against another party who may be responsible for the damage. The insurance company “stands in the shoes” of its insured to seek damages from whoever caused the loss. Typically, construction contracts include a “waiver of subrogation” clause that limits the right of the insurer to file a subrogation action against another participant in the construction project.

businesman facing a challenge

These waiver of subrogation clauses are good public policy and generally benefit all project participants insofar as they (1) avoid excessive finger pointing among parties who are involved in an ongoing commercial relationship (and thereby encourage immediate repairs in lieu of a lawsuit) and (2) are economically efficient because only one party needs to value and insure the risk.

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After tearing through the Caribbean, Hurricane Matthew’s path brought it north to the southeastern coast of the United States, bringing evacuations, business closures and damages to the region. In the storm’s aftermath, colleagues Tamara Bruno, Colin Kemp, Peter Gillon, Vince Morgan and Joe Jean discuss important steps to take to maximize insurance recovery following such an event.

 

 

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iStock_21656161_MEDIUM-egg-mcsomething-300x199If you believe the news, I may be lucky to make it out of the driveway alive on my morning commute tomorrow. That microwave-ready triple egg breakfast sausage sandwich I stuff into an increasingly jowly face on my way to the car? Recalled. The overpriced technology-assisted car that practically backs itself out of the driveway as I struggle to wipe away the remnants of my savory breakfast? Recalled. Each morning brings fresh product recall announcements involving everything from contaminated sunflower seeds to exploding toilets. This year contamination recalls in Food and Drug Administration (FDA) regulated industries alone rose 167% from the first quarter to the second quarter. The exponential rise of product recalls stems from a convergence of factors, including increased governmental regulation and more extensive and technologically sophisticated testing of products.

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Over the past four months, a trio of cases has introduced a policyholder-friendly breath of fresh air to Iowa insurance coverage law as Iowa state and federal courts have found that defective workmanship may constitute a covered occurrence under the plain language of CGL policies.

Black weathervane in the form of a rooster

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Since 1979, commercial general liability (CGL) insurers have relied on the New Jersey Supreme Court case of Weedo v. Stone-E-Brick, Inc. and its progeny to argue that a subcontractor’s defective work can never qualify as an “occurrence” under a standard form ISO CGL policy. This argument is contrary to both the language of standard CGL policies and the trend in recent case law, but courts in New Jersey and elsewhere have continued to cite Weedo for this proposition. With its new decision in Cypress Point Condominium Association, Inc. v. Adria Towers, LLC, the New Jersey Supreme Court has now finally relegated Weedo to its proper status as an historical footnote based on outdated policy language.

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Cypress Point involved claims for rain water damage to a condo building. When the condo association began noticing the damage, it brought claims against the developer/general contractor and several subcontractors. The association alleged that the subcontractors’ defective work on the exterior of the building allowed water leaks that damaged steel supports, sheathing and sheetrock, and insulation. When the developer’s CGL insurers refused to cover the claims, the association sued the insurers, seeking a declaration that the association’s claims against the developer were covered.

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Phishing is a criminal hacker’s favorite sport, and for good reason. It’s a tried and true way to land the big one, over and over again. Whether using a spoofed bank website and stolen email addresses to trick customers into divulging account information, sending email messages purporting to be from a senior company official to deceive employees into providing personal health records, or posing as a trusted vendor and transmitting wire transfer instructions to fraudulently divert funds, hackers are reeling in the catch and making it look easy.

Malware phishing data concept

But a well-managed company should have sophisticated safeguards in place. And if these fail, there is insurance coverage, right? The prudent policyholder buys all kinds of insurance: It has up-to-the minute “Cyber” coverage. It has Crime and Fidelity coverage with Computer Fraud riders. It has Professional Liability coverage. And of course it has regular old Commercial General Liability and Property coverage. Surely it’s covered for this type of fraud. Or is it?

While seeming to offer products that respond to the latest risks, insurers often provide limited coverage and seek to exclude the most obvious and inevitable losses. A series of recent cases highlight some of the biggest holes in the insurance safety net.

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While the fast-paced world of insurance evolves every day, some advice stays golden. Partners Peter Gillon and Alex Hardiman opined on the importance of maximizing the return on your D&O insurance for the Kevin LaCroix-run D&O Diary blog last summer, and the words in their post remain relevant. Click here to read “Maximizing the Return on Your D&O Insurance for Merger Objection Lawsuits.”

 

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Business Interruption insurance provides the policyholder with important peace of mind—it covers lost business arising from unexpected damage to the policyholder’s property. But what if the damage isn’t to the policyholder’s own property—what if the losses arise because of damage a supplier or customer suffers? When a link in your supply chain breaks, Contingent Business Interruption or “CBI” coverage can step in to replace it.Weak Link

CBI coverage, like Business Interruption coverage, is a property insurance extension that addresses lost income suffered due to an interruption of business. Instead of focusing on loss or damage suffered by the insured on its own property, however, CBI coverage addresses “contingent” losses, or losses that involve suppliers or customers. A CBI loss is a loss that results from damage to a supplier or customer that prevents the supplier from providing its goods or services to a policyholder or prevents a customer from receiving the policyholder’s goods or services. This coverage is crucial for policyholders whose business depends upon supply chains, customers or other “streams of commerce” for commercial success. Over the past few years, we’ve seen a spike in the number of CBI claims made by policyholders. During the same timeframe, however, we’ve also seen an increase in the number of coverage disputes related to CBI coverage. Although the concept is fairly straightforward, recovering for CBI losses often isn’t.

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