Pay Attention to Policy Language in a Hardening Insurance Market

Ian Ascher[1] and Jared Zola

The insurance market has proven to be a difficult environment for buyers in 2019. The long tenure of the soft insurance market cycle is changing, and is presenting challenges with pricing, capacity, and sustainability of favorable coverage terms. Coming out of difficult natural catastrophe years in 2017 and 2018, the property insurance market took a sharp turn to protect insurers’ bottom lines. While hardening of the property insurance market was expected, the broader casualty market has taken this opportunity to drive corrective action on their portfolios as well, leaving insurance buyers with little leverage.

How Insurers Are Reacting to the Market Shift

Insurers are approaching the market shift with different strategies, some focused on rate increases, while others are focused on restricting terms, or both. While individual loss experience still plays a role in renewal outcomes, there appears to be more of a portfolio-level push on rate and terms regardless of individual quality of risk factors for any given policyholder. In this environment, stricter control over capacity deployment leads to less competition, which may force the buyer into tough decisions regarding what utility insurance provides for its organization. The guarantee of comprehensive coverage at a fair price becomes harder to balance in a setting where definitively having both is less than certain. Continue reading “Pay Attention to Policy Language in a Hardening Insurance Market”

Insurers Seize on Kokesh Ruling to Disclaim Coverage for SEC Disgorgement

Justin F. Lavella and Alexander H. Berman

In April 2017, white collar and securities attorneys, as well as potential defendants, cheered the Supreme Court’s unanimous opinion in Kokesh v. SEC, which held that civil disgorge­ment, when imposed as part of a Securities and Exchange Commission (“SEC”) enforcement proceeding, is a “penalty” and therefore subject to a five-year statute of limitations.[1] At the time, Kokesh was hailed as limiting the size of future dis­gorgement awards, in some cases dramatically. However, the court’s categorization of SEC disgorgement as a “penalty” may have much wider ripple effects that could jeopardize billions of dollars in potential future insurance recover­ies. This ripple effect first manifested itself in J.P. Morgan Sec., Inc. v. Vigilant Ins. Co., where New York’s intermediate appellate court recently held that an SEC disgorgement settlement was no longer a covered “loss” under the defendant’s insurance policy, because Kokesh recategorized such disgorgements as non-covered “penalties.”[2] Continue reading “Insurers Seize on Kokesh Ruling to Disclaim Coverage for SEC Disgorgement”

Seeking Insurance Coverage for Data Breach Claims? A Recent Case Confirms that Certain D&O Policies Potentially Provide Coverage

James S. Carter

Businesses are increasingly purchasing dedicated cyber insurance policies to address their cyber and data security exposures. To date, however, many of the judicial decisions addressing insurance for cyber exposures have done so under other, more traditional, types of insurance policies such as commercial general liability (“CGL”) and commercial property policies. Some of these rulings have disappointed policyholders by concluding that such non-cyber insurance policies do not cover cyber exposures. But a recent decision by the United States Court of Appeals for the Fifth Circuit demonstrates that certain non-cyber policies potentially afford coverage for cyber exposures. In Spec’s Family Partners, Ltd. v Hanover Insurance Co., No. 17-20263, 2018 U.S. App. LEXIS 17246 (5th Cir. June 25, 2018), the court of appeals found that a contractual liability exclusion in a management liability policy did not excuse the insurer of its duty to defend its policyholder, a private company, against a claim arising out of a payment card data breach. Continue reading “Seeking Insurance Coverage for Data Breach Claims? A Recent Case Confirms that Certain D&O Policies Potentially Provide Coverage”

Federal Court Says Subpoena Is a “Claim” Triggering Insurance Coverage

Jared Zola

An issue frequently raised in coverage disputes involving claims-made liability insurance policies is determining whether certain pre-lawsuit events or disputes constitute a “claim” sufficient to trigger coverage.

Unlike occurrence-based liability policies that respond in the policy year or years during which the coverage-triggering event occurred (e.g., the years in which a person sustained injury in an asbestos bodily injury claim), a claims-made liability insurance policy is triggered upon the insured’s receipt of a claim. Upon an insured providing notice of a claim, its insurers may dispute whether the notice-triggering event constitutes a “claim” at all. Continue reading “Federal Court Says Subpoena Is a “Claim” Triggering Insurance Coverage”

Insurance Coverage for the Opioid Crisis

Amy J. Spencer

With the “opioid epidemic” at an all-time high—and the resulting news coverage and public awareness also at an all-time high—now is the time for pharmaceutical companies, pharmacists, hospitals, doctors, first responders, and employers to review their professional liability and general liability insurance policies and any other potentially applicable policies such as products liability and directors and officers (“D&O”) insurance. Continue reading “Insurance Coverage for the Opioid Crisis”

Policyholders (and the Courts) Continue to Ignore Section 1123 When Analyzing Insured v. Insured Exclusions

Justin F. Lavella and Kyle P. Brinkman

Last month the United States Court of Appeals for the Sixth Circuit issued its anticipated decision in Indian Harbor Insurance v. Zucker, affirming a 2016 decision from a federal district court in Michigan that an Insured v. Insured (“IVI”) exclusion bars coverage for a claim brought by a post-bankruptcy litigation trustee for the benefit of the insured debtors’ creditors. The district court’s Indian Harbor decision was driven largely by the mistaken conclusion that a post-bankruptcy trustee is an ordinary assignee of the debtor company—an insured—and therefore purportedly stands in the shoes of the insured debtor for purposes of the IVI exclusion. As we described at the time, that decision, however, ignores the fundamentally different nature of transfers pursuant to Bankruptcy Code Section 1123 when compared to ordinary assignments pursuant to state contract law and the fact that a post-bankruptcy trustee assumes special powers as an estate representative. Unfortunately, after appeal, this issue still remains unresolved.

Continue reading “Policyholders (and the Courts) Continue to Ignore Section 1123 When Analyzing Insured v. Insured Exclusions”

Corporate Executives Beware: You Need Insurance Protection When Serving on a Nonprofit Board

Robyn Michaelson

Michaelson, Robyn L.Many corporate executives generously serve as directors and officers of nonprofit organizations. While they are undoubtedly inundated with meetings and workshops focusing on corporate risk management at their day job, they may not consider potential liability arising from their philanthropic work. Just as a corporate director may face lawsuits, even those lacking merit, for allegedly breaching fiduciary obligations to shareholders, so, too, a nonprofit director may face similar allegations of wrongdoing for a broad range of activities including, for example, allegedly permitting the mismanagement of funds or approving an employee’s termination. Even if the director ultimately prevails after a trial on the merits, the nonprofit may not possess the financial means to indemnify her or his legal fees. Before any such issue threatens financial well-being, it is prudent for any individual joining a nonprofit organization to take the time to make sure the nonprofit has appropriate insurance coverage. So what is appropriate coverage?

Continue reading “Corporate Executives Beware: You Need Insurance Protection When Serving on a Nonprofit Board”