Policyholders Should Prepare Now to Demand Coverage for New York Adult Survivors Act Claims (Part 2)

Natasha Romagnoli, Steven J. RomanAnna K. Milunas, and Amit Roitman ●

New York’s Child Victims Act (“CVA”), which opened a one-year revival window extending the statute of limitations for claims of childhood sexual abuse, had a substantial impact on the state’s businesses and other institutions. The impact of New York’s Adult Survivors Act (“ASA”), signed into law this summer, will be even greater.

In Part 1 of this two-part series, we covered the implications of the ASA, preparing for ASA claims, and insurance coverage for sexual abuse claims.

This post (Part 2) gives practical guidance on how to prepare for and mitigate your risk under the ASA.

Locating Coverage Years—or Decades—After the Fact

Locating old insurance policy documents can be difficult, time consuming, and sometimes ultimately fruitless. Like some of the most famous texts of antiquity, we can today only catch glimpses of them in fragments or passages quoted and requoted in other texts down the centuries. The analogy serves as a reminder that the absence of coverage documents from the period in question does not signify an absence of coverage.

In sexual abuse cases, the state of New York encourages a generous interpretation of evidence of past insurance coverage, no matter how scant. In the courts, defendants can use secondary evidence such as policy renewal documents, supplementary policy documents from the period, letters and meeting minutes, and even certificates of insurance to establish the coverage in place at the time of the abuse. During the CVA revival window, the state’s Department of Financial Services asked insurers to go above and beyond and “act in good faith” in determining historical coverage, “so that victims will be compensated.”

Whether the same spirit will be brought to bear on ASA cases remains to be seen. While New York has been clear in its commitment to restorative justice for sexual abuse survivors, having the actual documents in hand allows targeted entities to develop a detailed defense strategy well in advance of the anticipated trial. Businesses and other organizations that believe they could be named as defendants under the ASA should begin the work of locating old policies now.

Continue reading “Policyholders Should Prepare Now to Demand Coverage for New York Adult Survivors Act Claims (Part 2)”

Policyholders Should Prepare Now to Demand Coverage for New York Adult Survivors Act Claims (Part 1)

Natasha Romagnoli, Steven J. RomanAnna K. Milunas, and Amit Roitman ●

New York’s Child Victims Act (“CVA”), which opened a one-year revival window extending the statute of limitations for claims of childhood sexual abuse, had a substantial impact on the state’s businesses and other institutions. The impact of New York’s Adult Survivors Act (“ASA”), signed into law this summer, will be even greater.

During the CVA’s revival window, survivors filed almost 11,000 lawsuits against schools, camps, healthcare providers, religious organizations, and other institutions regularly serving children. Not all of these entities had insurance coverage for sexual abuse claims, and several ended up in bankruptcy as a consequence. The influx of cases also affected state and federal courts, adding to the backlog caused by pandemic shutdowns and precautions. The CVA’s window closed in August 2021, but a year later very few CVA cases have made it to trial. It could be years before the majority of CVA cases are resolved.

The ASA’s impact on businesses, organizations, and courts is likely to dwarf the CVA’s. The ASA opens a one-year window on November 24 of this year, allowing sexual abuse survivors who were 18 years old or older when the abuse took place to file claims against their abusers, even if the statute of limitations is long expired. Like the CVA, the ASA allows claimants to name vicarious liability defendants as well as individual perpetrators. This means any organization involved in creating the conditions for the abuse is susceptible to ASA lawsuits.[i] Because so many more organizations serve, employ, and interact with adults than with children, the ASA’s reach—and the number of claimants involved—will be exponentially longer than the CVA’s.

Continue readingPolicyholders Should Prepare Now to Demand Coverage for New York Adult Survivors Act Claims (Part 1)

Business Insurance: Perspectives: ‘Causation’ Key in Hurricane Ian Coverage Disputes

Business Insurance, September 29, 2022

Jared Zola and Kyle P. Brinkman ●

Hurricane Ian and its aftermath are wreaking havoc in the Caribbean and Florida. While the situation is developing rapidly, Ian has moved through Florida after initially making U.S. landfall as one of southwest Florida’s most intense hurricanes in history. It produced catastrophic storm surge exceeding 10 feet in certain locations, destructive winds packing maximum sustained winds of more than 140 mph and relentless rainfall.

The economic impact of the storm will be felt by businesses and individuals across Florida and the southeastern United States for some time. Many businesses have and will continue to suffer direct damage to property and lose income due to the resulting interruption of their operations, but many other businesses are also likely to lose substantial income due to evacuation orders, disruption of utility service and disruption of the operations of key suppliers or customers. Florida is home to many businesses in the real estate, retail, hospitality, senior living, distribution and entertainment sectors that may face significant exposures to their operations.

Businesses should examine their insurance policies closely and not indiscriminately accept coverage denials premised on flood exclusions, or other excluded perils.

Read more on our website.

The War Exclusion and State-Sponsored Cyberattacks: The Battle Is Won but Is the War Over?

James S. Carter

Sovereign nation states have been behind (or suspected of being behind) some of the worst cyberattacks. When a cyberattack has state involvement, the inevitable question is whether it constitutes an act of war. The answer can have a profound impact on insurance coverage because virtually every insurance policy has a war exclusion. In a case of first impression, a New Jersey trial court recently addressed whether a war exclusion applied to losses arising from the NotPetya cyberattack in 2017.[1]

The United States and several other countries contended that Russia was responsible for launching the NotPetya attack to destabilize Ukraine. NotPetya quickly spread beyond its intended targets in Ukraine, causing collateral damage to millions of computers worldwide. Among the many impacted organizations was the pharmaceutical company, Merck & Co. Inc., which suffered damage to 40,000 of its computers, costing it more than $1.4 billion.

Continue reading “The War Exclusion and State-Sponsored Cyberattacks: The Battle Is Won but Is the War Over?”

Eyes Wide Open: The Quest for Arbitrator Impartiality in the Wake of Halliburton

Robert P. Jacobs

Jacobs_Robert_03491_Headshot_4C_Print_frameOn November 27, 2020, the day after Thanksgiving was celebrated in the United States, the United Kingdom Supreme Court issued a long-awaited decision in Halliburton Company v. Chubb Bermuda Insurance Ltd., a decision that has been characterized as bringing clarity to an arbitrator’s duty of disclosure where the arbitrator has received multiple appointments by the same party in different arbitrations involving the same subject matter. From the policyholder’s perspective, however, the decision brought neither clarity nor a reassuring result.

Here are the facts:

This matter concerned an arbitrator well known in the London insurance coverage arena, Kenneth Rokison QC. The case arose out of the Deepwater Horizon disaster in the Gulf of Mexico, which spawned (at least) three separate insurance coverage arbitrations.

Arbitration 1 was between Halliburton and Chubb. Halliburton had settled the claims against it and sought coverage from Chubb under the Bermuda Form policy that it had sold to Halliburton. Chubb denied the claim on the premise that the settlement was not reasonable. Mr. Rokison was appointed by the English High Court to chair that panel.

Arbitration 2 was between Transocean and Chubb. Transocean was the owner of the Deepwater Horizon drilling rig. It also had settled the claims against it and Chubb also rejected its claim for coverage. Chubb appointed Mr. Rokison to that arbitration.

Arbitration 3 was between Transocean and another insurer. That insurer also appointed Mr. Rokison to that panel. Continue reading “Eyes Wide Open: The Quest for Arbitrator Impartiality in the Wake of Halliburton

What’s Next with D&O and COVID-19 Coverage?

Allison Zamani

The principal focus in considering insurance coverage for COVID-19-related losses and liabilities has, thus far, primarily concerned business interruption coverage. But there are many other types of coverage that could come into play as businesses recover. Among the various other types of insurance coverage that could be implicated is Directors & Officers (“D&O”) liability insurance.

In the simplest terms, D&O insurance is meant to protect a company’s directors and officers from claims alleging that a mistake, bad judgment, or other malfeasance in operating a business has caused the business to suffer some form of loss or to incur some form of liability. These various circumstances are embodied in the definitions of what D&O policies refer to as “Wrongful Acts.” A typical “Wrongful Acts” definition includes the breach of a duty, neglect, error, misstatement, misleading statement, omission, or act of a director and/or officer of a company. Securities litigation and, to a more limited extent, regulatory investigations are the classic types of claims that arise from conduct typically encompassed within a “Wrongful Act” definition. There are generally three parts to a D&O policy, called Side A, B, and C coverage. Side A coverage is for “Wrongful Acts” committed by directors and/or officers that the company does not or cannot indemnify. Side B coverage exists to reimburse the company for indemnity payments the company makes on behalf of directors and/or officers for their “Wrongful Acts.” Finally, Side C coverage insures the company itself when it is sued. For public companies, Side C coverage is typically triggered only by securities claims. Privately held companies may be covered for a broader range of claims involving the “Wrongful Acts” of directors and officers. D&O Insurance covers not only indemnity payments but also defense costs, i.e. the costs necessary to respond to any litigation or investigation.

As far as COVID-19 is concerned, decisions that companies have made in order to operate under these difficult circumstances may be called into question as things return to “normal.” For example, companies have had to respond to the challenges of the pandemic and to issue public statements about that response. These actions could potentially prompt securities litigation (direct and derivative securities claims) and class actions to the extent that companies and/or a company’s directors and officers have allegedly failed to respond adequately or have made false statements to shareholders and/or the public. Similarly, a company’s financial reports may come under scrutiny, particularly if the company suffered a substantial loss as a result of COVID-19.

Continue reading “What’s Next with D&O and COVID-19 Coverage?”

Under Pressure to Diversify: Availability of D&O Coverage for Corporate Diversity Claims

Natasha Romagnoli and Hannah K. Ahn

With the recent rise in novel diversity lawsuits, which have targeted some of the leading companies across the country, and are sure to be a hot topic of litigation this year and beyond, policyholders are highly encouraged to review their existing directors and officers (“D&O”) insurance policies to ensure that they have adequate protection in place to cover diversity claims.

If you are one of the more than 100 million people who watched the Super Bowl, you noticed that companies are starting to be more vocal about the importance of diversity. With ads featuring all Black actors and more modern families, companies are celebrating inclusion and promising to join the fight to end systemic racism. The NFL itself is a prime example of this change in messaging. Years after Colin Kaepernick faced backlash for kneeling to protest inequality, the NFL ran its own ad this year that highlighted its pledge to spend $250 million to end racism.

Talk of diversity and inclusion has been growing—and growing more insistent—starting with the first Black Lives Matter protests in 2013 and building to last year’s protests following the murder of George Floyd, who died while being forcibly detained by Minneapolis police. Despite their messages of support for diversity and inclusion, however, many companies have struggled to promote diversity in their own ranks, especially with respect to their boards of directors and C-suite executives. But consumers and investors alike are now pressuring companies to meaningfully respond to their demands for internal change. Of late, this includes shareholder derivative lawsuits that use federal securities law not only to target the company’s lack of success in diversifying, but also to challenge the commitment of the company’s directors and officers to enact change. These novel “diversity lawsuits” open a new realm of potential liability, in addition to forcing companies to consider how to promote diversity in their ranks and respond to internal and customer demands for change.

While there have only been a handful of diversity lawsuits filed as of today’s date, the allegations against some of the best known names in business, like Facebook, Oracle, and Monster Beverages, could easily apply to other publicly-traded companies across the country. The individual details vary from case to case, but the common charge against the directors and officers of the sued companies is that they breached their fiduciary duties and violated Section 14(a) of the federal Securities Exchange Act by failing to include diverse directors on their boards and in their senior executive ranks, while at the same time touting their commitment to diversity, equality, and inclusion in the company’s proxy statements and other corporate publications. Corporate counsel can forget about their old playbook for dealing with employee discrimination complaints or outside groups threatening a boycott. This is new legal terrain being staked out by stakeholders in companies (in some cases, institutional investors) and the class action lawyers representing them.

To read our full client alert, please click here.

This client alert was reprinted in Wolters Kluwer Legal & Regulatory Solutions U.S. in April 2021.

Top 10 Tips for Insurance Policyholders (Fall 2020)

John A. Gibbons

1. Assess the policies you have and reassess the policies you should buy in the future.

2020 has brought a host of unwelcome events: pandemics, fires, floods, cyberattacks, financial failures, etc. An insurance program tailored to the risks and business opportunities of your specific company can provide for recovery during dark times, and specialized insurance products can help you safely expand your business. It is time to consider how tailored your current program is, and how you can better align insurance assets to your business in the future.

2. Use indemnities and additional insured status to expand your insurance assets.

Everyday business for many companies involves the use of terms and conditions; sales or services orders; and leases that address indemnification, minimum insurance requirements, and additional insured status. A well-thought-out use of additional insured status can allow you to leverage the insurance assets and insurance premiums of counterparties.

3. Ensure that you get the full benefits of your liability and property insurances.

Insurance policies provide many coverages, policy limits, and extensions that may not be readily apparent, and all of which may provide substantial financial assistance in the event of a loss. In addition, specialized forms of insurance, additional riders, or policy wording upgrades can better tailor policies to your specific business attributes. Use the renewal season to explore your options.

4. Avoid “conventional wisdom” about what is or is not covered.

With insurance, words matter! In fact, the wording determines the outcome. Do not accept statements about what others think a policy does or should cover. For example, claims for intentional wrongdoing and punitive damages often are covered by liability policies. Likewise, losses from your supply chain may be covered under your property policies. Non-payments of debts and breaches of contractual promises are covered under various forms of policies. Let the words lead you to coverage.

5. Give notice once you know of a loss or claim.

Typically, notice should be given soon after a loss, claim, or lawsuit, but remember that a delay in giving notice will not necessarily result in the loss of coverage. Consider the potentially applicable insurance assets that may apply and give notice.

6. Insist your insurers fully investigate claims.

Insurers have a duty to investigate claims thoroughly and must look for facts that support coverage.

7. Watch what you say.

Communications with an insurer or an insurance broker regarding a lawsuit against you or a loss are not necessarily privileged.

8. Don’t take “no” for an answer.

A reservation of rights is almost always the start of the insurance claim process, and a denial should not dissuade you from pursuing your rights. Even if coverage is not obvious at first, it may be there, if you look in the right places.

9. Document, document, document your claim.

Whether it is a first-party loss or a liability suit against you, write to your insurer and document your submission of information and materials. Require your insurer to respond in writing and to explain its position. A well-documented chain of correspondence narrows disputes, helps to limit shifting of insurer positions, or helps to make such shifting very apparent if your claim proceeds to formal enforcement measures.

10. Insist that your insurers honor their duties.

In the liability context insurers frequently owe broad duties to defend with independent, conflict-free counsel, even if uncovered claims dominate the lawsuit against you. In property insurance contexts, insurers have duties to help you on an expedited emergency basis to protect your interests immediately after a loss. It is important to hold insurers to their duties to protect you immediately upon assertion of liability or after a loss—delay only benefits insurers.

 

Don’t Let Jury Trials Vanish Further Amidst the Coronavirus Pandemic

Jared Zola

A trial team and I were asked recently whether we would prefer to postpone an in-person jury trial several months or conduct the trial now via Zoom. We responded with a resounding, “in person.”

Not a single one of us is immune to the coronavirus COVID-19 pandemic. We’ve all suffered loss. Some much more tragic and permanent than others, but no one can honestly say that her or his life is unchanged. Some things that seemed normal earlier this year and before then may never go back to the way they were. Will we fly cross-country to conduct a four-hour deposition in person, even when it is safe to do so? Maybe; depends on the witness. Will we for an in-person meeting with colleagues? Maybe not.

While attorneys are proving every day that many parts of our profession can be performed remotely, we must closely guard the sanctity of jury trials from the coronavirus pandemic. Criminal and civil jury trials are the backbone of the American system of justice; our ultimate safeguard of civil liberties. The American jury trial is a constitutional right. I’m all for adapting to the present situation. But the thought of a “virtual” trial by jury is a bridge too far—and presents a serious risk of eroding one of the most fundamental American rights. Continue reading “Don’t Let Jury Trials Vanish Further Amidst the Coronavirus Pandemic”

New York Courts Skeptical of Insurers Seeking to Hide Coverage Analysis as Privileged

Alexander H. Berman, Robyn L. Michaelson, and Justin F. Lavella

One of the most basic discovery requests in insurance coverage litigation is for the insurer’s claims-handling documents and coverage analysis. A policyholder suing for insurance coverage is entitled to understand the insurer’s pre-denial coverage analysis, which is after all one of the core business functions of an insurance company along with marketing and selling policies.

Simply put, an insured must be allowed access to all documents held by the insurer, including communications and claim files that might speak to why the insurer denied the claim. In recent years, however, insurers have begun to involve both in-house and outside counsel in these deliberations, and have consequently asserted the protections of the attorney-client privilege and the work product doctrine to shield these critical business documents from discovery.

Fortunately, New York courts are developing a body of case law that properly treats such communications as discoverable. When an insurer communicates with counsel to assist in determining whether a claim is covered in the first instance, such communications are made primarily in furtherance of the insurer’s business function, as opposed to legal advice, and therefore are not immune from discovery. Any resulting memoranda simply reflects the same work that claims handlers have been performing since the establishment of the insurance industry. That the analysis was undertaken by an attorney rather than a non-attorney has no significance in the nature and purpose of the work being performed and the discoverability of the resulting analysis and documents. Continue reading “New York Courts Skeptical of Insurers Seeking to Hide Coverage Analysis as Privileged”

%d bloggers like this: