Contingent Business Interruption (CBI) Insurance: When Winter Storms Impact Your Suppliers or Customers

Robyn L. Michaelson

Michaelson, Robyn L.The National Oceanographic and Atmospheric Administration recently released its early forecast for this winter, predicting below-normal temperatures in the southern states and more snow and ice in the Southeast.[1] As we learned in winters past, the South can quickly grind to a halt after just a few inches of snow. If you or a business you rely on operates in the Northeast, you likely have your insurance squared away in case of storms. But you may not have considered similar problems with a southern supplier.

Contingent business interruption (CBI) insurance reimburses lost profits and added expenses resulting from interruption of a supplier’s or customer’s business. This insurance protects the policyholder against lost sales or higher production cost based on an inability to purchase from or sell to that third party. A CBI policy may target one supplier or customer, or broadly cover all of the insured’s customers and suppliers. CBI coverage is usually triggered by physical damage to the covered customer’s or supplier’s property.[2] Continue reading “Contingent Business Interruption (CBI) Insurance: When Winter Storms Impact Your Suppliers or Customers”

Does Your Company’s Cyber Risk Insurance Cover Cyber-Related Bodily Injury and Property Damage?

James S. Carter

Carter, James S.A recent article in the Wall Street Journal highlights a widespread cybersecurity threat that it reports has generally gone unrecognized: the vulnerability to cyberattacks of the underlying control systems that power and cool data-center networks.[1] These same types of systems, which include generators, thermostats, and air conditioners, are also found in commercial buildings and factories.[2]

The article reports that a cyberattack involving controloverheated_shutterstock_162410045 systems has the potential to take down an entire operation.[3] It could also endanger human life.[4] While these risks are not new, the article notes that security personnel at many companies do not realize that such systems may be connected to the computer system or the internet, and thus exposed to a cyberattack.[5] In fact, the article reports, such systems often lack basic security protocols, such as user names or passwords.[6] Continue reading “Does Your Company’s Cyber Risk Insurance Cover Cyber-Related Bodily Injury and Property Damage?”

What Real Estate Developers Need to Know About Insurance Coverage

Charrise L. Alexander

Charrise L. AlexanderAs the economy across the United States continues its slow improvement, many cities across the nation are experiencing a boom in real estate development. From residential to public transit to public works, developers are bidding on and undertaking large projects. Before beginning any new project, it is important that a developer understands the extent of its insurance coverage and ensures that it has adequate insurance to address the particularly unique circumstances involved with real estate development.

While most developers have a commercial general liability policy, such liability policies, even though broad in scope, maconstruction_shutterstock_223248622y not fully protect a developer against all of the risks it may face during development. For example, commercial general liability policies respond to claims involving bodily injury and property damage to third parties, but often do not provide coverage for damage to the developer’s own property. Continue reading “What Real Estate Developers Need to Know About Insurance Coverage”

What’s the Insured Value of an Allowed Bankruptcy Claim? Pay-as-Allowed, Pay-as-Paid, and a Novel Variation

John E. Heintz and Kyle P. Brinkman

John E. HeintzBrinkman, Kyle P.Bankruptcy of the insured does not relieve an insurer of its obligations under its insurance policy, including to pay covered liability claims held by creditors of the bankruptcy estate. Generally, for a creditor to obtain a distribution from the estate, the creditor must file a timely “proof of claim” in the bankruptcy proceeding, and the claim must be “allowed” by the bankruptcy court. Because a debtor’s assets are typically insufficient to compensate all creditors for the full allowed value of their claims, creditors usually are paid only a fraction of the dollar value allowed. Disputes have, as a result, sometimes arisen between debtor insureds or their successors on the one hand, and their insurers on the other, over whether the insurer is obligated to pay the allowed value of an insured claim (“pay-as-allowed”), or instead only the fractional amount the creditor actually would receive from the estate if there were no insurance coverage (“pay-as-paid”). Continue reading “What’s the Insured Value of an Allowed Bankruptcy Claim? Pay-as-Allowed, Pay-as-Paid, and a Novel Variation”

Delaware Supreme Court Sends Allocation Question to New York Court of Appeals

Edward Tessler

The Delaware Supreme Court certified an allocation question to the New York Court of Appeals that could have a major impact on policyholders’ recoveries for multi-year claims. A multi-year claim is one where the damages extend over a number of policy years, such as environmental claims or asbestos claims.

The certified question is:

Under New York law, is the proper method of allocation to be used all sums or pro rata when there are non-cumulation and prior insurance provisions?

Policyholders whose policies are governed by New York law should closely follow this case because it could drastically impact the amount they can recover. Continue reading “Delaware Supreme Court Sends Allocation Question to New York Court of Appeals”

What Happens If Your Company Gives Late Notice of a Claim to Its Insurer? Hint: Insurers Should Not Make Policyholders Guess

James S. Carter

Carter, James S.One of the most common questions that in-house counsel may have for coverage counsel is, “What is the effect of providing late notice of an insurance claim?” The answer is that it depends on which state’s law applies to the insurance policy. A minority of states view notice as a condition precedent to coverage, and unexcused or unreasonably late notice voids coverage. The majority of states, however, have adopted the notice-prejudice rule, which is one of the most beneficial rules to policyholders. Rooted in equity and contract principles, it holds that untimely notice does not waive coverage unless the insurance carrier has been materially prejudiced by the delay. But a state’s adoption of the notice-prejudice rule is usually not the end of the story. As the notice-prejudice rule has gained prominence, insurers havlate_time_shutterstock_123570787 (2)e shifted strategy from arguing against the adoption of the notice-prejudice rule to urging courts to carve out exceptions to the rule in which the insurer is deemed to suffer prejudice as a matter of law. This strategy, if successful, could have the effect of eroding the protection that the notice-prejudice rule affords policyholders. At a minimum, it will foster uncertainty among policyholders as to whether the notice-prejudice rule will apply. Continue reading “What Happens If Your Company Gives Late Notice of a Claim to Its Insurer? Hint: Insurers Should Not Make Policyholders Guess”

Insurance Coverage for Government Seizures of Property

John E. Heintz and John A. Gibbons

John E. Heintz John A. GibbonsMany businesses and individuals are familiar with insurance that is available to pay for property that is taken by a private third party, be it a stranger, employee, competing business, or anconfiscate_locked_chain_shutterstock_113300764y other private actor. But what happens when a government entity or official “seizes” property? Businesses may not immediately think of insurance, but a number of forms of insurance may offer protection and reimbursement for the loss of the “seized” or taken property. Continue reading “Insurance Coverage for Government Seizures of Property”