Catch Me If You Can: Fake Doctor's Application Voids Coverage For Himself But Not For Innocent Co-Insureds

This post was written by Kevin B. Dreher and Natalie C. Metropulos.

In life, sometimes even the law imitates art. As if copied straight out of the script of “Catch Me If You Can,” the U.S. District Court in South Carolina issued a ruling on October 21, 2014 in which it held that despite a false application for professional liability insurance submitted by an applicant pretending to be a doctor, the insurance afforded to the company and other doctors and nurses identified as named insureds under the policy remained in force and was not void ab initio as to the innocent co-insureds. Evanston Insurance Company v. Agape Senior Primary Care, et al., 2014 WL 5365679.

As Frank Abagnale Jr. said to Carl Hanratty, “people only know what you tell them.” Earnest Addo took that to heart and posed as Dr. Arthur Kennedy to obtain employment with Agape Senior Primary Care. Once employed, he filled out an application for professional liability insurance with Agape’s professional liability insurer, Evanston, warranting that he was a licensed medical doctor. Turns out Addo’s representations in his application to Evanston were false – he was in fact not a doctor. After discovering the fraud, Evanston sought to void the coverage it issued to Dr. Kennedy (a/k/a Addo) along with the coverage it issued to Agape and to every other doctor, nurse and health care professional employed by Agape.

 

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Property Exposed to the Ebola Virus - Are Associated Business Income Losses Covered Under First Party Policies?

Can policyholders expect coverage for loss of Business Income if (1) they must close their business and decontaminate it after the property is exposed to persons with the Ebola virus or (2) civil authorities prohibit access to their property because of such exposure?

In the first circumstance, policyholders would seek Business Income coverage, which covers policyholders for lost income and unavoidable continuing expenses when damage to property causes a suspension of business operations. In the second circumstance, policyholders would seek coverage under Civil or Military Authority clauses, covering loss of income where an action or order of an authority, taken or issued on account of property damage, prevents access to the policyholder’s premises. The key question under either coverage is whether the property exposed to an Ebola patient has suffered “property damage.”

Case law supports coverage in either circumstance. First, the Ebola virus, while not particularly hardy, can survive on dry surfaces for hours after exposure, and for days in expelled fluids kept at room temperature. Accordingly, cleanup must be undertaken in a thorough manner by professionals wearing protective equipment. 

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Beware Of Gaps In Your Cyber Risk Policy - AreYou Covered In the Event of an Insider Attack or Data Breach?

This post was written by Brian T. Himmel, J. Andrew Moss and Robert H. Owen.

The evolving market for cyberliability insurance coverage reveals significant differences in the scope of coverage afforded under available policies. A coverage gap that may exist under some policies is for insider cyber attacks. While external attacks receive substantial news coverage, a recent study finds that businesses may be far less equipped to stave off attacks involving insiders: employees, vendors, suppliers and others who may have authorized access to critical or sensitive data. Liability insurance protection – even under specialized cyberliability policy forms – may potentially lag behind on this important issue. Differences in policy language – including policy definitions and exclusions – may have a significant impact on the scope of coverage available for a cyberliability claim. It is therefore critical to understand the coverage provided under your company’s cyberliability policy in response to insider attacks or data breaches.


Brian Himmel and Andrew Moss are partners in the Reed Smith Insurance Recovery Group and co-leaders of the Group’s Cyberliability practice area. Rob Owen is an associate in the Insurance Recovery Group. Companies considering cyberliability coverage or interested in determining whether certain types of claims may be included as an insured risk under a particular policy form should contact Brian, Andrew or Rob to address questions regarding their specific cyberliability coverage needs.
 

Perception versus Reality: ACE Adds an Ebola Exclusion Just in Case

This post was written by Kevin B. Dreher and Michael H. Sampson.

The insurance industry reacts not only to real losses, but it reacts with equal concern to perceived risks, particularly where those perceived risks could, at least in theory, amount to significant financial loss for policyholders and/or insurers.  The Ebola “crisis” is the latest example of the insurance market reacting to a perceived risk that may never amount to an actual insurable loss.  Nonetheless, ACE has taken the first step in what is expected to be an industry-wide initiative to prospectively preclude coverage for Ebola-related losses by adopting an Ebola-specific exclusion that it intends to “selectively” add to property and casualty insurance policies.  Although ACE’s policyholders may never suffer an actual Ebola-related loss, ACE is leading the charge to ensure that the perceived risk of Ebola does not become a real financial loss, at least not for ACE.

Excess Insurance Implications of a Below Limits Settlement

This post was written by Courtney C.T. Horrigan and Caitlin R. Garber.

While policyholders frequently negotiate the terms and conditions of primary insurance, it is somewhat less common for policyholders to give the same attention to the language in their excess coverage. Excess policies which state that coverage attaches only after the underlying insurer pays out its full-limits of liability can frustrate policyholders attempting to resolve a coverage dispute with an underlying insurer. Policy wording is critical – as demonstrated in a recent Texas appellate court. Excess insurance can be drafted or endorsed to recognize exhaustion of underlying limits when either the insurer or the policyholder makes the required payments. Policyholders should carefully negotiate the terms of excess – as well as primary – coverage during the renewal process.

All Businesses Should Review Insurance Coverage in Face of Ebola Crisis

This post was written by Michael H. Sampson, Courtney C.T. Horrigan and Caitlin R. Garber.

Every day, there is a new story about Ebola in the media. While some commentators suggest that the threat of Ebola in the United States is overblown - and we hope they are right - now is still the time for all businesses to review their insurance policies to understand what insurance coverage, if any, they may have available should an Ebola-related liability and/or loss occur.

Potential for Ebola-related liability and loss is not just limited to hospitals or other medical institutions. Recent news stories have demonstrated the breadth of the potential impact of the Ebola crisis: It has affected not just health-care workers but also the airline industry, the chocolate industry, an Ohio university, a cruise ship sailing in the Caribbean, and others.

In considering potential coverage for such liabilities and losses – and when seeking coverage should such a liability or loss occur – businesses will want to carefully consider all of their insurance policies, including, but not limited, to commercial general liability policies, professional liability policies, commercial property policies, and directors’ and officers’ policies. The availability of coverage will depend not just on the specific facts of a business’ situation, but on the specific language contained in their insurance policies.

Michael H. Sampson and Courtney C.T. Horrigan are partners in the Reed Smith Insurance Recovery Group and are members of the firm’s Global Ebola Task Force. Caitlin R. Garber is an associate in the firm’s Insurance Recovery Group.  If you have specific questions regarding your insurance coverage for Ebola-related risks, please contact Michael H. Sampson, Courtney C.T. Horrigan, Caitlin Garber, any member of the firm’s Insurance Recovery Group with whom you usually work, or Douglas E. Cameron, the Reed Smith Insurance Recovery Group’s Global Practice Group Leader.

Obtaining Coverage By Stepping Outside The Box

 By Timothy P. Law

Every lawyer likes to believe that he or she thinks outside the box. In the law, that can mean different things to different people. For me, it means finding paths that are not immediately apparent in striving to meet the client’s objectives. Many times, insurance recovery lawyers see an insurance company’s reservation of rights or denial of coverage listing three reasons for denial, and then proceed to research and advocate on those three issues. In doing so, lawyers can miss opportunities for success.

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Insurance Coverage for Violations of the Privacy Right of Seclusion

By Timothy P. Law

The scope of insurance coverage for publication of material that violates a person’s right of privacy is a hotly debated issue nationwide. A decision earlier this week by the Court of Appeals of Wisconsin squarely addresses a key facet of this debate: coverage available for violations of the Telephone Consumer Protection Act (“TCPA”).

In Sawyer v. West Bend Mutual Insurance Co., decided on July 10, 2012, the Wisconsin Court of Appeals ruled that liability coverage for publication of material that violates a person’s right of privacy applies both to the privacy right of secrecy and to the privacy right of seclusion. 

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Don't Forget About D&O Insurance When The Government Subpoena Arrives

By Paul E. Breene and Mark S. Hersh

When an investigation is commenced by a federal or state government entity, whether by service of a subpoena or by less formal means, a company should have two standard operating procedures: first, hire excellent and experienced counsel to respond to the investigation or subpoena, and second, determine whether insurance coverage may be available to pay for what are frequently significant defense costs that may be incurred in connection with the investigation.

Securing insurance coverage for subpoenas and informal investigations, both civil and criminal, can be an arduous process, but policyholders who plan ahead and know the pitfalls can give themselves a significant advantage in securing timely coverage. Significantly, failing to secure coverage for an investigation can mean that there will be no coverage if the investigation leads to lawsuits or other legal proceedings. The attorneys in Reed Smith's Insurance Recovery Group have extensive experience advising clients on these and related issues.

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Getting the Corporate Deal Done: A Little Insurance Knowledge Goes a Long Way

By Laura Geiger and John Vishneski

A company’s insurance program is an asset that is often ignored during corporate transactions. This is a mistake. Understanding the insurance assets available and how to maximize insurance assets during a corporate transaction will give companies an advantage at the negotiating table. Failing to maximize coverage during a corporate transaction can have disastrous results. The attorneys in Reed Smith's Insurance Recovery Group can counsel companies engaging in corporate transactions on these complicated issues. Good insurance counsel make the transaction process easier and ensure that insurance asset value is maximized. 

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Coverage For Construction Defects

By Paul Walker-Bright

A hypothetical: The roof of a parking garage that is part of a condominium development partially collapses, destroying landscaping over the collapsed section of the roof and the floors underneath the collapsed section. The roof had been fully installed and the parking garage was being used at the time of the collapse, but work continued on the landscaping and the condominium units. The cause of the collapse is traced to roof beams not strong enough to withstand the load of the landscaping. The design of the parking garage called for weaker roof beams. The roof beams cannot be replaced, and consequently the landscaping over the rest of the roof must be removed and replaced with lighter materials to prevent further collapses.

This hypothetical, which is not an outlandish scenario in the construction business, raises a myriad of coverage issues under several different types of policies, including first party property, builder’s risk, general liability and professional liability policies. The attorneys in Reed Smith's Insurance Recovery Group have extensive experience advising policyholders and engaging in litigation regarding these types of coverage issues.

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Answers To The Most Common And Perplexing Questions About Professional Liability Coverage

Reed Smith partner Tom Marrinson, resident in the firm’s Chicago office, has been advising policyholders about their insurance coverage, and representing them in coverage litigation, for more than 20 years. While Tom’s experience ranges widely, he has literally written the book on insurance coverage for professionals and companies that employ them

Professional Liability Insurance, published by Law Journal Press, is written to appeal to both the neophyte and those with considerable experience in the area of professional liability insurance. The book begins with some of the basics of professional liability insurance (such as, who is a "professional" and what types of services are considered "professional services") and how a professional liability insurance policy is put together, in an attempt to provide a basic background for the more in-depth look that the book takes at some of the other issues confronting those involved in professional liability insurance disputes.

 

 

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Insurance Coverage Legal Audits are Not a Luxury

This post was written for  Boardmember.com

Most executives view insurance with disdain, because it makes no immediate contribution to production, research and development or marketing. Ordinarily, insurance has no tangible results and does not improve the balance sheet. It does not increase stock value. Generally, insurance represents a pure expense detracting from the bottom line. Few officers and directors truly appreciate insurance and even fewer actually understand it. Properly assessed insurance, however, can be one of the best investments the corporation will hopefully never use.

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Bond Insurer FGIC Ordered To Stop Writing Policies and To Cease Paying Claims; ISDA Announces FGIC 'Failure to Pay' Credit Event

This post was written by David Schlecker and Andrea Pincus.

3rd Quarter Financials Lead to Action By NYS Superintendant of Insurance and ISDA


On November 24, 2009, Financial Guaranty Insurance Company ("FGIC"), a New York- domiciled monoline financial guaranty insurer, was ordered by New York's Superintendent of Insurance to cease writing any new policies and to suspend payment of all claims. The Superintendent's order follows FGIC's Quarterly Statement for the third quarter of 2009, in which FGIC reported that as of September 30, 2009, it suffered an impairment of its required minimum surplus to policyholders of $932,234,577.


FGIC presented the Insurance Department with a proposed "Surplus Restoration Plan" intended to remediate its exposure to certain residential mortgage-backed securities ("RMBS") and collateralized debt obligations of asset-backed securities ("ABS CDOs"). Under the plan, FGIC proposes to take the following steps:

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Pushing Back on Insurance Coverage Denials for Sexual Abuse Claims

This post was written by John B. Berringer

It has become routine in the past ten years or so for liability insurance companies to deny insurance coverage for sexual abuse claims, often on the theory that sexual abuse is intentional in nature. Many liability insurance policies commonly adopt the definition of “occurrence” which requires that a claim must arise from an “accident.” Under these policies, whether allegations of sexual abuse are encompassed by the term “accident” will determine whether the abuse claims are covered. 

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