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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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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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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NY High Court Holds that "Self-Serving" Testimony from Underwriter is Insufficient for Rescission

This post was written by J. Andrew Moss

The New York Court of Appeals rejected an effort by Continental Casualty Company (CNA) to rescind an excess professional liability (E&O) policy issued to the law firm Pepper Hamilton LLP, in a decision under Pennsylvania law that also affirmed summary judgment in favor of two of the firm’s other excess E&O insurers based on the application of a “prior knowledge” exclusion in their policies. Executive Risk Indemnity Inc. v. Pepper Hamilton LLP, No. 130 (N.Y. Oct. 20, 2009).

The dispute centered on Pepper Hamilton’s work on behalf of the now-defunct Student Finance Corporation, which eventually led to significant litigation against Pepper Hamilton. According to the opinion, in March 2002 Pepper Hamilton and one of its partners learned that SFC and its principal (the now twice convicted Andrew Yao),

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Insurance Company Pays Up, Resolving Unallocated Settlement and Defense Costs

This post was written by John Ellison and Luke Debevec.

On August 13, 2009, the City of Sterling Heights, Michigan received a check from United National Insurance Company for over $15.4 million, satisfying a judgment awarded by the federal district court for the Eastern District of Michigan and upheld on appeal by the Court of Appeals for the Sixth Circuit Apart from this payment, United National and Sterling Heights will continue to litigate the amount of additional damages that the Sixth Circuit determined to be due to the City.

 

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Have NJ Court Rules, Will Travel: NJ Court Holds Insurer Must Pay Counsel Fees Incurred in Illinois Declaratory Judgment Action

 On June 5, 2009, in response to the appeal filed by Myron Corporation, a New Jersey appellate court held that Atlantic Mutual Insurance Corp. was responsible for Myron’s counsel fees incurred in fending off Atlantic’s Illinois declaratory judgment action pursuant to NJ Rule 4:42-9(a)(6). The coverage dispute centered on defense coverage for numerous cases filed against Myron, alleging that junk faxes sent by Myron violated the Telephone Consumer Protection Act (“TCPA”). Atlantic defended Myron in the cases under a reservation of rights. After the Seventh Circuit ruled that insurance coverage was not available for TCPA claims in an unrelated case [Am. States Ins. Co. v. Capital Assoc. of Jackson County, Inc.], Atlantic decided it was a good time to file a DJ action against Myron in Illinois federal court. 

The problem with this brilliant strategy was that, as the Illinois court wrote, dismissing the case: “a New Jersey court has the greatest interest in resolving an insurance coverage dispute arising from policies which appear to have been issued in New Jersey to a New Jersey corporation with its principal place of business in New Jersey.” Once in the hands of a New Jersey court, Atlantic lost. The court held that Atlantic owed a defense to Myron for the TCPA cases. The parties then settled, except on the issue of whether Myron was entitled to counsel fees for both the New Jersey and Illinois insurance coverage litigations under NJ Rule 4:42-9(a)(6)

Things didn’t improve for Atlantic on appeal:

We agree with Myron that, unless the insured can recover its counsel fees for out-of-state litigation in this situation, an insurer could wear down the insured financially through forum-shopping. In this case, there is no doubt that Atlantic filed its action in Illinois to take advantage of a favorable Seventh Circuit ruling on coverage. While this may have been good legal strategy from Atlantic's point of view, it imposed costs on Myron to fight its way out of what the Illinois court found was an inappropriate forum, and to get the case back into an appropriate venue.

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Third Circuit Misses the Mark in CPB International

This post was written by Douglas R. Widin.

Recently, the Court of Appeals for the Third Circuit decided Nationwide Mutual Insurance v. CPB International, Docket No. 07-4772 (April 14, 2009). CPB supplied chondroitin to Rexall for use in compounding tablets, including chondroitin and glucosamine. CPB supplied two batches of chondroitin that turned out to fall short of contractual specifications and to contain impurities. By the time these defects were discovered, Rexall had already compounded the CPB-supplied material with glucosamine, so that both compounds had become useless.

In the lawsuit that ensued, Rexall brought a claim for breach of contract against CPB seeking return of the purchase price it had paid for the first batch, and also seeking consequential damages for the damage to the glucosamine and economic losses. CPB tendered that claim to its CGL carrier, Nationwide, which defended under a reservation of rights and also brought a declaratory judgment action to avoid any duty to defend or indemnify.

The Third Circuit held in favor of Nationwide and discharged it from any coverage obligations.

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AIG Hardball?

Bloomberg News yesterday carried a report of a court filing alleging that AIG reported a claimant to Homeland Security in order to avoid paying a verdict that now amounts, with interest, to $3 million. 

The worker, Aleksander Janda, was arrested today on charges related to using someone else’s Social Security number, including identity theft, said Helen Peterson, a spokeswoman for Queens District Attorney Richard Brown. In February, Janda won the $2.7 million jury verdict from a property owner for an injury he received after falling 12 feet onto a cement floor while working. In a letter last month, a lawyer for Janda told the judge that AIG contacted Queens prosecutors to get Janda arrested and deported. AIG is the insurer for the property owner.

“It was AIG who contacted the Queens District Attorney’s office and the U.S. Department of Homeland Security in an effort to have the plaintiff arrested on criminal charges and then deported,” the worker’s lawyer, Brett J. Nomberg of Brand Brand Nomberg & Rosenbaum LLP in New York, wrote May 29 to the state court judge in charge of the case, Bernice D. Siegal.

Marie Ali, an AIG spokeswoman, declined to comment.

After the Feb. 17 verdict, the property owner asked the judge to set aside the award and order a new trial, Nomberg said in a phone interview. If Janda is deported, he won’t be able to appear at the new trial, Nomberg said.

Click here for full story.