When Assessing Insurance Needs, Medical-Marijuana Dispensaries Must Consider Pennsylvania Regulations

Pennsylvania’s burgeoning medical-marijuana industry is and will be carefully regulated. When purchasing insurance, medical-marijuana dispensaries should pay careful attention to the Commonwealth’s regulations, in particular to the regulations relating specifically to dispensaries. Pennsylvania’s medical-marijuana regulations are only temporary, and most of them (including the ones relating to dispensaries) will expire in 2018

Certain of those regulations directly address insurance. For example, Pennsylvania requires that dispensaries “obtain and maintain an appropriate amount of insurance coverage that insures the site and facility and equipment used in the operation of the facility.” 28 Pa. Code § 1141.44(a). “An adequate amount of comprehensive liability insurance covering the [dispensary’s] activities authorized by the permit shall begin on the date the initial permit is issued by the Department and continuing for as long as the [dispensary] is operating under the permit.” Id.

Pennsylvania also requires that all dispensaries “obtain and maintain workers’ compensation insurance coverage for employees at the time the [dispensary] is determined to be operational by the Department.” 28 Pa. Code § 1141.44(b). Continue Reading

Texas Legislature Votes to Restrict Policyholders’ Rights

By Jim Cooper and Luke Debevec on 18 May 2017 Posted in Insurance Coverage, Insurance General, Property Damage & Business Interruption

Texas lawmakers are now on the fast track to restrict policyholders’ rights when their insurance companies fail to pay property insurance claims arising out of weather events, such as storms involving heavy winds and hail. Now that the Texas Senate has approved House Bill 1774, Governor Abbott is almost sure to sign it. Unfortunately, this will unleash unexpected and unpleasant surprises for Texas businesses and other insurance policyholders.

Most significantly, this harmful piece of legislation is designed to cut back on penalties that are intended to deter bad faith conduct by insurance companies, as well as to empower policyholders to fight back when their claims are denied, delayed or handled in inappropriate ways. The new legislation seeks to diminish these substantial penalties that previous Texas legislatures created for the purpose of deterring such bad faith conduct by insurance companies. Interest that can be awarded by Texas courts for certain property insurance claims would drop from 18 percent to 10 percent. This is a dramatic reduction in the damages that can be awarded against insurers, and the impact must be understood as encouraging abuse and delay by insurers.

Reps & Warranties Insurance Case Highlights the Need for New Expertise and Old-Time Common Sense

By Kit Chaskin on 17 May 2017 Posted in Corporate and Transactional Insurance Coverage, D&O, E&O, Professional Liability, Insurance Coverage, Insurance General

A rare lawsuit concerning coverage under a reps & warranties policy presents two issues of interest to M&A lawyers:

If the insured under a reps & warranties insurance policy fails to obtain the insurer’s consent to a settlement, coverage for that settlement is forfeited, even if the settlement was “panicked” and on a short timeframe.
Sell-side policies do not cover allegations of seller fraud. This is why buy-side policies are preferred – they cover the buyer’s losses resulting from seller fraud.

Pennsylvania Court Confirms Multiple Trigger for Environmental Claims

By Brian Himmel, George L. Stewart, II, Caitlin Garber and Kateri Persinger on 27 April 2017 Posted in Commercial General Liability, Insurance Coverage, Insurance General

Recently, the Commonwealth Court of Pennsylvania gave policyholders another victory in the continuing battle with insurers over application of the “multiple trigger” doctrine. In Pennsylvania Manufacturers’ Association Insurance Co. v. Johnson Matthey, Inc., the Commonwealth Court held that the multiple-trigger approach – which expands the number of policies potentially available to provide coverage for long-tail liabilities – can be applied to claims involving environmental contamination, rejecting another attempt by the insurance industry to limit application of the doctrine in Pennsylvania. Significantly, the court held that in determining whether the multiple-trigger approach will apply, the critical factor is whether the underlying injury involves a long latency period between the initial exposure to the injurious condition, and the ultimate discovery (manifestation) of the resulting injury or damage. Although the decision arises in the context of coverage for environmental contamination, its reasoning represents a sweeping rejection of recent attempts by the insurance industry to limit application of the multiple trigger to asbestos-related injuries.

Please click here to read the full alert.

Schrödinger’s Coverage: When a Risk is Covered and Not Covered by Insurance

By Andy Moss on 16 March 2017 Posted in Commercial General Liability, Cyberliability, D&O, E&O, Professional Liability, Employment Practices Liability, Financial Insurance Coverage, Insurance Coverage, Insurance General, Property Damage & Business Interruption

When is a person an “employee” under one insurance policy but not an employee under another? Conflicting or inconsistent definitions across multiple policy lines issued to the same company can give rise to significant gaps in insurance coverage, as a recent opinion of the U.S. Court of Appeals for the Seventh Circuit instructs, Telamon Corp. v. Charter Oak Fire Insurance Co., Nos. 16-1205 & 16-1815 (7th Cir. March 9, 2017).

Telamon hired Juanita Berry in 2005 under a series of consulting agreements with her personal communications company, J. Starr Communications. Over the next six years, Berry’s job responsibilities expanded beyond the terms of the consulting agreements, with Telamon eventually naming her Vice President of Major Accounts, the senior-most manager in one of the company’s divisions on the East Coast. Part of Berry’s job was to oversee an asset recovery program under which Telamon removed old AT&T equipment and sold it to salvagers. But without the company’s knowledge, Berry personally removed the old equipment and sold it, keeping the money for herself. By the time Telamon discovered the scheme, Berry had embezzled $5.2 million. Telamon fired Berry, and the government indicted her on wire fraud and tax evasion charges. She was convicted and sentenced to five years in prison.

Eighth Circuit pollution-exclusion opinion a cautionary tale for natural gas industry

By Mike Sampson on 13 February 2017 Posted in Commercial General Liability, Construction Coverage, Insurance Coverage, Insurance General, Insurance News of Note, Property Damage & Business Interruption

The interpretation and application of a pollution exclusion in a commercial general liability (“CGL”) policy is often a fact-specific and jurisdiction-specific exercise. That said, the U.S. Court of Appeals for the Eighth Circuit’s recent decision, applying North Dakota law and interpreting such an exclusion in a CGL policy, should command the attention of the entire natural gas industry.

At issue in Hiland Partners GP Holdings, LLC, et al. v. National Union Fire Insurance Company of Pittsburgh, PA, No. 15-3936 (8th Cir. Jan. 31, 2017), was an explosion at a natural gas processing facility that “receives gas and hydrocarbon products and processes them into byproducts for sale.” Appellants, who owned and operated the facility, were an additional insured under a third party’s CGL policy. Continue Reading

Reinsurance Deal Raises Red Flags

By Mike Sampson, Ann Kramer and Kateri Persinger on 25 January 2017 Posted in Commercial General Liability

American International Group, Inc. (“AIG”) recently announced that it entered into a significant reinsurance agreement with a subsidiary of Berkshire Hathaway Inc. (“Berkshire”). Reportedly, that agreement “covers 80% of substantially all of AIG’s U.S. Commercial long-tail exposures for accident years 2015 and prior.” While AIG states that it “will retain sole authority to handle and resolve claims,” the details of the arrangement, by which the Berkshire subsidiary “has various access, association and consultation rights,” remain far from clear. The involvement of the Berkshire subsidiary and any other related Berkshire entities, which have routinely put their economic interests ahead of their insureds’, should give policyholders pause. Policyholders should remain vigilant and cautious. To read our full alert on this topic, click here.

The Expanded French Class Action System May Impact Liability and Insurance Coverage For Corporations Domiciled and Doing Business in France

By Kevin Dreher and Laura Ferry on 18 November 2016 Posted in Insurance Coverage, Insurance General

Although the French class action system has gotten off to a slow start with only 6 actions initiated to date, the recently and anticipated expanded scope of the French class action system will impact the potential liability and insurance coverage of corporations domiciled and doing business in France. To learn more about the implications of the Expanded Scope of the French Class Action System read our full alert on this topic by clicking here.

Lumbermens Liquidation: Deadline to File Liquidated Claims Extended to 2017

By Kevin Dreher and Caroline Upton on 10 November 2016 Posted in Insurance Coverage, Insurance Insolvency & Regulatory, Insurance News of Note

The deadline for submitting documentation to establish “closed” or “liquidated” claims in the Lumbermens Liquidation has been extended to November 10, 2017. To learn more about this important deadline extension, read our full alert on this topic by clicking here.

The Cosby Show: The Insurance Coverage Episode

By Amber Finch and Benjamin Fliegel on 10 November 2016 Posted in Insurance Coverage, Insurance News of Note

On November 8, 2016, the District Court in the District of Massachusetts held that AIG has a duty to defend Bill Cosby against pending defamation claims under both Massachusetts and California law. The court rejected AIG’s contention that the defamation claims fall within the exclusion for sexual misconduct since they were “arising out of” claimants’ original allegations of sexual misconduct. Instead, the court found the exclusion was at least ambiguous in the context of these defamation claims and, therefore, a duty defend is owed.

It is generally well known that William H. Cosby, Jr., (known familiarly in his comedy and acting career as Bill Cosby), has been accused on a number of occasions of sexual misconduct many years ago. Cosby has denied the allegations in public statements issued personally and through representatives.

Based upon these denials, three defamation cases were filed against Cosby and others in the District Court of Massachusetts. Green v. Cosby, Case No. 14-cv-30211, Ruehli v. Cosby, Case No. 15-cv-13796, and McKee v. Cosby, Case No. 15-cv-30221. Cosby sought coverage for the defamation claims under a Massachusetts homeowners policy (“Homeowner’s Policy”) and a personal excess liability policy (“Excess Policy”), both purchased from AIG. The policies cover claims alleging personal injury, which is defined to include “[d]efamation, libel or slander” emotional distress. While the Homeowner’s Policy includes a duty to pay defense costs, the Excess Policy includes a duty to defend. Both policies exclude actions “arising out of” sexual misconduct, harassment or abuse. Continue Reading