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Courtney Horrigan

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On December 29, 2023, an Arkansas court in the case of Walmart, Inc. v. ACE Am. Ins. Co., 04CV-22-2835-4, 2023 WL 9067386, (Ark. Cir. Ct. Dec. 29, 2023) found that defendant insurers owe Walmart a duty to pay or reimburse defense costs that Walmart incurred while defending prescription opioid liability lawsuits. 

Like many in the pharmaceutical supply chain, Walmart is a defendant in thousands of lawsuits filed by state and local government entities acting in their parens patriae capacity. These lawsuits allege that Walmart knowingly, recklessly, or negligently caused bodily injuries, like addiction, death, and property damage, by failing to monitor, detect and report suspicious orders of prescription opioids. In 2022, Walmart entered into a “National Settlement” that resolved many of those governmental suits. The settlement reimbursed costs the government plaintiffs alleged they incurred for treating its citizens’ bodily injury and property damage.  Walmart sought defense and indemnity coverage from AIG and other insurance companies providing excess coverage under its general liability policies. The insurers denied coverage.Continue Reading A win for Walmart! An Arkansas court finds insurers have a duty to defend certain prescription opioid liability lawsuits

Ever since the Seventh Circuit’s 2001 decision in Level 3 Communications, Inc. v. Federal Insurance Co., 272 F.3d 908 (7th Cir. 2001), insurance companies have argued that settlements constituting restitution or disgorgement are uninsurable on grounds of public policy. While numerous decisions since 2001 have undercut this defense, two recent decisions out of the New York Court of Appeals and the Northern District of Illinois further confirm that coverage does not depend on how the damages paid are characterized. In both J.P. Morgan Securities Inc. v. Vigilant Insurance Co., No. 61, 2021 N.Y. slip op. 06528 (N.Y. Nov. 23, 2021), and Astellas v. Starr Indemnity, No. 17-cv-8220 (N.D. Ill. Oct. 8, 2021), the courts looked beyond the labels of “restitution” and “disgorgement” affixed to the insureds’ settlement payments to determine whether such payments were covered by each insureds’ respective insurance policies.

Last week’s post on The Policyholder Perspective took an in-depth look at Vigilant Insurance Co.  This week we consider how Vigilant, in tandem with Astellas, demonstrates a trend in how courts interpret labels on payments in an insured’s settlement agreement.

In Astellas, the insured (Astellas) entered a settlement agreement relating to a False Claims Act investigation and agreed to pay $100 million plus interest to the United States, with $50 million of such settlement labeled as “restitution to the United States.” In a similar vein, the insured (Bear Sterns) in Vigilant Insurance Co. entered a settlement agreement with the SEC for alleged illegal trading practices and made a $160 million “disgorgement” payment – $140 million of which was an estimate of the profits gained by Bear Sterns’ clients – and a $90 million payment for “civil money penalties.” Astellas submitted a claim to its insurers for the $50 million “restitution to the United States,” and Bear Sterns submitted a claim for the $140 million “disgorgement” payment reflecting its clients’ profits gained.Continue Reading Labels, Shmabels: Recent Decisions Confirm No “Restitution / Disgorgement” Exclusion in Management Liability Policies

Recently, resolving an insurance-coverage dispute, the U.S. Court of Appeals for the Third Circuit held that “for a contract to be considered a renewal, it must contain the same, or nearly the same, terms as the original contract.”  The court’s precedential ruling in Indian Harbor Insurance Co. v. F&M Equipment, Ltd., No.14-1897 (Oct.15, 2015), which…

The New York Supreme Court, Appellate Division, First Department’s June 23 decision in Dupree v. Scottsdale Ins. Co., Case No. 653412-11, highlights the importance of negotiating favorable language in a fraud exclusion, a standard feature in D&O liability insurance policies that precludes coverage for claims arising out of fraudulent or criminal acts committed by the insured, typically as determined by a final adjudication in the underlying action.

In Dupree, the insured, Rodney Watts, sought coverage for defense of a criminal action alleging (i) conspiracy to commit bank fraud, (ii) bank fraud, and (iii) making false statements. Scottsdale paid for Watts’ defense through his conviction and sentencing pursuant to a preliminary injunction. Scottsdale, however, sought to be relieved of its obligation to pay for Watts’ subsequent appeal – and to recoup defense costs it had already paid – based on the operation of the policy’s fraud exclusion, which became operable only upon a “final judgment” against the insured. The question before the court was simple enough: when is a judgment final for purposes of triggering the fraud exclusion? In particular, is a judgment final during the pendency of an appeal?Continue Reading New York Court Narrowly Construes “Final Judgment” Language In Fraud Exclusion: Does Your D&O Policy Protect You Through An Appeal?

1. Representations and Warranties insurance has quickly risen to become a standard topic of discussion in many merger and acquisitions transaction negotiations.

2. Representations and Warranties Insurance is not a new product – but until recently its use has been limited because of prohibitive premium pricing and buyer concerns as to whether insurers would actually pay on claims. The insurance market is working to bring prices down and establish a payment history.
Continue Reading Top Ten Things to Know about Representations and Warranties Insurance

Just days after news broke that ISIS hackers forced the shutdown of the U.S. Central Command’s Twitter account, President Obama met with congressional leadership, members of the Federal Trade Commission and the Department of Homeland Security to unveil a proposal to facilitate increased cooperation between the private sector and government to combat growing cybersecurity threats. Citing concerns with preserving national security, public safety and public health, the President proposed new federal cybersecurity legislation, emphasizing that although our digital economy “creates enormous opportunities,” it also “creates enormous vulnerabilities for us as a nation” that are growing and costing us billions of dollars. In remarks on Tuesday at the National Cybersecurity Communications Integration Center, the President further acknowledged the serious legal and liability issues involved with private companies sharing information with the government, and argued that his proposed legislation “includes essential safeguards to ensure that [the] government protects privacy and civil liberties” and other liability protections for companies that share information on cyber threats.
Continue Reading President Obama Acknowledges Growing Cybersecurity Threats to the Government and Economy, Proposes New Measures to Fight Cyber Risks

The District Court of Massachusetts’ January 6, 2015 opinion in Biochemics, Inc. v. Axis Reinsurance Co., 2015 WL 71493 (D. Mass. Jan. 6, 2015), reaffirms the importance of providing timely notice of all D&O liability claims – including subpoenas. In Biochemics, the policyholder sought coverage from its primary D&O liability insurer, Axis, for defense costs it incurred in an SEC enforcement action commenced during the AXIS policy period. Judge Rya Zobel held that Biochemics had no coverage for the SEC enforcement action because it related back to two deposition subpoenas that the SEC served on Biochemics before the AXIS policy incepted. Because those deposition subpoenas indicated on their face that the SEC had commenced a formal investigation against Biochemics, each subpoena was a “Claim” that should have been reported to Biochemics’ prior D&O carrier. Because the Claim was “first made” before the AXIS policy period, Judge Zobel granted AXIS’ motion for summary judgment and found that AXIS owed Biochemics no coverage under its policy.
Continue Reading Lessons Learned: Report All Potential D&O Liability Insurance Claims Without Delay

Top-ranking U.S. officials continue to stress the importance of securing adequate protection in the event of cyberliability losses. Most recently, those efforts have been directed to financial institutions, an industry particularly susceptible to cyber attacks. On December 3, 2014, United States Deputy Secretary of the Treasury, Sarah Raskin, delivered a speech at the Texas Bankers’ Association Executive Leadership Cybersecurity Conference wherein she provided banks with a simple checklist to consider before a cyber attack occurs. Notably, one item on the Deputy Secretary’s checklist was cyberliability insurance – coverage at which the Deputy Secretary recommended all banks take a hard look.
Continue Reading Deputy Secretary of Treasury Encourages Financial Institutions

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.
Continue Reading Excess Insurance Implications of a Below Limits Settlement

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.
Continue Reading All Businesses Should Review Insurance Coverage in Face of Ebola Crisis