Insurance News of Note

Since July 2017, national, regional and local businesses operating in Illinois have been hit with a virtual storm of class actions under the Illinois Biometrics Privacy Act (“BIPA”), 740 ILCS 14 et seq.  BIPA regulates how businesses may record and store biometric data from customers or employees, and these actions create the potential for significant losses, including the costs of defending class action litigation and potential awards of statutory damages. Defending, settling and paying judgments in claims under BIPA may be covered in whole or in part under cyberliability, media liability, and/or employment practices liability insurance. Businesses operating in Illinois and states with similar laws (such as Texas and Washington) should carefully review their liability insurance programs to determine whether they may respond to a claim under BIPA or a similar statute, and should provide prompt notice of claim in the event of a suit.

The Illinois BIPA requires written consent before any biometric data can be collected and stored; requires companies to develop a publicly available written policy disclosing its schedule and guidelines for its retention of, and eventual permanent destruction of, employees’ biometrics; and mandates how companies must handle biometric data once in possession. If a company fails to abide by the consent, disclosure, or handling requirements, an employee may recover the greater of either (i) actual damages, (ii) $1,000 for a negligent violation, or (iii) $5,000 for an intentional or reckless violation. Awards of plaintiffs’ attorneys’ fees and injunctive relief are also available.
Continue Reading Beware the Fine (Thumb) Print: Insurance Coverage for Class Actions Under the Illinois Biometric Information Privacy Act, and Similar Biometric Privacy Statutes

As reported extensively in the media over the past week, the cannabis industry has been hit hard by recent natural disasters. While companies doing business in this industry may face some unique challenges in purchasing insurance, and when attempting to obtain coverage for losses, insurance coverage – contrary to certain media reports – nevertheless may be available to them.  As such, cannabis-related companies should not just pass on submitting claims to their insurers when they experience losses.  Nor should they reflexively forego obtaining insurance in the first place.

Recent media reports

Both the Northern California wildfires and Hurricane Maria have caused extensive cannabis-related losses:

  • On October 13, 2017, The New York Times reported: “Fatal fires that have consumed nearly 200,000 acres in Northern California, devastating the region’s vineyards particularly in Napa and Sonoma Counties, are also taking a toll on a fledgling industry just months before its debut: recreational marijuana. Many of the region’s farms, including those that harvest cannabis, have been scorched, including those in Sonoma County and in Mendocino County, the center of California’s marijuana industry. Mendocino is one of three California counties that comprise [the] Emerald Triangle, where much of the United States’ marijuana is produced.”
  • On October 12, 2017, cnn.com reported: “Blazes have destroyed a number of farms in Mendocino County right before legal recreational sales begin in California.”
  • Also on October 12, 2017, the USA Today reported that “[m]arijuana farmers and dispensary owners across Northern California are nervously watching as wildfires burn through some of the state’s prime cannabis growing areas and destroy valuable crops ….”
  • On October 11, 2017, Marijuana Business Daily reported: “Hurricane Maria devastated Puerto Rico’s medical marijuana industry, setting back its development at least six months – if not much longer – and causing millions of dollars in damage to [medical marijuana] businesses. No outdoor marijuana cultivation facilities survived ….”

Often citing industry insiders, some of these publications have reported that insurance is not available to cover cannabis-related losses. The New York Times, for example, reported that “reliable insurance [is] difficult to acquire.”  Other publications went further, stating categorically that no insurance is available to the cannabis industry.  CNN reported:  “Cannabis cultivators cannot insure their businesses because federal law prohibits marijuana, which means that financial institutions can’t go near it.”  Likewise, the USA Today reported that “pot growers can’t get crop insurance like traditional farmers ….”
Continue Reading In Wake of Disasters, Do Not Just Assume No Coverage Available for Cannabis-Related Losses

In Rancosky v. Washington National Insurance Company, No. 28 WAP 2016, the Pennsylvania Supreme Court confirmed that, to prevail on a claim pursuant to Pennsylvania’s bad-faith statute, a policyholder does not have to prove that an insurance company acted with a “motive of self-interest or ill-will.”  While the Pennsylvania Superior Court had reached the

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

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

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 The Cosby Show: The Insurance Coverage Episode

Following on from our previous alert on the Insurance Act 2015 and the key advantages it offers to policyholders of commercial insurance, we have prepared a second alert looking at what might constitute the knowledge of the insured for the purpose of complying with the duty to make a fair presentation, and the possibility of

The New York Court of Appeals, the state’s highest court, recently rejected an attempt to apply the “common interest doctrine,” an exception to the general rule that communicating privileged information to a third party waives the attorney-client privilege, to situations where separately represented parties communicate attorney-client privileged information in connection with transactions or other circumstances other than in anticipation of litigation. Ambac Assur. Corp. v. Countrywide Home Loans, Inc., No. 80, 2016 WL 3188989 (N.Y. June 9, 2016). As this case shows, companies should be mindful of what information they share outside the litigation context, because the common interest doctrine may not be available to protect that information.
Continue Reading ‘Sorry, But You Have Nothing in Common’: The New York Court of Appeals’ Recent Rejection of the ‘Common Interest Doctrine’ Outside the Context of Litigation

On Monday, April 25, 2016, the Supreme Court of Colorado ruled that policyholders could not be indemnified for a settlement incurred before providing their insurers of notice of the claim—even if the insurer did not suffer any prejudice from lack of notice. In a 4-3 decision in Travelers Prop. Cas. Co. v. Stresscon Co., No. 13SC815 (Colo. Apr. 25, 2016) (“Stresscon”) the court held that “no-voluntary-payments” provisions (or “consent-to-settle” provisions) would excuse an insurer’s duty to indemnify settlement amounts of which the insured had not provided notice.

The question before the court was whether the notice-prejudice rule it had applied to occurrence-based liability policies in Friedland v. Travelers Indem. Co., 105 P.3d 639 (Colo. 2005) (“Friedland”) prevented an insurer from avoiding indemnification under the “no-voluntary-payments” provision. In Friedland, the Colorado Supreme Court agreed with jurisdictions that require an insurer to show prejudice before denying a claim if notice was untimely. The court stated in Friedland that notice provided after a claim had settled did not necessarily preclude a policyholder’s recovery of insurance benefits, but created a presumption that the insurer suffered prejudice. If the policyholder adequately rebutted the presumption of prejudice, then the insurer would be permitted to deny coverage only if it proved actual prejudice. The court did not address the question of how the notice-prejudice rule interacted with a no-voluntary-payments provision.

This question was answered Monday in Stresscon. In Stresscon, a concrete subcontractor (the policyholder) was sued by its contractor to recover damages incurred as a result of construction delays caused by the policyholder. Before any suit had been filed, the policyholder entered into a settlement with the contractor without consulting its insurance company. Several months later, the policyholder sued its insurer (and other entities) and ultimately recovered a jury verdict for bad faith breach of contract.
Continue Reading Colorado Supreme Court Holds That An Insurer Need Not Show Prejudice If Denying Coverage For A Settlement Prior to Notice of Claim