The October 21, 2016 DDoS attack on the internet’s domain name system infrastructure underscores the need to consider cyberliability insurance coverage as a critical component of your company’s security and privacy breach response plan, and if your company carries cyberliability insurance, to ensure that your coverage will respond to a network business interruption, security breach or privacy event against or within your company or its vendors. To read more, please click here.
A California appeals court recently sharpened the teeth of insurance companies’ duty to settle [Ace Am. Ins. Co. v. Fireman’s Fund Ins. Co. (2016) 2 Cal. App. 5th 159]. By broadening the situations in which an insurer can be held liable for failing to settle within limits to include cases that never go to verdict or judgment, this ruling protects policyholders from unreasonable insurer decision-making without forcing them into risky trials. With a clear split among the California Appellate Divisions, this issue is now ripe for Supreme Court review.
On the set of Warner Bros.’ superhero film “Green Lantern,” a stunt gone wrong injured a special effects supervisor, who then sued Warner Bros. Entertainment Inc. and related entities to recover damages for his injuries. Warner Bros. had a $2 million primary policy and $3 million umbrella policy with Fireman’s Fund, and an excess policy of $50 million with Ace American to respond to the accident. Continue Reading
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 contracting out from the provisions of the new Act. The Act is now in force in England and Wales, so it is definitely worthwhile to make sure you’re aware of the major changes introduced in the Act and how they might affect your business.
Please click here to read the full alert.
The Insurance Act 2015 (the Act) came into force on 12 August 2016, introducing major changes in English law in relation to insurance and all forms of reinsurance.
It applies to all contracts of insurance and reinsurance governed by English law entered into after 12 August 2016. This includes renewals, amendments and endorsements to existing contracts.
Many articles and commentary have been published dealing with the new Act. Here, we wanted to draw the attention of those responsible for the purchase of insurance and reinsurance to the application of this new Act so that the key advantages it offers to policyholders are not overlooked in the course of upcoming insurance placements, amendments and renewals. The three areas discussed below are worthy of particular note: disclosure, warranties, and basis of contract clauses.
A California district court pushed back on the restrictive interpretation of a standard intellectual property exclusion and found coverage for a policyholder’s patent related lawsuit. The United States District Court (Northern District of California) recently ruled that claims asserting (1) the breach of a patent license agreement and (2) patent misuse were covered under a commercial insurance policy, and not subject to the policy’s intellectual property exclusion. Moreover, the court found that the mere fact that claims are related to assertions of infringement does not preclude coverage unless the claims assert injuries as a result of that infringement.
The Underlying Action
Policyholder Tessera initiated an International Trade Commission (ITC) investigation, accusing several companies of infringing its patents by importing and selling semiconductor packages. Several of these companies were customers of Powertech Technology Inc. (PTI), a company that had obtained a license agreement from Tessera. In December 2011, PTI sued Tessera on several claims and defenses relating to Tessera’s ITC investigation, including breach of the licensing agreement, fraud and deceit, and patent misuse. In February 2012, Tessera tendered the defense and immunity of these claims under three commercial insurance policies issued by St. Paul Mercury Ins. Co. (St. Paul), which accepted the tender of defense under a full reservation of rights, but disputed coverage. After initial motion practice, Tessera and PTI resolved the action by settlement.
The Coverage Action
In April 2012, St. Paul initiated an action for declaratory relief against Tessera, claiming that the standard intellectual property exclusion in its policy excluded from coverage the claims asserted against Tessera. The exclusion at issue bars coverage for: “injury or damage or medical expenses that result from any actual or alleged infringement or violation of any of the following rights or laws: […] Patent…Other intellectual property rights or laws….” The exclusion also bars coverage for “any other injury or damage or medical expenses alleged in a claim or suit that also alleges any such infringement or violation.” Continue Reading
What does it mean to call a fire “hostile”? This question has become increasingly important for insurance policyholders, such as those seeking coverage for fires and explosions following crude-by-rail or chemical-by-rail accidents.
When an explosion or fire event results in death, personal injuries or property damage, insurance companies may rely on a pollution exclusion. These exclusions may contain important exceptions, however, for “hostile fires”…
Read more at Railway Age…
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.
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
In an encouraging development for insureds, the United States Court of Appeals for the Fourth Circuit held that a health care company’s general liability insurer was required to defend the company against claims stemming from an alleged failure to secure electronic medical records. In The Travelers Indemnity Co. of America v. Portal Healthcare Solutions, L.L.C., No. 14-1944 (4th Cir. Apr. 11, 2016), the Fourth Circuit held that the breach resulted in a “publication” of medical records, thus falling within the scope of the general liability policy issued to Portal Healthcare Solutions, L.L.C. (“Portal”). The decision reaffirms that insureds that experience adverse cyber events are not limited to cyber-specific policies as the source of potential insurance coverage.
Portal’s insurer, The Travelers Indemnity Company of America (“Travelers”), commenced litigation in the United States District Court for the Eastern District of Virginia, seeking a determination that it was not required to defend Portal against a putative class action alleging that Portal negligently failed to secure a server hosting medical records, which resulted in those records becoming available on the Internet. Ruling on cross-motions for summary judgment, the District Court sided with Portal, reasoning that the allegations “at least potentially or arguably” alleged a “publication” of private medical information that either (a) gave “unreasonable publicity” to the patient’s private life, or (b) “disclose[d] information” about the patient’s private life. Either circumstance triggered a coverage obligation under the Travelers policies.
National Public Radio and other news outlets are reporting that a Los Angeles-area hospital recently paid a $17,000 ransom (in the form of 40 bitcoins) to hackers to unencrypt its computer networks, which had been held hostage after “ransomware” was introduced into the hospital’s network. Ransomware is a form of malicious software, or “malware,” that encrypts information or aspects of an organization’s computer network, preventing authorized users from accessing it. Persons maliciously cause the ransomware to be placed on the network, then demand money in exchange for an encryption key to unlock the network. It is not difficult to see the tremendous economic losses and liability risks of a ransomware attack, in particular to a medical facility treating vulnerable patients. Continue Reading