Every policyholder in every industry should make sure that it in fact has obtained insurance covering the actual, specific risks presented by its line of business.

That point is the critical one driven home by the U.S. District Court for the Central District of California in United Specialty Insurance Company v. E-Cig Vapor Emporium, LLC, No. EDCV 18-0002 JGB (SHKx), 2018 WL 5098859 (C.D. Cal. Oct. 15, 2018).  While applicable to any business in any industry, this lesson is particularly valuable to businesses in certain newer industries – such as the vaping, e-cigarette, and cannabis industries – where the market for insurance may be more limited and the coverages offered may be more restrictive.Continue Reading Federal court’s E-Cig decision provides cautionary tale

It should go without saying that when a business purchases any insurance policy – including, but not limited to, a commercial general liability (CGL) insurance policy – the business expects the policy to provide coverage for its line of business and the specific risks it faces. Cannabis-related businesses are no different. However, they must be especially vigilant to make sure that what an insurance company gives with “one hand” (the coverage grant), it does not take away with the “other” (an exclusion). Remarkably, marijuana-related exclusions may still be found in CGL and other insurance policies marketed and sold to businesses in the cannabis industry.

To better illustrate the concern, consider the following non-cannabis-related scenario: When purchasing insurance, a swimming pool manufacturer would, of course, want to make sure that its CGL policy will provide coverage in the event that a third-party sues the manufacturer for bodily injury allegedly arising out of the use of one of its swimming pools. Conversely, that manufacturer would not want to purchase a CGL policy that excludes coverage for any bodily injury arising out of the use of its swimming pools. While, in that latter situation, the CGL policy may still provide the manufacturer some coverage for certain, limited types of claims, the policy would not provide the manufacturer coverage for the real risks that it faces — that is, those arising out of the use of its swimming pools. Such coverage, therefore, would essentially be illusory coverage. In other words, it would be basically no coverage at all.Continue Reading CannaBeware: Make sure insurance actually covers the risks your business faces

The Supreme Court of Appeals of West Virginia has made it harder for policyholders to prevail on claims of common law bad faith against insurers in that state. In State of West Virginia ex rel. State Auto Property Insurance Companies v. Stucky, No. 17-0257, 2017 WL 4582607 (W. Va. Oct. 10, 2017), West Virginia’s highest court held that an insurance company cannot be held liable for bad faith regardless of its dilatory conduct, so long as it ultimately defends and indemnifies its policyholder.  As the dissent in Stucky observed, however, “[t]his over-simplified approach is myopic.”

In Stucky, the policyholder was a construction company that allegedly damaged a couple’s home.  The construction company, though, believed it “was insured for the damage to the … property under a commercial general liability policy ….”

Although the company’s insurer initially agreed “that it would handle the claim,” the insurer nevertheless allegedly “conducted a series of inspections and investigations, thereby delaying a potential settlement of the plaintiffs’ lawsuit, increasing the amount of the plaintiffs’ property damage, and resulting in the lawsuit filed against [the construction company] by the plaintiffs.”Continue Reading “Myopic” ruling limits policyholders’ ability to recover for common law bad faith in West Virginia

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

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.Continue Reading Court Upholds Coverage Under General Liability Policy for Claim Alleging Failure to Protect Data

Recently, in a non-precedential order, an Illinois appellate court correctly held that a “Pollution and Health Hazard Exclusion” in a commercial general liability policy did not preclude coverage for mold-related bodily injury claims. See In re Liquidation of Legion Indem. Co., 2014 IL App (1st) 140452-U (Sept. 30, 2015) (applying Texas law).

That court held, inter alia, that “the plain language of the [p]olicy does not specifically exclude mold related claims.” Id. at ¶ 16. It continued: “While the policy does not need to specifically list the terms ‘mold’ and ‘fungi’, the intent to exclude coverage must be expressed in clear and unambiguous language. Here the alleged intent to exclude mold related claims was not clearly stated in the [pollution e]xclusion.” Id. at ¶¶ 17-18 (internal citation omitted).  The court later stated: “It is undisputed that the [p]olicy’s [e]xclusion did not include the words ‘mold,’ or ‘fungi’ although [the insurer] could have easily inserted the words in the [p]olicy’s [e]xclusion to avoid different interpretations.” Id. at ¶ 21. All good points.Continue Reading If not “determinative,” then at least compelling: Other, specific exclusionary language available on market undermines application of pollution exclusion

A recent outbreak of Legionnaires’ disease in New York has, according to published news reports, been responsible for the death of 12 people. According to those same reports, more than 100 other people have become ill as a result of the outbreak, which has been traced to a rooftop cooling tower(s).

For better or worse, when an outbreak of a disease occurs, lawsuits may soon follow. Indeed, recent news stories report that one individual who contracted Legionnaires’ disease in New York just sued the hotel where the outbreak allegedly began. According to published reports, that person is alleging that the hotel was “negligen[t], careless[], and reckless[].”

When such third-party lawsuits – relating to Legionnaires’ disease or some other disease – are filed against an insured, insurance coverage may be available under its commercial general liability (“CGL”) insurance policy(ies). CGL policies typically provide coverage for “damages” on account of “personal injuries” or “property damage.” Relying on various policy exclusions, insurers, however, may try to deny coverage for disease-related lawsuits. So, faced with such a suit, a policyholder should carefully review its policy(ies) and make sure its interests are adequately protected.

Legionnaires’ disease in particular has been at the center of a number of insurance-coverage disputes. According to the U.S. Centers for Disease Control and Prevention, “Legionnaires’ disease … is caused by a type of bacterium called Legionella …. The bacterium is named after a 1976 outbreak, when many people who went to a Philadelphia convention of the American Legion suffered from this disease, a type of pneumonia (lung infection).”
Continue Reading Host of insurance-coverage questions tied to Legionnaires’ disease

The Pennsylvania Supreme Court recently issued a long-awaited decision in Mutual Benefit Insurance Company v. Politsopoulos, No. J-85-2014, delivering the insured in that case, and policyholders across Pennsylvania, a big victory.

As explained more fully in Reed Smith’s recent Client Alert – “’The” insured versus “any” insured: The Pennsylvania Supreme Court limits the application

Insurance companies often look to the pollution exclusions in their commercial general liability policies in attempts to exclude coverage for many types of claims. They will try to fit all sorts of things within the definition of “pollutants.” Just last Friday, though, the U.S. District Court for the Eastern District of Louisiana made that more difficult, offering a common-sense understanding of the term “pollutant.” That court found that “under Louisiana law, Legionella and Pseudomonas aeruginosa bacteria” – the bacteria which cause Legionnaire’s disease – “do not qualify as ‘pollutants’ within the meaning of [pollution] exclusions.”
Continue Reading Court’s reasoning that “bacteria” is not a “pollutant” favorable for policyholders in other cases