A recent California appellate court decision found that a wage and hour exclusion in an Employment Practices Liability Insurance (“EPLI”) policy did not bar coverage for claims under California Labor Code sections 2800 and 2802 alleging failure to reimburse expenses. S. Cal. Pizza Co., LLC v. Certain Underwriters at Lloyd’s, London Subscribing to Policy No. 11EPL-20208, Case No. G056243, 2019 WL 4572859 (Cal. Ct. App. Aug. 27, 2019), as modified on denial of reh’g (Sept. 20, 2019). This is a significant decision. It gives policyholders an argument that insurers must defend wage and hour suits that include covered allegations of failure to reimburse expenses, as the court in Southern California Pizza found. 
Continue Reading

On January 15, 2019, the Ninth Circuit certified the following question to the California Supreme Court:

Does a commercial liability policy that covers “personal injury,” defined as “injury… arising out of… [o]ral or written publication… of material that violates a person’s rights of privacy,” trigger the insurer’s duty to defend the insured against a claim that the insured violated the Telephone Consumer Protection Act by sending unsolicited text message advertisement that did not reveal any private information?
Yahoo! Inc. v. National Union Fire Insurance Company of Pittsburgh, Pa., No. 17-16452, D.C. No. 5:17-cv-0447-NC.

Yahoo! sought coverage under its general liability policies issued by National Union for a number of putative class actions alleging that it violated the TCPA by transmitting unsolicited text message advertisements to putative class members. National Union denied coverage and Yahoo! sued for breach of contract. The Northern District granted National Union’s motion to dismiss and Yahoo! appealed that order to the Ninth Circuit.


Continue Reading

In an unpublished decision, the Ninth Circuit affirmed the Central District of California’s interpretation of the related acts provision in a professional liability policy, holding that related acts reported in a prior policy period were not excluded from coverage in a subsequent period because that policy defined “Policy Period” to mean only the current policy period, not any policy period. Attorneys Insurance Mutual Risk Retention Group, Inc. v. Liberty Surplus Ins. Co., No. 17-55597 (9th Cir., Feb. 15, 2019). As a result, the related acts clause, which incorporated this term, could not be read to aggregate claims first made under prior policy periods with those made in the current period. The case reinforces the importance of reviewing the particular language of an insurance policy rather than relying on case law interpreting similar language. Small differences in policy language can lead to significant changes in the available coverage.
Continue Reading

In November, Tyler wrote about insurance issues raised by both the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act, which goes into effect on January 1, 2020. California’s governor Jerry Brown signed two other cyber-related laws in September, which will also go into effect on January 1, 2020 – Assembly Bill 1906 and Senate Bill 327, which address security concerns relating to devices that are capable of connecting to the internet – the so-called Internet of Things or “IoT”. See California Civil Code 1798.91.04(a) et seq.

The bills largely mirror each other and, put very simply, require manufacturers of devices that are capable of being connected to the internet to equip them with “reasonable” security features that are both appropriate to the device and require a user to generate a new means of authentication before access is granted to the device for the first time. Technologists are debating whether the laws are good or bad, and if good, whether they go far enough. Regardless, the law will become effective and manufacturers of IoT devices will have to comply with them. The law does not provide for a private right of action; it permits the state’s Attorney General to enforce its provisions.

The new California law applies to all connected devices sold or offered for sale in California. Because California is such a large market, this likely means that all such devices sold in North America and Europe will comply with California’s regulations, and older, less secure devices will be diverted to countries with fewer regulations.


Continue Reading

A 6th Circuit case decided earlier this year demonstrates how positions taken by insureds in prior litigation can impact or foreclose coverage in subsequent disputes with insurers. See K.V.G. Properties, Inc. v. Westfield Ins. Co., 900 F.3d 818 (6th Cir. 2018).

In K.V.G. Properties, Inc., K.V.G., was unaware that its tenant was operating a cannabis growing operation. Although Michigan allowed for limited legal marijuana cultivation, there was no evidence the tenant was in compliance with local law. After a DEA investigation resulted in a search warrant, K.V.G. had the tenant evicted from the property. K.V.G. then sought recovery from Westfield under its property policy for extensive damage done to the property by the tenant, including torn out walls, and damage to the HVAC, duct work, and roofing.
Continue Reading

An obscure niche product less than a decade ago, cyber insurance is now a staple of many companies’ risk transfer programs. Its rise in prominence is no wonder. High-profile data breaches have caused businesses millions of dollars in losses and untold reputational harm. Companies are right to shed some of their cyber risks through insurance, and the basic protections it offers are well known. It pays for the business’s investigation and notification to consumers of data breaches, and it defends against ensuing class action lawsuits and regulatory actions.

As valuable as these basic coverages are, companies should carefully consider and address their risks beyond them. Those that fail to do so may leave some of their biggest risks uncovered.

Cyber insurance is not an off-the-shelf product; there is no standard form. Dozens of insurers sell it, each using its own proprietary language. And the market is evolving rapidly to keep up with the risk environment’s shifting sands. Thus, simply renewing last year’s policy will not provide the cutting-edge protection available today. Like other contracts that a business signs, a proposed cyber insurance policy must be scrutinized and negotiated to meet the business’s unique needs.  And the challenges in this area require a group effort that pulls in personnel and resources not just from the finance or risk management departments, but also IT, Legal and others.

Two areas of cyber insurance are seeing particularly rapid change and uncertainty: coverage for exposures relating to the European Union’s General Data Protection Regulation (GDPR) and business interruption coverages. Broad coverage is ostensibly available for GDPR risks, but its enforceability under applicable law is in question. Business interruption coverages are increasingly addressing the interconnectedness and complexity of computer systems in the age of the cloud, where one system’s downtime can affect many other companies’ operations.
Continue Reading

I recently participated in a panel at the Association of Business Trial Lawyers Annual Meeting – “Bad News Delivered: The Board Meeting and Crisis Management.”  Among other topics, the panel discussed the role of insurance counsel in crisis management, and addressed the following questions:

Who Is The Client? 

When meeting with a board in a time of crisis, it is critical to identify whether your client is the company or the board.  And if it is the company, the board must understand that while they are the decision-makers for your client, they themselves are not your clients.

Depending on whom you represent, your advice and strategy may differ.  Although acting on behalf of the company and bound by fiduciary duties and the duty of loyalty, in a time of crisis board members may be concerned about how the company’s insurance can be used to protect their interests, as opposed to the company’s.  If counsel is representing the company, the strategy may focus on preserving the coverage to settle a nasty case, fund burdensome defense or investigation costs, or protect individuals who are critical to the company’s on-going business strategies.  And if the company is in bankruptcy, the debtor in possession or trustee may want to preserve the assets for claims against the estate, as opposed to lower priority indemnity claims or non-indemnifiable claims against individual insureds such as board members.

If counsel is representing an individual, he or she may have the luxury of an indemnification from the company – assuming the company is able to fulfill it.  If not, counsel may need to invoke Side A or other provisions in the policy to preserve the policy limits for the individual directors or officers, and access to much-needed defense costs.
Continue Reading

I recently participated in a negotiation with an insurer who had denied coverage for an underlying errors and omissions claim in the mid-seven figures. The insurer’s counsel and I exchanged stern letters, each explaining why our respective client’s position was absolutely correct, and the other’s absolutely wrong. The client’s broker arranged a meeting with principals and counsel on both sides. At the meeting, the insurer’s counsel and I debated our respective positions once more. Neither of us conceded any possibility that the other could be right. After 25 minutes, my client put a stop to the debate competition and, aided by the broker, moved into negotiations with the insurer’s principal.

The opening offer and demand were miles apart. But within an hour, the case settled, to the clear satisfaction of both sides. With no mediator. No wrangling about which mediator to select. No waiting three months to get a date on the mediator’s calendar. No mediation briefs or reply briefs. No waste of non-refundable mediator’s fees. No shuttle diplomacy, bracketing or mediator’s proposals. No mediator reserving jurisdiction to hammer out disputed settlement terms. It felt almost too easy.

Are lawyers too dependent on mediators to settle their cases? Whether you answer that question yes or no, there are many situations where a neutral can resolve a case where party negotiations would fail. This is particularly true in a “three-way” mediation, where the defendant’s insurer is participating but is reserving rights, denying coverage, or rejecting defense counsel’s settlement recommendations. These mediations present unique challenges that require a skilled mediator and savvy defense and coverage counsel.
Continue Reading

Michael KornFarella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry. To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.

Our latest installment is with Michael Korn, Managing Principal, Property Practice Leader with Integro Insurance Brokers.
Continue Reading

Larry RebackFarella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry. To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.

Our latest installment is with Larry Reback, Managing Principal, Leader of Policy Response Unit with Integro Insurance Brokers.
Continue Reading