The cyber insurance markets are beginning to adapt to the new California Consumer Privacy Act (CCPA) which went into effect on January 1, 2020.

There is great variation in how cyber insurance policies currently address risks under the CCPA. And further developments are expected as the law begins to impact companies under its jurisdiction—that is, companies that, regardless of their location, are for-profit, collect data from California residents, and either have annual revenue of at least $25 million; or collect, store and/or save the data of at least 50,000 California data subjects; or realize at least half of their revenue from the sale of data.

It is critical that companies subject to the CCPA understand the nuances of cyber insurance policies, and how they may be able to negotiate favorable coverage terms when they buy or renew them this year.

I dive into the CCPA’s impact on insurance policies in an article I co-authored with my Farella colleagues Sushila Chanana and Nate Garhart for TAG Cyber Law Journal. Read the full article, here.

Companies of all sizes have fallen victim to attacks whereby fraudsters will use deceptive communications, such as spoofed emails, to trick an employee into transferring money into the fraudsters’ control. While these increasingly prevalent schemes are an ever-present risk for businesses, the body of case law finding these losses covered under crime insurance policies continues to develop. In a previous post, we discussed decisions from the Second Circuit and Sixth Circuit that have found coverage under crime policies for phishing-related losses. Now, with its decision in Principle Sols. Grp., LLC v. Ironshore Indem., Inc., 944 F.3d 886 (11th Cir. 2019), the Eleventh Circuit has held that such losses are covered by policies insuring against fraudulent instructions. Continue Reading Another Federal Circuit Finds Phishing Loss Covered Under Crime Policy

In an article I wrote for the North Bay Business Journal’s Vine Notes column, I review the issues around insurance coverage for smoke taint damage to grapes and wine. Insurers’ attempted clean lines of distinction can quickly become hazy when it comes to smoke taint. Now that we are just over two years past the 2017 wildfires in Napa and Sonoma, it is a good time to review how this issue is developing.

Read the full article: Wine ‘Smoke Taint’ Blurs Insurance Coverage Distinctions

It is an all-too-common dilemma. As phishing schemes have become more prevalent and more sophisticated, businesses of all sizes have fallen victim to these attacks where a fraudster will use a spoofed email or other deceptive communication to trick an employee into transferring money into the fraudster’s control. While this is a difficult scenario for anyone to face, two decisions from federal circuit courts have offered policyholders some relief by finding coverage for these losses under policies insuring against Computer Fraud. In doing so, these opinions rejected insurers’ arguments that the theft accomplished through these fraudulent emails did not qualify as Computer Fraud or were not losses that were directly caused by Computer Fraud. Continue Reading Are Losses Resulting from Phishing Incidents Covered by Crime Policies Insuring Against Computer Fraud?

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 Reimbursement of Employment-Related Expenses Is Not a “Wage and Hour” Claim Within the Meaning of EPLI Exclusion

In Pitzer College v. Indian Harbor Insurance Company, the California Supreme Court resolved two previously open questions in insurance law: (1) it concluded that the notice-prejudice rule[1] is a fundamental public policy of California, and (2) it concluded that the notice-prejudice rule applies to consent provisions, but only in first-party policies.

This decision provides three primary lessons to insureds. First, when a first-party insurer cites a strict notice provision as a complete bar to coverage, a California policyholder should respond by citing the notice-prejudice rule, even if the policy selects the law of a state that does not follow the notice-prejudice rule. Second, the insured should do the same if a first-party insurer cites a consent provision as a basis to limit coverage for otherwise-covered expenses. In both cases, the notice-prejudice rule may override the choice of law provision and preserve coverage unless the insurer was actually and substantially prejudiced by the delayed notice/consent. Third, in the case of third-party policies, the insured should continue to promptly notify the insurer in the event of a claim and should seek consent before incurring otherwise-covered expenses. The insured should not rely on the notice-prejudice rule to potentially save coverage where it delays notice or fails to seek consent for expenses under a third-party policy. Continue Reading California Supreme Court Ruling Clarifies That the Notice-Prejudice Rule Is a Fundamental Public Policy That May Override Choice of Law Provisions

I recently moderated a Bar Association of San Francisco Insurance Section program co-sponsored with the Cannabis Law Section. The program highlighted recent changes to local insurance requirements and market availability of coverage for cannabis businesses.

Local insurance requirements vary greatly by city and county, and it is important to take this into account—especially if you will be doing business throughout California. While certain coverages are still unavailable (i.e., true outdoor crop insurance) or prohibitively expensive (i.e., quality D&O insurance), one point of optimism is that the insurance market is actually adapting quickly and well to the demand for insurance for this industry. As a result, the panel recommended reviewing and updating your insurance portfolio often with the assistance of a broker who is well versed in the cannabis space. Continue Reading Insurance for the Cannabis Industry Program Takeaways

Tyler Gerking was inducted as a Fellow of the American College of Coverage Counsel’s 7th Annual Meeting in Chicago, Illinois on May 9, 2019. Mary McCutcheon presided over the meeting as she completed her term as President of the College.

The American College of Coverage Counsel (ACCC), established in 2012, is the preeminent association of U.S. and Canadian lawyers who represent the interests of insurers and policyholders. The ACCC’s membership currently stands at over 300 Fellows. Its mission is to advance the creative, ethical and efficient resolution of insurance coverage and extracontractual disputes; to enhance the civility and quality of the practice of insurance law; to provide peer-reviewed scholarship; and to improve the relationships among the members of our profession.

Rounding out Farella’s participation in the College, Jennifer Bentley, a summer associate at Farella in 2018, received First Prize in the ACCC Law School Practical Skills Writing Competition.

Massachusetts Appeals Court Gets It Right – Mostly

Hot on the heels of the Federal Tenth Circuit Court of Appeals’ decision in MTI, Inc. v. Employers Insurance Company of Wausau, __ F.3d __, 2019 WL 321423 (10th Cir. 2019) (about which I wrote earlier this month), the Appeals Court of Massachusetts also found that the phrase “that particular part” as used in exclusions j(5) and j(6) in the CGL policy must be applied narrowly. In All America Ins. Co. v. Lampasona Concrete Corp., 95 Mass. App. Ct. 79 (2019), the court held that damage caused to an underlying vapor barrier and a tile and carpet finish applied on top of the concrete floor slab poured by Lampasona was not excluded from coverage by the j(6) exclusion in the Lampasona’s policy. The court found that Lampasona did not install the vapor barrier or the tile/carpet, so they were not “that particular part” on which Lampasona was working.

Continue Reading “That Particular Part” – Yet More

Insurers often claim “economic damages” are not covered under a standard commercial general liability (CGL) policy. The Fourth District Court of Appeal’s decision in Thee Sombrero, Inc. v. Scottsdale Ins. Co., 28 Cal. App. 5th 729, 736 (2018) review and request to depublish denied (Jan. 30, 2019), demonstrates that “loss of use” can be measured by “economic damages”—i.e., loss in profit or diminution in value—so long as they are tied to a property interest.

In Thee Sombrero, Inc., the insured’s negligent security services resulted in the revocation of Thee Sombrero’s permit to use its property as a night club after a patron was allowed to enter without passing through the metal detector, resulting in a fatal shooting. Thee Sombrero sued the security company, and obtained a default judgment. Thee Sombrero then pursued Scottsdale to satisfy the judgment. The trial court found in favor of Scottsdale, but the Court of Appeal reversed, finding that “the loss of the ability to use the property as a nightclub is, by definition, a ‘loss of use’ of ‘tangible property.’ It defies common sense to argue otherwise.” Id. Continue Reading Damages for Permit Revocation Constitute Covered “Loss of Use”