Government investigations can be expensive endeavors for businesses. The availability of insurance coverage, which may help reduce those costs, can turn on whether the government investigation qualifies as a “claim” under the policy. Two recent decisions exemplify this issue.
A California state court recently rejected an excess insurer’s attempt at an early exit from litigation over whether it owes coverage for cyber liabilities. In that case (previously summarized here), the policyholder, Cottage Health, suffered a data breach resulting in the disclosure of patients’ private medical information. Subject to a reservation of rights, Cottage Health’s primary insurer, Columbia Casualty, paid millions of dollars to help respond to the data breach and to defend and settle a class action lawsuit filed against Cottage Health. Cottage Health’s excess insurer was Lloyd’s.
In Universal Cable Productions LLC, et al. v. Atlantic Specialty Insurance Co., No. 2:16-cv-04435 (C.D. Cal. Oct. 6, 2017), the United States District Court for the Central District of California held that a “war” exclusion barred insurance coverage for losses arising from NBCUniversal’s decision to postpone and relocate production of its action-thriller miniseries Dig, due to an armed conflict between Israel and Hamas. During the conflict, Hamas and other militant groups fired over 4,000 rockets and mortar shells into Israel, forcing NBCU to halt filming in Jerusalem and move production to Croatia and New Mexico.
Earlier this week, Canada’s transport minister announced that a drone had collided with a commercial aircraft, the first confirmed collision of its kind in North America. Thankfully, the aircraft sustained only minor damage and was able to land safely. But this recent incident, which many commentators believed was inevitable given the proliferation of consumer and commercial drones, highlights the potential risks associated with drone operations.
The Sports Litigation Alert has published an article written by Hunton & Williams insurance recovery attorneys Lorelie S. Masters, Michael S. Levine, and Tae Andrews. The article, entitled “Recent Catastrophic Storms Emphasize the Need for Event-Cancellation Insurance for Professional Sports Organizations,” originally ran in the October 13th issue of the Alert. In the article, Masters, Levine, and Andrews discuss the need for event-cancellation insurance for games and other events held in professional sports organizations’ stadiums.
In an article appearing in Law360, Hunton & Williams insurance partner, Michael Levine, weighs in on Office Depot’s pending Ninth Circuit appeal of a district court ruling that Office Depot is not entitled to coverage for a California False Claims Act case alleging that the office supply chain overbilled public agency customers. The decision is premised on a finding that California Insurance Code Section 533 — which precludes coverage for a policyholder’s willful acts — applies to the entire underlying CFCA action, including allegations of reckless and negligent conduct. But as Levine points out, the district court made the “fundamental error” of presuming that Office Depot had actually been found liable for a violation of the CFCA, when it had not. Section 533 requires “more than the mere allegation” of a willful act by a policyholder, he said. Levine goes on to explain the danger in affirming such an erroneous ruling is that “it creates a dilemma for policyholders, because even the mere allegation of a CFCA violation would be barred from coverage [even though n]othing in Section 533 suggests it was intended to have such a broad preclusive effect.”
A Missouri appellate panel recently upheld a lower court’s ruling in favor of the insured that an “all-sums” allocation would apply to determining exhaustion of the insured’s liability insurance coverage and, in so holding, rejected the pro-rata, proportional allocation sought by the insurers. The appellate panel further held that coverage could be exhausted vertically.
In their new article for FC&S Legal, Hunton & Williams attorneys Lorie Masters, Syed Ahmad, and Jennifer White discuss critical questions that must be answered when assessing and protecting against cyber risk in the financial sector. The article is available here.
A recent decision highlights the need for businesses to carefully consider the applicability of insurance coverage across borders. In this case, the owners of an Idaho restaurant traveled to Thailand for business related to the restaurant. While in Thailand, thieves stole uniforms and decorations from the owners, who then submitted an insurance claim. The insurer denied the claim because the policy only covered property within the “coverage territory,” which was limited to the U.S., its territories, and Canada.
In prior posts (here and here), we have highlighted some potential coverage concerns for losses arising out of the use of blockchain technology. However, as previously reported, Blockchain technology’s relevance to insurance is not limited to coverage for losses. In fact, earlier this week, the Blockchain Insurance Industry Initiative known as B3i expanded its membership to include heavyweight insurance companies like Chubb, AIG, and Gen Re as well as notable insurance and reinsurance brokers like Marsh, Guy Carpenter, Willis Re, and JLT Re.