The adage goes, “the best defense is a good offense.” This appears to be the approach that New York insurance regulators are advocating in response to what they deem “systemic risk[s] that occur when a widespread cyber incident damages many insureds at the same time, potentially swamping insurers with massive losses.” On February 4, 2021, the New York Department of Financial Services (“DFS”), which regulates the business of insurance in New York, has issued guidelines, in the Insurance Circular Letter No. 2 (2021) regarding “Cyber Insurance Risk Framework” (the “Guidelines”), calling on insurers to take more stringent measures in underwriting cyber risks. In the Guidelines, DFS cites the 2020 SolarWinds attack as an example of how managing growing cyber risk is “an urgent challenge for insurers.”
A California state court denied an insurer’s motion to dismiss Goodwill Industries of Orange County’s COVID-19 business-interruption claim after an apparent reassessment of how California’s federal courts have applied (or, rather, misapplied) California precedent to COVID-19 cases. The case is Goodwill Industries of Orange County, California v. Philadelphia Indemnity Insurance Co., No. 30-2020-01169032-CU-IC-CXC (Cal. Super. Ct. Jan. 28, 2021).
The Hunton Insurance Recovery Team recently issued a client alert analyzing how two Ohio federal judges ruled on COVID-19 coverage cases.
As previously reported, an Oklahoma state court recently granted summary judgment to the Cherokee Nation for its COVID-19 business interruption claim. The court has now issued a more substantive opinion, establishing the merits of the Cherokee Nation’s claim and providing yet another blueprint for policyholders seeking to recover COVID-19-related losses under “all risk” commercial property insurance policies.
A South Florida restaurant has asked the US Supreme Court to overturn a federal district court’s ruling that the restaurant is not entitled to coverage under an “all risk” commercial property insurance policy for lost income and extra expenses resulting from nearby road construction. In the underlying coverage action, the policyholder, Mama Jo’s (operating as Berries in the Grove), sought coverage under its all-risk policy for business income losses and expenses caused by construction dust and debris that migrated into the restaurant. Should the Supreme Court grant certiorari, the case will be closely watched by insurers and policyholders alike as an indicator of the scope of coverage available under all-risk policies and whether the principles pertinent to construction dust and debris (at issue in Mama Jo’s claim) have any application to the thousands of pending claims for COVID-19-related business interruption losses pending in the state and federal court systems.
Not surprisingly, COVID-19 business interruption insurance disputes dominated media headlines for most of 2020. Nonetheless, there were a number of other insurance rulings that will undoubtedly shape the coverage landscape. Policyholders enjoyed a number of significant wins including significant victories related to COVID-19 business interruption cases. The start of a new year gives us an opportunity to highlight some of 2020’s most notable coverage decisions. A copy of our recently published Year in Review: Top Insurance Cases of 2020 can be found here.
In a resounding victory for policyholders, an Oklahoma state court granted partial summary judgment for the Cherokee Nation in its COVID-19 business interruption claim. The Cherokee Nation is seeking coverage for losses caused by the pandemic—specifically, the inability to use numerous tribal businesses and services for their intended purpose.
Based on the “all risks” nature of the policy and the fortuitous nature of its loss, the Cherokee Nation sought a partial summary judgment ruling that the policies afford business interruption coverage for COVID-19-related losses. The policy provided coverage for “all risk of direct physical loss or damage,” which the Cherokee Nation contended was triggered when the property was “rendered unusable for its intended purpose.” In support of this view, and consistent with established insurance policy interpretation principles, such as providing meaning to every term and reading the policy as a whole, the Cherokee Nation argued that a distinction must exist between “physical loss” and “physical damage.” This distinction demands an interpretation supporting the “intended purpose” reading of the policy language. Thus, the physical presence of COVID-19 depriving the Cherokee Nation of the use of covered property for its intended purpose triggered a covered loss. Continue Reading Cherokee Nation Wins Summary Judgment in COVID-19 Business Interruption Claim
New Jersey’s highest court heard arguments Monday in the appeal of a ruling that the New Jersey Transit Corp.’s (“NJ Transit”) insurers are required to insure $400 million of water damage loss caused by Hurricane Sandy.
The matter stems from an insurance claim NJ Transit made after the super storm rocked the East Coast in 2012. NJ Transit claimed over $400 million in losses as a result of damage to its tracks, bridges, tunnels and power stations. In response, its tower of property insurers took the position that a $100 million flood sublimit applied to limit NJ Transit’s recovery under its insurance tower, not the policy’s $400 million overall limits. Continue Reading New Jersey Supreme Court Hears Insurers’ Bid to Overturn a $400M Decision
The First Circuit recently held that a “Special Hazard and Fluids Limitation Endorsement” was ambiguous and therefore there was excess coverage for a fuel spill that occurred after a tanker-truck overturned.
In Performance Trans. Inc. v. General Star Indem. Co., the First Circuit reversed the District Court’s grant of summary judgment in favor of General Star Indemnity Company. The District Court held that the excess policy General Star issued to Performance Trans. Inc. precluded coverage for a spill that resulted in the leaking of thousands of gallons of fuel. The District Court relied on the existence of a total pollution exclusion to bar coverage and held that the policy’s Special Hazards and Fluids Limitation Endorsement could not create an ambiguity that would afford coverage. Continue Reading First Circuit Rules Excess Insurer Must Provide Coverage for Fuel Spill
From event-driven litigation to government investigations, 2020 has brought a variety of directors’ and officers’ liability exposures arising from the COVID-19 pandemic. Looking toward the new year, we expect that robust D&O insurance programs will remain of critical importance for companies and their officers and directors in 2021 and beyond.