On May 20, 2021, the Supreme Court of Illinois upheld the state appellate decision finding that that West Bend Mutual Insurance Company must defend its insured, a tanning salon, against a class-action lawsuit claiming violation of the Biometric Information Privacy Act (BIPA) under two business owners’ liability policies.
As we reported in a prior blog, on August 14, the Judicial Panel on Multidistrict Litigation rejected plaintiffs’ request for a consolidation of all COVID-19 insurance coverage federal litigation, agreeing to consider mini-MDLs as respects five specific insurers, which accounted for roughly one-third of the federal cases. On October 2, the Panel rejected the concept of mini-MDLs as respects four of these five insurers and accepted an MDL for the fifth insurer.
At the outset, the Panel agreed with plaintiffs that each of the proposed mini-MDLs presented common legal and factual questions about the drafting and interpretation of the respective insurer’s insurance policy forms. However, the Panel ultimately concluded that consolidation would not be the most efficient course of action for federal suits against The Hartford, Travelers, Cincinnati Insurance Co., and Lloyd’s of London. As it explained, because COVID-19 and the resulting government closures have placed many policyholders on the brink of bankruptcy, efficiency needed to be the litigation’s primary goal. The time it would take a transferee court to organize a centralized action accommodating laws of a multitude of states would undermine that goal, especially where dispositive motions addressing policy interpretation questions are already briefed and pending. The Lloyd’s suits faced the additional efficiency hurdle of multiple syndicates with multiple policy forms, putting a single, discrete question of policy interpretation out-of-reach.
However, the Panel did see fit to centralize over 30 lawsuits against Society Insurance Co. The Panel based its deviation on the limited geographical scope of the lawsuits against Society, which only implicated insurance law of six states, making the action more manageable than the nationwide cases facing the other insurers. The Panel left the door open for further streamlining measures in the Society case, like establishing “state-specific tracks” or choosing already-briefed motions as “bellwether motions” upon which to decide threshold policy interpretation issues. The Panel transferred the Society suits to Judge Edmond E. Chang in the Northern District of Illinois, who was already handling a number of these cases.
The Panel’s ruling brings to a close the COVID-19 MDL saga for at least five insurers and their policyholders, as the actions will proceed separately in courts nationwide. To the extent other federal courts were delaying proceedings pending the Panel’s decision, those actions should also resume.
Hunton Insurance partners Syed Ahmad and Michael Levine were interviewed by Law360 for its year-end article discussing the top insurance rulings in 2019, for their insights on two of the year’s biggest insurance decisions.
In Ferguson v. St. Paul Fire and Marine Insurance Co., the Missouri Court of Appeals, Western District, found that a public entity liability policy covered the injuries sustained by a man that had been wrongfully convicted, notwithstanding that the policy was issued years after the relevant prosecution. The court’s ruling is in stark contrast to the Illinois Supreme Court’s recent decision in Sanders v. Illinois Union Insurance Co., No. 124565, 2019 WL6199651 (Ill. Nov. 21, 2019), the subject of a prior blog, where the court found that it was the policies in place at the time of the wrongful prosecution that provided coverage for the offense. In our earlier blog, we discussed the costly consequences the Sanders decision could impose on policyholders in Illinois. Although reaching an opposite conclusion than Sanders, Ferguson is based on different policy language and, ultimately, does not appear to be inconsistent with the Sanders decision. While certainly a welcomed decision from a policyholder’s perspective, Ferguson and Sanders highlight the importance that policy wording can play in defining the scope of an insurance program and how similar factual scenarios can result in drastically different coverages based on seemingly minor differences in policy wording. A copy of the Ferguson decision can be found here.
The Illinois Supreme Court’s recent decision in Sanders v. Illinois Union Insurance Co., 2019 IL 124565 (2019), announced the standard for triggering general liability coverage for malicious prosecution claims under Illinois law. In its decision, the court construed what appears to be a policy ambiguity against the policyholder in spite of the longstanding rule of contra proferentem, limiting coverage to policies in place at the time of the wrongful prosecution, and not the policies in effect when the final element of the tort of malicious prosecution occurred (i.e. the exoneration of the plaintiff). The net result of the court’s ruling for policyholders susceptible to such claims is that coverage for jury verdicts for malicious prosecution – awarded in today’s dollars – is limited to the coverage procured at the time of the wrongful prosecution, which may (as in this case) be decades old. Such a scenario can have costly consequences for policyholders given that the limits procured decades ago are often inadequate due to the ever-increasing awards by juries as well as inflation. Moreover, it may be difficult to locate the legacy policies and the insurers that issued such policies may no longer be solvent or even exist. A copy of the decision can be found here.
In an article appearing in Law360 on August 8, 2019, Hunton insurance partner, Syed Ahmad, provided insight into three recent significant D&O insurance decisions.
May 25, 2018 should be a day circled on many company calendars. On that day, the European Union’s long-awaited Global Data Protection Regulation (“GDPR”) will go into effect. It is crucial for U.S. companies to prepare for the GDPR, as they, too, will be required to comply with a new set of data privacy rules if they are handling data from EU-based customers, suppliers, or affiliates. As long as you collect personal or behavioral data from someone in the EU, you must comply with the GDPR.
Since our first report last year, Lemonade Insurance, a tech start-up that planned to offer peer-to-peer insurance products, has launched in four states, offering homeowners and renters insurance in New York, California, Illinois, and New Jersey. Lemonade’s cutting-edge use of technology and its alternative business model could prove disruptive to the insurance industry.
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.”
Notwithstanding the absence of a congressional war declaration since Japan bombed Pearl Harbor, Zurich American Insurance Company has invoked a “war exclusion” in an attempt to avoid covering Illinois snack food and beverage company Mondelez International Inc.’s expenses stemming from its exposure to the NotPetya virus in 2017. The litigation, Mondelez Intl. Inc. v. Zurich Am. Ins. Co., No. 2018-L-11008, 2018 WL 4941760 (Ill. Cir. Ct., Cook Cty., complaint filed Oct. 10, 2018), remains pending in an Illinois state court. Continue Reading Zurich Invokes War Exclusion in Battle Over Coverage for NotPetya Attack