In a prior post, we predicted that novel coronavirus (COVID-19) risks could implicate D&O and similar management liability coverage arising from so-called “event-driven” litigation, a new kind of securities class action that relies on specific adverse events, rather than fraudulent financial disclosures or accounting issues, as the catalyst for targeting both companies and their directors and officers for the resulting drop in stock price. It appears that ship has sailed, so to speak, as Kevin LaCroix at D&O Diary reported over the weekend that a plaintiff shareholder had filed a securities class action lawsuit against Norwegian Cruise Line Holdings, Ltd. alleging that the company employed misleading sales tactics related to the outbreak.

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The CDC reports that, as of the end of last week, the coronavirus disease had spread through China and to 31 other countries and territories, including the United States, which has now seen its first two related deaths. The public health response in the United States has been swift and includes travel advisories, heightened airport screening, and repatriation and quarantine of potentially infected individuals. Outside the United States, countries like China, Italy, and South Korea have implemented more severe measures to combat the disease. From smart phones to automobiles, coronavirus has major short- and long-term implications for public and private companies facing potentially significant supply chain disruptions, store and office closures, and other logistical issues. These business losses, however, may be covered by insurance. Below are several key insurance considerations for policyholders to contemplate when evaluating the availability of insurance coverage for coronavirus-driven losses.

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A New York appellate court recently held that renewable bio-diesel fuel manufacturer BioEnergy Development Group LLC may pursue tens of millions of dollars in damages from its insurers under two all-risk insurance policies, including amounts in excess of the policy limits, where the insurers refused to pay claims in a timely manner.

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A Florida district court recently held that an insurer wrongfully refused to defend a Miami-based strip club in a lawsuit filed by 17 models claiming that the club used their images to promote its business without their authorization. The insurer was required to defend the club for allegations of defamation under the policy’s personal and advertising coverage even though 16 of the 17 plaintiffs’ claims alleged conduct outside the covered policy period and no plaintiffs brought a cause of action for “defamation.” The decision highlights the broad duty to defend, in Florida and elsewhere, that policyholders should emphasize when pursuing coverage.

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Real estate investment trust VERIET, Inc. (formerly known as American Realty Capital Properties) announced this week that it agreed to a $765.5 million settlement to resolve shareholder class action and related lawsuits arising from a host of alleged securities violations and accounting fraud at ARCP since the company went public in 2011. Defendants in the class action settlement have agreed to pay more than $1 billion in compensation, including millions from ARCP’s former manager and principals, chief financial officer, and former auditor.

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The Seventh Circuit recently withdrew its controversial opinion that broadly interpreted an exclusion in Emmis Communications Corporation’s D&O policy, thereby barring coverage for losses in connection with claims of circumstances “as reported” under Emmis’ other insurance policy. The reversal, while very rare, was the correct result that alleviated concerns about the chilling effect the court’s broad reading of the exclusion may have on policyholders’ decisions to provide notice under all potentially applicable insurance policies.

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Recent reports of another social engineering scam, this time at a North Carolina public school system, demonstrates why public entities and companies, alike, need to regularly review their cyber vulnerabilities and potential exposures and ensure that their cyber insurance is properly tailored for their specific risks.

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Following a six-day trial, a Texas jury found that Great American Insurance Company breached its policy with a hydraulic fracturing company and engaged in unfair settlement practices when it refused to pay for loss the company sustained in a well accident. The decision highlights the need to vigorously pursue coverage using all information available and the benefits of leveraging state statutory protections governing unfair claims settlement practices to ensure that insurers handle claims in a prompt, fair, and reasonable manner.

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A federal appeals court reversed an auto parts manufacturer’s summary judgment win, construing a policy limitation on flood hazards to apply broadly to all types of losses, even though the limit “does not expressly say what losses it limits.” In Federal-Mogul LLC v. Insurance Company of the State of Pennsylvania, manufacturer Federal-Mogul suffered more than $60 million in property and time-element losses following a 2011 flood in one of its factories in Thailand. Federal-Mogul submitted a claim to its insurer, but the insurer refused to pay more than $30 million because the flood occurred in a high hazard flood zone, to which the insurer argued a sublimit in the policy applied.

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A federal court in Pennsylvania has held that Liberty Mutual must defend its insured, Hershey Creamery Company, in an intellectual property infringement lawsuit because the suit raises claims that potentially implicate coverage under the policies’ personal and advertising injury coverages. The court further found that the alleged wrongful conduct was not subject to the policies’ IP infringement exclusion.

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