This year, like last, the National Oceanic and Atmospheric Administration predicts an extremely active hurricane season. As we write this post, the Gulf Coast, Mid-Atlantic, New York, and New England regions are still recovering from the devastation Ida has left in her path. Now is the time to ensure your insurance program is hurricane-ready. As reported in the client alert linked below, our insurance coverage team provides critical steps that you should take now to ensure that you protect your assets and maximize recovery in the unfortunate event of a hurricane claim.
Continue Reading Before and After the Storm: Know Your Insurance Rights, Coverages and Obligations

A federal court in New York denied an insurer’s attempt to dismiss a coverage dispute, rejecting the insurer’s contention that the individual insured directors were “necessary” parties. The insurer argued that, because the outcome of the coverage suit could jeopardize the directors’ indemnity and thereby implicate the D&O policy’s Side A coverage for non-indemnified losses, the directors had an indispensable interest in the litigation. The court disagreed.

The coverage dispute in LRN Corp. v. Markel Insurance Co., 1:20-cv-08431 (S.D.N.Y. Aug. 23, 2021), arose from an underlying lawsuit in the Delaware Chancery Court brought by an LRN shareholder against the company and three of its directors. The plaintiff in the underlying lawsuit alleged that a self-tender offer by LRN to acquire shares of LRN’s common stock was coercive and part of a scheme that was in part orchestrated by the LRN’s directors. LRN, though dismissed from the underlying lawsuit, continued to pay legal fees for the named directors.
Continue Reading Insured Directors Not “Necessary” for Complete Adjudication of Insurer’s Coverage Obligations

The Superior Court of Delaware held that a directors and officers liability insurer must advance defense costs to a mortgage broker targeted in a federal government investigation of alleged False Claims Act violations. In Guaranteed Rate, Inc. v. ACE American Insurance Company, No. N20C-04-268 MMJ CCLD (Del. Sup. Ct. Aug. 18, 2021), Guaranteed Rate received a Civil Investigative Demand from federal authorities in June 2019 regarding the company’s underwriting and issuance of federally-insured mortgage loans. Eleven days later, Guaranteed Rate provided notice of the CID under a private company management liability policy issued by ACE American Insurance Company.
Continue Reading D&O Insurer Must Fund $18 Million Defense of Mortgage Broker in Fed’s Investigation of False Claims Act Violations

The Seventh Circuit has reversed a lower court’s decision to dismiss a lawsuit against Federal Insurance Company and a health insurance technology company for unauthorized robocalls soliciting the sale of health insurance. The court emphasized that the complaint, which alleged the two companies were vicariously liable for the calls, pled sufficient detail to move forward.
Continue Reading Robocalling Suit Against Insurer Survives and Illustrates Proper Application of Federal Pleading Standards

On Tuesday, a New Hampshire trial court awarded summary judgment to the owner of scores of hotels after finding that the hotels sustained covered “physical loss of or damage to” insured property caused by the pandemic presence of COVID-19 and its viral agent, SARS-CoV-2. The merits ruling is yet another recent victory for policyholders who continue to make headway against an early wave of insurance company dismissals, most of which, unlike the ruling on Tuesday, never considered evidence in support of their decisions.
Continue Reading New Hampshire Court Finds Hoteliers Sustained Covered COVID-19 BI Loss

In 2020, Americans faced a shortage of toilet paper. This year, companies face a shortage of microchips. Microchips are a crucial component in a growing number of electronic products, everything from smartphones to cars and household appliances. As the shortage trickles down the supply chain, downstream businesses are now unable to obtain the microchips or other components they need to make their products. This forced companies to slow or, in some cases, totally shut down their production lines until the supply of microchips can be restored. These slowdowns and closures have led to substantial losses of income for affected businesses. Fortunately, insurance coverage is likely available for these types of business income losses.
Continue Reading Can’t Find Microchips? Insurance May Help Ease the Pain

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.

Continue Reading Insurer ‘Burned’ by Illinois Supreme Court Decision Regarding Tanning Salon’s Coverage for Biometric Information Disclosure

The Northern District of New York recently awarded summary judgment to insurer Affiliated Factory Mutual Insurance Co. against Mohawk Gaming Enterprises, a casino and resort operated by the Saint Regis Mohawk Tribe located on the border of New York and Canada. Mohawk Gaming sued AFM seeking recovery of business income losses due to the COVID-19 pandemic. In granting the insurer’s motion, however, the court failed to consider all parts of the AFM policy, as required under New York law, and failed to afford meaning to specific language contained in the policy’s two communicable disease sections, each of which specifically contemplate that “communicable disease,” as defined and covered under the AFM policy, can cause loss and damage to property. Instead, the court followed other decisions from “numerous courts around the country,” each of which is based on inherently flawed reasoning (e.g., reliance on cases where no presence of virus was alleged or cases that clearly and broadly excluded loss caused by virus), to conclude that the presence of virus “is insufficient to trigger coverage when the policy’s language requires physical loss or physical damage.” In fact, a federal court in Texas recently rejected the very same reasoning employed in Mohawk Gaming after recognizing that the FM/AFM policy form “is much broader than [others] and expressly covers loss and damage caused by ‘communicable disease.’” See Cinemark Holdings, Inc. v. Factory Mut. Ins. Co., No. 4:21-cv-00011 (E.D. Tex. May 5, 2021).

Continue Reading New York Federal Court Ignores Policy’s Uniquely Broad Wording in Favor of Following the Herd

In September, we discussed a Florida district court’s finding that an insurer must defend a Miami strip club in a lawsuit filed by 17 models who alleged the club used their images to promote its business without authorization. Recently, an Illinois federal judge ruled similarly, ordering that First Mercury Insurance Company defend its insured, Triple Location, against a similar lawsuit.

In First Mercury Insurance Co. v. Triple Location LLC, three models sued the insured strip club after it allegedly published their images without consent. The models claimed the unauthorized postings created the false impression that they had agreed to promote the insured business, Club O, which harmed their image, brand, and marketability. The models also alleged that the club was negligent in failing to adopt and implement policies and procedures to prevent the misappropriation of images.


Continue Reading Insurer Must Bare All and Defend Strip Club Against Infringement Claims