The construction industry is no stranger to insuring its projects against the risks of physical and natural disasters. Policies purchased to cover these risks, however, often are not broad enough to reach cyber threats, which can be just as damaging and costly as a physical disaster. During the past decade, hacks have targeted the data held by several high profile companies, including Target Corp., Sony Corp., Equifax Inc. and Yahoo Inc. So far, the construction industry has not yet been at the center of one of these attacks. Still, builders are no less susceptible to these risks than any other industry, especially given that these companies often possess sensitive data related to buildings and projects.
On May 10, 2018, the Eleventh Circuit Court of Appeals affirmed a Northern District of Georgia decision barring coverage for a loss claimed to arise under a “Computer Fraud” policy issued by Great American Insurance Company to Interactive Communications International, Inc. and HI Technology Corp. Interactive Commc’ns Int’l, Inc. v. Great Am. Ins. Co., No. 17-11712, 2018 WL 2149769 (11th Cir. May 10, 2018). InComm sells “chits,” each of which has a specific monetary value to consumers who can redeem them by transferring that value to their debit card. To redeem a chit, a consumer dials a specific 1-800 number and goes through a computerized interactive voice system. InComm lost $11.4 million when fraudsters manipulated a glitch in the system by placing multiple calls at the same time. This allowed consumers to redeem chits more than once. InComm sought coverage for these losses under its “Computer Fraud” policy.
On April 13, 2018, the Superior Court of New Jersey, Appellate Division, affirmed a trial court decision finding that a bill of sale intended to include the transfer of insurance rights and finding that such transfer did not violate an anti-assignment clause. Cooper Industries, LLC, Plaintiff-Respondent, v. Columbia Casualty Company And One Beacon America Insurance Company, Defendants-Appellants, and Employers Insurance Of Wausau, Allstate Insurance Company, Lexington Insurance Company And Westchester Fire Insurance Company, 2018 WL 1770260,(N.J. Super. A.D., 2018). In May 1986, Cooper Industries merged several entities and transferred assets to a “new” McGraw-Edison Company through a bill of sale. Eighteen years later, on November 30, 2004, Cooper Industries merged the new McGraw-Edison company into itself. In 2009, the Environmental Protection Agency determined that Cooper Industries was responsible for generating and disposing of hazardous substances due to McGraw-Edison’s actions taken years earlier. Cooper Industries sought coverage under the commercial general liability policies McGraw-Edison had in place at the time of the environmental and pollution-related occurrences.
On April 20, 2018, the Eleventh Circuit affirmed an Alabama district court decision finding that an “absolute pollution exclusion” did not bar coverage for environmental property damage and injuries from a sewage leak. Evanston Ins. Co. v. J&J Cable Constr., LLC, No. 17-11188, 2018 WL 1887459, (11th Cir. Apr. 20, 2018).
In a ruling earlier this month, an Eleventh Circuit Court of Appeals judge ruled in Scott, Blane, and Darren Recovery L.L.C., Anova Foods Inc. v. Auto-Owners Insurance Co., No. 17-12945-E, 2018 WL 1611256 (11th Cir. 2018), that an insurer did not have a duty to defend and indemnify its insured in a false marketing suit. Anova Food Inc. was sued by its competitor, King Tuna, for allegedly falsely asserting in its advertising that it treated tuna meat with a smoking process using filtered wood chips. King Tuna claimed that, in reality, Anova treated its tuna with synthetic carbon monoxide. In finding that King Tuna’s lawsuit did not trigger Auto-Owner’s duty to defend, the court held (1) that the lawsuit did allege a covered “advertising injury”; (2) that coverage was excluded under the policy’s “failure to conform” exclusion; and (3) coverage was barred by Anova’s untimely notice of the lawsuit.