Tagged: “Insurance Coverage Litigation”
In a recent decision, the New Jersey Appellate Division held that six businesses were not entitled to insurance coverage for losses sustained when they were forced to close or limit their operations as a result of Executive Orders (“EOs”) issued by Governor Phil Murphy to halt the spread of COVID-19. This ruling follows the general trend nationally in which courts have rejected claims by insureds for business interruption losses incurred due to government orders related to the spread of COVID-19. The decision arose from the consolidated appeals of six businesses that reported losses as a result of the EOs and sued their insurance companies, alleging they improperly refused to cover the plaintiffs’ insurance claims for business losses sustained due to the issuance of the EOs. All six suits were dismissed with prejudice at the trial level pursuant to Rule 4:6-2(e) for failure to state a claim, because the plaintiffs’ business losses were not related to any “direct physical loss of or damage to” covered properties as required by the terms of their insurance policies. The Appellate Division affirmed all six dismissals and further concluded that the losses were not covered under “their insurance policies’ civil authority clauses, which provided coverage for losses sustained from governmental actions forcing closure or limiting business operations under certain circumstances.”...
Last week, legislation was introduced in the New Jersey Assembly that would require property insurers to cover business interruption losses arising from the COVID-19 pandemic suffered by small businesses (i.e., businesses with less than 100 full-time employees who work 25 or more hours per week). The bill would require coverage for any loss of business or business interruption “due to global virus transmission or pandemic” that is suffered for the duration of the State of Emergency declared by Governor Murphy on March 9, 2020. It appears that such coverage must be provided regardless of existing policy requirements (e.g., direct “physical loss” or “damage”) or potentially applicable exclusions (e.g., the “Virus or Bacteria” exclusion in many policy forms). After an initial favorable vote by the NJ Assembly Homeland Security and State Preparedness Committee, the bill was reportedly withdrawn by its sponsors, but may be amended and reintroduced in the short-term. The bill as initially drafted would provide significant relief to policyholders with small- to medium-sized businesses that may be the hardest hit in what is rapidly developing into a global economic crisis. This would certainly be welcome relief. However, that proposed relief comes with a potential backend cost to all policyholders in New Jersey. While insurers would have the obligation to indemnify policyholders for qualifying loss,...
Is a commercial policyholder able to get insurance under the terms of its computer fraud coverage (typically offered as part of a crime policy) for a fraud based upon information transmitted by email? Not according to the Fifth Circuit’s recent decision in Apache Corporation v. Great American Insurance Company, which vacated the trial court’s judgment and left the policyholder with a $2.4 million uninsured loss. While the opinion is unpublished and therefore should have limited precedential value, it highlights the importance of reviewing your company’s coverage profile in an effort to close potential gaps in insurance coverage for security breaches and other losses involving computer use.
The Federal Trade Commission (“FTC” or “the Commission”) recently confirmed that disclosure of sensitive consumer data as a result of inappropriate data security practices may be deemed an “unfair act or practice” in violation of the Federal Trade Commission Act (“FTC Act”). This decision is important because the FTC reached this conclusion with no evidence of actual economic or physical harm, or any actual health and safety risks as a result of the disclosure. The Commission’s decision is also notable because it emphasizes the FTC’s expanding reach in the regulation of data security.
EIFS litigation is no stranger to New Jersey. EIFS (or “exterior insulation and finish system”) – a popular, post-World War II building system that resembles stucco while simultaneously providing watertight exterior insulation – originated in Europe and migrated to American homes in the late 1960s and early 1970s. According to The New York Times, it was utilized in the construction of “countless homes built in New Jersey,” which meant that the state was deeply affected when it became evident that, installed in a certain way, EIFS trapped water behind its siding and led to crumbling wall sheathing and rampant mold. Nationwide lawsuits ensued and, while a class action settlement was eventually reached with the largest EIFS manufacturer in 2003, New Jersey courts – at every level – returned to EIFS litigation again and again.
Policyholders may still enforce an insurer’s duty to defend under a Commercial General Liability (“CGL”) policy for claims arising out of a data security breach, according to a recent Fourth Circuit decision. While the decision was issued in an unpublished opinion (a mere 18 days after oral argument), the decision represents a significant victory for policyholders seeking insurance coverage for claims arising out of data breaches resulting in the disclosure of personal information.
A recent decision by the New Jersey Supreme Court serves as a strident warning to commercial insureds to make prompt notice of claims under claims-made policies. In Templo Fuente de Vida Corp. v. National Union Fire Insurance Company of Pittsburgh, P.A., the claims-made D&O policy at issue required written notice of a claim “as soon as practicable … and … during the Policy Period.” The insured was served with an underlying complaint on February 21, 2006. It retained defense counsel and filed an answer, but did not provide notice of the claim to its insurer until August 26, 2006 — a delay of six months, yet still within the policy period. The insurer denied coverage for various reasons, including that notice was not provided “as soon as practicable.”
The risks inherent in the maintenance and storage of confidential information present an ongoing challenge to daily operations. Cyber insurance may be an appropriate mechanism to mitigate those risks. But – BUYER BEWARE – broad exclusions and other conditions in a cyber policy can hack into coverage and leave your company uninsured and exposed to significant liability for defense costs, liability payments, and regulatory damages.
The New York Court of Appeals has vacated its recent decision in K2 Investment Group, LLC v. American Guarantee & Liability Insurance Co., reverting to the majority position that an insurer breaching its duty to defend an insured is not barred from relying on policy exclusions to defend a later claim for indemnification. The case originated from a related lawsuit where K2 Investment Group, LLC and ATAS Management Group, LLC (collectively, the “LLCs”) sued an attorney for legal malpractice.
The Pennsylvania Superior Court recently set forth a new standard for determining when an insured must seek the insurer’s consent to settle underlying third-party claims where the insurer had previously offered to defend the insured under a reservation of its right to decline coverage for any adverse judgment that might be entered against the insured later.
