Insurance Operations in a Cyber World
Richard M. Borden, Joshua A. Mooney and Mark Greisiger
- You are the front lines of cybersecurity; being aware of potential problems is critical.
- Be paranoid. Your organization has a lot of valuable data, so you are a target.
- If you see something, report it, even if you think it is probably not a big deal.
MASTERS CLASS I
A. The Impact of #MeToo on Employment Claims
Nancy Conrad and James P. Anelli
- The #MeToo movement matters. The increased dialog around sexual harassment has led to an increase in activity at the U.S. Equal Employment Opportunity Commission (EEOC). For example, sexual harassment lawsuits filed by the EEOC in fiscal year 2018 show more than a 50% increase from the prior fiscal year. Charges filed with the EEOC alleging sexual harassment in fiscal year 2018 demonstrate a 13.6% increase from the prior fiscal year.
- State laws are rapidly changing in response to #MeToo. New and developing laws in several states add additional employer and supervisor duties, and potential liability. For example, the NYC Human Rights Law protects all individuals against discrimination based on gender, including sexual harassment in the workplace, and can carry civil penalties against violators of up to $250,000. States are also passing laws mandating that employers provide interactive sexual harassment training to all employees and supervisors, including Delaware, New York and New Jersey; Pennsylvania will likely follow. Many states are also introducing laws that place limitations on confidentiality in settlements of sexual harassment complaints.
- Summary judgment is less likely in the wake of #MeToo. Courts have held that the reasonableness of the employer’s response to harassment and an employee’s action (or inaction) is a question to be determined by a jury. This will likely lead to more trials.
B. M&A Shareholder Litigation and Bump-Up Claims: What’s a D&O Insurer to Do?
David J. Creagan and Justin K. Fortescue
- M&A objection litigation is not going away: the majority of public-company M&A deals will be challenged in court.
- Policy wording is important: make sure the “bump-up” wording clearly expresses the underwriting intent.
- Managing expectations: if feasible, correct any misconceptions the policyholder or broker may have about coverage of bump-up claims.
- Consistent messaging: ensure that underwriters, claims handlers and brokers are on the same page.
C. Navigating Construction Claims: How Recent Cases Impact Coverage Obligations
Anthony L. Miscioscia, Eric B. Hermanson and Timothy A. Carroll
- Jurisdiction really matters. There still are material differences between states as to when, if at all, an insurer must defend a claim pre-suit, whether consequential damages caused by faulty workmanship are caused by an occurrence, what trigger of coverage applies to construction defect claims, when/how exclusions apply and whether/when an insured is entitled to independent counsel.
- Courts’ views are continuing to evolve and perhaps change. Insureds continue to fight for coverage for construction claims. And some courts, from Pennsylvania to Washington, are addressing these issues and could in the coming year either clarify or alter some of the current rules.
- Take a long view to claims. In construction defect claims, insureds and insurers often have different interests in a particular claim – based on whether there are multiple policies, significant deductibles/SIRs, additional insured rights or obligations and primary/excess coverage issues. What may be advantageous to argue in one claim may not be to that insured’s/insurer’s benefit in another.
D. Long-Tail Exposure Insurance: An Update on Coverage Issues Concerning Asbestos/LTE/Environmental Claims and a Look at Emerging Issues
Robert F. Walsh, Gregory S. Capps and Ciaran B. Way
- New issues still arise. For example, in a case of first impression, the Connecticut Supreme Court enforced an occupational disease exclusion in the context of asbestos bodily injury claims.
- Even in jurisdictions where the law is “settled,” continue to pay attention to applicable law and facts that may distinguish your case.
- New types of claims and contaminants continue to develop in the long-tail arena; for example, there is a growth of sexual abuse claims resulting from extended statutes of limitation, along with a rise in claims involving cosmetic talc and PFAS.
MASTERS CLASS II
A. Revivers, Statutes of Limitations and Vanishing Immunity in the Face of Mass Torts
Michael O. Kassak and Luke A. Repici
- New, 21st-Century Mass Torts are prompting many state governments to take actions expanding claimants rights to bring lawsuits involving conduct which occurred decades ago.
- While the specific actions differ by jurisdiction, the majority of states have enacted or are considering reviver statutes, extended statutes of limitations and/or narrowing or eliminating existing immunities.
- These previously barred or expired claims raise a whole host of coverage issues, from the seemingly simple (e.g. locating policies) to the complex (e.g. determining what policies are triggered and the number of occurrences).
B. Appraisals: An Efficient Way to Determine the Amount of the Loss or a Trap for the Unwary?
Edward M. Koch and Marc Penchansky
- Consider invoking appraisal for covered claims when the parties disagree on the scope and value of the claim.
- Make sure you get the right appraiser (i.e. one who is sufficiently qualified and independent) who will advocate for a reasonable position.
- Once returned, appraisal awards are usually final except in very narrow circumstances (e.g. fraud, bias, if the award extends beyond the scope of the appraisal, etc.)
C. Know Your Reinsurance Contract: Special Clauses and Endorsements
Daryn E. Rush and Zachery Roth
- Reinsurance contract language can vary widely, and even slight variations can have a significant impact.
- Don’t assume that all of your company’s contracts are the same. Even renewal wordings may contain different language.
- READ THE CONTRACT!
D. Data Security to Data Privacy: What This Means for Cyber/Tech Coverage
Richard M. Borden, Joshua A. Mooney and Andrew G. Lipton
- D&O securities class action claims are being filed at continuously higher rates year after year. Many of these claims are “event-driven,” i.e. the stock market’s reaction to a negative event involving a company. Because of this, even before any regulations or comment by the SEC, cybersecurity events give rise to possible D&O exposure because the negative stock price reaction to the public revelation of a data breach (such as in Equifax and Marriott) can and do lead to securities class action claims that are expensive to defend even if the cases are meritless.
- The SEC’s cybersecurity guidance in February and October 2018 makes cybersecurity risk a financial risk, and the SEC seeks to regulate cybersecurity issues through the C-suite through disclosures, similar to financial disclosures in connection with Sarbanes-Oxley. Therefore, the plaintiff class action bar will seize upon this guidance as a basis for showing in any D&O class action that the directors and officers of a given company are under an obligation, per the SEC, to disclose cybersecurity events, readiness and risk.
- Insurance policies that may typically respond to cybersecurity events (such as Cyber and/or Tech E&O insurance policies) may not provide coverage for costs incurred in connection with regulatory investigations under new privacy statutes like the CCPA and BIPA. That is because many cyber/Tech E&O policies require some sort of data breach or unauthorized access of data to have occurred before any regulatory investigation coverage is triggered. This may become a problem because investigations commenced under statutes like CCPA and BIPA may not involve data breaches at all.
MASTERS CLASS III
A. Bankruptcy 101: What Every Claims Professional Needs to Know About Bankruptcy
Heidi J. Sorvino and Amy E. Vulpio
- Don’t panic when your insured files for bankruptcy, but do understand the difference between Chapter 7 liquidation and Chapter 11 reorganization and stay on top of deadlines set by the Bankruptcy Court.
- Don’t violate the bankruptcy stay (e.g. by cancelling a policy without seeking stay relief or the debtor-insured’s consent). The bankruptcy stay is the insurers’ friend because it halts litigation against the debtor-insured!
- In Chapter 11 cases, do review the debtor-insured’s bankruptcy plan to find out how your policies will be treated and who will be around post-confirmation to fulfill the debtor-insured’s obligations thereunder.
B. Summer Is Coming: The Stark Facts About Climate Change (What Every Insurer Should Know)
John S. Anooshian, Sean P. Mahoney and R. Victoria Fuller
- Climate Change lawsuits are on the rise: more than 1,200 climate change suits have been filed in more than 30 jurisdictions around the world, including the U.S., the U.K., the European Union, Australia, Brazil, New Zealand, Canada, Spain and India.
- Climate Change lawsuits are raising many of the same liability and coverage issues implicated by the previous waves of tobacco and pollution litigation. In particular, there are significant coverage questions relevant to almost all types of insurance policies implicated as to whether and to what extent insured companies and their executives had knowledge of the alleged harm caused by climate change.
- Climate Change is a reality for underwriters: many large insurers are building underwriting teams of climatologists, statistical modelers and computer scientists to revamp their risk models to account for climate change, and they are beginning to focus on much more recent climate data in assessing risk. This shift in risk analysis may result in higher premiums, climate change liability exclusions or a significant reduction in the availability of insurance in certain regions.
C. How to Succeed in Dismissing Your Case Without Really Trying: Little-Known Ways to Obtain an Early Dismissal
Geoffrey F. Sasso and Mark Paladino
- There are various little-known nuances in the law that can create an avenue to dismissal of an action, including bankruptcy disclosure and business registration requirements and a failure to prosecute. Knowing those nuances can pay big dividends.
- There may be non-traditional ways to posture a case for a dispositive motion in a more advantageous forum and/or at an atypical time, and you should always be considering the best ways to obtain those tactical advantages.
- Cases regularly present roadblocks to dismissal. However, there may be ways to reach your goal through out-of-the-box thinking, vigilance, creativity and calculation.
D. Issues in Punitive Damages
Robert G. Devine and James D. Burger
- Punitive damage claims are becoming more common, especially in high exposure cases, and the question is reaching the jury more frequently.
- Coverage for punitive damages requires a case-by-case analysis and depends on jurisdiction and type of claim.
- Counsel should create and preserve appellate issues as part of litigation strategy in punitive damage cases.
- Careful consideration should be given to how a punitive damage issue is presented to the jury on the verdict sheet.
- Tort reform is an effective solution and can provide protection against runaway punitive damage claims.
Bad Faith Advice from the Professionals
Michael S. Olsan, Craig E. Stewart, Regan Shulman, and Helen K. Michael
- Nothing will incite a policy holder to bring a bad faith claim more than for the insurer to categorically deny a duty to defend: before a reasonable investigation of the facts, or without any consideration of whether at least part of the claim is covered.
- The second leading cause for bringing a bad faith claim is the insurer’s delay: in determining coverage, in investigating the claim and in negotiating a reasonable settlement.
- To avoid bad faith damages, know the law and practice of the jurisdiction where the underlying case will be tried; maintain close contact with the insured, don’t delay and be reasonable.
Road Trip Through the CGL Policy
Randy J. Maniloff
- When considering coverage litigation, insurers must factor in the possibility of being saddled with their policyholder’s attorney’s fees. About 45 states allow in some manner for the possibility of an insured recovering its attorney’s fees if successful in coverage litigation.
- 92% of the words in the definition of “property damage” addresses its “loss of use” aspect. It can be easy to overlook this and focus on “physical injury” to tangible property, which is the more commonly thought-of aspect.
- Duty to defend is often thought of in terms of the four corners of the complaint being the basis for the determination, but the majority of states require an insurer to also consider extrinsic evidence when determining if it owes a defense to its insured.
This information should not be construed as legal advice or legal opinion on any specific facts or circumstances. Prior results do not guarantee a similar outcome. The contents are intended for general informational purposes only, and you are urged to consult a lawyer concerning your own situation with any specific legal question you may have.
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