Insurers face a potential double whammy when it comes to cybersecurity threats. Like other companies, they must be vigilant about protecting the sensitive data they collect and store from hacks and breaches. On the other hand, insurers also are responsible for paying for claims when a breach occurs. Insurers are scrambling to craft new coverages in the wake of new risks and liabilities, while insurance regulators are scrambling to implement enhanced regulations requiring ... Keep Reading »
McCarran-Ferguson Lands a Jab on the FAA
As we reported in this space late last year, the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1745 (2011), tilted the scales toward federal power in the field of arbitration, preempting state laws that may stand in the way of enforcing arbitration agreements pursuant to the Federal Arbitration Act ( "FAA"). Naturally, this left the McCarran-Ferguson Act spoiling for a fight, given its restoration to the states of all power to ... Keep Reading »
Phishing for Cybersecurity Coverage: When is a Fraud a “Computer Fraud”?
In late June, the New York Court of Appeals affirmed a trial court ruling that there was no coverage for a health insurance company policyholder, under a "Computer Systems Fraud" rider issued by its insurer, for an underlying $18 million liability it incurred as a result of paying fraudulent claims submitted by providers for services never performed, under certain of its Medicare Advantage plans. In August, a Texas federal court found coverage under a "Computer Fraud" ... Keep Reading »
Cybersecurity Coverage Litigation: Learning to Survive After the Second Wave Hits
It’s a familiar pattern. First, new risks inspire legislation and regulations that impose new penalties. Next, insurers and policyholders fight over whether the new liabilities are covered under traditional liability policies. Finally, insurers craft new coverages to define their obligations in the changed environment. See, e.g., DeMeo, Eldred, Utiger & Scruggs, "Insuring Against Environmental Unknowns," 23 J. Land Use & Envtl. L. 61, 62-65 (2007). In this ... Keep Reading »
Telematics and Usage-Based Insurance: Benefits, Challenges, and the Future
The NAIC's Center for Insurance Policy and Research (CIPR) released a white paper in March 2015 providing an excellent overview of the brave new world of automobile "telematics" data and their use in premium rate-making by auto insurance. Telematics allow for the measurement of actual driving habits, through remote access to a vehicle's real-time driving data. Thus, a driver's actual experience can be studied in data transmitted from, for example, the vehicle's ... Keep Reading »
Cyber Risk as a Regulatory Issue: Tales of Encryption
Spurred by the prescient reporting found in this space (and, just maybe, by the Anthem data breach, which occurred a week later), insurance regulators have recently engaged in a flurry of regulatory activity relating to cyber security issues. Very shortly after the Anthem breach was announced, the newly-formed Cybersecurity (EX) Task Force of the National Association of Insurance Commissioners (NAIC) called for a multi-state examination of Anthem's cybersecurity ... Keep Reading »
Cyber Risk as a Regulatory Issue: A Connecticut Regulator Shares Her Insights
Even at Sony, cyber security was a hot topic before Kim Jong-un took an interest in Seth Rogen’s oeuvre. In 2011, hackers gained access to the personal and financial information Sony had collected on more than 100 million participants in its on-line gaming networks. The incident was the subject of more than 60 class actions, for which Sony announced a settlement last summer. Sony’s plight illustrates one facet of the interrelationship between cyber risk and ... Keep Reading »
Like Hats and Belt Buckles, Indemnity Agreements in Texas Must be CONSPICUOUS
It pays to be obvious, especially if you have a reputation for subtlety. –Isaac Asimov Earlier this month, the U.S. Court of Appeals for the Tenth Circuit held that Texas law allows an indemnity agreement to insulate a party from the consequences of its own, allegedly negligent conduct, but only if that feature of the agreement is disclosed conspicuously. In Martin K. Eby Construction Co., Inc. v. Kellogg Brown & Root, Inc., No. 13-3027 (10th Cir. Dec. 9, ... Keep Reading »
McCarran-Ferguson vs. the FAA: Judge Posner Declares TKO in Favor of Arbitration
In a bout before the U.S. Court of Appeals for the Seventh Circuit, two heavyweight federal statutes squared off, with coverage for hundreds of long-tail, asbestos-related personal injury lawsuits on the line. In one corner: the Federal Arbitration Act, enacted by Congress to overcome federal courts’ erstwhile reluctance to enforce arbitration agreements. In the other corner: the McCarran-Ferguson Act, created to curb those courts’ over-reach into insurance regulation ... Keep Reading »
New Jersey Appellate Court Keeps “Running Spigot” Open on Allocation of Defense Costs Under Non-Eroding-Limit Fronting Policies (and Other Spooky Tales from the Towers of Coverage Past)
New Jersey's Appellate Division recently affirmed each of several challenged rulings rendered in a long-running coverage dispute between plaintiff IMO Industries and its many historical insurers arising from asbestos exposure-related injuries dating back to the 1940's. IMO sought declaratory and other relief to establish IMO's and the defendant insurers' respective obligations for defense and indemnity of underlying personal injury lawsuits against IMO. Plaintiff IMO ... Keep Reading »