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 »
Third Circuit Decides that “Publication” Doesn’t Include the Collection of Customer Data
On September 15, 2015, the Third Circuit Court of Appeals declared that Lamorak Insurance Company (formerly OneBeacon America Insurance Company) and the Hanover Insurance Group don't have to defend their insureds, Urban Outfitters, Inc. and its subsidiary Anthropologie, Inc., under "personal and advertising injury" coverage in three putative class action lawsuits challenging the stores' collection of customer zip codes. The putative class actions are in the District ... 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 »
Accidentally On Purpose: Washington Court Finds Coverage For Contempt Of Court Based On “Misunderstanding”
Professional liability policies cover claims based on the insured’s alleged negligent acts, errors or omissions, and not claims for “sanctions or penalties” for “willful” professional misconduct. But the insurer’s duty to defend is very broad. Recently, a debtor in a bankruptcy proceeding filed a motion against the attorney for a judgment creditor, seeking to have her held in civil contempt for an allegedly “willful” violation of a discharge injunction. In Gauthier v. ... Keep Reading »
Keeping it Basic: NJ Supreme Court Limits Amount Owed to Innocent Third Parties
The New Jersey Supreme Court recently held that an automobile insurer must pay an innocent third party the contracted $10,000 amount of basic coverage following an auto accident involving the insured's vehicle, despite that the policy was procured by fraud and rescinded. Luckily for the insurer, the Court held that the insurer was only responsible for the amount of coverage provided by the rescinded policy, which was $5,000 less than the $15,000 per person/$30,000 per ... Keep Reading »
Conflict Resolution: Illinois Appellate Court Finds No Conflict in Defending Two Insureds, and No Duty of Primary to Excess Insurer to Settle Case
When an insurer defends its insured under a liability policy, the insurer has a duty to act in good faith to the insured in responding to settlement offers. In Illinois Emcasco Insurance Co. v. Nationwide Mutual Insurance Co., No. 1-14-0928 (Ill. Ct. App. Aug. 3, 2015), the Illinois Court of Appeals determined that, where a primary insurer and excess insurer provide coverage to a common insured, the primary does not owe the same duty to the excess – at least where the ... Keep Reading »
Accrual to be Kind: Pennsylvania Appellate Court Addresses Statute of Limitations for Declaratory Claim
A Pennsylvania appeals court recently addressed a nuanced procedural question: the applicable statute of limitations in a declaratory action of a coverage dispute. In Selective Way Ins. Co. v. Hospitality Group Svcs, Inc., No. 1430 WDA 2015 (Pa. Super. Ct. July 7, 2015), the court determined that an insurer’s responsibility to commence a timely action for declaratory relief in a coverage dispute begins to toll when the insurer has a factual basis sufficient to allow it ... Keep Reading »
Cybersecurity as a Regulatory Issue: The NAIC Considers The Anthem Breach And Weighs a “Cybersecurity Bill of Rights”
The Cybersecurity Task Force of the National Association of Insurance Commissioners (the "NAIC") met last month, as part of on the NAIC's 2015 Summer National Meeting in Chicago. The Task Force focused on two issues: the recent massive data breach suffered by Anthem, Inc., and a draft "Consumer Cybersecurity Bill of Rights" that was released for public comment in late July. The Anthem Breach Anthem's general counsel reported that the FBI has completed its ... Keep Reading »
Playing With Fire: No Liability Coverage For Tax Preparers Who Took Deductions for Illegal Tax Shelters
“Gimme Shelter” is one of the greatest of a lot of great Rolling Stones songs (made greater by Merry Clayton’s gut-wrenching contribution). And, of course, “Gimme Shelter” is a cliché often trotted out in discussions of tax shelters. We’re not going to do that here. Instead, Financial Strategy Group, PLC v. Continental Casualty Co., Case No. 14-6296 (6th Cir. Aug. 4, 2015), puts us in mind of that other great Stones song, “You Can’t Always Get What You Want.” Because ... Keep Reading »
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