Gibbons Law Alert
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.
In Allied Professionals Insurance Co. v. Jodar, New Jersey’s Appellate Division affirmed a trial court order denying enforcement of an arbitration choice-of-forum provision in a medical malpractice insurance contract. The decision is notable because it broadly interprets prior Appellate Division case law, reaches a contrary result to a recent Law Division case where the issue went unchallenged, and paves the way for further extension of the result.
The recent decision by New York’s Appellate Division, First Department in Executive Risk Indemnity, Inc. v Starwood Hotels & Resorts Worldwide, Inc., serves as a grim reminder to insureds to pay careful attention at the time of policy renewal to existing demands from third parties, applicable terms and conditions of expiring and renewal policies, differences in the scope of coverage, and appropriate disclosures. Those who do not run the risk of foregoing the insurance they thought they had without even realizing it.
The recent decision in MDC Acquisition Co. v. North River Insurance Co., serves as a reminder of the impact that clear and direct notice of policy changes will have on the scope of available insurance coverage. Although rendered by the Northern District of Ohio, the decision is based upon generally accepted legal principles that apply in most jurisdictions and is noteworthy for both insurers and policyholders.
One of the threshold – if not determinative – issues in many insurance coverage disputes is the number of “occurrences” that are presented by a particular set of facts relating to a claim submitted by the policyholder. In a recent decision, a New York appeals court has concluded not only that the relevant policy language allows for grouping of claims into similar “occurrences,” but that additional discovery may be conducted of the parties’ intent and the insurers’ underwriting guidelines and procedures relating to the relevant policy terms. In Mt. Kinley Ins. Co. v. Corning Inc., the Court affirmed the Trial Court’s denial of summary judgment, concluding that the insured’s comprehensive general liability (“CGL”) policies’ “occurrence”-related terms allowed for grouping of claims arising at a common location or at approximately the same time, which may result in a drastically reduced number of deductibles under the applicable policies. Thousands of individuals had brought separate claims against the insured — Corning Inc. — as a result of exposure to two asbestos-containing products. At issue on summary judgment was whether each of these individual claims constituted a separate “occurrence” under Corning’s primary, excess, and umbrella CGL policies, such that each claim would be individually subject to a deductible before the insurers’ coverage was implicated.
The U.S. Court of Appeals for the Third Circuit, in its May 1, 2012, decision in In re: Federal-Mogul Global, Inc. held that asbestos defendants who file Chapter 11 petitions and seek to resolve their asbestos-related liabilities through the creation of a personal injury trust under Section 524(g) of the Bankruptcy Code may transfer their rights under their liability insurance policies to the trust notwithstanding the policies’ anti-assignment provisions.
The Third Circuit’s recent decision in Atlantic Health System Inc. v. National Union Fire Insurance Company of Pittsburgh confirms the importance of strictly following the notice requirements of a claims-made policy and the relevance of the parties’ course of prior and subsequent performance on the ultimate interpretation of allegedly ambiguous policy terms and conditions. In this case, the failure to strictly comply with the notice requirements resulted in AHS retaining liability for more than $2 million of defense costs and settlement payments.
In Platt v. Fireman’s Fund Insurance Company, the Eastern District of Pennsylvania held that an insurer sued for insurance coverage benefits and for bad faith under Pennsylvania law was required to produce any material which pertains to instructions and procedures given to the adjuster for adjusting the plaintiff’s claims.