Hunton Insurance Recovery Blog

Hunton is pleased to share that insurance coverage associate Jae Lynn “JL” Huckaba has been elected to serve as President-Elect of the Miami Dade Bar Young Lawyers Section (YLS). JL’s year-long term is set to begin this month.

A federal court decision in Navigators Specialty Insurance Company v. SVO Building One, LLC emphasizes the breadth of the duty to defend under California law and the difficulty insurers face when attempting to allocate defense costs between covered and uncovered claims. The insurance dispute between Navigators and SVO arose from a lawsuit by an equipment manufacturer, Vertiv, against SVO, a data center designer, involving a data center project.

In a recent commentary published by Thomson Reuters, Hunton attorneys Michael S. Levine, Geoffrey B. Fehling, and Alex D. Pappas discuss important insurance considerations arising from the growing use of physical AI in real-world settings.

The article explores the emerging risks associated with physical AI, including bodily injury, property damage, and business interruption, and examines how both legacy insurance products and newer AI-specific policies may respond to those exposures. It also underscores the importance of proactively evaluating AI-related risks when reviewing insurance programs, negotiating vendor protections, and preparing for evolving underwriting and claims issues.

The New Jersey Supreme Court ruled in Mist Pharmaceuticals, LLC v. Berkley Insurance Company that a D&O insurer did not forfeit its right to rely on a capacity exclusion after partially funding years of litigation, repeatedly representing that partial coverage was available, and waiting five years to fully disclaim. While the Court ultimately enforced the exclusion, the decision offers several important takeaways for policyholders, particularly with respect to reservation of rights letters, settlement strategy, and D&O policy drafting. 

Hunton insurance partner Koorosh “KT” Talieh was recently named President of the American College of Coverage Counsel (ACCC), a distinguished organization of approximately 475 leading insurance coverage litigators. A longstanding fellow of the ACCC, KT previously served as president-elect, secretary/treasurer, and co-chair of the organization’s Membership Committee.

The Fourth Circuit in APAC-Atlantic, Inc. v. Owners Insurance Co., No. 24-1969, 2026 WL 458402 (4th Cir. Feb. 18, 2026) recently endorsed broad coverage for additional insureds, interpreting “arising out of” broadly under North Carolina law to extend coverage to a repaving company under its subcontractor’s liability insurance policy. The court held that an additional insured’s liability “arising out of” a named insured’s work in an additional-insured endorsement means liability “relating to” or “causally connected to” the named insured’s operations, rather than liability defined more narrowly as “caused by” or “the fault of” the named insured.

A recent securities class action, Dunn v. Upstart Holdings, Inc., brought against Upstart – a fintech lender – underscores emerging AI-related D&O risks. Filed April 2026 in California federal court, the suit alleges that Upstart and its executives misled investors about the performance of its AI loan underwriting model. When Upstart’s AI Model 22 underperformed, the company’s stock plunged, prompting an investor lawsuit claiming that management knew about calibration failures. The case spotlights the D&O insurance implications of artificial intelligence in corporate operations. Company executives face new exposures if AI algorithms malfunction or produce biased outcomes. For policyholders, D&O policies may provide coverage for defense and, possibly, liability in securities suits alleging misrepresentations about AI systems. Insurers, however, are starting to add AI exclusions or sublimits, wary of the unpredictable liability posed by opaque AI models.

In the case of County of San Bernardino v. Insurance Company of the State of Pennsylvania, the Ninth Circuit recently addressed the issue of whether general liability policies issued in the 1960s and 1970s included aggregate limits for claims arising under the premises-operations coverage in CGL policies. The difference between the policyholder’s interpretation of the policies’ limits clauses and the insurer’s interpretation was worth hundreds of millions of dollars in exposure for the insurer. The Court closely examined the policy language and extrinsic evidence from both the insurance industry’s drafting history and the parties before concluding that the policies were ambiguous. The Court construed that ambiguity in favor of the policyholder and ruled that aggregate limits did not apply to the claims at issue. The Court’s decision underscores the importance of carefully examining a policy’s limits, especially for older policies written before 1986 when the insurance industry revised the standard-form CGL policy to state the aggregate limits apply not only to products liability claims but to premises-operations claims as well. Decades of insurance industry drafting history confirms, as the policyholder’s submissions in this case indicate, that the industry well understood that operations claims like the environmental waste-disposal claims at issue here typically were not subject to aggregate limits. 

We are pleased to announce that Kevin V. Small, Partner in the firm’s Insurance Coverage practice, has been appointed to the Board of Directors of the RIMS New York Chapter for the 2026 term, serving as a Director.

The last year has seen a resurgence of special purpose acquisition companies or “SPACs.” Whether this SPAC comeback will persist remains to be seen. But sponsors, targets, investors, and other market participants should take heed of significant directors and officers liability insurance rulings arising from the SPAC heyday of the early 2020s that have now made their way through the courts and provide useful guidance to those looking to place and rely upon effective D&O insurance solutions.