Hunton Insurance Recovery Blog

Update: On May 1, 2023, the New Jersey appeals court affirmed the trial court's decision that a war exclusion did not bar $1.4 billion in coverage for Merck’s losses stemming from the NotPetya attack.

On June 27, 2017, the skies over New Jersey were clear and the ground steady. But Merck & Co., a New Jersey-based pharmaceutical company, was under attack. Malware ripped through its computers, damaging 40,000 of them and causing over $1.4 billion in losses.

Merck was not the sole target.^[1] Dubbed “NotPetya,” the virus tore through the US economy,^[2] and did an estimated $10 billion in damage. The US Department of Justice charged six Russian nationals, alleged officers of Russia’s Intelligence Directorate (the GRU), for their roles in the NotPetya attack, among others. The attackers’ goal, according to the DOJ, was:

Effective February 28, 2023, Hunton Andrews Kurth LLP has promoted insurance recovery lawyer Kevin V. Small, along with three other attorneys, to Counsel.  “Kevin quickly established himself as an integral part of our practice, particularly in the area of transactional liability insurance,” said practice head Syed Ahmad.  Ahmad added, “Kevin recently led the drafting of a Lexis Practice Note on Representations and Warranties Insurance that will be published in the coming weeks and provides rare insights on common issues arising in the claims context.” “Kevin makes ...

As discussed in a recent client alert, a Delaware court issued a significant opinion in a directors and officers liability claim involving a special purpose acquisition company. In an issue of first impression in Delaware, the Superior Court in Clover Health Investments Corp. v. Berkley Insurance Co. held that directors and officers of the post-merger entity were “Insured Persons” under the SPAC’s D&O policy because they were acting in “functionally equivalent” roles to directors and officers of the SPAC when the alleged pre-merger wrongful conduct took place. The court’s pro-policyholder rulings on coverage for government investigations, based on an ambiguous definition of “Claim,” and allocation of defense costs under the Larger Settlement Rule also have potential ramifications on future D&O claims in Delaware outside of SPAC deals.

Hunton insurance recovery group partner Larry Bracken and associate Rachel Hudgins were each recognized in Georgia Super Lawyers 2023’s most recent publication. Larry Bracken was recognized as a Super Lawyer, and Rachel Hudgins was selected as a Rising Star for Insurance Coverage.

A recent settlement filed by the Federal Trade Commission (FTC) and GoodRx may merit a review of your cyber insurance coverages. Earlier this month, the FTC took enforcement action for the first time under its Health Breach Notification Rule against the telehealth and prescription drug provider, GoodRx, for failing to notify consumers of its unauthorized disclosures of personal health information.

As detailed in a February 27 Hunton client alert, the Health Breach Notification Rule generally requires that vendors not covered by the Health Insurance Portability and Accountability Act (HIPAA) of personal health records give notice in the event of a “breach of security,” which is defined to include “unauthorized acquisition” of personal health records.

Earlier this month, the US District Court for the Northern District of Illinois ruled that Call One Inc., a tele-communications company, must litigate a claim by its insurer, Berkley Insurance Company, seeking to rescind coverage based on the information provided by the policyholder in its application for insurance. The coverage dispute is illustrative of insurers’ increased scrutiny of the answers to all policy application questions—including where no response is provided—to identify new or additional grounds to avoid coverage, even if it requires rescission of the policy. Policyholders should thus carefully consider all questions and requirements during the policy application process (including during renewal) to avoid potential disclosure disputes should a claim arise.

The surge in prices for eggs—the fourth most-purchased US grocery item—over the past months has surprised many American shoppers.  Last December, a dozen eggs cost $4.25 on average; 120% higher than at the same time in 2021.  The price hike stems from many factors, including supply chain issues and inflation.  But the primary culprit is the outbreak of the deadliest bird flu in US history, which has killed millions of chickens.  Grocery shoppers, however, are not the only ones feeling the economic impact of the ravage to poultry flocks.  Livestock owners and businesses are also feeling the economic pinch, particularly in areas hit hardest by the bird flu.  Insurance is a key component of risk management for livestock businesses and owners.  Here, we explore how insurance can mitigate the risks to livestock owners and businesses of accidental or unexpected events that result in the death of animals or economic losses.

On February 6, 2023, The Claims Journal highlighted a letter by members of Hunton’s insurance team, submitted on behalf of United Policyholders, to the California Supreme Court, which alerts the Court to the fundamental infirmities in the “standard” expounded by the insurance industry in COVID-19 business interruption litigations nationwide. The letter was issued to assist the Court in addressing a question certified from the US Court of Appeals for the Ninth Circuit, in Another Planet Entertainment, LLC v. Vigilant Insurance Co, asking whether the actual or potential presence of the COVID-19 virus on an insured’s premises “constitute direct physical loss or damage to property” for purposes of coverage under a commercial property insurance policy.

PFAS Regulation

Per- and polyfluoroalkyl Substances (“PFAS”) are a class of substances that have increasingly become the target of federal and state regulation in everything from drinking water, groundwater, site contamination, waste, air emissions, firefighting foam, personal care products, food and food packaging, and now consumer and commercial products. PFAS are widely-used chemicals that have the unique ability to repel both oil and water, which led to their application in many products including items such as stain and water-repellent fabric, chemical-and oil-resistant coatings, food packaging materials, plastics, firefighting foam, solar panels and many others. The carbon-fluorine bond is the strongest in nature, making these compounds highly persistent in the environment.

Last week, the Fifth Circuit affirmed that a title company’s crime protection policy applies to cover loss from a fraudulent wire transfer. The insurer, RLI Insurance Company (RLI), had argued that the $250,945.31 transfer was not covered under the funds transfer fraud endorsement because the instruction that led to the transfer was authorized and approved by the insured, Valero Title Inc. (Valero). Specifically, a Valero employee instructed Valero’s bank to wire the funds to a fraudulent account after a fraudster posing as a lender’s employee intercepted email communications regarding a payoff transaction and deceptively instructed the transfer.