Hunton Insurance Recovery Blog

With the circumstances in Ukraine intensifying and companies either shutting down or suspending operations in the region, the question arises about whether the sparingly used war exclusion will become more relevant as policyholders seek to recover losses. Economic effects of the conflict are spreading. Some companies may have to close operations entirely, some partially, and others may have their supply chains severely disrupted. The US government has warned companies to protect themselves against cyberattacks. The impact on policyholders, however, may take different forms, potentially implicating their business interruption, contingent business interruption, cyber, shipping and cargo, and political risk insurance coverages. Other coverages could be implicated as well.

An amended version of the Comprehensive Insurance Disclosure Act recently went into effect in New York State. This law applies to all civil lawsuits filed in New York State Court on or after December 31, 2021. The first disclosures required by the law will be due soon and it is important for defendants to be aware of their new obligations.

Most insurance policies include a period of limitation provision that limits how long policyholders have to sue their insurers for coverage under the policy.  But those periods of limitation can be traps for the unwary.  As with many insurance provisions, different states construe the same language differently.  States not only start the clock at different times, some states pause the clock while the insurer considers whether it will provide coverage.

In 1938, a DuPont chemist’s experiment yielded not—as he first thought—a lumpen, waxy mistake, but a new chemical with remarkable properties: heat-resistance, chemical stability, and low surface friction. Decades of continuing experimentation yielded a class of chemicals with the capacity to make non-stick, water-resistant coatings. In time, these chemicals, per- and polyfluoroalkyl substances (PFASs), would become a major component in thousands of consumer goods: food packaging, non-stick cookware, waterproof clothing, paint, stain-resistant carpets and furniture, and firefighting foams. The discovery of the toxicity of these remarkable chemicals lagged behind the widespread adoption, but eventually yielded a moniker that reflected PFAS’s stability and longevity: “Forever Chemicals.”

Recently, the Ninth Circuit dealt with a case involving a scenario that is becoming all too common. In Ernst & Haas Mgmt. Co., Inc. v. Hiscox, Inc., 23 F.4th 1195 (9th Cir. 2022), a property management company’s accounts payable clerk received several e-mails from her supervisor instructing her to pay some invoices. Unbeknownst to the clerk, these e-mails did not originate with her supervisor, but were actually part of a fraudulent scheme to elicit fraudulent bank transfers. The clerk paid off hundreds of thousands of dollars in “invoices” before becoming suspicious but, by then, it was too late and the damage was done.

In this final post in the Blog’s Landmark Montana Supreme Court Decision Series, we discuss the court’s ruling on the known loss doctrine and its interpretation of “occurrence” in National Indemnity Co. v. State, 499 P.3d 516 (Mont. 2021).

Policyholders must be mindful of expansive causation language in policy exclusions that could pose significant—and sometimes unforeseen—hurdles to obtaining coverage for D&O claims. In TriPacific Capital Advisors, LLC v. Federal Insurance Co., a California federal court recently ruled that a D&O insurer had no duty to defend an investment firm’s $8.5 million employment suit because coverage was barred by the policy’s broad contract exclusion, which applied not only to breach of contract claims but also any claims “arising from” contractual liability owed by the company.

The Delaware legislature recently passed an amendment to the statute governing Delaware corporations’ ability to indemnify directors and officers. That statute—8 Del. Law 145—provides that Delaware corporations “may” purchase “insurance” to insure liability of their directors, officers, employees, and agents “whether or not the corporation would have the power to indemnify such person against such liability.” The recent amendment clarifies that “insurance” includes captive insurance. It states: “For purposes of this subsection, insurance shall include any insurance provided directly or indirectly (including pursuant to any fronting or reinsurance arrangement) by or through a captive insurance company organized and licensed in compliance with the laws of any jurisdiction . . . .”

Liability insurance typically affords broad defense coverage.  But insurers sometimes reserve their right to challenge the insured’s right to a defense, or even outright terminate the defense.  When this occurs after the insurer has been in exclusive control of the defense, some courts recognize that the consequences can be catastrophic for the insured defendant.  Insurers, therefore, may be estopped from denying coverage where doing so will prejudice the insured.  This is exactly what transpired in RLI Ins. Co. v. AST Engineering Corp., No. 20-214 (2d Cir. Jan. 12, 2022), where the Second Circuit affirmed the district court’s decision that an insurer’s attempt to withdraw the defense it had provided to its insured for three years would prejudice the insured.

This post in our Landmark Montana Supreme Court Decision Series discusses the Montana Supreme Court’s consideration of an insurer’s duty to defend in National Indemnity Co. v. State, 499 P.3d 516 (Mont. 2021).