Hunton Insurance Recovery Blog

A California appeals court recently reversed a trial court’s determination that a D&O insurer had no duty to reimburse legal fees incurred by a company’s former CFO in defending against an SEC civil enforcement action, shareholder derivative claims, and counterclaims by the company asserting that the CFO breached his indemnification agreement. In doing so, the appeals court rejected the insurer’s argument that the defense costs the company advanced to the CFO were “restitutionary” damages excluded from the D&O policy’s definition of loss.

The court explained that its ruling favoring broad executive protection was consistent with the generally understood purpose of D&O liability insurance—to provide protection for individuals whose business decisions, made in their capacity as the management of a corporation, subject them to the risk of personal liability for losses that the corporation or its shareholders may incur.

Insurance can mitigate cross-border risks arising out of geo-political and government-related disruptions (such as war, corruption or expropriation), social unrest and cyber vulnerabilities. Different insurance products respond to these risks in different ways. For example, contingent business interruption coverage responds to mitigate lost profits resulting from an interruption of business caused by physical damage to a supplier’s property, while cyber insurance protects against the costs of digital threats, such as ransomware attacks, phishing or hacking. In a recent Supply & Demand Chain Executive article, counsel Jorge R. Aviles and associate Jae Lynn Huckaba analyze how the industry can utilize these different insurance products in unison and build a comprehensive insurance portfolio to maximize coverage and minimize losses from the most common cross-border risks.

The Ninth Circuit has affirmed victory for New York Marine and General Insurance Co. in its legal battle with Amber Heard over the cost of defending defamation claims brought against the actress by ex-husband, Johnny Depp. New York Marine and Gen. Ins. Co. v. Heard, No. 23-3399 (9th Cir. Nov. 25, 2024). The decision, premised on Virginia law, rather than the policyholder’s favored California law, underscores the potential for choice of law to have case-dispositive implications.

Courts nationwide have long held that defense costs incurred by a policyholder are presumed reasonable where an insurer breaches its duty to defend. The North Carolina Business Court in an opinion written by Judge Mark Davis recently adopted this rule under North Carolina law in Murphy-Brown, LLC v. Ace American Insurance Company, 2024 WL 4327353 (N.C.Super. Sep. 25, 2024).

Hunton insurance partner Geoffrey Fehling has been appointed Chair of the Insurance Law Committee of the Boston Bar Association (BBA) Financial Services Section.

A robust employee benefits program is critical to the success of any business. Of the types of benefits offered, a 401(k) retirement plan is as crucial as any. Businesses that administer such programs can protect themselves through Employee Benefits Liability coverage which is intended to cover errors and omissions in the administration of employee benefit programs.

Most insurance policies seek notice from the insured “as soon as practicable.” In certain jurisdictions, an insurance company cannot void coverage by arguing that the insured’s notice was somehow “late” unless the insurer can show that it has been prejudiced. This is referred to as the “notice-prejudice” rule. Because insurance is a state-law issue, the law on this issue varies from state to state.

Following an investigation involving public companies potentially impacted by the 2020 SolarWinds software compromise, the US Securities and Exchange Commission recently charged several companies with making materially misleading disclosures regarding cybersecurity risks and intrusions. The SEC’s enforcement is the latest example of “cyber as a D&O risk,” underscoring the importance of maintaining robust directors and officers (D&O) liability coverage, along with cyber insurance, as part of a comprehensive liability insurance program designed to respond to cyber incidents.

Last week, just before Hurricane Milton made landfall, Florida state officials issued an emergency decree to all licensed insurance adjusters in the state to protect homeowners against “unfair and deceptive acts” and “post-storm fraud” by insurance carriers. According to The Washington Post, the Florida Department of Financial Services is requiring that all claim adjusters provide an explanation for each change they make to a consumer’s loss estimate, document those changes, and retain all versions of the estimate and identify who made those revisions. When processing claims, adjusters must also use an electronic estimating system that provides an itemized report of all damage, as well as labor, materials, equipment and supplies. Those costs should be consistent with what a contractor or a repair company in that particular area would charge.

Just two months ago, Illinois Governor J. B. Pritzker signed significant amendments to the Illinois Biometric Information Privacy Act (BIPA). While the amendments limit businesses’ exposure to BIPA-related damages, significant BIPA exposures still persist. Given these continuing exposures, businesses should consider the protections that insurance can offer. The Illinois Appellate Court’s September 2024 decision in Tony’s Finer Foods Enterprises v. Certain Underwriters at Lloyd’s, 2024 IL App (1st) 231712 offers concrete guidance for businesses thinking about doing just that.