Hunton Insurance Recovery Blog

Hunton Andrews Kurth’s 300-lawyer cross-disciplinary Retail Industry Team has released its annual 2023 Retail Industry Year in Review. The Review discusses retail industry issues that implicate multiple legal practice areas and highlights new and emerging risks retailers may encounter in the year ahead.

Significant issues from 2023, with insurance implications that will continue to evolve in 2024 and beyond, include copyright infringement claims for retailers engaged in social media and polyfluoroalkyl substances (PFAS) related liability claims and related putative class action lawsuits.

We discuss these risks in the 2023 Retail Industry Year in Review and on our insurance recovery blog, along with other risks that will continue to affect the retail industry in 2024.

While liability for PFAS—Per- and Polyfluoroalkyl Substances, also known as “forever chemicals”—may be an emerging issue, the availability of insurance coverage for these and similar liability claims is not. “Commercial general liability,” or CGL, insurance was specifically designed to cover claims made by a company’s customers or customers of customers for resulting bodily injury and property damage. PFAS claims fit this bill. 

Though insurance companies have attempted to deflect from this intentionally broad coverage, CGL exclusions traditionally have been narrow. Even “pollution exclusions,” which have been raised by insurers facing PFAS claims, have limited scope. PFAS are products; and, thus, when drafting pollution exclusions, the insurance industry represented to regulators that they should apply only when (1) insurers can prove the policyholder expected or intended the alleged injuries and (2) only to true “industrial” pollution. 

In Yahoo, Inc. v. National Union Fire Insurance Co. of Pittsburgh, PA., the California Supreme Court confirmed that contra proferentem and other rules of policy interpretation apply even to language insurers argue is “manuscript” as long as the provisions in question use standard-form policy terms. There, the United States Court of Appeals for the Ninth Circuit asked the California Supreme Court to answer a certified question regarding whether a commercial general liability policy (CGL) covers defense costs related to claims under the Telephone Consumer Protection Act of 1991 (TCPA) (47 U.S.C. § 227). Following a thorough and thoughtful assessment of California law involving fundamental rules of policy interpretation, the California Supreme Court ruled in favor of the policyholder, Yahoo, Inc. (“Yahoo!”). The authors of this article represented amicus curiae, United Policyholders, in support of Yahoo! before the California Supreme Court. 

Just as the Ohio and Delaware supreme courts gear up for oral argument – September 8th and 22nd, respectively – on whether insurers must defend opioid distributors in lawsuits related to the opioid crisis, Hunton Andrews Kurth Partner Syed Ahmad weighed in with the policyholders’ prospective for Law360. “These appeals are significant,” Ahmad explained (and insurers’ counsel agreed), “because of the potential far-reaching impact on the scope of general liability coverage.”

In this month’s Recall Roundup on the Hunton Andrews Kurth Retail Law Resource blog, Hunton insurance attorneys Syed S. Ahmad and Geoffrey B. Fehling weighed in on a recent food contamination insurance coverage dispute, Travelers Casualty Insurance Co. of America v. Mediterranean Grill & Kabob, Inc. (W.D. Tex. Nov. 4, 2020), which dealt with single versus multiple “occurrences” under an insurance policy, a common issue in recall and contamination-related claims.

The Illinois Supreme Court’s recent decision in Sanders v. Illinois Union Insurance Co., 2019 IL 124565 (2019), announced the standard for triggering general liability coverage for malicious prosecution claims under Illinois law.  In its decision, the court construed what appears to be a policy ambiguity against the policyholder in spite of the longstanding rule of contra proferentem, limiting coverage to policies in place at the time of the wrongful prosecution, and not the policies in effect when the final element of the tort of malicious prosecution occurred (i.e. the exoneration of the plaintiff).  The net result of the court’s ruling for policyholders susceptible to such claims is that coverage for jury verdicts for malicious prosecution – awarded in today’s dollars – is limited to the coverage procured at the time of the wrongful prosecution, which may (as in this case) be decades old.  Such a scenario can have costly consequences for policyholders given that the limits procured decades ago are often inadequate due to the ever-increasing awards by juries as well as inflation.  Moreover, it may be difficult to locate the legacy policies and the insurers that issued such policies may no longer be solvent or even exist.  A copy of the decision can be found here.

A Florida district court recently held that an insurer wrongfully refused to defend a Miami-based strip club in a lawsuit filed by 17 models claiming that the club used their images to promote its business without their authorization. The insurer was required to defend the club for allegations of defamation under the policy’s personal and advertising coverage even though 16 of the 17 plaintiffs’ claims alleged conduct outside the covered policy period and no plaintiffs brought a cause of action for “defamation.” The decision highlights the broad duty to defend, in Florida and elsewhere, that policyholders should emphasize when pursuing coverage.

A Delaware court held that an appraisal action, which includes $39 million in attorneys’ fees, prejudgment interest, and costs incurred in defending litigation that arose out of Solera Holdings Inc.’s acquisition by Vista Equity Partners LP, constitutes a covered “securities claim” under Solera’s directors and officers liability insurance policy.

The Supreme Court of California has ruled that a general liability insurer must defend an employer against allegations of employee misconduct, reinforcing the breadth of (1) what constitutes an “occurrence” under an employer’s commercial general liability (CGL) policy and (2) the duty to defend regarding claims for negligent hiring, retention and supervision. The opinion in Liberty Surplus Ins. Corp. v. Ledesma & Meyer Constr. Co., Inc. can be found here.

On April 13, 2018, the Superior Court of New Jersey, Appellate Division, affirmed a trial court decision finding that a bill of sale intended to include the transfer of insurance rights and finding that such transfer did not violate an anti-assignment clause. Cooper Industries, LLC, Plaintiff-Respondent, v. Columbia Casualty Company And One Beacon America Insurance Company, Defendants-Appellants, and Employers Insurance Of Wausau, Allstate Insurance Company, Lexington Insurance Company And Westchester Fire Insurance Company, 2018 WL 1770260,(N.J. Super. A.D., 2018).  In May 1986, Cooper Industries merged several entities and transferred assets to a “new” McGraw-Edison Company through a bill of sale.  Eighteen years later, on November 30, 2004, Cooper Industries merged the new McGraw-Edison company into itself.  In 2009, the Environmental Protection Agency determined that Cooper Industries was responsible for generating and disposing of hazardous substances due to McGraw-Edison’s actions taken years earlier.  Cooper Industries sought coverage under the commercial general liability policies McGraw-Edison had in place at the time of the environmental and pollution-related occurrences.

On January 9, 2018, the Northern District of California held that the Nonprofits Insurance Alliance of California owed defense coverage to a pair of Scientology-based drug and alcohol rehabilitation centers for two lawsuits filed in Georgia and Oklahoma alleging that staff members had provided drugs and alcohol to patients, which resulted in injury and death. In Western World Ins. Co. v. Nonprofits Ins. Alliance of California, No. 14-cv-04466-EJD (N.D. Cal. Jan. 9, 2018), the court confirmed the broad scope of an insurer’s duty to defend under California law and rejected the insurer’s attempt to unreasonably expand the application of a “professional services” exclusion to avoid coverage.

In an article published in Law360, Hunton & Williams LLP partners Walter Andrews, Malcolm Weiss, and Paul Moura discuss two recent decisions in Tree Top Inc. v. Starr Indem. & Liab. Co., No. 1:15-CV-03155-SMJ, 2017 WL 5664718 (E.D. Wash. Nov. 21, 2017).  There, the Eastern District of Washington rejected an insurer's attempt to escape insurance coverage for a Proposition 65 lawsuit filed against juice-maker Tree Top Inc.

Last week, the Florida Supreme Court held that a Chapter 558 notice of construction defect constitutes a “suit” under a commercial general liability (“CGL”) policy sufficient to trigger the insurer’s duty to defend. The opinion can be found here, and our prior blog posts on this case here and here.

In an article appearing in Law360, Hunton & Williams LLP’s insurance coverage practice group head, Walter Andrews, weighs in on the Florida Supreme Court’s recent opinion in Altman Contractors, Inc. v. Crum and Forster Specialty Insurance Co. As I discussed in my previous blog post on the Altman Contractors case, available here, the Florida Supreme Court held that a Chapter 558 notice of construction defect constitutes a “alternative dispute resolution proceeding” under the definition of “suit” in a commercial general liability (“CGL”) policy so as to possibly trigger the insurer’s duty to defend. There, the policy defined “suit” as including “[a]ny other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.”

Earlier this month, the California Supreme Court agreed to review Montrose Chemical Corporation’s appeal from a September appellate court ruling that rejected Montrose’s preferred “vertical exhaustion” method of exhausting excess-layer policies in favor of a policy-by-policy review to determine which policies are triggered. The California high court’s grant of Montrose’s petition for review is potentially significant in clarifying the appropriate excess policy exhaustion trigger under California law, not to mention in addressing a significant insurer defense in Montrose’s longstanding coverage dispute over environmental insurance coverage, which has been winding its way through California courts for more than 25 years.

Three significant insurance disputes are pending before the New York Court of Appeals, and Hunton partner Syed Ahmad discusses the importance of those cases in Law 360’s article titled 3 Insurance Cases To Watch At NY’s High Court.

The Ninth Circuit in Teleflex Medical Incorporated v. National Union Fire Insurance Company of Pittsburgh PA, No. 14-56366 (9th Cir. Mar. 21, 2017) affirmed a jury verdict finding that AIG must pay $3.75 million in damages plus attorneys' fees to cover LMA North America, Inc.'s ("LMA's") settlement with its competitor over allegedly disparaging advertisements that characterized a competitor's products as unsafe.

In Cypress Point Condo. Ass'n, Inc. v. Adria Towers, L.L.C., 076348, 2016 WL 4131662, at *8 (N.J. Aug. 4, 2016), a condominium association sued its general contractor for rainwater damage to the condominium complex, after the project was completed, which was allegedly the result of defective work performed by subcontractors. The condominium association also sued the developer's CGL insurers, seeking a declaration that claims against the developer were covered by the policies. The trial court granted summary judgment to the insurers, finding that there was no "property damage" or "occurrence," as defined and required by the policies, to trigger coverage. The condominium association appealed, and the Appellate Division reversed, concluding that "consequential damages caused by the subcontractors' defective work constitute[d] 'property damage' and an 'occurrence' under the polic[ies]."

Last week’s torrential rains have caused widespread flooding in West Virginia and surrounding areas. It is important that policyholders in these and other areas remain mindful of the substantial benefits that may be available to them for resulting economic and physical losses under ordinary business insurance policies. Policyholders also should be mindful of the interplay between coverage for flood under business insurance policies and assistance that may be available from state and federal agencies (e.g., FEMA). Finally, policyholders should stand ready to enforce their ...

On Tuesday, Syed Ahmad and Jennifer White published an article in Risk Management magazine about how commercial general liability (CGL) policies may help policyholders looking to recover attorney’s fees or fund settlements in trademark infringement litigation. Historically, like the Johnny Lee song “Lookin’ for Love,” CGL policies were the wrong place to look for coverage, and insurers raised often successful defenses to covering such trademark infringement cases under CGL policies. Or, policyholders would avoid CGL insurance altogether in favor of intellectual ...

Globalization has inspired the development of cross-border business activities, as companies across several industries seek new markets for their goods and services.  The dynamic rewards have been accompanied by a corresponding increase in novel risks, and those who rely on traditional risk assessment mechanisms have often been left unnecessarily exposed.