Hunton Insurance Recovery Blog

With increasing frequency, companies are coming under fire for changes in customer loyalty programs, many of which occur without warning or recourse. Whether it is a persistent devaluation of miles or points, arbitrary expiration dates or some other perceived loss of value, customers and regulators are becoming increasingly discontent with programs that are touted as an added value to repeat customers.

We recently posted about Nevada becoming the first state to prohibit defense-within-limits provisions in liability insurance policies. Defense-within-limits provisions—resulting in what is called “eroding” or “wasting” policies—reduce the policy’s applicable limit of insurance by amounts the insurer pays to defend the policyholder against a claim or suit. 

Nevada recently became the first state to prohibit defense-within-limits provisions in liability insurance policies. Defense-within-limits provisions—resulting in what’s called “eroding” or “wasting” policies—reduce the policy’s applicable limit of insurance by amounts the insurer pays to defend the policyholder against a claim or suit. These provisions are commonly included in errors and omissions (E&O), directors and officers (D&O) and other management liability policies. This is in contrast to other policies, most commonly commercial general liability policies, which provide defense “outside of limits” where defense costs do not reduce the policy’s limit. 

In what is an unfortunate sign of the times, Springpoint Senior Living, Inc. recently sued its insurers in New Jersey federal court claiming they abruptly stopped covering Springpoint’s defense costs after doing so for nearly a decade.  A copy of the complaint can be found here. Springpoint’s allegations are emblematic of a growing trend among insurers taking drastic measures to avoid coverage, which is no doubt in response to the tightening economic conditions and looming recession around the globe. 

Walmart announced this week that it is testing a pilot program in North Carolina for the delivery of groceries and household items using automated drones, joining other retailers looking to beef up their drone delivery business.  In a related development, last week the Federal Aviation Administration (FAA) designated Amazon Prime Air as an “air carrier,” a key step in the process of Amazon’s quest to expand into the delivery-by-drone arena.  Amazon joins Wing, the Alphabet Inc. subsidiary, and UPS as companies that have obtained FAA approval to operate unmanned aircraft systems (i.e., drones) under the federal regulations.  Given the rapid rise of commercial drone use, businesses have understandably grown concerned that their drone technologies will expose them to a new set of risks, including damage to the drone itself, as well as third-party claims following property or physical injury caused by a company-operated or company-owned drone (and other third-party claims like invasion of privacy).  In light of these risks, it is key that businesses using drones obtain the insurance coverage necessary to protect themselves against such risks, and that they explore all coverage options should a drone-related loss arise in order to maximize their chances of insurance recovery.

May 25, 2018 should be a day circled on many company calendars. On that day, the European Union’s long-awaited Global Data Protection Regulation (“GDPR”) will go into effect.  It is crucial for U.S. companies to prepare for the GDPR, as they, too, will be required to comply with a new set of data privacy rules if they are handling data from EU-based customers, suppliers, or affiliates. As long as you collect personal or behavioral data from someone in the EU, you must comply with the GDPR.

In MF Global Holdings Ltd. et al. v. Allied World Assurance Co. Ltd. et al., No. 1:16-ap-01251 (Bankr. S.D.N.Y. Aug. 24, 2017), the United States Bankruptcy Court for the Southern District of New York ordered MF Global Holdings Ltd. and Allied World Assurance Co. Ltd. to arbitrate their $15 million errors-and-omissions coverage dispute in Hamilton, Bermuda. MF Global initiated an adversary proceeding against Allied World in the bankruptcy court after Allied World had refused to pay MF Global for amounts that MF Global returned to its customers' accounts as part of a settlement of claims against MF Global's former managers and directors. Allied World denied coverage under its "Bermuda Form" errors-and-omissions policy, claiming that this procedure was tantamount to deposit insurance, and not professional liability insurance, which is what errors-and-omissions coverage typically provides.

A case decided last week by the Sixth Circuit illustrates the importance of seeking bankruptcy claim policy amendments when placing D&O coverage. Indian Harbor Ins. Co. v. Zucker (6th Cir. Jun. 20, 2017) involved the application of the insured-vs.-insured exclusion and specifically, whether the policy’s insured-vs.-insured exclusion precluded coverage for a claim brought by a company’s liquidating trust, to which the company’s claims had been assigned by the company as debtor-in-possession after the company filed for bankruptcy. After the company’s claims were assigned to the liquidating trust, the trustee sued several of the company’s former executives for breach of fiduciary duty.

Private equity investors face unique challenges when procuring or renewing their liability insurance programs. For example, investors typically must complete lengthy applications or sign warranty and representation letters from their prospective insurers that inquire into knowledge by any potential insured as to any acts or omissions that could potentially give rise to a claim. These overbroad and often vague inquiries are problematic for private equity investors who would theoretically have to interview every employee, manager, or director at every subsidiary, fund, and ...

Bear Stearns' insurers were recently dealt a fatal blow, when the trial court granted Bear Stearns' motion for summary judgment and denied all insurers' motions (and defenses). See J.P. Morgan Sec. Inc. v. Vigilant Ins. Co., 2017 N.Y. Slip Op. 27127, 11 (N.Y. Sup. Ct. 2017). The court found that the documentary and testamentary evidence presented by Bear Sterns overwhelmingly demonstrated that Bear Stearns' misconduct profited their customers instead of resulting in Bear Stearns' own "ill-gotten gains." The court also found the settlement amounts reached by Bear Stearns in the SEC action and the private civil suits to be reasonable.

On December 6, 2016, a Connecticut appellate court held that a contract exclusion in a public entity errors and omissions liability insurance policy did not relieve the insurer's duty to defend when there was at least a possibility of coverage based on the allegations against the insured. The court reasoned that the fact finder could determine that the underlying negligent misrepresentation claim may not have arisen out of contract, thereby putting the claim beyond the scope of the policy's contract exclusion.  For a more detailed analysis of the Town of Monroe v. Discover Prop. & ...

An article by Hunton lawyers Walter Andrews and Mike Levine, titled Insurance Planning for 2016: Top Ten Real Estate Liability Concerns, was recently published in the Spring 2016 issue of The Real Estate Finance Journal. The article addresses ten recurring liability concerns facing real estate professionals, investors, developers, lenders, owners and managers, and the associated insurance issues. The article addresses ways commercial insurance can be used to mitigate potential liability for those involved in complex real estate transactions. Andrews and Levine, along with ...

Last week, two blind customers sued Sweetgreen, a D.C.-based salad chain, alleging violations of Title III of the Americans with Disabilities Act of 1990 (ADA) and sections of New York’s Human Rights statute. In the Complaint, the customers claim that Sweetgreen’s online ordering system “prevents blind customers from customizing and placing their orders in the same way as sighted customers can.” Title III prohibits discrimination on the basis of disability at “places of public accommodations,” like restaurants, movie theaters, schools, and recreation facilities. Courts are split about whether “places of public accommodation” are limited to actual physical structures or include websites that are part of an integrated merchandising effort. The tide is pressing toward the broader reading of the statute, emboldened in part by the Department of Justice’s long-awaited website accessibility regulations (now set to be published in fiscal year 2018).

On March 18, 2016, a Florida jury awarded Hulk Hogan (real name Terry Bollea) $115 million in damages in his lawsuit against Gawker.com. Mr. Bollea sued Gawker in Florida state court after it published portions of a video showing him having sex with the wife of a former friend, Todd Clem (a DJ better known as Bubba the Love Sponge). Mr. Bollea claimed he did not know he was being filmed and sought $100 million. He claimed, among other things, that his “goodwill, commercial value, and brand [were] substantially harmed” and that he suffered emotional distress by the posting. Following trial, the jury deliberated for six hours and awarded more than the amount sought: $55 million for economic harm and $60 million for emotional distress. On March 21, 2016, the jury awarded an additional $25 million in punitive damages.

On Monday, a Tennessee jury awarded $55 million to FOX sportscaster Erin Andrews in her suit against Michael Barrett, her stalker, and the Marriott hotel where they both stayed. In 2008, Mr. Barrett secretly videotaped Ms. Andrews through a peephole as she changed clothes in her hotel room. Hotel staff had revealed that she was staying at the hotel and, upon Mr. Barrett’s request, gave him a room next to hers. Mr. Barrett’s surreptitious video of Ms. Andrews was later made public. Ms. Andrews sued Mr. Barrett, West End Hotel Partners, LLC (the owner/franchisee of the hotel) and Windsor Capital Group, Inc. (the operator of the hotel) for negligence, invasion of privacy, and infliction of emotional distress causing embarrassment. The jury found the hotel’s owner and operator 49% at fault, comprising approximately $27 million of the total verdict.