Hunton Retail Law Resource

Liability insurance policies generally have an exclusion barring coverage for claims brought by the insured’s own employees. These exclusions usually do not bar coverage, however, when claims are brought by an employee of one insured against another insured. This scenario occurs frequently, especially for companies in the retail industry, who are usually one of multiple insureds under a single policy and are susceptible to being sued by another insured’s employees.

It is no secret that California has had appliance efficiency standards in place for some time now. And it is no secret that the California Energy Commission (“CEC”) has been responsible for crafting those standards. According to the CEC and the California State Legislature, however, compliance with those standards has been hit-or-miss. In 2011, the Legislature found that “significant quantities of appliances are sold and offered for sale in California that do not meet the state’s energy efficiency standards,” and the CEC itself has stated that nearly half of all regulated appliances are non-compliant, and that certain product categories are entirely non-compliant. The broad range of products covered by the CEC’s efficiency standards may be partly to blame for the lack of compliance, as manufacturers may not even realize their product must comply. For example, the efficiency standards encompass nearly every device with a rechargeable battery and that rechargeable battery system, meaning everything from cell phones to laptops to tablets to golf carts must be tested, certified and listed in the CEC’s database before being offered for sale in California. 

On August 2, 2017, the U.S. Senate confirmed one of President Trump’s two management-side appointees, Marvin Kaplan, to the National Labor Relations Board (“NLRB”) in a contentious vote along party lines. Kaplan was sworn in on August 10, 2017, for a term ending on August 27, 2020. 

The Santa Barbara City Council, in an effort to combat the retail malaise on State Street in Downtown Santa Barbara, has approved a pilot program that would streamline the permit and review process for potential commercial tenants.

This past week, several consumer actions made headlines that affect the retail industry.

FTC Extends Comment Period for Paint Claims

On August 7, 2017, the FTC extended the public comment period related to four proposed settlements with paint companies. According to the original complaints from June 2017, Benjamin Moore, Imperial Paints, ICP Construction and YOLO Colorhouse deceptively claimed that their paint products were either emission-free or contained zero volatile organic compounds, including during and immediately after application. 

On August 7, 2017, the FTC announced that it obtained a court order temporarily halting an online marketing scheme that deceptively lured shoppers into expensive negative option plans. The FTC alleged in its complaint that defendants used initial low-cost “trial” offers to hook consumers into expensive monthly shipments for tooth-whitening products without properly disclosing the terms and conditions of the deal or properly obtaining their consent.

As an update to our Recall Roundup’s focus on the fidget spinning craze from June and July, the Consumer Product Safety Commission (“CPSC”) has released spinner safety tips. Although the CPSC still reports no fidget spinner recalls, Acting Chairman Ann Marie Buerkle used the CPSC’s bully pulpit to warn of the choking dangers that result when fidget spinners break and release small pieces. In addition, she references “reports of fires involving battery-operated fidget spinners.” 

The Ninth Circuit will decide whether Great Lakes Reinsurance must defend clothing company, In and Out, against a trademark infringement suit by Forever 21. The dispute focuses on exclusionary language in the general liability policy issued by Great Lakes to In and Out, which broadly bars coverage for claims stemming from violations of intellectual property rights, but which also excepts from the exclusion claims for copyright, trade dress and slogan infringement occurring in the company's advertisements. The appeal concerns last year’s ruling by a California federal judge that Great Lakes owed a defense because the underlying complaint raised a potential that In and Out’s advertising infringed Forever 21’s trade dress.

In late May 2017, the American Law Institute met to approve the Proposed Final Draft of the first ever Restatement of the Law, Liability Insurance—the culmination of over seven years of work on this project. Not surprisingly, many of the issues discussed in the Restatement have been hotly contested by insurers. The proposed Restatement is important for retail industry insureds because courts around the country may look to this new Restatement in ruling on common insurance coverage disputes arising out of product liability actions, recalls and environmental contamination. For example, some of the most hotly debated sections of the proposed Restatement include, (1) policy interpretation principles, such as when a term is deemed ambiguous; (2) the standard for determining the insurer’s duty to defend; (3) the insurer’s duty to make reasonable settlement decisions; and (4) the allocation of liability in long-tail environmental claims.

In a video roundtable series, Hunton & Williams LLP partners Lisa J. Sotto and Steven M. Haas and special counsel Allen C. Goolsby, along with Stroz Friedberg’s co-president Eric M. Friedberg and Lee Pacchia of Mimesis Law, discuss the special consideration that should be given to privacy and cybersecurity risks in corporate transactions.