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Risk and Recovery: Legal Insights for the Insured

Bank Bond Covers Third-Party Losses Arising out of Bank Employee’s Fraud, Eighth Circuit Holds

Posted in Commercial General Liability (CGL)

Fidelity bonds are purchased primarily to protect against loss to the policyholder’s own assets, from things like employee theft or embezzlement. In Avon State Bank v. BancInsure, Inc., however, the Eighth Circuit interpreted the language of a bank’s fidelity bond to provide broader coverage, holding that the bond indemnified Avon State Bank for liability to third parties arising from an email scam.

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New Jersey State Court Rules Damage Caused by Superstorm Sandy Not Subject to Flood Sublimit

Posted in Property Damage

In a decisive victory for policyholders, Judge Thomas Vena of the Essex County Superior Court in New Jersey ruled that significant damages incurred by Public Service Enterprise Group Inc. (“PSEG”) as a result of storm surge flooding caused by Superstorm Sandy were not subject to the relevant policies’ sublimit of $250M for losses caused by “flood.” Continue Reading

Protecting Directors and Officers From Derivative Liability Arising From Data Breaches

Posted in Directors and Officers Liability

With data breaches affecting companies across virtually every industry, cyber security has remained front page news. Lawsuits brought by aggrieved consumers and financial institutions against companies that have suffered data breaches are not uncommon. Increasingly, companies are also being subjected to shareholder derivative suits against directors and officers alleging breach of fiduciary duty relating to a data breach. As a result, corporate boards should Continue Reading

Mississippi Supreme Court Limits Broker Liability Where Insured’s Conduct Is Uninsurable

Posted in Denial of Coverage

When an insurance claim is denied, policyholders sometimes look to their broker as a potential source of recovery.  Generally speaking, a broker owes its client the duty to procure the scope of coverage requested.  When a broker fails to do so, it may be liable for any gap in its client’s coverage.  The Mississippi Supreme Court addressed this issue recently in Mitchell Scruggs, et al. v. Greg Bost, et al. Continue Reading

Divided New York Court of Appeals Holds That Under Noncumulation Clause Only One Limit Is Available to Cover Multiple Claims

Posted in Policy Limits

In Nesmith v. Allstate Insurance Co., New York’s highest court, over a two-judge dissent, held that under the noncumulation clause in a landlord’s liability policy, only one limit was available to cover claims by children from different families who were exposed to lead paint in the same apartment during successive policy terms.  This result should cause holders of similar policies to stop and think, before renewing, about what they are getting for their premium. Continue Reading

Terrorism Risk Insurance Program Reauthorized, But Some Uncertainty Remains

Posted in Commercial General Liability (CGL), Terrorism Risk Insurance Program Reauthorization Act

On Monday, President Barack Obama signed into law a six-year extension of the Terrorism Risk Insurance Program after the House and Senate passed the bill by votes of 416-5 and 93-4, respectively. As we previously reported, Congress’ failure to extend the program, under which the federal government is responsible for a substantial share of insured losses resulting from “certified” acts of terrorism, could have significant implications for property or casualty policyholders. Many such policies include an endorsement, commonly designated as the “Conditional Exclusion of Terrorism Endorsement,” which conditions terrorism coverage upon the existence of the Federal Terrorism Insurance Program. While the government’s extension of the program is a positive sign for policyholders, it may not necessarily mean a return to the status quo. A question remains: Will insurance carriers that issued policies containing the Conditional Exclusion of Terrorism Endorsement argue that the exclusion has been triggered despite the Terrorism Risk Insurance Program’s revival? Continue Reading

Policyholders Face Uncertainty after Lapse of Terrorism Risk Insurance Program

Posted in Commercial General Liability (CGL), Terrorism Risk Insurance Program Reauthorization Act

Congress’ failure to renew the Terrorism Risk Insurance Program Reauthorization Act (“TRIPRA”), a 2007 extension of the 2002 Terrorism Risk Insurance Act, could have significant implications for companies that rely upon property or casualty policies to manage risk.  TRIPRA expired on December 31, 2014, potentially triggering policy endorsements that exclude coverage, previously provided under those policies, for loss or damage arising from acts of terrorism.  Standard property and casualty policies issued as of January 1, 2015 will also likely exclude such coverage now that carriers can no longer rely upon TRIPRA, under which the federal government bore a significant portion of insured losses caused by terrorism.  It remains to be seen whether insurance carriers will offer terrorism risk insurance going forward, how such coverage will be priced if it is available, and whether the new Congress will extend the Terrorism Risk Insurance Act.  In all events, policyholders should understand what TRIPRA’s expiration means for risk management purposes and what should be done unless and until Congress acts.

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Texas Supreme Court Denies Policyholder’s Discovery Regarding Claims Handling

Posted in Commercial General Liability (CGL), Property Damage

It is rare to see a state’s highest court address a discovery issue.  But the Supreme Court of Texas did just that recently in In re National Lloyds Insurance Co., holding that a policyholder’s demands for discovery about how her homeowner’s insurance carrier’s claims adjusters handled other insurance claims was an impermissible “fishing expedition.”  The decision is a sobering one for all policyholders, not just homeowners, that are insured under policies governed by Texas law and who believe that their insurers have not handled their claims in good faith.

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Texas Federal Court Clarifies Broad Scope of Professional Liability Policies for Lawyers

Posted in Professional Liability

Lawyers may be surprised to learn that lawsuits brought by clients challenging something other than purely legal advice or advocacy—such as billing—may not be covered by their professional liability policies.  Interpreting the phrases “professional services” and “legal services” in such policies narrowly, courts in some jurisdictions—including Texas—have historically limited professional liability coverage to claims based on the provision of legal advice or advocacy, not from more administrative tasks like billing and fee setting.  However, a new trend seems to be developing in Texas, where courts are increasingly recognizing that, even if non-legal services rendered by a law firm are arguably not “professional services” themselves, they are sufficiently related to professional services to be covered by professional liability policies.

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