Hunton Insurance Recovery Blog

In a recent article appearing in Florida’s Daily Business Review (available here), Hunton Insurance Recovery Practice team head, Walter Andrews, explains why phishing and whaling scams should be covered by insurance.  In the article, Andrews notes that recent appellate decisions support policyholders’ reasonable expectations of coverage and reject insurers’ contentions that social engineering losses do not result directly from the use of computers.  Andrews goes on to explain that should a company find itself a victim of a phishing or whaling attack, it should carefully ...

The California Department of Insurance recently approved three new insurance carriers to provide coverage for the emerging cannabis industry. Insurance Commissioner Dave Jones announced last week that The North River Insurance Company, United States Fire Insurance Company, and White Pine Insurance Company will all begin offering surety bonds for cannabis businesses by the end of the month.

In a recent post, we discussed the Sixth Circuit’s holding in American Tooling Center, Inc. v. Travelers Casualty and Surety Co. of America, No. 17-2014, 2018 WL 3404708 (6th Cir. July 13, 2018), where the Sixth Circuit reversed the district court’s summary judgment for the insurer, finding coverage under its policy for a fraudulent scheme that resulted in a $834,000.00 loss. The insurer, Travelers, has now asked the Court to reconsider its decision.

In a July 9, 2018 article appearing in Insurance Law360, Hunton Andrews Kurth insurance recovery practice head, Walter J. Andrews, explains why the Second Circuit’s decision in Medidata Solutions Inc. v. Federal Insurance Co., No. 17-2492 (2^nd Cir. July 6, 2018), affirming coverage for a $4.8 million loss caused by a “phishing” e-mail attack, is a common sense application of the plain language of Medidata’s computer fraud coverage provision.  As Andrews explained, “[c]learly, hijacking — or spoofing — email addresses constitutes an attack on a company's computer system for which a reasonable policyholder should expect coverage. A computer is a computer is a computer. Everyone knows that — except for insurance companies.”

Hunton Andrews Kurth LLP insurance recovery partners, Lorelie Masters and Lawrence J. Bracken II, received rankings in the 2018 Chambers and Partners USA attorney rankings.  Lorie received “Band 1” recognition in the Policyholder Insurance category for the District of Columbia and a "Band 2" recognition in the Dispute Resolution: Policyholder Insurance category for the Nationwide regions, while Larry received “Band 4” recognition in the General Commercial Litigation category among Georgia attorneys.  Both designations are the product of the outstanding results Lorie and Larry have achieved in their respective fields, and are indicative of the level of expertise both bring to the insurance recovery practice at Hunton Andrews Kurth, LLP.

Super Lawyers, a rating service of lawyers from more than 70 practice areas, has named Hunton Insurance Partner Lorie Masters on its Washington, DC 2018 Top 100 and Top 50 Women's lists. Super Lawyers’ competitive selection process includes independent research, peer nominations and peer evaluations. The list recognizes attorneys who have attained a high-degree of peer recognition and professional achievement. Congratulations Lorie! 

The Daily Business Review, an ALM publication covering the south Florida business community, has named Hunton’s Insurance practice head, Walter Andrews, as a recipient of its 2018 Professional Excellence Award.   The award recognizes exemplary work by attorneys in the legal profession and community.  The award is a precursor to an event hosted by the Daily Business Review on May 30 at the Rusty Pelican in Miami, where one of this year’s three Professional Excellence Award winners will be named Attorney of the Year.  Congratulations, and good luck Walter!

Hunton insurance recovery partner, Syed Ahmad, was recently asked to comment by Law360 on a Delaware Superior Court decision finding that state law does not preclude D&O insurance coverage for fraud-based claims against two Dole Food Co. executives, who are seeking to force several excess insurers to help pay for $222 million in settlements they reached to resolve stockholder suits accusing them of driving down Dole’s price before a 2013 take-private deal.  According the Ahmad, the ruling is likely to carry strong precedential effect due to the solid reasoning of the court’s decision, which is premised on the Delaware Supreme Court’s 1986 decision in Whalen v. On-Deck Inc., which upheld the availability of coverage for punitive damages under Delaware law.

Hunton & Williams Insurance Recovery partner, Lorelie (Lorie) S. Masters, has been selected to Law360’s 2018 Insurance Editorial Advisory Board, whose purpose is to analyze Law360's coverage of significant developments in the practice of insurance coverage law, and gain insight from experts in the field on how best to shape future coverage.  An article in Law360 discussing the Editorial Advisory Board and each of its members can be found here.

Congratulations to Lorie and the other members of the 2018 Editorial Advisory Board!

In a ruling earlier this month, an Oklahoma appellate court ruled in JP Energy Marketing LLC v. Commerce and Industry Insurance Co., No. 115285, 2017 WL 7903997 (Okla. Civ. App. March 01, 2018), that additional insured status would be afforded to a project owner despite the absence of a direct contract between the project owner and the subcontractor requiring that the project owner be named as an additional insured, finding that a direct contract was not required where the insurance policies did not use the words “between” or “direct” to describe the level of contractual relationship that would give rise to additional insured status.  The decision underscores the importance of carefully evaluating the language used in “additional insured” provisions, which can vary widely in scope and effect.

The Eleventh Circuit, in Mid-Continent Casualty Co. v. Adams Homes of Northwest Florida, Inc., No. 17-12660, 2018 WL 834896, at * 3-4 (11th Cir. Feb. 13, 2018) (per curiam), recently held under Florida law that a homebuilder’s alleged failure to implement a proper drainage system that allowed for neighborhood flooding triggered a general liability insurer’s duty to defend because the allegations involved a potentially covered loss of use of covered property.

Hunton & Williams Insurance Recovery leader, Walter Andrews, discusses the top insurance issues facing employers in Part 2, of a two-part video series.  Part 1 of the series is available here.

A recent ruling by U.S. District Judge Paul Byron of the Middle District of Florida has made clear that the actual words used in an insurance contract matter. The court, in Mt. Hawley Insurance Co. v. Tactic Security Enforcement, Inc., No. 6:16-cv-01425 (M.D. FL. 2018), denied an insurance company’s motion for summary judgment attempting to rely on an exclusion to deny coverage to its policyholder.  The policyholder, Que Rico La Casa Del Mofongo, operated a restaurant establishment in Orlando, Florida, and sought coverage for two negligence lawsuits filed against it for allegedly failing to prevent a shooting and another violent incident on its premises.

In an article recently featured in Westlaw Journal Insurance Coverage, my colleagues Lorie Masters, Michael Levine, and I discuss significant cases and other insurance developments from 2017. The full article can be found here.

In a recent article published in Internet Retailer, Syed Ahmad, Lorelie (Lorie) Masters, and Katie Miller discuss the risks retailers face when using smartphone-reliant technology and contactless payment systems, including ransomware attacks and other security breaches, and the insurance coverage necessary to address these potential risks.

The calendar may have started anew in 2018, but federal regulators have affirmed that they are still firmly focused on one of 2017’s emerging issues—cryptocurrencies and, more specifically, initial coin offerings (ICO).

Hunton & Williams insurance partner, Syed Ahmad, was quoted twice in Law360 concerning significant insurance cases to watch in 2018.  On January 1, 2018, Ahmad noted that Pitzer College v. Indian Harbor Insurance Co., pending in the California Supreme Court, “can be significant for coverage disputes in California because the California rule could override the law of the state that would apply otherwise, even if the parties agreed to another state’s law governing,"  On January 9, 2018,  Ahmad was again asked by Law360 to comment on key D&O cases that will likely be decided in 2018.  Ahmad noted that in Patriarch Partners LLC v. Axis Insurance Co., pending in the Second Circuit Court of Appeals, Patriarch's appeal presents an unusual situation in which a policyholder is arguing that various developments in an ongoing SEC investigation don't constitute a claim under a D&O policy, in order to avoid the application of an exclusion.  In other circumstances, it may be favorable for a policyholder to assert that a preliminary step in an SEC probe is a claim, so as to maximize coverage.   According to Ahmad, the district court didn't fully address how, in the context of the specific policy language at issue, a non-public order by the SEC could qualify as a claim.   "As Patriarch argues, 'until an agency makes a demand upon the target under legal compulsion, there may be no way for a policyholder to even know that it is being investigated, that an order authorizing investigation has been issued against it or what the order of investigation says,'" Ahmad said, quoting from Patriarch's appellate brief.

With 2017 now in the rearview mirror, my colleagues Michael Levine, Lorie Masters, and I take the opportunity in this year’s annual review to reflect on the cases and other insurance developments that made the year memorable and will influence coverage decisions and disputes in 2018 and beyond.

Thank you and Happy New Year to all of our readers!

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.”

In today’s interconnected society, a cyber breach is inevitable. For energy companies in particular, the threat is even more acute as cyber security improvements lag behind the rapid digitalization in oil and gas operations. One recent cyber security report stated that 68% of respondents reported that their organization experienced at least one cyber compromise. And, just last week, it was disclosed that hackers used sophisticated malware, called “Triton,” to take control of a key safety device at a power plant in Saudi Arabia. Find our analysis of this latest attack on the blog here .

In what has been described as a “watershed” cyber incident, hackers recently used sophisticated malware—dubbed Triton—to take control of a key safety device installed at a power plant in Saudi Arabia. One of the few confirmed hacking tools designed to manipulate industrial control systems, this new breach is part of a growing trend in hacking attempts on utilities, production facilities, and other critical infrastructure in the oil and gas industry. The Triton malware attack targeted the Triconex industrial safety technology made by Schneider Electric SE. The attack underscores the importance of mitigating this and other similar risks through cyber and other traditional liability insurance as part of a comprehensive cybersecurity program.

Whether a policyholder’s losses are “direct” or “indirect” can be coverage-determinative. Most financial institution bonds exclude “indirect” or “consequential” losses. A recent decision in Fed. Deposit Ins. Corp. v. Arch Ins. Co., No. CV C14-0545RSL, 2017 WL 5289547 (W.D. Wash. Nov. 13, 2017) addressed the issue of “direct” versus “indirect” losses in a dispute under a financial institution bond issued by Arch Insurance Company (Arch) to Washington Mutual Bank (WaMu). The court held that WaMu’s losses resulting from its purchase of fraudulent loans were “direct” losses, and that WaMu’s sale and contractual obligation to repurchase the fraudulent loans did not convert its losses from direct to indirect.

Last week, Golden Bear Insurance Company became the first admitted insurer approved by the California Department of Insurance to provide insurance coverage for marijuana companies. Golden Bear will now begin offering first- and third-party insurance coverage specifically targeting marijuana companies in the state.

Insurance giant Allianz Global Corporate & Specialty S.E. announced yesterday that it has launched a blockchain prototype for a global captive insurance program. The project focuses on professional indemnity and property insurance for a customer with a captive insurance program with local subsidiaries in the U.S., China and Switzerland. Captive programs are complex programs used frequently by multinational organizations to self-insure their risks. These organizations create their own self-insurance programs, or ‘captives,’ which aggregate assets or insurance exposures from their global operations.  The programs collect premiums from each operating unit much like an ordinary insurer.  The captive entity likewise pays out claims as they arise. Allianz administers the captive insurer as a “fronting insurer,” using the insurer’s diverse multi-national network to ensure global reach and compliance.  Blockchain technology automatically connects all parties involved in the insurance program by using its distributed ledger technology, which is shared among all program participants and can record transactions and data entries. Updates and changes to the data are shared in real-time across all users. This creates a much faster, transparent, secure and efficient means of distributing information, conducting business processing and recording transactions across multiple parties.

An eye-popping settlement in Georgia serves as a cautionary tale for insurers who refuse to provide a straight answer when responding to a demand for policy limits and as a lesson for insureds dealing with recalcitrant insurers: Don’t just take “no” for an answer.

A recent article published by Securityroundtable.org highlights the vulnerabilities businesses face in a world of e-commerce and interconnectivity, and how proper planning through a tailored cybersecurity program that includes - among other components - appropriate insurance coverage for cyber risks can help prevent a successful attack and mitigate the financial impact should one occur. Whether the issue is prevention or risk mitigation, cybersecurity should be at the top of the corporate agenda. As discussed in the Securityroundable.org article, Lisa Sotto, chair of the ...

With Brexit approaching in March 2019, uncertainty remains over whether Britain and Brussels will reach an agreement to ensure that UK insurers can continue to pay out on policies after Britain leaves the European Union.  The uncertainty tied to Brexit serves as a broader warning to policyholders about the potential pitfalls that can occur when large-scale political or economic change occurs, and how that change can impact an insurer’s indemnity obligations under a pre-existing contract.  In the case of Brexit, it remains unclear whether UK and EU regulators will permit the ...

In their new article for FC&S Legal, Hunton & Williams attorneys Lorie Masters, Syed Ahmad, and Jennifer White discuss critical questions that must be answered when assessing and protecting against cyber risk in the financial sector.  The article is available here.

In prior posts (here and here), we have highlighted some potential coverage concerns for losses arising out of the use of blockchain technology. However, as previously reported, Blockchain technology’s relevance to insurance is not limited to coverage for losses. In fact, earlier this week, the Blockchain Insurance Industry Initiative known as B3i expanded its membership to include heavyweight insurance companies like Chubb, AIG, and Gen Re as well as notable insurance and reinsurance brokers like Marsh, Guy Carpenter, Willis Re, and JLT Re.

In an article in the September issue of ABA Business Law Today, Hunton & Williams attorneys Lorie Masters, Sergio F. Oehninger, and Patrick McDermott discuss the increasing use of blockchain technology, the security of the technology, and insuring against the relevant risks. As they explain, the "potential disruptive uses of blockchain technology in the marketplace have been compared to that of the Internet." Thus, businesses across industries should consider their insurance would cover risks arising out of the use of blockchain technology. The authors point out that current ...

Congratulations to Hunton & Williams insurance recovery lawyer, Patrick McDermott, on his confirmation by the DC Bar Foundation’s Board of Directors to the organization’s Young Lawyers Network Leadership Council.  The DC Bar Foundation launched the Young Lawyers Network Leadership Council in November 2011 as an opportunity for younger attorneys to further the goal of access to justice within the community.  Members serve as ambassadors in order to promote DCBF’s mission and programs and to help raise additional resources to support local legal aid organizations.  Among ...

Following the devastation of Hurricane Irma, the Florida Office of Insurance Regulation has entered an emergency order regarding insurance procedures for residential property policies to assist policyholders and streamline the claims process. The insurance commissioner’s order provides standardized requirements for claims reporting, grace periods for payment of premiums and performance of other duties by policyholders, and temporary postponement of cancellations and non-renewals. These include:

Consulting firm Ernst & Young recently announced that it is collaborating with Microsoft, data security firm Guardtime, and shipping and logistics conglomerate Maersk to create a marine insurance platform based on blockchain technology. The companies anticipate that their blockchain-based product—to be implemented globally beginning in early 2018—will connect clients, brokers, insurers, and third parties to "distributed common ledgers that capture data about identities, risk and exposures" and integrate this information with insurance contracts. The platform's capabilities include: "the ability to create and maintain asset data from multiple parties; to link data to policy contracts; to receive and act upon information that results in a pricing or a business process change; to connect client assets, transactions and payments; and to capture and validate up-to-date first notification or loss data."

Hunton & Williams Insurance Recovery partner, Michael Levine, was quoted in an August 29, 2017 article appearing in Business Insurance, regarding the rapid increase in lawsuits, and insurance issues, surrounding concussions in high school and college sports.  Among other things, the article discusses a coverage lawsuit filed by Great American Assurance Company against Conference USA in federal court in Dallas, Texas.  In the lawsuit, the insurer alleges that its policy did not afford coverage for football concussion injuries because the policy included a “limited event ...

Benchmark Litigation has released its Under 40 Hotlist for 2017, naming the year’s most promising emerging talent in their respective litigation communities in the US and Canadian litigation community by peers and clients.  Among those named is our own Syed Ahmad, along with other Hunton partners Ryan Glasgow (Labor & Employment), Jason Harbour (Bankruptcy), Kerry McGrath (Administrative Law) and Amanda Wait (Competition).

Congratulations, Syed!

Since our first report last year, Lemonade Insurance, a tech start-up that planned to offer peer-to-peer insurance products, has launched in four states, offering homeowners and renters insurance in New York, California, Illinois, and New Jersey. Lemonade’s cutting-edge use of technology and its alternative business model could prove disruptive to the insurance industry.

As posted earlier today on Hunton & Williams' Retail and Privacy blogs, and as reported in Law360, Hunton & Williams announces the formation of a cross-disciplinary legal team dedicated to guiding companies through the minefield of regulatory and cyber-related risks associated with high-stakes corporate mergers and acquisitions.

Earlier today, Hunton & Williams LLP insurance coverage lawyer Andrea DeFIeld was named “Rookie of the Year” by the Greater Miami Chamber of Commerce in their annual HYPE Awards ceremony.  The awards recognize Miami-Dade County’s brightest young professionals who have demonstrated outstanding achievements in their professions.  Andi certainly has done that, and much more, said Hunton’s Insurance Coverage practice leader, Walter Andrews, who attended the awards ceremony with Andi.  Andrews added, “Andi is an integral part of our practice and a leader among young ...

Insurance coverage law continued to evolve through 2016. As the year draws to a close, we take this opportunity to reflect on the cases and law that made this year memorable and will influence coverage decisions and disputes in 2017.

On March 31 and April 15, we wrote blog posts (which can be accessed here and here) about a D.C. federal judge's decision to rescind MetLife's systematically important financial institution (SIFI) status. On October 24, a D.C. Circuit three-judge panel heard oral argument of the appeal of that decision. The federal government advocated to reinstate MetLife's "too big to fail" designation by arguing that regulators were not required to prove the insurance giant was likely to collapse before imposing enhanced federal oversight. Conversely, attorneys for MetLife argued that the Financial Stability Oversight Council (FSOC) acted arbitrarily by not partaking in any threshold analysis of how MetLife would be vulnerable to a financial collapse.

Hunton & Williams LLP’s insurance coverage counseling and litigation team has relocated its core group of lawyers to Washington from McLean, Va. Hunton’s Washington office is home to more than 150 lawyers and is the firm’s second-largest office.

“The move is good for us and great for our clients,” says practice head Walter J. Andrews. “Being in the nation’s capital better provides us with national exposure and a central location to assist our clients nationally and internationally.”

Hunton’s insurance coverage counseling and litigation lawyers have kept pace ...

Hunton & Williams LLP’s insurance coverage counseling and litigation team has relocated its core group of lawyers to Washington from McLean, Va. Hunton’s Washington office is home to more than 150 lawyers and is the firm’s second-largest office.

“The move is good for us and great for our clients,” says practice head Walter J. Andrews. “Being in the nation’s capital better provides us with national exposure and a central location to assist our clients nationally and internationally.”

Hunton’s insurance coverage counseling and litigation lawyers have kept pace ...