Hunton Insurance Recovery Blog

The Fourth Circuit recently affirmed insurance coverage for a South Carolina policyholder based on the “axiomatic principle” that an insurer which fails to fully and fairly articulate its potential coverage defenses in a reservation of rights letter loses the right to contest coverage on those grounds. Stoneledge at Lake Keowee Owner’s Assoc. v. Cincinnati Ins. Co., No. 19-2009, 2022 WL 17592121 (4th Cir. 2022) (quoting Harleysville Group Insurance v. Heritage Communities, Inc., 803 S.E.2d 288 (S.C. 2017)). More particularly, in Stoneledge, the Fourth Circuit affirmed per curiam a South Carolina District Court’s grant of summary judgment in favor of a homeowners association that had successfully sued its general contractors for construction defects and was seeking to recover the damages owed from the contractors’ insurers. The Fourth Circuit agreed that the insurers’ vague reservation of rights letters failed to reserve the defenses on which the insurers purported to deny coverage.

A review of insurance policies at renewal should be on every business’s annual task list—and it should be checked twice! Just as your business grows and evolves every year, so should your insurance program. Together with staying proactive and preparing for renewal months before the policy expiration, there are a number of best practices to put your business in the best position to maximize insurance recovery, including shopping around, evaluating changes to your business, engaging the appropriate stakeholders, and performing a policy audit with a coverage attorney.

On November 23, 2022, a federal court in Minnesota highlighted the importance of strategically approaching product liability claims, both in terms of their underlying defense and their insurability. In Federal Insurance Company v. 3M Company, No. 21-2093 (JRT/DTS), 2022 WL 17176889 (D. Minn. Nov. 23, 2022), the court rejected the insurer’s attempt to treat each underlying lawsuit as a separate occurrence, thereby maximizing per-occurrence deductibles, and instead found that the manufacture of the allegedly defective medical devices was the sole occurrence responsible for each of the lawsuits. 3M, therefore, was only required to pay a single deductible.

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. 

One of the threshold issues in COVID-19 insurance coverage cases that have been brought across the country is whether the policyholder’s allegations meet the applicable pleading standard in alleging that the virus caused physical loss or damage. In many cases, the courts have gotten it wrong, effectively holding policyholders to a higher standard than required. But recently, a California federal judge righted those wrongs by acknowledging the correct pleading standard in that case, which is whether the allegations state a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). The Court, here, correctly recognized that the policyholder, the Los Angeles Lakers, met that pleading standard when it alleged that the COVID-19 virus can cause physical loss or damage by physically altering property.

On November 3, 2022, US News announced its annual law firm rankings, where Hunton Andrews Kurth LLP garnered the highest (Tier 1) ranking among national insurance law practices. Hunton’s insurance team also received Tier 1 honors for “Insurance Law” in three regions (Washington, DC, Atlanta and San Francisco) and Tier 2 honors for “Litigation – Insurance" in Washington, DC. US News ranks law firms in tiers from 1 (highest) to 3 (lowest) based on quantitative data that speaks to general demographic and background information on the practice group, attorneys and other ...

While Harvard prepares to defend its admissions policies to the Supreme Court, one of its insurers continues to argue that a technicality prevents Harvard from recovering $15 million to defray its defense costs under its insurance policies.

Last month, we discussed an insurance coverage dispute between Harvard College and Zurich American Insurance Company. The dispute arises from Zurich’s refusal to cover a 2014 lawsuit that an affirmative-action group filed against Harvard, alleging that the university’s admissions policies violated Title VI of the Civil Rights Act. Since the affirmative action suit was filed, Harvard has been defending its admissions policies through the trial and appellate court systems, an effort that has cost the university more than $25 million.

A New York federal court recently held that an insurance company was entitled to recoup legal fees paid under a directors and officers liability policy in defense of a criminal action against an ex-CEO who was convicted of bribery. On a motion for reconsideration, the court affirmed its earlier ruling that the CEO’s conduct fell within the policy’s “Dishonest and Willful Acts Exclusion,” reasoning that the criminal case had been finally adjudicated despite a pending appeal. Because there was no coverage, the insurer could seek repayment of all defense costs it had paid to date. Not only is the court’s recoupment decision potentially inconsistent with New York law, but it also raises thorny questions regarding just when a judgment is “final” for the purpose of triggering D&O policy exclusions.

As we have discussed in prior parts of this series, the insurance industry has developed an array of policies specifically tailored to cover cryptocurrency claims, and some of these policies may also cover certain NFT claims. Separate and apart from these tailored policies, policyholders with NFT claims also may look to traditional forms of insurance. 

NFTs are collectible and one of a kind, yet digital. The most common NFT is a type of visual art image like a digital painting, a photograph or generative designs (created by artificial intelligence). However, this high-level definition doesn’t do justice to just how pervasive these have become. In addition to traditional artwork, there are:

A federal court recently found that a policyholder adequately plead that a loss of hundreds of thousands of dollars through wire fraud is covered under a commercial crime policy. In Landings, Yacht, Golf, and Tennis Club v. Travelers Casualty and Surety Company of America Case No. 2:22-cv-00459, Landings Yacht, Golf, and Tennis Club (“Landings”) sued Travelers Casualty and Surety Company of America (“Travelers”) under a crime policy for denying coverage for: (1) about $6,885.79 in unauthorized withdrawals (“First Withdrawal”) from users purporting to be Landings and (2) $575,723.95 in withdrawals made by a third-party purporting to act on behalf of Landings (“Second Withdrawal”).^[1]