Imagine that your company has finally released its new flagship product, which is slated to be the new lifeblood of the company. You’re elated when early sales far exceed expectations. But soon you are hit with a demand letter from a competitor alleging that the product infringes its patents, and threatening suit. Remembering that your company purchased comprehensive coverage under its commercial general liability (CGL) policy, you feel some initial relief—but soon your insurer tells you that the general policy does not provide patent coverage, or even expressly excludes such claims. Suddenly, you’re left wondering how your company will weather a costly patent lawsuit while continuing to roll out its new product.
Articles Posted in Litigation
Forging New Paths: Incorporating Appellate Strategies into Insurance Litigation
Claim analysis and pre-trial preparation can sometimes become so focused on determining what the law is that lawyers lose sight of our ability to change that law. In some cases, that means discovering and arguing new legal issues. In others, it means persuading the courts to take your side of a question that has not been decided before or has produced conflicting decisions, or even to overturn a binding ruling that stands in your way. To create these opportunities, you have to look beyond the most direct paths available—supplementing your likely trial arguments with an awareness of how the decisions you make before and at trial affect your ability to shape the law on appeal. This is as true in insurance litigation as in any other area of law.
Electing to Pay One Claim Over Another to an Insured’s Detriment Could Subject Insurers to Bad Faith Claims
A federal court in Michigan just breathed new life into a long-running legal saga—while at the same time issuing a warning shot across the bows of insurers—by declining to dismiss an insured’s bad faith cause of action alleging its insurer wrongly decided to pay one claim before another, to the insured’s detriment.
The Devil in the Details: When Settlements with Co-Defendants Become “Other Insurance”
As the old adage goes, “the devil is in the details.” Insurance policy terms do not always apply in ways that policyholders expect. For this reason, it is imperative to understand how coverages, definitions and exclusions work together to avoid surprise gaps in coverage. The Fifth Circuit found a coverage gap in a recent case holding that settlement contributions from co-defendants met an excess policy’s broad definition of “Other Insurance,” preventing the policyholder from securing coverage for a significant part of its losses.
Don’t Let Them Off the Hook: Ninth Circuit Affirms an Insurer’s Broad Duty to Defend
As the adage goes, don’t make a promise you cannot keep. An insurance policy, like any other contract, involves a commitment from both sides. For third-party liability policies, an insurer typically commits to a broad duty to defend the policyholder against any suits alleging claims that have a potential for coverage under the insurance policy. However, when a claim arises, insurers have a financial interest in trying to get off the hook. At times, policyholders need to turn to the courts for help reeling insurers in and forcing them to follow through with their commitments.
Recently, in Hanover Insurance Company v. Paul M. Zagaris, Inc., the Ninth Circuit ruled that an insurer had to defend its insured, a real estate brokerage firm, in a proposed class action suit because there was a potential for coverage for at least one of the alleged claims. The plaintiffs alleged that the real estate brokerage firm had received undisclosed kickbacks from the sale of natural-hazard disclosure reports to its clients. Specifically, they claimed that the firm breached its fiduciary duties, deceived its clients by omission, engaged in constructive fraud, and was unjustly enriched, among other things.
Changes Lie Ahead for Companies in the #METOO Era – A Good Insurance Program Should Be a Part of those Changes
America is facing a reckoning. Many brave individuals have stepped forward over the last several months to speak truth about sexual harassment and assault in workplaces, in entire industries, and even in Congress. For a very long time, companies dealt with sexual assault and harassment allegations quietly and in backrooms, and these allegations often were not taken seriously. However, thanks to the turning tide, more companies are reexamining their internal policies, encouraging change in corporate culture, and addressing sexual assault, harassment, and discrimination claims more directly. As part of this effort, companies should also look at their corporate insurance programs to confirm insurance is in place should any such claim arise.
Only about 41 percent of companies with more than 1,000 workers report having some kind of insurance plan to cover sexual harassment and discrimination, and only about 33 percent of companies with at least 500 employees carry any insurance coverage for claims resulting from sexual harassment or assault. The numbers are even starker for startup companies, with only three percent of companies with fewer than 50 employees carrying such coverage. Therefore, while more and more companies are instituting anti-sexual harassment and anti-discrimination policies, many companies remain ill-prepared to handle the inevitable challenges that await individuals, executives, and companies alike, as a result of this watershed moment in American culture.
Developments in South Carolina: Harleysville Revisited
In two posts earlier this year—South Carolina May No Longer Hold Insurers’ Reservations and The Insurer’s Mixed-Coverage Burden—we told you about an important decision issued by the South Carolina Supreme Court in Harleysville Group Insurance v. Heritage Communities, Inc. Those posts were written shortly after the court issued its original opinion on January 11, 2017. But on July 26, 2017, the court issued a new opinion replacing the original. So what has changed? Not much … and that’s a good thing for policyholders.
Don’t Be Caught Napping – Your Insurance May Not Be Exhausted
As the cliché saying goes: “When it comes to love, never settle for less than you deserve.” But when it comes to insurance coverage, sometimes settling for less than the full limits of a policy is an effective compromise that saves time and avoids costly litigation. However, if losses may reach excess policies, then policyholders should take a second look before signing on the dotted line. Excess liability policies often include a limitation requiring the “exhaustion” of underlying policy limits before excess coverage is triggered. If the policyholder settles with an underlying insurer for less than the underlying policy limits, excess insurers may dispute whether the settlement qualifies as “exhaustion.”
Think You Don’t Need Cyber Insurance? This Recent Data Breach Class Action Ruling May Change Your Mind
Cyber insurance continues to be one of the hottest topics in the insurance industry. In the last several years it has evolved from a little-known specialty product to a standard purchase for some corporate risk departments. By now, most companies generally are aware that cyber attacks present substantial risks. Many unfortunately have first-hand experience as victims of an attack. But many companies still do not necessarily view cyber insurance as a “must-have” type of insurance, like general liability or property insurance. Some companies may believe their potential cyber exposure is minimal or simply think that cyber coverage is cost prohibitive. A recent D.C. Circuit decision is a sobering reminder that cyber insurance should at least be considered in connection with a company’s risk management plan, and is probably a “must-have” for companies that maintain records containing a substantial amount of personal information.
Beauty and the Beast: Insurance in the Fashion Industry
Fashion is sexy; insurance is not. So it’s easy to think of the two separately. But there are many points of intersection. Some of those intersections are not industry-specific: like other industries, fashion—design houses, retailers, textile manufacturers, modeling agencies—carries property, D&O, cyber, and many other lines of insurance. But unique aspects of the fashion world, and recent litigation trends affecting it, underscore the importance for the fashion industry to understand insurance in order to maximize successful recovery of insurance assets. Here, we comment briefly on three areas: IP, employment, and antitrust.