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It’s a jungle out there. Penalties imposed under the Foreign Corrupt Practice Act for bribery charges proliferated like vines in 2016. In the dramatic conclusion of the Brazil-based Operation Car Wash probe, Brazilian construction giant Odebrecht-Braskem agreed to pay U.S., Brazilian and Swiss authorities $3.5 billion for paying bribes to government officials around the world. Teva, the international pharmaceutical company, was revealed to have paid bribes to Russian, Ukrainian and Mexican officials, and would have to pay nearly $500 million in penalties.iStock-512289218-jungle-path-300x200

But while these penalties are eye-catching, the internal investigations that responsible corporations undertake to avoid them can be even more expensive. A thorough internal investigation includes hiring outside attorneys, accountants, experts and consultants and sending them around the globe to probe potential bad acts in a company’s foreign offices. Sometimes, the fees continue to roll in even after settlement, when companies are ordered to pay outside monitors to make sure they are still complying with their FCPA obligations. A company may easily find itself on the receiving end of a multi-million dollar bill.

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Texas is not a place known for surrendering. (Remember the Alamo!). But like their compatriots in other states, Texas policyholders sometimes see the advantage of surrendering their liability iStock-522384399-alamo-300x200insurance policy rights to their litigation adversaries in order to retreat from the dispute. Whether they may have to stand and fight first is a question that the Texas Supreme Court may finally answer in Great American Ins. Co. v. Hamel. In that case, the Texas Supreme Court has agreed to review whether an insurer may be responsible for a judgment entered against its insured that is the result of a non-adversarial trial. This will be an important decision that will have significant repercussions for insureds and insurers alike.

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The first thing your insurance company must do after receiving notice of a loss is investigate your claim and make a coverage determination. The insurer will evaluate the strength of your claim, whether to pay it and what amount to pay. Even if the insurer thinks your claim is potentially covered, it may take the position that your claim is not covered or slow down its claim adjustment process to delay a payout in an effort to leverage a settlement for less than full value. If you sue to challenge your insurer’s coverage denial, a critical step to protect your rights and get the full coverage owed is to gain discovery of the insurer’s internal claims documents.

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We’ve come a long way since the days of Timothy Leary—both in terms of marijuana legalization, and in the diversity of business insurance products that have reached the market to insure marijuana-related risks. As of this blog post, more than 20 states have legalized marijuana for medical use, including eight states that have also legalized it recreationally. At the federal level, however, marijuana continues to be a Schedule I controlled substance, making it illegal for any purpose. Whether and to what extent the federal prohibition will be enforced by the Trump administration is not yet known. As the legal marijuana industry continues to grow apace, industry participants would do well to consider the insurance products available to them and potential pitfalls for the unwary.

Hand Holding Small Marijuana Leaf with Cannabis Plants in Background

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The Florida Supreme Court recently issued a widely reported decision, Sebo v. American Home Assurance Co., which applied the concurrent cause doctrine in ruling that an all-risk homeowner’s insurance policy provides coverage when damage is the result of multiple events—so long as at least one of them is a covered peril. Plaintiff John Sebo purchased a home, which he insured under an all-risk homeowner’s policy written by American Home. As an “all-risk” policy, it provided coverage for damage to property caused by all perils, except those it explicitly excluded. Design defects and faulty construction were among the excluded perils. Within less than two months of buying the house, Mr. Sebo discovered major leaks during rainstorms, which were later found to be the result of design defects and faulty construction. Hurricane Wilma then caused even more damage. When Mr. Sebo sought coverage for damage from the water intrusion, American Home denied most of the claim on the grounds that it was caused by design defects and faulty construction—which were excluded perils. But the Florida Supreme Court found coverage.

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In 1173, builders broke ground in Pisa, Italy, on the Torre de Pisa (that is, the Tower of Pisa). At over 183 feet, it was to be a grand statement—remember, this was 1173, not 2016.

Torre Inclinada de Pisa

But the story is not all roses. The tower began immediately to tilt—by the time they started laying just the second floor of the tower, it was leaning. Thus, it earned the name we all now know (and love?), “Torre pendent di Pisa”—the Leaning Tower of Pisa. Wikipedia explains, “[t]he tower’s tilt began during construction, caused by an inadequate foundation on ground too soft on one side to properly support the structure’s weight. The tilt increased in the decades before the structure was completed, and gradually increased until the structure was stabilized (and the tilt partially corrected) by efforts in the late 20th and early 21st centuries.” The tower now leans over 12 feet from the vertical axis.

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Pennsylvania policyholders need to keep their eyes on the details when it comes to defending faulty workmanship claims. What you see—or think you see—is not always what you get. In Bealer v Nationwide Mutual Insurance Company, the U.S. District Court for the Eastern District of Pennsylvania held on November 16, 2016 that an insurance company did not have a duty to defend its policyholder after determining that the claims assertedMonochrome portrait of senior man peering through magnifying glass, grimacing in the underlying litigation were for faulty workmanship and did not constitute an “occurrence.” But other Pennsylvania decisions provide opportunities to find coverage for policyholders who might be in similar situations.

William Tierney entered into a contract with Robert Bealer for the purchase of a lot and construction of a residence. About six months after Tierney moved in, a rainstorm flooded the basement of his home—after which he noticed cracks on several foundation walls, and then brought suit against Bealer.

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No matter the industry, businesses continue to face ever-escalating workers’ comp insurance premiums. In an effort to keep costs down, many companies are turning to an increasingly popular alternative to traditional “guaranteed cost” or “retrospective premium” workers’ comp programs: “large deductible” (LD) policies. LD policies theoretically give businesses greater Chain And Padlock Around Dollar Bundlecontrol over claims exposure and costs while at the same time satisfying regulatory requirements by having an insurance company as the ultimate guarantor of claims payments. But while some businesses may save money with LD policies, they may also find their assets tied up for years unless they challenge some common—and often problematic—terms and conditions of their LD policy programs.

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New York is a tricky forum for policyholders pursuing insurance coverage claims. In particular, New York jurisprudence has long failed to recognize and address causes of action for bad faith. Historically, insureds seeking to impose extracontractual liability have been required to meet the high bar of showing “egregious tortious conduct” and “a pattern of similar conduct directed at the public generally.” Contract-based claims invoking good faith and fair dealing often fared no better, with courts routinely dismissing insureds’ bad faith claims because they viewed them as “duplicative” of the policyholders’ underlying claims for breach of the insurance contract.

In 2008, a glimmer of hope emerged from New York’s highest court. In Bi-Economy Market, Inc. v. Harleysville Insurance Co., the court recognized a policyholder’s right to recover consequential damages in excess of policy limits where (1) the damages were the direct result of improper claims handling, and (2) the damages were foreseeable by the parties at the time of contracting. Although this decision did not create a bad faith cause of action, it did provide policyholders with a potential avenue to recoup consequential damages where the insurer violated its implicit contract-based covenant of good faith and fair dealing.

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The failure to include and/or accurately describe property locations is among the most common points of tension we see in litigation over wide-area catastrophe loss issues (earthquakes, floods, hurricanes) between the insured and its property insurance carriers. However, many first-party property policies offer devices to ensure that the policyholder is properly protected. When coverage for a location becomes disputed, the policyholder can put pressure on the carrier by resorting to “gap-filler” endorsements that are widely available, if underutilized.

Mind the gap sign

The insurance company may have prospectively protected itself the day your policy went into effect by adding an “occurrence limit of liability” endorsement. This clever insurance carrier device, which has become common in the last decade, is intended to limit the carrier’s exposure at each particular location, placing the onus on the insured to put every “location” on a master list with correctly reported values for each category of exposure (e.g., business interruption, property damage, contents exposure, etc.).

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