Oct 16 2020

Insurance Law – 10/16/2020



The Ninth Circuit has ruled that a California District Court did not err in holding that Employment Practices Wrongful Act coverage did not extend to allegations that the insured had a practice of failing to properly reimburse its delivery drivers for employment-related expenses in violation of California law. In Unity Courier Service Inc. v. Hudson Ins. Co., No. 19-56168 (9th Cir. Oct. 9, 2020)(unpublished), the court ruled that this coverage was not triggered merely because the complaint alleged misconduct arising from an employee handbook or policy statement of the insured or by allegations that the insured had misrepresented that its employment policies comply with all applicable laws.

FLORIDA     Pandemic/”Direct Physical Loss”/Causes of Loss

A federal district court in Orlando has ruled in Harvest Moon Distributors, LLC v. Southern-Owners Ins. Co., No. 20-1026 (M.D. Fla. Oct. 9, 2020) that a wine and beer distributor for the Walt Disney parks in Orlando could not obtain property insurance for loss of business income, extra expense and inventory as a result of beer that spoiled after the parks closed. Judge Byron did agree with the insured that allegations in its complaint that the beer had become inedible alleged a plausible claim for "direct physical loss." However, the court refused to require Extra Expense coverage in light of the fact that the insured’s Complaint only alleged that Disney had suspended operations and did not contend that the insured itself had suspended its operations or had been obliged to undergo a "period of restoration." Further, the court found that there was no allegation that the insured was unable to buy beer from its suppliers or sell it to other customers. Further, the court found that these losses were excluded as involving loss due to the "acts or decisions…of any person, group, organization or governmental body" since the beer went bad because of Disney’s decision to close its park and not due to the COVID-19 virus itself.

GEORGIA     Pandemic/”Direct Physical Loss”

In Henry's Louisiana Grill Inc. v. Allied Insurance Company of America, No. 20‑2939 (N.D. Ga. Oct. 6, 2020), Judge Thrash ruled that the COVID virus does not cause physical loss to the insured's property, nor is it "direct." In the case, the court found that the Georgia Governor's Executive Orders had not caused a physical change that rendered once satisfactory dining rooms unsatisfactory. Further, the court took note of the fact that the plaintiffs were not contending in their complaint that any COVID-19 particles had been found on the property. As a result, the court found that "no physical damage as a result of the virus' presence can be argued here." In finding that the loss to the property was not "direct", the judge observed that "the Order did not impose limitations on businesses or their operations. The Plaintiffs' closure was likely prudent, but that decision was not made directly by the Order – it was made by intervening persons as a result of intervening conditions." In any event, the court concluded that holding that such orders had led to a "physical loss" of the insured's dining rooms "would massively expand the scope of the insurance coverage at issue here." As "the Plaintiff's construction would potentially make an insurer liable for the negative effects of operational changes resulting from any regulation or executive decree, such as a reduction in a space's maximum occupancy." Further, the court found that limiting the policy's coverage to physical damage to property was consistent with the "period of restoration" language in the policies which "appears to contemplate a range of potential covered damages, ranging from those requiring repairs or replacements to those required at the relocation of the business. This range of contemplated harms aligns with an understanding that 'loss of' means total destruction of all 'damage to' seems some amount of harm or injury." The court also declined to find any "civil authority" coverage the plaintiffs had not pleaded that the actions of any civil authority had prohibited access to their premises or prohibited access to the insured's dining facilities. Further, the court found that the plaintiffs had not pleaded any facts that areas "immediately surrounding" the damaged properties were blocked by any civil authority order and, in fact, the plaintiffs had not identified any particular property around their premises which was damaged by COVID-19 or had its access restricted by a civil authority. In light of this analysis, the court ruled that Georgia law was clear with respect to these issues and that it was not necessary or appropriate to certify such questions to the Georgia Supreme Court.

IOWA     Pandemic/”Direct Physical Loss”

Judge Wolle issued a short order in Oral Surgeons, P.C. v. The Cincinnati Ins. Co., No. 20‑222 (S.D. Iowa Sept. 29, 2020) granting Cincinnati's motion to dismiss on the basis that the insured's inability to conduct non‑emergency dental procedures during the pandemic is not based on any direct physical loss to the insured’s property.

NEW YORK     Asbestos/Trigger/Allocation Disputes

The Appellate Division of the New York Supreme Court has vacated a trial court’s declaration that “as a matter of law, injury-in-fact in an asbestos action occurs from the date of first claimed exposure through death or the filing of suit, thereby triggering each policy in effect from the date of first claimed exposure, The Fourth District sustained the trial court’s declaration of successor liability, declaring that documents prepared contemporaneously with the reorganization, the deposition testimony of employees involved in the reorganization, and evidence of post-reorganization conduct, that the parties to the reorganization agreement, consistent with the language therein, intended to, and did, transfer assets including insurance rights. Nevertheless, the Appellate Division ruled in Carrier Corp v. Allstate Ins. Co., 2020 NY Slip Op 05620 (App. Div. Oct. 9, 2020), that summary judgment should not have been granted in light of contradictory affidavits with respect to whether asbestos injuries occur immediately after initial exposure and averring instead that harm occurs only when a threshold level of asbestos fiber or particle burden is reached that overtakes the body's defense mechanisms. Te Appellate Division didl affirm the lower court's adoption of an "all sums" rule for allocaition in liight of the excess policies’ provision for “non-cumulation.”

TEXAS     Pandemic/”Direct Physical Loss”

Senior Judge Fitzwater has ruled in Vandelay Hospitality Group v. The Cincinnati Ins. Co., No. 20‑1348 (N.D. Tex. Oct. 7, 2020), that a restauranteur's effort to compel lost business income due to the interruption of its business during the COVID-19 pandemic. The court declared that Vandelay's action merely set forth conclusory legal assertions and was not supported by factual allegations, However, the court granted the insured leave to file an amended complaint to correct these defects. At the same time, the court dismissed the insured's claims for bad faith and alleged violations of the Texas Prompt Payments Act.


Inside the Insurance Industry

Lloyds issued a new report last Friday calling for the development of less complex and more effective insurance policy products.

Liberty Mutual has issued a nine point matrix assessing the factors driving a hard market, including (1) severe weather; (2) litigation strategies; (3) dangerous driving; (4) the economy; (5) tech and social inflation pressures on umbrella insurance rates; (6) dislocations as workers readjust to their old job responsibilities; (7) state statutes presuming causal links between injuries and COVID-19; (8) difficulties facing businesses as they reopen and (9) emerging plaintiffs’ litigation strategies.

Munich Re has named Elizabeth Kramer as its new chief underwriting officer.

Pandemic Update

A corporation that owns over 100 hotels and fast food franchises has filed suit in the federal district court in New Jersey alleging in Manhattan Partners, LLC v. Zurich-American Ins. Co., No. 20-2243 (D.N.J.) that it is insured for pandemic-related business interruption losses.

Cyber Developments

The Seyfarth Shaw law firm has admitted that it was the target of a sophisticated ransomware attack over the weekend.

Opioid Claims

Johnson & Johnson has reportedly offered $5 billion in exchange of a global resolution of the opioid claims against it.

New Coverage Litigation

NetDiligence has sued Arthur J. Gallagher C. in federal court in Manhattan for failing to obtain “communicable disease” coverage that would have insured it for losses that it has suffered this year due to pandemic-related event cancellations.

Mark Your Calendars

The Federation of Defense and Corporate Counsel will be presenting its Insurance Information Institute on November 5-6 via Zoom. Here is a link to register. This year’s program will feature:

  • Keynote Speaker, Dr. Steven Weisbart, Chief Economist and Executive Director of the Insurance Information Institute
  • Michele Fenice, Vice President of Chubb; Hank Watkins, Regional Director and President of Lloyd’s America; and Traci McQuire, Chief Claims Officer of AmeriTrust Group will join coverage attorney Lauren Curtis for a discussion of State of the Industry—Trends and Challenges
  • Stefan Holzberger, Chief Ratings Officer, A.M. Best Company will discuss the current state of the market
  • Nationally-recognized coverage attorneys will discuss the various liability claims that have arisen across the country as a result of the COVID-19 pandemic
  • A review of COVID-19 legislation enacted to date and its impact upon liability and coverage litigation with Robert Gordon of the American Property Casualty Insurance Association; Harold Kim, President of the U.S. Chamber Institute for Legal Reform; J. Stephen Zielezienski, American Property Casualty Insurance Association; and Martin Lavelle, Managing Counsel, Claim Legal Liability/Major Case, The Travelers Companies, Inc.
  • Insurance Commissioners and officials from Massachusetts, Michigan, South Carolina, Illinois and West Virginia will join Amy Mass, Vice President of the Hanover Insurance Group for a discussion of the regulatory response to 2020
  • A discussion of the impact of COVID-19 on the Reinsurance Market with Stephen Carter, Esq., Carter Perry Bailey, London, England; Angus Kench, Vice President of Casualty, Workers Compensation and Crisis Management Claims of Liberty Specialty Markets, New South Wales, Australia; and Richard K. Traub, Traub Lieberman Straus & Shrewsberry LLP; and
  • Data Privacy and GDPR—Where are We Headed? With Marisa Trasatti, Wilson Elser Moskowitz Edelman and Dicker; Sean Griffin, Dykema; and Sarah Cushard, Senior Security Specialist, Greycastle Security.


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