PANDEMIC UPDATE
The Fourth Circuit issued a short unpublished opinion last week in Golden Corral Corp. v. Illinois Union Ins. Co. No. 21-2219 (4th Cir. Aug. 11, 2022), holding affirming a North Carolina District Court's declaration of coverage for a North Carolina District Court's entry of summary judgment for an insurer. In keeping with it's earlier ruling in Uncork and Create, the court declared that "the "policy's coverage for business income loss and their expenses did not apply to [plaintiff's] claim for financial losses caused by the COVID-19 pandemic in the absence of any material destruction or material harm to its covered premises."
Having previously ruled in Illinois and Michigan cases that COVID 19 does not cause "direct physical loss," the Seventh Circuit has now applied the same analysis to an Indiana case, ruling in Circle Block Partners v. Fireman's Fund Ins. Co., No. 21-2459 (7th Cir. Aug. 17, 2022) that "a temporary denial of a plaintiff's preferred use of its property, absent some physical alteration, does not fall within the plain meaning of direct physical loss or damage." The court rejected the insured's argument that that the virus "adsorbs" onto surfaces and materially alters them. Further, the court ruled that the law on this point was clear and denied the insured's request that the issue be certified to the Indiana Supreme Court for resolution.
NEW CASES OF CONSEQUENCE
SECOND CIRCUIT ADR/Arbitrability (NY)
The Secondi Circuit has ruled that a dispute between an excess liability insurer and Exxon concerning coverage for MTBE claims must be arbitrated and that a court order affirming the arbitral result for Exxon need not be vacated even though the U.S. District Court judge in question realized after the fact that he owned stock in Exxon. In ExxonMobil Oil Corp. v. TIG Ins. Co., No. 201-1946 (2d. Cir. Aug. 12, 2022), the court ruled that an "Alternative Dispute Resolution Endorsement" that replaced a standard clause requiring arbitration in London in accordance with the English Arbitration Act of 1960 was binding and enforceable despite language that seemed to require mutual assent to arbitration by the parties. The Second Circuit further found that there was no evidence of bias on the part of Judge Ramos' approval of the case, as confirmed by a subsequent de novo merits review by Judge Mary Kay Vyskocil (who before going on the bench was lead counsel for Travelers in numerous large insurance cases). While therefore ruling that the District Court had properly granted Exxon's motion to compel arbitration, it erred in granting pre-award interest beyond the Policy limit of $25 million when it confirmed that award," as the parties' agreement specified that in the event of a breach, liquidated damages were the sole remedy and made no provision for any award of interest.
CALIFORNIA First Party/Physical Loss/Cryptocurrency
A federal court in San Francisco has ruled that a homeowners insurers did not owe coverage for a theft of Bitcoins from the insured's digital "wallet." In granting Travelers' motion to dismiss, Judge Curley ruled in Burt v. Travelers Commercial Ins. Co., No. 22-03157 (N.D. Cal. Aug. 16, 2022) that the theft was not a "physical loss" because cryptocurrency does not have a material existence, is not formed out of tangible matter, and is not perceptible to the sense of touch.
DELAWARE Opioid Claims/Procedure/Forum Non Conveniens
A Chancery Court judge denied an insured's motion to dismiss suits that eight insurers filed against CVS in the immediate aftermath of the Delaware Supreme Court's ruling in Rite-Aid that the underlying opioid claims were not covered by CGL insurance. Despite the insured's forum con conveniens argument and contention that the Rhode Island case that it had filed three days later was the more comprehensive and appropriate forum within which to litigate these issues, Judge Wallace ruled in In Re: CVS Opioid Insurance Litigation, No. 22C-02-045 (Del. Super. Aug. 12, 2022) that there was no "race to the courthouse" in this instance and that the insurers' filing in Delaware therefore should be given some deference as being first-filed. More consequentially, the court ruled that Delaware was not an inappropriate forum and that CVS would not suffer hardship from having to suffer here, especially as there did not appear to be any difference between the two state's relevant case law.
FLORIDA Assignments
The Florida District Court of Appeal has ruled in Mold Buster Detection Services v. Citizens Property Insurance Assoc., No. 4D21-1210 (Fla. DCA4 Aug. 10, 2022) that a trial court was correct in dismissing a mold remediation company's claim against a customer homeowner's insurer due to the fact that the insured's assignment of rights did not comply with the requirements of Section 627.7152. Although plaintiff had argued that the case turned on the terms of Section 627.7143, the Fourth District pointed out that Section 627.7143 only applied where a policy prohibited assignments, which was not the case here.
ILLINOIS EPL/Biometric Privacy/Employer Statutes Exclusion
Despite an insured's claim that both EPL and CGL policies applied to a former employee's claim that the insured had violated the Illinois Biometric Information Privacy Act by collecting, using and disseminating biometric identifies, Judge Kocoras has ruled in Church Mutual Ins. Co. v. Prairie Village Supportive Living, No. 21 C 3752 (N.D. Ill. Aug. 11, 2022) that language in the EPL policy precludes any claim under the CGL policy and that there is, in fact, no coverage for such claims under the BPL policy because of the policy's "violation of laws applicable to employers" exclusion. In this case, the District Court ruled that BIPA was not a statute similar to the various enumerated ones within the exception to this exclusion because it does not protect employees against discrimination and its not limited in scope to employers.
ILLINOIS Duty to Settle
The Appellate Court has ruled that the liability insurer of a bar that was sued for an altercation on its premises is not liable for a $2 million judgment that followed its rejection of a pre-trial demand for its $1 million policy limits. In Valdez v. Illinois Ins. Corp., 2022 IL Appl (1st) 201121 (Ill. App. Ct. Aug. 1, 2022), the First District found that Illinois law on "duty to settle" cases requires the claimant to present evidence that (1) a third party demanded settlement within the policy limits, (2) there was a "reasonable probability" of a finding of liability against the policyholder, and (3) there was a "reasonable probability" of recovery in excess of the policy limits. In this case, the court found that the claimant had not established facts to show that an excess judgment was probable. Further, the Appellate Court rejected the plaintiff's argument that, upon receipt of the policy limits demand, the insurer had a right to advise its insured of the demand and the risk of an excess judgment and that, having failed to do so, it had forfeited its right to contest liability for this excess judgment.
NEW HAMPSHIRE Insolvency
In the latest of many rulings since the Home Insurance Company was declared insolvent, the New Hampshire Supreme Court has ruled In The Matter of the Liquidation of the Home Insurance Company, No. 2021-0211 (N.H. Aug. 12, 2022) that a judge in the Business division of the Superior Court did not err in granting the Liquidator's motion and approving the Claim Amendment Deadline on the law, facts and circumstances presented"; and (2) in concluding that the Claim Amendment Deadline strikes "a reasonable balance between the expeditious completion of the liquidation and the protection of unliquidated and undetermined claims" in accordance with RSA 402-C:46, I (2018).
OTHER DEVELOPMENTS OF NOTE
Inside the Insurance Industry
Allstate announced last week that Glenn Shapiro will retire as the president of its Property-Liability division at the end of next month. Shapiro joined Allstate as its chief claims officer in 2016 and has held his current position since 2018.
Lloyds issued a new Market Bulletin last week expressing concern about the impact of government-sponsored cyberattacks. Bulletin YF581 requires that all stand- alone cyber-attack policies falling within risk codes CY and CZ must include clauses that clearly exclude or provide coverage for liability for losses arising from any state backed cyber-attacks. These exclusions must:
- Exclude losses arising from a war (whether declared or not), where the policy does not have a separate war exclusion.
- Exclude losses arising from state backed cyber-attacks that (a) significantly impair the ability of a state to function or (b) that significantly impair the security capabilities of a state.
- Are clear as to whether cover excludes computer systems that are located outside any state which is affected in the manner outlined in 2(a) & (b) above, by the state backed cyber-attack.
- Set out a robust basis by which the parties agree on how any state backed cyber-attack will be attributed to one or more states.
- Ensure that all key terms are clearly defined.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.