Certain captive insurers that lost or will lose membership in the US Federal Home Loan Bank (FHLB) system as a result of a 2016 rulemaking by the Federal Housing Finance Agency may get a reprieve under the Housing Opportunity Mortgage Expansion Act. A similar bill was also introduced in the House of Representatives. Significantly, the proposals provide only for the restoration of FHLB membership for captive insurers, not for new membership for those captive insurers that previously had no membership.
The National Association of Insurance Commissioners recently adopted the Insurance Data Security Model Law. The model law builds on existing data privacy and consumer breach notification obligations by requiring insurance licensees to comply with detailed requirements regarding maintaining an information security programme and responding to and giving notification of cybersecurity events.
After 1985 coverage for asbestos-related injuries claims became generally unavailable. However, courts are still grappling with the question of whether damages arising from asbestos claims should be allocated to the assured for periods when they were uninsured because insurance coverage was unavailable. In the past year, courts in Connecticut and New York have taken up the unavailability exception doctrine, coming out on opposite sides of the debate.
Insurance policy provisions concerning 'related' acts are frequently found in professional liability and various claims-made policies. While wordings and definitions may vary in policies (where the terms are defined at all), substantial consequences can pivot on the interpretation of the word 'related'. To complicate matters further, the timing of related claims can add an additional variable to the equation.
Waivers of subrogation technically involve two separate contracts: a waiver clause that is part of the agreement between the insured and a third party; and an insurance policy provision in which the insurer permits the insured to waive its recovery rights against the third party. While most of the litigation surrounding waivers of subrogation is focused on the specific language in either of these clauses, recent developments in the law should give insurers and insured alike more to think about.
A recent US District Court for the District of Arizona ruling may be one of the first in the country to interpret the unique issues that arise in relation to cyber-insurance policies. While it may be imprudent to read too much into the case in light of the relative lack of case law interpreting these policies, it does offer some useful guideposts for practitioners advising clients with respect to this type of cyber coverage.
In JH France v Allstate the Pennsylvania Supreme Court concluded that when multiple policies are triggered and are potentially liable for losses which occurred over many years, the insured can choose which policies have to respond to make payment of those losses. JH France became the leading case for the implementation of pick-and-choose all-sums allocation, with significant implications for reinsurers.
Attorney-client privilege and the work product doctrine have been challenged and stretched through recent cases across the United States, particularly where bad faith of an insurer is alleged. This update provides practical pointers for insurers and attorneys, to assist in laying the groundwork for privilege and asserting attorney-client privilege.
Despite the increasingly intrusive nature of discovery of insurers' files and attacks to attorney-client privilege, privilege appears to be a stronger ground for asserting protection than a standalone assertion of work product. Whether an insurer has impliedly waived attorney-client privilege continues to be a case-by-case analysis, but asserting the 'advice of counsel' defence will weaken an insurer's ability to claim the privilege where bad faith is alleged.
In the past year, cyber-attacks have become more frequent and more damaging. The insurance industry has responded, with more carriers than ever now offering cyber-specific policies. To the extent that courts are finding that commercial general liability policies do not cover cyber-attacks, insurers continue to look for areas to craft wording that is responsive to the emerging threats while staying true to proven risk management structures.
The US courts have recently ruled, in following the Bellefonte v Aetna decision, that defence costs are to be included in reinsurance facultative certificates' limits of liability. The courts have generally followed Bellefonte and, minus any specific ambiguity in the limit of liability stated within the facultative certificate, the courts will likely apply a single limit of liability to loss and expense.
Two recent New York court decisions highlight the need for insurers to provide a written disclaimer of coverage to their insureds "as soon as is reasonably possible" after acquiring actual or constructive knowledge of grounds for a disclaimer of liability.
In the realm of cyber-security, the insurance industry has generally been reactive. However, recent data breaches with far-reaching implications are forcing insurers and insureds alike to take proactive measures to minimise potential damages. While the stakes remain high, one would think that the extent to which coverage is afforded to cyber-losses would be well defined. Unfortunately, this is not the case.
Since 2004, Michigan has applied a two-part test for determining whether a plaintiff's claim sounds in medical malpractice or an alternative liability theory. While this test remains controlling law, the state's intermediate court of appeals has occasionally interpreted the term 'claim' inconsistently in the context of this test. These apparent inconsistencies could have significant implications for insurance carriers.
New York and New Jersey lawmakers have proposed amendments to their state's Unfair Claim Settlement Practices Act to empower policyholders against their insurers in the event of alleged bad-faith denial of claims. Insurers should familiarise themselves with these proposals, as there is a significant likelihood that they will have a considerable impact on claim reviews.
The Court of Appeals of Washington, Division One recently held that two excess professional liability insurance policies were not triggered where the insured entered into a global settlement with the underlying primary carrier, such that the insured accepted less than the primary policy limit in payment of the subject loss.
Attorney-client privilege plays an important role in the representation of clients in the realm of insurance law. Privilege attaches as early on as the first contact between a potential client and an attorney. However, without adequate safeguards to ensure its protection, attorney-client privilege may be subject to waiver. This can often arise in the context of an insurance broker's relationship with the insured and insurer.
Subrogation takes place when an insurer 'steps in the shoes' of its insured in order to pursue recovery from third parties that are legally responsible to the insured for a loss. Professional lines insurers are governed by the same subrogation case law developed in the context of personal lines and pure-loss indemnification contracts. However, the states are split on which party has the superior interest in subrogation and reimbursement.
The concept of excess insurance seems simple enough at first glance, but one issue has proved contentious: what must happen, vis-à-vis the underlying policies, to trigger excess coverage? The state of play was uncertain at the beginning of 2013, but the exhaustion issue has since been squarely confronted by an influential court.
JP Morgan is the latest legal instalment concerning the plain and ordinary meaning of the exhaustion requirement contained in an excess insurance policy. While recent case law has served to crystallise the issues concerning the interpretation of underlying exhaustion requirements, the burdens that may be placed on the insured and its underlying insurers have also become more certain.