Tag Archives: Legal Environment

Concurrent Causation and Hurricane Irma claims

The issue of causation, especially when there may be multiple causes of loss, can be a tricky one for both insureds and insurers. It comes down to what caused the loss – and in what order.

Take the example of a major catastrophe, like a hurricane, where there may be property claims arising from both wind and water. Determining the cause of loss is key to determining whether there is coverage under the terms of an insurance policy because there are two policies in play, one for wind damage and one for flood damage.

Some jurisdictions subscribe to the “efficient proximate cause doctrine” while others subscribe to the “concurrent causation doctrine”.

What’s that?

The efficient proximate cause doctrine finds that where there is a concurrence of different perils, the efficient cause – the one that set the other in motion – is the cause to which the loss should be attributed.

Under the concurrent causation doctrine, when multiple perils contribute to a loss, coverage is allowed if at least one cause of the loss is covered by the policy.

In the case of Florida, a recent court decision adopted the concurrent causation doctrine, which will impact Hurricane Irma claims.

Hatching A Lawsuit? Protect Your Business With Insurance

If you didn’t think suing over Santa was bad enough shed a tear over the unfortunate case of the Hatchimal.

For those of you who aren’t familiar with the latest toy craze (or weren’t lucky enough to find one under the Christmas tree), the Hatchimal is basically an interactive stuffed animal that hatches from an egg.

Created by toy maker Spin Master Corp, each Hatchimal learns how to walk, talk and play games as it goes through the five stages of its life: egg, hatching, baby, toddler and kid.

Cute, right? Yes, but…

What if your Hatchimal fails to hatch?

For my sons, the case of the unhatching Hatchimal was remedied simply by a cuddle and some (admittedly overly exuberant) help breaking open its shell.

But as Business Insurance reports, the failure to perform has led one disappointed parent—Jodie Hejduk of Bakersfield, California, to file a lawsuit seeking class action against Spin Master Corp.

The complaint, filed in U.S. District Court in the Eastern District of California charges Spin Master with spoiling the holidays and false advertising after the toy Hedjuk purchased for her daughter failed to hatch.

The suit alleges the hottest toy of the season which retails at $50-$60 was so hard to find that some were selling on the black market for $350:

“For the few children who were lucky enough to receive a Hatchimal, many were left disappointed when their Hatchimal failed to live up to its name. Despite Spin Master’s representations that the toy would “hatch”, many Hatchimals did not hatch.”

The suit asserts violations of the California Consumer Legal Remedies Act, Unfair Competition Law and False Advertising Law. It also brings claims for unjust enrichment, breach of express warranty and injunctive relief.

A note on Spin Master’s website says:

“We have had more than a million successful hatches since we first launched Hatchimals on October 7th and we are still hard at work making sure that everyone has a magical hatching experience. We are 100% committed to bringing the magic of Hatchimals to all of our consumers.”

Spin Master also offers some troubleshooting tips on its Support/FAQs page.

And here’s the must-watch video on how to hatch your Hatchimal:

Businesses address their liability concerns through many types of risk management, of which insurance is an important component, according to the Insurance Information Institute (I.I.I.). See I.I.I. facts and statistics on litigiousness.

Women’s Marches And Insurance

The Women’s March on Washington has inspired a grassroots movement of tens of thousands who will show their solidarity in sister marches held in cities across the country on January 21, the day after the inauguration of U.S. president-elect Donald Trump.

All 50 states and Puerto Rico are confirmed to have at least one grassroots-led march on that day, with more than 500,000 people expected to march across the U.S. and in 55 cities around the world.

For volunteer organizers of sister marches, what began with a simple Facebook posting in many cases has grown into a much bigger event for which organizers have taken on not just leadership responsibility, but potential liability consequences too.

Notwithstanding the rights of individuals to come together in peaceful protest, there’s the potential for claims for bodily injury or property damage in the event a march becomes less peaceful than expected.

What this means is that local volunteer organizers may want to explore their insurance options.

For example, many (but not all) municipalities require individuals or groups using public property to purchase liability insurance as part of the application process for a permit to hold an event.

This issue is already a hot topic in Phoenix, Arizona, where under state regulation, organizers of the sister march are required to secure some $2 million in liability insurance, per this AZCentral.com report.

A number of municipalities also offer tenant user liability programs (so-called TULIP programs) that enable organizers of certain public events on city property to more easily obtain event liability insurance.

Where Insurance Meets Transgender Rights

Both as assumers of risk and as employers, insurers are in a unique position when it comes to navigating the changing legal environment and civil rights.

Recent federal and state rulings pertaining to the rights of transgender individuals raise a number of issues, and there are potential insurance implications to consider.

In March North Carolina passed a controversial law (HB 2) requiring transgender individuals to use public bathrooms that correspond to their gender at birth. This led the U.S. Justice Department to send a letter to North Carolina leaders saying the law violates the U.S. Civil Rights Act and Title IX.

More than 150 CEOs and business leaders of major companies voiced their opposition. PayPal withdrew its plans for a $3.6 million investment and 400 jobs in the Tar Heel state.

Also in April, in a landmark ruling on transgender students’ rights in schools, the Fourth Circuit Court of Appeals in Virginia decided that the U.S. Department of Education can prohibit anti-transgender discrimination under Title IX, a federal law that prohibits sex discrimination in education. (G.G. v Gloucester County School Board)

In the wake of this ruling, President Obama issued a directive instructing public schools to allow transgender students to use the restroom that matches their gender identity.

Meanwhile, several federal agencies have issued strong opinions on the issue of discrimination and transgender rights, for example:

—The U.S. Department of Health and Human Services has ruled that hospitals, clinics and other healthcare providers cannot discriminate against patients on the basis of gender identity.

U.S. Attorney General Loretta Lynch has made clear that laws restricting restroom access that affect transgender individuals are discriminatory.

—The Departments of Justice and Education issued a joint letter to public schools explaining how federal law prohibiting sex discrimination affects schools’ obligations toward transgender students.

—The U.S. Equal Employment Opportunity Commission (EEOC) has sued several employers over their treatment of transgender employees, including restroom access, on the basis that alleged conduct violates Title VII of the Civil Rights Act of 1964, which prohibits sex discrimination, i.e.. employment discrimination based on gender identity or sexual orientation.

While this is an evolving area of law and liability for businesses and municipalities everywhere, insurers—and the policies they write—will no doubt be implicated.

Industry experts say it’s critical that businesses find out what their state or municipality has enacted on this issue and establish a coherent nondiscriminatory policy to minimize their own liabilities.

In a recent PodCast with A.M. Best on the legal issues surrounding transgender restroom access Brian Cafritz, a partner at Kalbaugh, Pfund & Messersmith Law P.C. said there could be potential implications for commercial general liability policies that cover slander, defamation, assaults, or other discrimination acts.

Cafritz also noted that as federal laws change, negligent hiring or retention claims could be raised impacting the insurance policies that cover these entities.

School districts and municipalities in particular face rising potential liability. A recent brief by Munich Re noted that policy coverage that might be impacted by transgender litigation against school personnel include:

—General liability: physical bodily injury and/or mental anguish, mental injury

—Personal Injury: defamation of character, violation of privacy rights

—Wrongful Acts – tortious error, act or omission

Workplace issues as they relate to transgender employees was a topic of discussion at the recent RIMS conference session, as reported by Business Insurance.

Employment Matters Cost

If you’re a small or medium-sized business with fewer than 500 employees you might think that none of your employees would file discrimination charges against your company.

But a just-released survey by Hiscox dispels that myth, showing just how costly employment matters can be for small and medium-sized enterprises (SMEs)–and how important it is to have employment practices liability (EPL) insurance.

A representative study of 446 closed claims reported by SMEs with fewer than 500 employees found that some 19 percent of employment charges resulted in defense and settlement costs averaging a total of $125,000. On average, those matters took 275 days to resolve, Hiscox found.

While the average self-insured retention (deductible) for these charges was $35,000, without employment practices liability insurance, these companies would have been out of pocket by an extra $90,000, Hiscox said.

“Most employment matters don’t end up in court, but for those that do, the damages can be substantial,” Hiscox noted.

Its survey cites data showing the median judgment is approximately $200,000, which is in addition to the cost of defense. About 25 percent of cases result in a judgment of $500,000 or more.

Where a business is located can make a big difference in the potential employment exposure it faces.

The 2015 Hiscox Employee Lawsuit Handbook found states with the highest risk of employees filing lawsuits are: New Mexico (66 percent higher than national average), Washington DC (65 percent higher), Nevada (47 percent higher), Alabama (41 percent higher) and California (40 percent higher).

Overall, U.S.-based companies of all sizes have at least an 11.7 percent chance of having an employment charge filed against them, Hiscox found.

Claims Journal has more on this story here.

Wondering what’s covered by EPL insurance? The Insurance Information Institute (I.I.I.) explains all here.

 

Pride in Insurance

June is Pride month and our annual round-up of the latest insurance news around the LGBT (lesbian, gay, bisexual and transgender) community takes on added significance with today’s U.S. Supreme Court decision on same-sex marriage.

The Supreme Court decision in Obergefell v Hodges means that the U.S. Constitution guarantees a right to same-sex marriage in all 50 states. This has a number of implications for health, life, and auto insurance.

For example, health and life benefits that currently exist in states that recognize same-sex marriage will—once the law goes into effect—extend to all states.

Some of these benefits include: coverage of a same-sex spouse and children under health insurance plans; equal tax treatment of health insurance premiums for married gay couples; and recognition of a spouse for survivor benefits, including social security and life insurance.

For auto insurance offerings, too, this means that LGBT customers who are married will be entitled to the married rate, regardless of where they live.

Esurance, one of the first car insurers to extend the married rate to LGBT customers, points to what equality means for auto insurance in a just-issued press release here.

For LGBT couples who are married or are planning to get married, Esurance offers the following advice:

In addition to saving money with the married rate, married couples in states newly recognizing same-sex marriage can be identified as a spouse on their partner’s insurance policy. This will allow them to receive additional benefits on that policy such as coverage while driving a rental or borrowed car.

Until the ruling goes into effect in individual states, Esurance will continue to extend its married rate to either married gay couples, domestic partners or those in civil unions–even in states that have yet to recognize same-sex marriage. Something it has done since 2011.”

Fitbit Data Measures More Than Just Fitness

If you know someone who leads an active lifestyle, you may already know what a Fitbit is. For everyone else, a Fitbit is a wearable device that tracks steps, calories, distance and even sleep.

Now it appears data from wearable devices may be admissible in court.

Forbes.com reports that a law firm in Calgary is working on the first known personal injury case that will use activity data from a Fitbit to help show the effects of an accident on their client.

According to the report, the young woman in question, who used to be a personal trainer, was injured in an accident four years ago. While Fitbits weren’t on the market back then, her lawyers believe they can use data from her Fitbit to show that her activity level has significantly decreased and is now below where it should be for someone of her age and profession.

The article suggests that “cases like this could open the door to wearable device data being used not just in personal injury claims, but in prosecutions.”

The young woman’s lawyer is also quoted saying that such data could be useful to insurers assessing questionable claims and that just as courts requisitioned Facebook for information several years ago a court order could compel disclosure of that data.

Sounds like another case where digital information has an unintended use in the courtroom.

The Importance of Having a Cyber Liability Policy

As the number of companies suffering a data breach continues to grow — with U.S. retailer Staples now reported to be investigating a breach — so do the legal developments arising out of these incidents.

While companies that have suffered a data breach look to their insurance policies for coverage to help mitigate some of the enormous costs, recent legal developments underscore the fact that reliance on traditional insurance policies is not enough, notes the I.I.I. white paper Cyber Risks: The Growing Threat.

A post in today’s Wall Street Journal Morning Risk Report, echoes this point, noting that a lawsuit between restaurant chain P.F. Chang’s and its insurance company Travelers Indemnity Co. of Connecticut could further define how much, if any, cyber liability coverage is included in a company’s CGL policy.

Collin Hite, partner and leader of the insurance recovery group at law firm Hirschler Fleischer tells the WSJ that whatever the outcome of this case, companies that want to be sure they are protected against cyber-related losses may have to purchase separate cyber liability policies–and make sure those policies are broad enough to encompass the myriad ways an attack could cost the firm money.

P.F. Chang’s confirmed in June that it had suffered a data breach in which data from credit and debit cards used at its restaurants was stolen.

An earlier  post in the Hartford Courant Insurance Capital blog by Matthew Sturdevant  has the details on  the  legal action  between Travelers and P.F. Chang’s.

To-date the application of standard form commercial general liability (CGL) policies to data breach incidents has led to various legal actions and differing opinions, according to the I.I.I. paper on cyber risks.

One recent high profile  — and oft-cited case  — followed the April 2011 data breach at Sony Corp. in which hackers stole personal information from tens of millions of Sony PlayStation Network users.

A New York trial court ruled that Zurich American Insurance Co. owed no defense coverage to Sony Corp. or Sony Computer Entertainment America LLC.

In his ruling, New York Supreme Court Justice Jeffrey K. Oing said acts by third-party hackers do not constitute “oral or written publication in any manner of the material that violates a person’s right of privacy” in the Coverage B (personal and advertising injury coverage) under the CGL policy issued by Zurich.

Further expertise and analysis on cyber risks and insurance is available from the I.I.I.

Changing U.S. Liability Claims Environment

Growth in U.S. liability claims could accelerate to 5-6 percent in the near future, according to a just-released report by Swiss Re sigma.

The slowdown in U.S. liability claims paid after 2008, primarily due to economic drivers such as the recession and weak recovery, is expected to reverse.

Why the change?

Cyber risk and the liability from emerging technologies including hydrofracking and autonomous cars, combined with stronger economic growth will drive liability claims costs higher, sigma says.

Interestingly the report suggests that the effects of tort reform, which contributed to a slowdown in claims growth in the mid-2000s in the U.S., were a one-off benefit and will no longer suppress claims growth to the same degree.

It notes:

Often these types of reform have only a temporary effect on claims growth, which fades as the rules eventually soften again or the legal profession learns how to optimize the pursuit of claims in the new framework.”

Tort reform in the U.S. has focused on medical malpractice and class action claims, the report says.

Many early studies concluded that medical malpractice reforms such as limits on lawyers’ fees and non-economic compensation were effective in reducing medical malpractice liability. However, some of these caps were later overturned by state supreme courts.

Despite passage of the Class Action Fairness Act in 2005, empirical evidence on the effects of federal class action reform in the U.S. remains inconclusive, sigma adds.

The report also warns that litigation funding, in which a third-party funding company pays the costs of litigation and is paid only if the litigation is successful, is still in its infancy in the U.S. but developing.

There are fears it will grow, driving up litigation and future claims costs for insurers.”

Check out this I.I.I. backgrounder on the U.S. liability system here.

Survey: Lawsuits Steady, But Financial Impact Rises

While the number of lawsuits filed against U.S. companies in the past year was stable, the financial impact of the litigation they face continues to increase, according to Norton Rose Fulbright’s Annual Litigation Trends Survey.

More than one-third (34 percent) of all companies faced at least one lawsuit with more than $20 million at issue in 2013, up from just 23 percent in 2011, continuing a trend in recent years that’s left fewer respondents untouched by high-value cases.

Energy companies are much more likely to have one or more large lawsuits pending against them compared to other industries (52 percent versus 34 percent for the total sample), the study found, as are larger companies generally (51 percent versus 34 percent for the overall sample).

Among the largest companies surveyed (revenue greater than $5 billion), two-thirds reported having one or more lawsuits greater than $20 million pending against them, twice the rate for the overall sample.

Meanwhile, the percentage of larger companies spending $10 million or more annually on litigation increased to 43 percent in 2013 – the second consecutive year of growth (33 percent in 2012, 19 percent in 2011).

Another key takeaway from this year’s study is that healthcare industry respondents had the most litigation matters compared with other industries, with 55 percent indicating more than 20 suits versus 30 percent for the overall sample.

That increased activity also led to higher spending, with 49 percent of healthcare respondents reporting a 2013 litigation spend of $5 million or more, closely followed by energy at 46 percent.

The percentage of financial services companies spending $5 million or more on litigation more than doubled to 38 percent in 2013, up from 15 percent in 2012 and just 11 percent in 2011.

Labor and employment disputes once again were the most common litigation issues facing U.S. companies in 2013.

The number of U.S. companies facing regulatory proceedings increased for the third consecutive year, reflecting a stricter regulatory environment and increased scrutiny from a broad range of state and federal agencies.

Not surprisingly, legal counsel concerns over regulatory/investigation matters are also up sharply in the 2013 survey, with 41 percent of respondents indicating it as a top concern, versus just 23 percent in 2012.

Norton Rose Fulbright’s 10th annual litigation trends survey of corporate law departments in the U.S. saw responses from a total of 401 senior corporate counsel executives representing a broad range of industries.