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Kidnap Ransom Insurance: Unlocking Coverage for Ransomware Attacks

By one account, “the cost of global ransomware attacks will exceed $11.5 billion annually by 2019, up from $5 billion last year and $325 million in 2015” – a 35X increase in just four years.  Relative to other cyber crime, ransomware is an equal opportunity enterprise—striking individuals as well as businesses of all kinds. Risk managers, in-house counsel and other executives may be tempted to assume that there is no traditional coverage for cyber ransom, or that only a stand-alone network security/privacy liability policy (often with deductibles or self-insured retentions exceeding the ransom) is likely to cover such loss. There is an often overlooked alternative. Kidnap, ransom & extortion (“K&R”) coverage, placed by many companies in connection with traditional D&O or crime policies, may provide a much-needed source of recovery for policyholders and an efficient alternative to dedicated network security/privacy liability insurance. Ransomware Trends in 2018 Ransomware has been a cyber… Continue Reading

On Shaky Ground: How Can Policyholders Prepare for the Predicted Increase of Earthquakes in 2018?

This year has already been a busy one for seismic activity. In the first weeks of 2018 alone, there have been reports of a 7.9 magnitude quake off the shores of Kodiak, Alaska, a 6.2 magnitude temblor in Japan, and a series of tremors in California. And, few will forget the catastrophic earthquakes that struck Mexico City and the Iraq-Iran border last year. With this recent domestic and international seismic activity and predictions of more to come, some corporate policyholders will ask the question: what insurance coverage is available to protect against property damage and business interruption loss from earthquakes? While insurance terms and conditions may vary by region and from one policyholder to another, generally speaking, “all-risk” commercial property policies insure all non-excluded direct physical loss or damage to covered property. As a general proposition, many such policies may include exclusions for loss or damage resulting from “earth movement.”… Continue Reading

Three Things Employers Should Know When Seeking EPLI Coverage For Sexual Harassment Claims

At a time when tolerance seems to be an increasingly precious commodity, society can celebrate an awakening intolerance for sexual harassment. For all of the scandal and salacious detail dominating the media in recent months, there is the hope that victims of depravity can find empowerment and healing, if not justice, too. Countless public figures—once insulated from accountability by wealth, power and status—have been forced to reckon with the reality of their crimes and consequences. But high-profile resignations and public apologies imply a finality and resolution for wrongdoers that is much slower in coming for those wounded by workplace impropriety. And for every victim, there are countless others—including families, friends, institutions and communities—who are swept up in the aftermath of sexual assault. Among those exposed to significant risk surrounding what can only be called a revolution in public attitudes and societal standards governing sexual harassment are employers, supervisors and others,… Continue Reading

Hurricane Harvey and Insurance Coverage: Protecting Your Statutory Rights Before September 1st

As Hurricane Harvey continues to sweep the Texas coastline and destroy property in its path, insureds should take action before September 1st to protect their statutory rights and avoid the changes made under House Bill 1774, also referred to as the “Hail Bill,” which take effect September 1, 2017. The Hail Bill adds “Chapter 542A – Certain Consumer Actions Related to Claims for Property Damage” to the Texas Insurance Code. This Chapter applies to actions on first-party claims for damage or loss of covered real property caused “wholly or partially” by “forces of nature”—including damage caused by floods, hurricanes, and rainstorms. In relevant part, Chapter 542A does two important things. First, Chapter 542A limits the interest policyholders may recover from a late-paying insurer under Section 542.060 of the Insurance Code for so-called “forces of nature” claims from 18 percent to approximately 10 percent under current market rates. Second, Chapter 542A… Continue Reading

Texas Supreme Court Provides Guidance On The Recoverability Of Judgments Entered Against An Insured By Third-Party Plaintiffs

In a much anticipated decision, the Texas Supreme Court has given direction to policyholders and third-party plaintiffs on the circumstances under which a judgment entered against the policyholder will be recoverable from the judgment debtor’s insurer.  The case is important to insureds defending against third-party claims because it offers instruction on how to transfer liability appropriately to an insurer for an adverse judgment.  The decision is equally important to plaintiffs seeking to maximize recovery of judgments against parties, whose greatest asset may be a liability policy. In Great American Insurance Company v. Hamel, 2017 WL 2623067 (Tex. June 16, 2017), homeowners obtained a judgment against a builder for defective workmanship in a bench trial held after the homeowners agreed with the builder not to pursue the builder’s owner or the owner’s personal assets in satisfaction of a judgment entered against the builder.  After trial, the builder assigned all claims against… Continue Reading

Texas’ New Hailstorm Law: Five Things That Every Corporate Policyholder Should Know About Chapter 542A of The Texas Insurance Code

On Saturday, May 27th, Governor Greg Abbott signed into law what has become known as the Texas “Hailstorm Bill.” Since a variant of this legislation was first introduced in 2015, reforming Texas’ “Prompt Payment of Claims” statute (Chapter 542 of the Texas Insurance Code) and its “Bad Faith” insurance law (Chapter 541 of the Texas Insurance Code) have been the focus of heated debate and intense lobbying by insurers and consumer and business interests alike. Proponents of the bill argued, under the banner of “tort reform,” that reducing statutory penalties against insurers was necessary to curb abusive “hailstorm” claims, which, by some reports, insurers have spent $340 million fighting since 2012. Haynes and Boone, LLP insurance partner, Ernest Martin, organized opposition from Texas businesses and provided testimony to legislative committee members warning that weakening statutory penalties will remove crucial incentives for insurers to pay first-party claims for property damage, business interruption and… Continue Reading

Texas Supreme Court Clarifies Damages Recoverable For Violations Of The Texas Insurance Code

The Texas Supreme Court has clarified years of confusion over the damages recoverable for statutory “bad-faith” by holding that policy benefits can constitute actual damages resulting from violations of the Texas Insurance Code. The Problem Since at least 1998, Texas policyholders and insurers have labored under some uncertainty regarding the damages recoverable when an insurer engages in “unfair or deceptive acts or practices” denominated as such under Chapter 541 of the Texas Insurance Code. Section 541.060, for example, prohibits insurers from, among other things, (1) misrepresenting to a claimant a material fact or policy provision relating to coverage at issue; (2) failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear; (3) failing to promptly provide to a policyholder a reasonable explanation of the basis in the policy, in relation to the facts… Continue Reading

Pursuing Political Risk Insurance Coverage In 2017

If 2016 is memorable as a year of immense political upheaval, 2017 may offer more of the same.  Already, in the first months of 2017, significant domestic political events have transpired, with the promise of more to come.  These are events of significant consequence to specific companies, discrete industries and America’s global trading partners.  Domestically, for example, we can anticipate changes in regulations governing private health insurance and uncertainty regarding bi- and multi-lateral trade agreements.  Overseas, continued anxiety exists in Europe over the ongoing Syrian refugee crisis and “Brexit.”  France, Germany, the Netherlands and Italy will all hold general elections in 2017, with important implications for the Euro and the economic outlook for the EU and the global economy.[1] There are ways to manage even the extreme financial risk created by the political turmoil of late. Well-established tools like lobbying, contractual risk transfer and insurance may to one degree or another… Continue Reading

Lessons Learned on Insuring Cyber Risk from P.F. Chang’s and State Bank of Bellingham: What to Look for in Placing Dedicated Network Security/Privacy Liability Insurance

With ever-increasing malware, spear phishing and ransomware attacks on corporate America and ever-contracting terms insuring “cyber” liability under traditional insurance, more and more risk managers are venturing into the market for dedicated network security and privacy liability or “cyber” insurance.  Others remain dubious—preferring “traditional” coverage to policies that are little understood and even less tested by claims.  Over the past several weeks, two judicial decisions have been issued addressing coverage for cyber risk under “traditional” and “cyber” policies.  The score for policyholders: cyber insurance: 0; traditional insurance: 1. In P.F. Chang’s China Bistro, Inc. v. Federal Insurance Company, a federal district court judge in Arizona denied P.F. Chang’s coverage under a specialized “CyberSecurity” policy for its liability for more than $1.9 million in credit card “assessments,” representing the cost of fraudulent charges paid by Visa and MasterCard after hackers obtained some 60,000 credit card numbers from restaurant customers in 2014. … Continue Reading

Securing Lender Access to Insurance Proceeds in Bankruptcy

In most financing transactions, particularly project finance transactions, lenders seek to obtain security over all of a borrower’s assets. One crucial asset that sometimes does not get sufficient attention is insurance proceeds. Lenders are accustomed to ensuring access to the borrower’s insurance coverage through “additional insured” or “loss payee” provisions.  In theory, if there is an “occurrence” or event resulting in physical loss or damage to the borrower’s property or even ensuing business interruption losses, the lender, as “additional insured” or “loss payee,” is independently entitled to recover the value of the damaged property or lost profits directly from the insurer as a party to the applicable policy—even if the insured is in bankruptcy.  In practice, this strategy usually works well.  After all, the overriding legal rule dictates that policies and their proceeds are only the property of the bankruptcy estate if the borrower is the beneficiary of such proceeds… Continue Reading

September 2018
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