The insurance industry is still doing what it can to react to the COVID-19 pandemic. This means situations are changing rapidly within certain sectors of the insurance marketplace. 2020 was already projecting to be a difficult year for insurance markets prior to COVID-19, with property and auto insurance rates seeing significant increases and many carriers reducing capacity in coverage areas like directors and officers liability insurance. The pandemic has only accelerated some of these movements.
Claims made insurance coverage can create some confusing issues. A claims made policy covers claims that are made against the policy during the period of the policy’s effective dates. This is in distinction to an occurrence policy, which covers claims based on the policy in effect when the incident giving rise to the claim occurred.
Cyber coverage remains a hot topic in the insurance world. The coverage is relatively new and complicated questions of claims handling are still working their way through the court system with often unforeseeable results. Now, a novel defense is one cyber coverage lawsuit may throw a major wrench in the extent of protection these policies provide.
When people think of property insurance, they often immediately think of buildings – things like houses, retail stores, or warehouses. If they continue the thought further, they may think of additional items of property like furniture or inventory. These items have a very real physical presence, and that physical presence subjects them to potential damage or loss from known hazards like a fire or water damage. Property insurance exists to protect individuals and companies from that loss.
Insurance contracts are contracts of good faith. Usually, this means that both parties to the contract will deal with each other honestly and fairly, fulfilling their obligations under the contract. Occasionally, allegations of bad faith on the part of insurance companies arise. Courts have sometimes struggled with all to handle the full extent of damages in these circumstances.
In 1986, responding to a host of industries that struggled to find acceptable coverage in the traditional insurance marketplace, Congress passed the Liability Risk Retention Act. The Act authorized the creation of risk retention groups – liability insurance companies owned by its members. Entities in an industry suffering through a liability crisis can form a risk retention group to provide them with the coverage they need when the wider insurance market is unwilling to.
Wire transfer fraud claims resulting from cyber attacks have increased dramatically over recent years, and companies are losing millions of dollars in these attacks. As is common when a new business risk develops, organizations look to their insurance policies to help cover their losses. As we have shared in previous examples, the coverage is not always adequate.
The extent of coverage for a company that has been a victimized may be sparse, and the costs of any breach are ongoing. Consequences of a fraudulent wire transfer depend not just on the specific wording in the policies a business has purchased, but as seen in the following instances, also being upheld differently in different states.
In claims handling and litigation, a little creativity with definitions can help advance a case forward. Occasionally, though, that creativity gets pushed a little too far. Fireman’s Fund recently won a declaratory judgment ruling they did not owe coverage to a luxury apartment building. The case hinged on the interpretation of a relatively simple word in the insurance policy - “vehicle.”
Insurance lawsuits often turn on the definitions of words. This confusion results in extensive litigation over words that seem to have commonly understood meanings – words like loss or occurrence for example. With millions of dollars on the line, the exact definition of a single term within a policy can make or break a business. This highlights the need for companies to understand to the best of their ability what their insurance coverage provides and what it does, keeping a particular eye on what exclusions may apply.
In the wake of an accident, its standard for trucking companies to conduct thorough investigations of what happened. Having a clear indication of what happened can help the company manage the claims process more efficient and help the company save money in the long run. At the same time, trucking companies need to be aware that their investigations create a paper trail that can be used against them in a lawsuit. As a result, post-accident investigative processes need to be well thought out to ensure they do not accidentally damage the business.