Michael O. Kassak, R. Victoria Fuller, and Victoria M. Ranieri
1. AI mimics human intelligence, but is not a substitution for human intelligence;
2. AI poses additional risks to insurers through insured use, defense counsel use, and insurer use without appropriate human oversight; and
3. Insurers should look to updating underwriting and claims handling practices to account for the additional risk and exposure posed by AI.
Adam M. Berardi and Elizabeth L. Ferguson
1. Conflicts of interest between insureds and insurers may give rise to an insured’s right to independent counsel. Jurisdictions differ in what constitutes a conflict and whether that conflict warrants the insured’s retention of independent counsel. Know what the applicable state law requires before agreeing to the insured’s counsel selection.
2. If independent counsel is necessary, immediately provide billing guidelines and set a clear expectation that the insured and its chosen counsel will honor the policy’s cooperation conditions. Remember (and remind your insured) that defense costs must always be “reasonable and necessary.”
3. Demand the timely and ongoing production of defense invoices and audit them to ensure that counsel is billing fairly and appropriately, i.e. no vague entries or block billing. Auditing bills provides another means to monitor litigation activity.
Wesley R. Payne, IV and Bernadette B. Silver
1. Indemnification and Risk Transfer Are Core Tools for Shifting Liability––PA Law recognizes both contractual and common law indemnification, though contractual indemnification supersedes common law when present.
2. Coverage Scope Depends on Endorsement Type and Contractual Compliance––Fault-based endorsements and written contract requirements determine when and how additional insured coverage applies. To ensure that additional insured status is provided, the parties should have a written executed agreement not an unsigned agreement or a verbal agreement or rely on prior costs and dealings between the parties because coverage may not be triggered without a written endorsement.
3. A Certificate of Insurance is NOT Proof of Actual Coverage––it is informational only and can be misleading if relied upon for confirmation of insured status.
Gabriel E. Darwick and Paul A. Briganti
1. Cyber coverage litigation continues to increase as a result of various factors, including the increased volatility and complexity of cyber threats, the availability of AI tools to fuel attacks, and the ever-growing cyber insurance market.
2. Over the last several years, insurers and insureds have had varying success in cyber coverage litigation. Insurers have prevailed on plain-language limitations, exclusions, and notice conditions. In some cases, insureds have been able to avoid narrow causal connections in policy language, to access multiple coverages that were not deemed mutually exclusive, and to use the doctrine of contra proferentum to obtain favorable interpretations of policy language.
3. Insurers can seek to increase their chances of success in coverage litigation in several ways, including making cyber insurance and cyber events easier to understand for judges and juries, retaining an expert to provide context, and establishing that the insured or its broker is sophisticated and understood how the coverages functioned at time the policy was issued.
Lynndon K. Groff and Luciana P. Lalande
1. The PFAS Problem: Per- and poly-fluoroalkyl substances (PFAS) pose a serious risk of significant bodily injury, property damage, and other claims against insureds. The multidistrict litigation for aqueous film-forming foam claims (AFFF MDL) in the District of South Carolina remains a hot bed of underlying PFAS claims. Presiding Judge Richard Gergel is currently focusing on the thousands of underlying bodily injury claims in the AFFF MDL, which are being managed through a bellwether trial process. Significant litigation is also taking place outside the AFFF MDL in actions involving industrial facilities and similar sites; non-AFFF products like turnout gear, biosolids, and textiles; and deceptive marketing suits. The parties asserting claims, the legal theories being advanced, and the damages being sought in underlying litigation are evolving.
2. The Status of PFAS Coverage Litigation: PFAS coverage litigation has begun to accelerate. Major cases involve AFFF manufacturers 3M and Tyco, AFFF component manufacturer BASF, and bankrupt former AFFF manufacturer Kidde, and a number of other PFAS coverage actions are advancing in multiple jurisdictions. After a series of forum disputes, insurers have generally avoided litigating coverage in the AFFF MDL. Some coverage actions have resulted in decisions on important coverage issues.
3. Recent PFAS Coverage Decisions: Significant coverage decisions in PFAS cases over the past year addressed federal discretionary and mandatory jurisdiction, the duty to defend in the context of underlying MDL claims, “trigger” principles, and the applicability of pollution exclusions to different types of underlying PFAS claims. Prior PFAS coverage decisions involved other issues like number of occurrences, allocation, and knowledge-based defenses. We anticipate additional rulings on these and other issues in the coming months and years.
Scott H. Casher and Marlena K. Ellis
1. Because many policy exclusions are limited to claims “arising under” the Fair Labor Standards Act (FLSA) or equivalent wage statutes, they may not encompass related state labor-code or contractual remuneration provisions. Accordingly, insurers may still have a duty to defend when the complaint alleges compensation related violations outside the scope of the exclusion.
2. Courts remain divided on whether the de minimis doctrine applies to state wage and hour claims and this split among jurisdictions makes accurate timekeeping systems critical for all work, even incidental tasks.
3. The "no piggybacking" rule (as seen in Harrington v. Cracker Barrel) limits the size of nationwide collective actions by requiring that each out-of-state plaintiff must prove the court has personal jurisdiction over their individual claim, preventing them from relying solely on the in-state plaintiff's connection.
Eric B. Hermanson and Austin D. Moody
1. There is a see-saw battle in the coverage world between courts that view a general contractor’s faulty work as “property damage,” caused by an “occurrence,” subject to CGL policy exclusions – and courts that say faulty work isn’t an “occurrence” and doesn’t trigger the CGL insuring agreement at all.
2. The difference in approach can produce very different coverage outcomes, especially when the general contractor faces liability for subcontracted faulty work.
3. New Jersey – a longtime proponent of the “no-occurrence” position – recently reversed position on this issue. However, a Massachusetts federal court just rejected New Jersey’s position and reaffirmed the traditional “no-occurrence” view. Other states continue to line up on one side or another. The battle rages on.4. As uncertainty continues into a fourth decade, brokers and underwriters are (finally) beginning to adopt specific policy language to address the issue. Various endorsements have been proposed, with different language and limitations.
Siobhain Minarovich and Frank J. Perch, III
1) After Truck Ins. v. Kaiser Gypsum, insurer standing in an insured’s mass tort bankruptcy case continues to be challenged. While some courts have found that being asked to pay claims is sufficient to demonstrate party in interest status, others have found that a reservation of rights can defeat an insurer’s standing because the insurer lacks clear financial responsibility for claims.
2) Third party releases have generally been approved in plans post-Purdue Pharma where creditor consent was obtained by silence or a failure to object, in cases where the creditors were given clear and prominent notice and an opportunity to opt out.
3) J&J’s talc bankruptcy was dismissed a third time because the court found that the plan voting process was defective. Avon/AIO was able to confirm a plan for talc claims with 100% creditor support. The Boy Scouts Plan was mostly confirmed on appeal and has gone effective.
Dirk C. Haarhoff and Brendaliz Minaya Ruiz
1. The claim file will be evidence should there be coverage litigation. Create and maintain a claim file that evidences a thoughtful and diligent coverage investigation.
2. Communications between an adjuster and counsel for the insurer are privileged where the adjuster investigated and adjusted the claim while the attorney conducted legal analysis/research and provided a legal opinion.
3. Identifying and conveying coverage issues is critical to: (1) comply with state law; (2) meet your duty of good faith and fair dealing; (3) preserve rights; (4) avoid coverage by waiver or estoppel; and (5) provide the insured with adequate opportunity to protect against uncovered exposures.
Barbara S. Carra and Robert F. Walsh
1. There is no single definition of “bad faith”, but it is not an innocent mistake nor is it mere negligence.
2. What is required to prove bad faith and the damages recoverable for bad faith activity significantly vary by jurisdiction.
3. Defenses to bad faith claims may also vary by the laws of different jurisdictions, but the best defense is diligent, conscientious, and well-documented claim handling.
1. Kenyon v. Security Ins. Co. of Hartford (Sup. Ct. N.Y. 1993): The advent of the concept of “Traditional Environmental Pollution,” which has been at the heart of the decades-long debate over the breadth of the Absolute Pollution Exclusion.
2. Keene Corp. v. Ins. Co. of N. Am. (D.C. Cir. 1981): The advent of the Continuous Trigger, which greatly increased the number of years of liability policies obligated to respond to asbestos and hazardous waste claims, but also created a general new mindset that other types of losses may involve a continuing injury and coverage under multiple years policies.
3. Marx v. Hartford Accident and Indemnity Co. (Neb. 1968): The advent of the definition of “Professional Services,” which looks to the specific act at issue – does the act involve specialized skill and knowledge? – and not simply that the act was performed by a professional.
