In a pro-policyholder ruling, the North Carolina Supreme Court recently held that a homeowner’s claims against an insurance agent for negligence and gross negligence, seeking punitive damages, survived a motion to dismiss based on the insurance agency’s course of dealing with the homeowner. The decision, Jones v. J. Kim Hatcher Insurance Agencies, Inc., et al., is a win for policyholders and demonstrates how the North Carolina Supreme Court is willing to balance the normal expectation that a person must read what he signs with an insurance agency’s role in inducing the policyholder to do otherwise.

Continue Reading North Carolina: Policyholders Not Contributorily Negligent for Agent’s Misstatements

Today, large swaths of the globe stand at the brink of political violence and armed conflict with some areas in active warfare.  Russia’s ongoing war in Ukraine, Israel’s armed conflicts against Hamas in Gaza and Hezbollah in Lebanon, and the simmering tensions regarding China’s territorial claim to Taiwan and other disputed territories in the South China Sea are just a few international conflicts that grab daily international headlines.  Turmoil in the global markets stemming from the imposition of tariffs between the U.S. and some its trading partners has raised concerns of a global recession that could further destabilize governments and currency in emerging markets.  But in this period of uncertainty in the international order, companies with substantial international investments or operations may face increased risks of expropriation, currency instability and political violence in jurisdictions previously thought stable.  Indeed, insurance company Allianz considers about 100 countries to be at “high or extreme risk of civil unrest.” 

Continue Reading The Increasing Importance of Political and Marine/War Risks Insurance to Manage Risks From Global Unrest and Disruptions to the International Trade System   

Natural disasters are becoming more frequent, more severe, and more destructive.  No part of the United States is entirely immune from some combination of tornadoes, fires, droughts, earthquakes, freeze events, and hurricanes.  Indeed, 2024’s “extraordinary” hurricane season saw Hurricanes Helene and Milton devastate swaths of the Southeastern United States from Florida to North Carolina.[1]  This trend has continued in the early days of 2025 with wildfires in California and winter storms in the South and along the East Coast causing devastation, supply chain disruptions, and, reportedly, tens of billions of dollars in insured losses.

Continue Reading America’s Aging Dams and Other Infrastructure is an Urgent Insurance Coverage Issue
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Following the recent catastrophic wildfires that have affected California, businesses need assistance navigating the ins and outs of insurance coverage and the claims process and ultimately protecting their interests if litigation ensues. Whether it’s wildfires in California, hurricanes along the Atlantic and Gulf coasts, tornadoes in the Midwest, or infrastructure failures in major population centers, how can you maximize recoveries under insurance programs and policies? And how can corporate policyholders manage claims, coverage disputes, business interruption insurance and more — no matter the cause of the crisis or the industry involved?

Click below for resources that support those who have experienced loss, especially in the wake of the Los Angeles wildfires.

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The SEC public company cyber disclosure rule raises issues that companies should consider in reviewing existing insurance coverage and in assessing overall risk. 

The SEC recently adopted a new cybersecurity disclosure related rule (the “SEC Cyber Disclosure Rule”)[1] in response to increasing risks associated with cyber incidents and a perceived need for investors to receive more fulsome corporate disclosures about cybersecurity risks, governance, and material incidents.  In prior efforts to improve consistency and accuracy of public company cybersecurity risk disclosures, the SEC issued interpretive guidance explaining how cybersecurity risk and incidents should be communicated based on long-standing requirements to periodically—and as needed—disclose material information to shareholders.[2]  But in spite of this guidance, in the SEC’s view corporate disclosure practices remained inconsistent, under-disclosure persisted, and investors lacked consistent information by which they could evaluate public companies’ cybersecurity risk.  In July 2023, the SEC adopted the SEC Cyber Disclosure Rule, which mandated new disclosures among other things, and which became effective in December 2023.

Continue Reading The SEC’s Cybersecurity Incident, Governance, and Management Reporting Requirements: What you Need to Know to Avoid Cyber and D&O Coverage Gaps

In March last year, New York’s Appellate Division – First Department issued Xerox an important pro-policyholder decision in its D&O insurance recovery action against Travelers, arising from Xerox’s failed 2018 merger with Fujifilm.  In a thoughtful order, the court issued three key pro-policyholder rulings that: (1) reinforce the rule that the words “arising from” when used in policy exclusions should be narrowly construed under New York law; (2) recognize that an insurer who shows bad faith indifference to its policyholder’s rights may be held liable for a breach of the duty of good faith and extracontractual damages under New York law; and (3) held that the reasonableness of an underlying settlement is  an issue of fact that should go to the jury.  A copy of the Court’s decision is available here.

Continue Reading Xerox Obtains Important Pro-Policyholder Decision in New York’s First Department, Adopting Narrow Construction of “Arising From” Exclusions and Confirming That Insurers Who Show Indifference to Policyholders’ Rights May Be Liable for Bad Faith in New York

Last week, the North Carolina Supreme Court issued its long-awaited ruling in North State Deli, LLC v. The Cincinnati Insurance Company, siding with a group of North Carolina restaurants that sought business interruption insurance for losses they sustained because of the COVID-19 pandemic.  Specifically, the court held that those restaurants sustained “direct physical loss” to property, as that phrase is used in their commercial property policies, when COVID-19 government orders restricted the restaurants’ use of and access to their property, resulting in the suspension of their operations and the loss of income.  In reaching this holding, the Supreme Court of North Carolina joined the Supreme Court of Vermont as the only other state supreme court to have ruled in favor of policyholders on the question of COVID-19 business interruption insurance coverage. 

Continue Reading North Carolina Supreme Court Unlocks the Door to COVID-19 Business Interruption Coverage, Holding that Pandemic-Era Restrictions on Use of Property Constitute “Direct Physical Loss” to Property

A recent decision by a federal court in the Eastern District of New York illustrates how directors and officers (“D&O”) policies can provide valuable insurance coverage for defense costs and potential liabilities arising from False Claims Act (“FCA”) litigation.  In Northern Metropolitan Foundation for Healthcare, Inc. v. RSUI Indemnity Company, Case No. 20-CV-2224 (EK) (JAM) (E.D.N.Y. Sept. 24, 2024), the insured—an owner and operator of adult healthcare centers in Brooklyn, New York—sought coverage under a D&O policy for defense costs for a relator’s qui tam action alleging that the insured defrauded the federal and New York state governments in submitting claims for reimbursement.  The government chose not to intervene and the qui tam lawsuit was ultimately dismissed.  The D&O policy at issue contained a Government Funding Defense Expense Coverage (“Government Funding”) provision excluding “the return of funds which were received from any federal, state, or local government agency” from the policy’s definition of “Loss,” and limiting coverage for “any Claim arising out of the return, or request to return, such funds.”  

The insurer argued that the Government Funding provision barred coverage for the underlying qui tam action on the ground that the FCA causes of action included a “request to return. . . funds.”  The district court disagreed, ruling that the ordinary meaning of “return”—to put original owner of property back in its prior position—did not apply to the underlying qui tam action because: (1) FCA damages are compensatory and punitive in nature; and (2) the relators who brought the action never possessed the money that they were seeking in their complaint, so the claim could not arise from a request to return funds.  In reaching this conclusion, the district court held that its interpretation was the only reasonable interpretation of the language in question, but it went on to state that even if the Government Funding provision were ambiguous, it would not preclude coverage because any ambiguity must be construed in favor of the insured in accordance with basic insurance policy interpretation principles.  Based on this analysis, the court confirmed that coverage for defense costs incurred in the underlying FCA qui tam action was not limited by the Government Funding provision. 

On October 15, 2024, the insurer filed a notice of appeal to the Second Circuit.  However, the district court’s decision appears to be in line with other well-reasoned decisions holding that FCA damages are compensatory in nature, and therefore not excluded under D&O policies.  For example, the court’s reasoning was consistent with the Seventh Circuit’s recent detailed analysis of the insurability of FCA related losses in Astellas US Holding, Inc. v. Federal Insurance Company, No. 21-3075, 2023 WL 3221737 (7th Cir. May 3, 2023), where that court held that the remedies available under the FCA were compensatory in nature, even in situations where the  government may label a portion of an underlying FCA settlement agreement as restitution. 

This pro-policyholder decision in Northern Metropolitan comes at a time when the Department of Justice (“DOJ”) has ramped up FCA enforcement efforts against healthcare providers, which further underscores the importance for healthcare companies and other companies that may face FCA exposure to consider whether they have adequate insurance in place to mitigate potential FCA-related losses.  Policies that may respond to FCA investigations and lawsuits may include D&O, Errors & Omissions (“E&O”), and Employment Practices Liability (“EPL”), among other lines of coverage.  While some insurers may argue that FCA-related exposures are uninsurable as a matter of law, decisions like Astellas and Northern Metropolitan prove otherwise.  Healthcare providers should work with experienced coverage counsel and their brokers to examine their policies before annual renewals to ensure they have the best coverage terms in place to protect themselves against the risk of expensive government investigations and FCA litigation.

Hurricane Helene made landfall in Florida on September 26, 2024, eventually making its way up to western North Carolina where it caused unprecedented damage. The estimated costs associated with these damages grow daily, with AccuWeather currently estimating losses between $145 and $160 billion. Earlier this week, we issued an alert with general tips policyholders should consider when pursuing insurance claims for hurricane-related losses. As damage reports continue to come in from portions of western North Carolina that have been cut off from regular communications, we are updating our guidance for North Carolina policyholders.

Continue Reading Tips for Pursuing Insurance Claims and Disaster Relief Funding in North Carolina After Hurricane Helene

RELATED UPDATE: Tips for Pursuing Insurance Claims and Disaster Relief Funding in North Carolina After Hurricane Helene (October 3, 2024)

Hurricane Helene made landfall on Thursday, September 26, 2024, carrying catastrophic 140 mph winds as the first known Category 4 storm to hit Florida’s Big Bend region since records began in 1851. By Friday, Hurricane Helene’s effects could be felt through Georgia, South Carolina, North Carolina, Tennessee, and Virginia, with numerous fatalities and significant property damage and power outages reported across the entire southeastern United States. Flooding from the storm resulted in highway and road closures throughout the region, including Interstate 40 in North Carolina, and multiple dams in Tennessee and North Carolina were on the brink of failure before stormwaters began to subside.

Continue Reading Tips to Maximize Insurance Recoveries for Hurricane Helene Property Damage and Business Interruption Losses