Employers nationwide are experiencing a new wave of ERISA litigation targeting so-called “tobacco surcharges” on employees enrolled in employer-sponsored health plans. Because these lawsuits are generally brought as putative class actions, the stakes can be significant and some multi-million dollar settlements have already become public. But employers need not face the costs of defending and resolving these ERISA cases alone. Fiduciary liability insurance policies generally require insurers to pay for defense costs incurred in ERISA class actions and, depending on their terms and conditions, fiduciary liability policies may cover most, if not all, of any eventual settlements or judgments. Employers should carefully review reservation of rights letters and resist efforts by fiduciary liability insurers to improperly resist or limit coverage for tobacco surcharge litigation.
Continue Reading Maximizing Insurance Coverage for Emerging ‘Tobacco Surcharge’ ERISA Litigation
Insurance Industry’s Use of AI: A Fair or Unfair Claim Settlement Practice?
The insurance industry has been swift to adopt artificial intelligence (“AI”). According to consulting firm McKinsey & Company, 76% of insurers surveyed have already begun using generative AI in their day-to-day operations. [1] This adoption spans the different facets of insurers’ work cycles, including claims, underwriting, legal, and risk management. Policyholders and their attorneys must remain aware of the potential pitfalls of AI implementation, particularly as it pertains to claims management.
Continue Reading Insurance Industry’s Use of AI: A Fair or Unfair Claim Settlement Practice?When Geopolitic Events Disrupt the Cloud: Insurance Coverage for Data Center Supply Chain Losses in a New Era of Conflict
A New Risk Landscape for AI Infrastructure
Escalating tensions involving Iran—including maritime incidents affecting oil transport and alleged cyber and physical targeting of digital infrastructure in the Middle East—highlight a growing and underappreciated risk for AI-driven data centers: disruption that originates far beyond the insured’s own operations. These developments are not occurring in a vacuum. They come at a time when hyperscale data center expansion has become a central driver of economic growth in the United States, as well as a national security priority, underpinning everything from cloud computing to artificial intelligence development.
Continue Reading When Geopolitic Events Disrupt the Cloud: Insurance Coverage for Data Center Supply Chain Losses in a New Era of ConflictFifth Circuit Issues Pro-Policyholder Ruling that ADR Proceeding Triggered Insurer’s Duty to Defend and Indemnify
On October 20, 2025, the United States Court of Appeals for the Fifth Circuit issued a significant decision clarifying that an insurer’s duty to defend under Texas law extends to a contractually mandated alternative dispute resolution (ADR) proceeding.[i] The Fifth Circuit reversed a magistrate judge’s dismissal of BPX Production Co.’s (BPX) coverage claims, holding that an ADR proceeding triggers an insurer’s duty to defend and indemnify under a commercial general liability (CGL) policy—thus rejecting the insurer’s argument that a “suit” was required. Further, the Fifth Circuit held that an insurer’s conduct can waive conditions to coverage. This decision provides important guidance for corporate policyholders navigating insurance disputes involving an ADR proceeding, policy defenses asserted by insurers, and the assignment of insurance rights to maximize an insurance recovery in the circumstance of a bankruptcy.
Continue Reading Fifth Circuit Issues Pro-Policyholder Ruling that ADR Proceeding Triggered Insurer’s Duty to Defend and IndemnifyThe Archdiocese Resurrects Faith in the New York Court System: New York Supreme Court Issues Another Decision Allowing a New York Policyholder to Seek Damages for Bad-Faith Claim Handling
Last month, the New York Supreme Court issued a well-reasoned order denying the Archdiocese’s insurers’[1] motion to dismiss its claim against them for breach of the covenant of good faith and fair dealing, holding that the policyholder’s complaint sufficiently alleged its Insurers claim handling conduct amounted to bad faith.[2] The Order is part of a new trend in New York that allows bad-faith claims to proceed when styled as claims for breach of the duty of good faith and fair dealing, where the conduct supporting the alleged bad-faith claim is independent of the alleged conduct giving rise to a breach of contract claim, and the policyholder sufficiently alleges damages arising from the bad-faith conduct.
Continue Reading The Archdiocese Resurrects Faith in the New York Court System: New York Supreme Court Issues Another Decision Allowing a New York Policyholder to Seek Damages for Bad-Faith Claim HandlingNorth Carolina: Policyholders Not Contributorily Negligent for Agent’s Misstatements
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 MisstatementsAmerica’s Aging Dams and Other Infrastructure is an Urgent Insurance Coverage Issue
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 IssueThe SEC’s Cybersecurity Incident, Governance, and Management Reporting Requirements: What you Need to Know to Avoid Cyber and D&O Coverage Gaps
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 GapsXerox 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
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 YorkNorth 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
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