On May 3, the 7th U.S. Circuit Court of Appeals sided with the policyholder, resolving an insurance coverage dispute over a $100 million settlement related to claims under the federal Anti-Kickback Statute and the federal False Claims Act.
Read on for analysis of this decision, which tries to clarify the difference between compensatory damages, which
With bank stability and the related stock market rout now dominating the headlines for the first time since the 2008 financial crisis, are financial institutions’ D&O and bankers’ professional liability / E&O (“BPL”) liability policies ready to help backstop coverage, or potentially full of holes? Coming out of a hard market where insurers carefully and quietly pulled back some policy enhancements over the course of several years, now is the time for financial institutions to review their insurance policies to identify and fill any significant gaps and holes in their executive risk coverages. The last two weeks demonstrate that financial institutions, as well as their directors and officers, face the risks of receivership, government investigations, securities lawsuits, and personal liability following a bank failure or stock rout in the face of financial stability concerns.
In a unanimous decision, the Ohio Supreme Court found that appellee EMOI Services, LLC’s (“EMOI”) businessowners insurance policy does not cover losses resulting from a ransomware attack on EMOI’s computer software systems.
On March 14, 2022, Russian President Vladimir Putin signed a law allowing the seizure of foreign-owned aircraft in Russia. Many aircraft in Russia are owned by international firms and leased for use in Russia. Such seizures are a likely source of insurance claims by the planes’ owners and financers.
Most commercial air carriers do not own the aircraft they operate, preferring instead to lease them for tax and accounting purposes. Many aircraft used in Russia for passenger traffic were built by Western firms and are owned and financed internationally. For example, according to news reports, 740 Bermuda-registered airplanes operated in Russia are now subject to seizure.
The Russian invasion of Ukraine and the resulting sanctions Western countries have imposed on Russia have already caused potentially catastrophic losses for businesses with assets and investments in Ukraine, Russia and neighboring countries impacted by the attack. These losses could accelerate, based on a March 9, 2022, announcement by Russia’s ruling party.
According to that announcement, a Russian government commission has begun the approval process toward Russia nationalizing the assets of foreign businesses that leave Russia in light of the economic sanctions. This could create dire economic consequences for foreign businesses that leave Russia.
Entering 2020, corporate policyholders already faced a hardening insurance market. But as the COVID-19 pandemic continues to wreak havoc on global markets and sow civil unrest throughout the globe, and the insurance industry faces unprecedented losses, the market has further deteriorated entering 2022.
In fact, Reuters reported COVID-19 losses of $44 billion so far, which represents the third-largest cost to insurers of any catastrophe to date (behind Hurricane Katrina and the 9/11 terrorist attacks). These factors have not only made some insurance companies reluctant to extend new coverage, but have also incentivized insurance companies to deny or delay claims until their balance sheets recover.
On Nov. 23, 2021, the New York Court of Appeals sided with the policyholder, resolving a decades-long insurance coverage dispute, J.P. Morgan Sec. Inc. v. Vigilant Ins. Co., __ N.E.3d __, 2021 N.Y. Slip Op. 06528, 2021 WL 5492781 (Nov. 23, 2021). It held that a $140 million disgorgement payment to the Securities and Exchange Commission (SEC) was a covered “loss” rather than an uninsurable “penalt[y]” under the error and omissions/professional liability policies at issue.
The 6-1 majority opinion is a landmark decision on the insurability of disgorgement and restitution damages that will likely have ramifications for policyholders seeking to recover similar losses from their insurers in disputes in New York and throughout the country.