California Insurance-Related Bills Meet Deadline for Passage in 2015

The deadline for Assembly bills to be passed by the California Assembly and for Senate bills to be passed by the California Senate was June 5.

Bills that met the deadline are eligible for enactment this year. Bills that failed to meet the deadline remain alive and may be acted on in 2016.

Assembly bills that met the deadline are now being considered in the Senate. Senate bills that met the deadline are now being considered in the Assembly.

This year's regular legislative session will end on September 11.


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Court Dismisses Case For No Diversity Jurisdiction 2 Days After Filing

In an unusual display of speedy discretion, federal District Judge Sheri Polster Chappell wasted no time in dismissing the complaint on a public works payment bond filed by Advance Industrial Coating, LLC in Advance Indus. Coating, LLC v. Westfield Ins. Co., No. 2:15-cv-141-FtM-38DNF (D. for M.D. Fla., Mar. 6, 2015). Advance filed its complaint in the Middle District of Florida - Ft. Myers Division - on March 4, 2015. Just two (2) days later, on March 6, 2015, Judge Chappell dismissed the action without prejudice for Advance's failure to properly plead the citizenship of the parties! The Court's order was sua sponte!

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Typo Renders Proposal For Settlement Ambiguous ― No Fees Awarded

In GEICO v. Ryan, No. 4D13-2615 (Fla. 4th DCA, Mar. 11, 2015), the Court reversed the Trial Court's award of attorney's fees in favor of the insured because the "Proposal for Settlement contains a patent ambiguity--spelling out $100,000 in words but also referring to $50,000 in numerals." Specifically, Bernadette Ryan ("Ryan") brought an uninsured/underinsured motorist claim against her insurer, Government Employees Insurance Company ("GEICO"), for an auto accident involving Ryan. Ryan served GEICO with a proposal for settlement, pursuant to Fla. Stat. 768.79 and Fla. R. Civ. P. 1.442. As noted, the proposal for settlement contained a typo that included a difference between the spelled out amount and the numeric amount. It should be noted, however, that the applicable GEICO policy limits were $50,000, and the proposal for settlement included a statement that "the total amount of the settlement should not exceed $50,000." Additionally, no testimony or other evidence was taken by the Trial Court, but "it was represented to the [Trial] court that the attorneys talked about a settlement and the defense attorney fully knew the settlement proposal." As such, the Trial Court entered final judgment in favor of Ryan.

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Melissa Anderson v. Thomas Aul, 2015WI 19 25 (February 25, 2015)

 In a significant decision the Wisconsin Supreme Court has held that claims-made-and-reported requirements in claims made policies should be enforced as written. An insured's failure to report a claim during the time required by the policy will operate as a bar to coverage. See Anderson v. Aul, 2015 WI 19. The Court reversed the Court of Appeals decision holding that Wisconsin's notice-prejudice statute superseded the claims-made-and-reported requirement of the professional liability policy. The Court also observed that even if the notice-prejudice statutes applied, requiring an insurer to provide coverage for a claim reported after the end of a claims-made-and-reported policy period was per se prejudicial to the insurance company. The decision places Wisconsin in the majority of jurisdictions that have enforced claims-made-and-reported policies as written.

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Sony and Its Insurers Wrangle over Coverage for Data Breach

A coverage dispute winding its way through New York appellate courts could provide useful guidance about the scope of “personal and advertising injury” coverage in standard commercial general liability policies.

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Do Medical Records Support Removal And Do Unripe Claims Get Dismissed

By Edward Sylvester

In Alilin v. State Farm Mut. Auto. Ins. Co., No. 6:14-cv-1183-Orl-41DAB (D. for M.D. Fla., Jan. 30, 2015), Judge Carlos Mendoza denied Alilin's challenge to the amount in controversy prong of State Farm's removal to federal court and found that Alilin's medical bills, which were previously submitted to State Farm with a settlement offer, were persuasive evidence that the amount in controversy exceeded $75,000. The Court also denied application of Alilin's argument that future set-offs would reduce the medical expenses to significantly less than the jurisdictional amount, because the amount in controversy is determined at the time of removal; thus, "post-judgment 'set-offs' or collateral source payments are irrelevant."

Additionally, the Court addressed State Farm's motion to dismiss Alilin's claim for bad faith, which was based on the premature nature of the claim. Alilin argued that the bad faith claim should be abated and not dismissed. Although the Court acknowledged that Florida courts hold such claims in abatement, the Court stated that Alilin "bears the burden of establishing the Article III prerequisites to jurisdiction" and found that Alilin's inability to establish the bad faith claim was ripe warranted dismissal "for want of subject matter jurisdiction."

For more information on removing actions to federal court, or any other litigation-related questions, please contact Edward Sylvester directly.

Edward Sylvester is a partner in the Miami office and is licensed to practice in all state and federal courts in both Florida and Ohio.

Sizing Up Cyber Risks after the Sony Breach

Sony’s most recent data breach underscores the difficulties in underwriting and insuring cyber risk. Sony incurred losses that were surprising in both their scope and type. The company already is a defendant in at least four new lawsuits concerning the disclosure of employees’ confidential information. In addition to potential liability, Sony suffered substantial first-party losses that may be difficult to quantify, including forensic costs, reputational injury, and business interruption losses.

According to published reports, Sony may have $60 million in cyber insurance to mitigate these losses.  Even if this figure were true and the cyber policies applied to the breach, Sony’s insurance probably would cover only a fraction of its actual damages.

The unprecedented nature of this breach may cause some insurers to reexamine their exposure to cyber risks. Although companies can purchase cybersecurity insurance, these policies are not always affordable. The problem is most acute on the first-party side. 

In a November 2012 Cybersecurity Insurance Workshop Readout Report, the Department of Homeland Security noted that, although a sizeable third-party market exists to cover loss of customer or employee data, first-party policies "remain expensive, rare, and largely unattractive." The report identified several factors for this problem including: the lack of actuarial data to model cybersecurity risks and fears that a “cyber hurricane” would overwhelm insurers with large and unpredictable losses. The Sony breach may spur more talk of “cyber hurricanes.”

Insurers have limited their exposure on the third-party side as well. Most cyber liability policies have burning limits, meaning that defense costs erode coverage. This feature allows insurers to cap their exposure at pre-determined levels. At the same time, insurers are expanding cyber-related exclusions in commercial general liability policies and other conventional insurance products, forcing companies to seek coverage for cyber risks in specialty policies.

As insurers obtain actuarial data, they will develop more affordable products for addressing third-party and first-party cyber risks. But the onus for developing this market is not only on insurers. Companies must improve their data security. Increased security should reduce the risk of breach, allow cyber losses to be more easy to predict in size and type, and in the end make cyber risks more insurable.

Travis Wall recently authored the chapter on Cyber-Security Insurance for the LexisNexis California Insurance Law & Practice treatise. For more information, please contact Travis directly (email).


Latest Updates to Media Liability Insurance in California

Hinshaw & Culbertson LLP partner James Castle recently enhanced and updated the chapter on Media Liability Insurance for LexisNexis' California Insurance Law & Practice. Cases discussed include:

For more information on Media Liability Insurance, please contact James Castle (email).

Latest Updates to the California Inurance Holding Company Act

Hinshaw & Culbertson LLP attorney Suh Choi has updated and enhanced Chapter 5, The California Insurance Holding Company Act, for the LexisNexis California Insurance Law & Practice treatise:

The latest update features a new section on "Divestiture of Control," that discusses the notice of proposed divestiture that any controlling insurer seeking to divest its controlling interest in that insurer must file with the Commissioner. The section describes how the Commissioner will deal with confidentiality concerns surrounding the notice. The new section also notes the possibility that the Commissioner may require parties seeking to divest control to file for formal approval of the transaction.

The revised chapter also features a new practice note as to the California Department of Insurance's requirements as to exhibits that must accompany the filing of Form A Information Statement when there are various acts that will, directly or indirectly, lead to a change in control of a domestic insurer or person controlling a domestic insurer.

Section 5.06[1] newly points out an exception to the exemption from registration granted an admitted foreign insurer whose domiciliary jurisdiction has disclosure requirements and standards that are substantially similar to California's requirements.

Section 5.06[8] newly discusses the annual enterprise risk report that must accompany registration statement.

A new practice note in the section discusses various online filing requirements through the California Department of Insurance's Online Assistance System for Insurers Submittals ("OASIS").

A new practice note discusses the Department's "safeguard" provisions with regard to agreements between a California insurer and an affiliate."

For more information on The California Insurance Holding Company Act, please contact Suh Choi (email).

New Chapter on Cyber-Security Insurance Authored by Hinshaw & Culbertson Partner

Hinshaw & Culbertson LLP partner Travis Wall recently authored the chapter on Cyber-Security Insurance for the LexisNexis' California Insurance Law & Practice treatise.

The chapter provides an introduction to common cyber incidents, such as data breaches, and addresses the different kinds of losses and liabilities that arise from these events.

This analysis includes a discussion of the legal and statuatory framework governing data breaches. The bulk of the chapter addresses potential coverage for cyber incidents under commercial general liability policies.

Despite recent trends, most case law in cyber context has involved traditional third-party liability insurance. Even though insurers and policy holders are shifting coverage for cyber risks away from traditional insurance into specialty policies, the prior case law is still instructive. These decisions influenced how insurers drafted cyber insurance policies. The case law also may inform how courts interpret particular provisions in specialty policies or endorsements. Thus, this chapter analyzes these pertinent court decisions. It assesses coverage provisions and exclusions under CGL Coverage A and B as applied to cyber incidents.

The chapter ends with a discussion of key characteristics of specialized cyber policies and emerging trends of coverage disputes in this area.

For more information on Cyber-Security Insurance, please contact Travis Wall (email).