Claims and Issues, an exploration of questions and a presentation of research on all sorts of interesting subjects including legal research on many topics.
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Excess insurers were held entitled to intervene as of right in the primary insurers' declaratory relief action that they did not have either a duty to defend or to indemnify under their general liability insurance policies. Liberty Mut. Fire Ins. Co. v. Lumber Liquidators, Inc., 314 F.R.D. 180 (E.D. Va. 2016).
The Nation magazine reports on a speech given recently by Senator Elizabeth Warren on the 'gig economy.' Overall, the report gives Sen. Warren credit for raising issues arising from the so-called 'gig' economy, which is sometimes also called the 'sharing' economy, although the report points out that her speech was not heavy on specifics. See George Zornick, "Elizabeth Warren Takes On the 'Gig Economy'" (The Nation Online at www.thenation.com posted May 20, 2016).
One of the specifics Senator Warren mentioned, though, is her suggestion that people working for the corporations in the gig economy should have catastrophic insurance to protect themselves and the public. Senator Warren suggests that premiums could be paid by periodic deductions from their paychecks.
I would respectfully add that the corporations -- whether they are deemed "employers" of these workers or not -- could as easily add a contribution to each paycheck just as they do with Social Security payments they must make so that the workers will have Social Security when the time comes. As an employer, I know what every other employer knows: It's a cost of doing business.
The first known case to address lender force-placed insurance practices in Orlando, Florida also reveals the answers to two important questions: Why there is probably no E&O coverage for mortgage servicers in these LFPI cases, and what is the only fact in these cases that successfully supports a multitude of claims?
Here are some noteworthy facts behind the seminal decision in Sekula v. Residential Credit Solutions, Inc., No. 6:15-cv-2104-Orl-31KRS, 2016 WL 1559142, at *1 (M.D. Fla. April 18, 2016):
The homeowners' mortgage was for $282,400.00.
The mortgage servicer force-placed a policy for $485,900.00 at a premium -- to be paid in increments by the Sekulas as a part of their monthly mortgage payment -- of $10,544.00 per year.
The homeowners put the replacement value of their home at $300,000.00 and obtained a different insurance policy in that amount with a far lower annual premium of $785.00.
These facts are noteworthy in this case because they did not affect the outcome.
The Court in this case was of the view that the mortgage servicer acted within the terms of the mortgage both by force-placing an insurance policy with limits much higher than the value of the home insured, and by force-placing an insurance premium in an amount that was 13 times greater than what the homeowners found for themselves.
The essential alleged fact was instead that the mortgage servicer allegedly "exceeded the authority provided in [the mortgage agreement] to force-place insurance" by inflating the premium that the homeowners had to pay by including the amount of kickbacks allegedly paid by the insurance carrier to the mortgage servicer. Sekula v. Residential Credit Solutions, Inc., No. 6:15-cv-2104-Orl-31KRS, 2016 WL 1559142, at *3 (M.D. Fla. April 18, 2016).
That is the single most important fact in lender force-placed insurance practices cases filed across the United States: The lender or its agent the mortgage servicer imposed unauthorized charges and hid them in the force-placed insurance premium, not that the lender or servicer charged a lot of money. That essential fact has successfully supported a multitude of claims against lenders' and servicers' motions to dismiss. In this case, that fact allegation successfully supported the homeowners' claim for breach of contract.
Similarly, "an undisclosed kickback would be a violation of that implied duty [of good faith]." Sekula v. Residential Credit Solutions, Inc., No. 6:15-cv-2104-Orl-31KRS, 2016 WL 1559142, at *4 (M.D. Fla. April 18, 2016). For this reason, the homeowners' alleged claim of a breach of the implied covenant of good faith also successfully withstood the servicer's motion to dismiss in the Sekula case.
The nature of the successfully alleged claims in this seminal case reveals that there are strong arguments against E&O coverage for mortgage servicers on account of their conduct in LFPI practices. Mortgage servicers simply are not held liable because they charged too much, but instead they have been held subject to liability only when they are alleged to have force-placed unauthorized charges.
"The Commission on Enhancing National Cybersecurity, appointed by President Barack Obama, will hold a public forum on May 16 at the New York University School of Law, Center on Law and Security on cyber risks facing the financial and insurance sectors. The commission will hold three separate panel discussions focused on cybersecurity challenges and opportunities in the finance and insurance sectors, as well as cybersecurity research and development in the finance sector. The commission, which will hold four such forums, plans to allow up to 15 minutes for public comments at the end of the day-long event."
From "Cyber Commission Sets Public Forum Targeting Financial, Insurance Sectors" Politico Pro (05/05/16) Goode, Darren (subscription required). Reprinted from AIA "First Read," posted May 6, 2016.
…. MORE OF A GOOD ROADMAP FOR CYBERINSURANCE INSURANCE UNDERWRITING AND CLAIMS QUESTIONS.
Aon Risk Services has provided a good roadmap for questions to ask before purchasing or underwriting a cyberinsurance policy. Reading its website between the lines regarding Cyberinsurance, Aon has also provided an outline of some important insurance coverage questions that come up during the claims process. Key points are boldfaced here by the author.
In evaluating Cyber Insurance, it is important to understand the risks and exposures an insurance policy may or may not address. While there are numerous standard products available in the marketplace, we believe that one size does not fit all. Since the terms and conditions of each Cyber Insurance product vary greatly, we examine and modify each offering to present a recommended solution that is tailored to our clients' unique needs.
Many professional service firms consider expenses related to a privacy or security data breach, such as statutory notification costs, to be of paramount concern.
More and more contracts are specifically requiring insurance coverage for these types of costs
Data breach disclosure laws have been enacted or introduced in a majority of states, as well as in the European Union, and continue to evolve
Cyber Insurance policies provide access to data breach consultants and panels of experts to assist firms that suffer data breaches. This insurance pays expenses for forensic investigation and public relations, as well as notification costs, credit monitoring, and consumer education and assistance costs arising out of a data breach. Some policies also cover the cost of retaining outside counsel to evaluate the firm's potential obligations for a breach.
Cyber Insurance can also be designed to cover the following additional exposures:
Privacy and Security Liability
Business Interruption and Extra Expenses
Contingent Business Interruption
Cyber Extortion
Data Corruption
Media Liability
Strategic Approach
Our process for discussing Cyber Insurance is educational and consultative:
Phase 1
A "Gap Analysis" is performed to determine where any possible coverage can be found in existing insurance policies
Results are presented in a clear and concise format, with open dialogue
Based on the findings, we provide recommendations on how to address any gaps
Phase 2
We provide an application for Cyber Insurance and assist with any questions
We negotiate Cyber Insurance options specific to our clients' individual needs
A detailed comparison of the terms and conditions of each offering is presented
We place a Cyber Insurance solution as directed by the client"
… DOES NOT EXCLUDE "FRAUD-BASED CONSUMER-PROTECTION CLAIMS," ILLINOIS FEDERAL COURT HOLDS UNDER MINNESOTA LAW.
In Big Bridge Holdings, Inc. v. Twin City Fire Ins. Co., 132 F.Supp.3d 982 (N.D. Ill. 2015), the Federal District Court held that an "unfair trade practices exclusion" in a Directors and Officers Liability Policy was ambiguous under Minnesota law. As a result, the exclusion did not bar all coverage for the underlying claims alleged against the policyholder, which the Court described "as fraud-based consumer-protection claims alleging deceptive (not anti-competitive) business practices."
When an insurance carrier declines to issue an insurance policy because the risks are too rich for its blood, the insurance company is not declining coverage under a policy because of an exclusion. Instead, it is declining to issue a policy in the first place because of "ineligible risks." Ineligible risks are on the rise because rather than denying already-issued coverage on the basis of exclusion, carriers are declining to cover certain risks at all. SeeRon Hurtibise, "Insurers Widening Lists of Things They Won't Cover" (Sun-Sentinel Online [Ft. Lauderdale, Florida], posted April 24, 2016).