Privacy, as it relates to an individual’s personally identifiable information, such as Social Security numbers, credit card and healthcare data, has become a cause célèbre of federal and state regulators. Increases in the scope of privacy laws continue to fuel a rise in publicly reported corporate data breach incidents. A company that suffers a significant data breach not only confronts the possibility of great financial loss, it may also suffer irreversible reputational damage—fueling a need for privacy insurance.
Sunday, July 29, 2012
Privacy Insurance
Here's an article by Toby Merrill of ACE USA on everything you need to know about privacy insurance. He writes:
Wednesday, July 25, 2012
SJC gives effect to anti-concurrent causation clause
Surabian Realty owns a professional office building in Foxborough, Massachusetts. In June, 2009, heavy rains fell in the area of the property. About thirty minutes into the storm, water stopped flowing down a parking lot drain that had become clogged with debris. As a result, rainwater collected in the parking lot and seeped under the door of the building, flooding and damaging the lower level.
Surabian sought coverage from its insurer, NGM. The policy contained an exclusion for loss or damage caused by water "regardless of any other cause or event that contributes concurrently or in any sequence to the loss." The phrase in quotes is called an anti-concurrent causation clause, and is often an issue in coverage for hurricane losses where a policy provides coverage for wind damage but excludes coverage for water damage.
The original water exclusion included surface water and water "that backs up or overflows from a sewer, drain or pump." The sewer, drain or pump clause, however, was replaced by a policy endorsement under which "the most we [the insurer] will pay for loss or damage caused by water that backs up or overflows from a sewer, drain or sump is $25,000."
NGM denied the claim because the damage resulted at least in part from surface water, which was excluded by the policy.
In Surabian Realty Co., Inc. v. NGM Ins. Co., __ N.E.2d __, 2012 WL 2819398, the Supreme Judicial Court of Massachusetts noted that "surface water" has been defined by case law as "waters from rain, melting snow, springs, or seepage, or floods that lie or flow on the surface of the earth and naturally spread over the ground but do not form part of a natural watercourse or lake." Rainwater that collects in a parking lot is surface water. Rainwater that collects on the ground is surface water even if, but for an obstruction, the water would have entered a drainage system.
The court reviewed extrajurisdictional cases that stand for the proposition that water must have "occupied" a pipe or drain in order to have backed up or overflowed from it.
The court held, "Construing these clauses in combination, we interpret the insurance contract, as amended by the indorsement, to exclude damage caused by flood waters that spread over the surface of the ground without having entered a drain, but to cover damage caused by water that backed up after entering a drain."
The parties agreed that the damage at issue was caused both by water that backed up after entering the drain and by water that, as a result of the blockage, never entered the drain. (I'm not an engineer, but I would question why water would have backed up from the drain. What was the force that pushed the water out of the drain? I would think -- again, I'm not an engineer-- that water that entered the drain would stay there, leaving no room for other water to enter it.)
Applying the anti-concurrent causation clause, the court held that because one cause of the damage was covered and another was excluded, there was no coverage for the loss under the policy.
Surabian sought coverage from its insurer, NGM. The policy contained an exclusion for loss or damage caused by water "regardless of any other cause or event that contributes concurrently or in any sequence to the loss." The phrase in quotes is called an anti-concurrent causation clause, and is often an issue in coverage for hurricane losses where a policy provides coverage for wind damage but excludes coverage for water damage.
The original water exclusion included surface water and water "that backs up or overflows from a sewer, drain or pump." The sewer, drain or pump clause, however, was replaced by a policy endorsement under which "the most we [the insurer] will pay for loss or damage caused by water that backs up or overflows from a sewer, drain or sump is $25,000."
NGM denied the claim because the damage resulted at least in part from surface water, which was excluded by the policy.
In Surabian Realty Co., Inc. v. NGM Ins. Co., __ N.E.2d __, 2012 WL 2819398, the Supreme Judicial Court of Massachusetts noted that "surface water" has been defined by case law as "waters from rain, melting snow, springs, or seepage, or floods that lie or flow on the surface of the earth and naturally spread over the ground but do not form part of a natural watercourse or lake." Rainwater that collects in a parking lot is surface water. Rainwater that collects on the ground is surface water even if, but for an obstruction, the water would have entered a drainage system.
The court reviewed extrajurisdictional cases that stand for the proposition that water must have "occupied" a pipe or drain in order to have backed up or overflowed from it.
The court held, "Construing these clauses in combination, we interpret the insurance contract, as amended by the indorsement, to exclude damage caused by flood waters that spread over the surface of the ground without having entered a drain, but to cover damage caused by water that backed up after entering a drain."
The parties agreed that the damage at issue was caused both by water that backed up after entering the drain and by water that, as a result of the blockage, never entered the drain. (I'm not an engineer, but I would question why water would have backed up from the drain. What was the force that pushed the water out of the drain? I would think -- again, I'm not an engineer-- that water that entered the drain would stay there, leaving no room for other water to enter it.)
Applying the anti-concurrent causation clause, the court held that because one cause of the damage was covered and another was excluded, there was no coverage for the loss under the policy.
Thursday, June 28, 2012
Mass. Appellate Division holds that preclusion of insurer's experts as sanction for nonproduction of documents violated due process
Advanced Spine Centers sued Commerce for PIP and 93A damages. In discovery it sought a number of documents, including reports written by Commerce's proposed experts in other cases. Commerce produced copies of reports of its proposed experts for the case at hand, but asserted that it had no other reports in its possession, custody or control.
Advance moved in limine to preclude the experts from testifying because Commerce had not provided the requested reports. The trial court allowed the motion.
In Advanced Spine Centers, Inc. v. Commerce Ins. Co., 2012 WL 2153943 (Mass. App. Div.), the Massachusetts Appellate Division overturned that ruling, holding that the sanction was too broad and violated the principles of due process.
Advance moved in limine to preclude the experts from testifying because Commerce had not provided the requested reports. The trial court allowed the motion.
In Advanced Spine Centers, Inc. v. Commerce Ins. Co., 2012 WL 2153943 (Mass. App. Div.), the Massachusetts Appellate Division overturned that ruling, holding that the sanction was too broad and violated the principles of due process.
Wednesday, June 20, 2012
Great article on exhaustion of underlying coverage
Michael Aylward, one of the premier insurance coverage attorneys in Massachusetts as well as an all-around nice guy, has published a comprehensive article on recent developments in the law relating to when underlying coverage is exhausted for the purpose of triggering excess coverage.
Saturday, June 16, 2012
Appeals Court holds insurer failed to use due diligence to contact insured when it did not use social media
Stephanie Cotto was injured in an automobile accident while riding as a passenger in a vehicle owned by George Luddy Chevrolet and driven by her friend, Luddy employee Julie Bertholdt. Bertholdt was an insured under a policy issued by Universal to Luddy.
Cotto filed suit. She obtained a default judgment as a result of Bertholdt's failure to answer interrogatories. Damages were assessed. Universal refused to satisfy the judgment, asserting that Bertholdt had breached her duty to cooperate.
Cotto filed an action to reach and apply coverage under the policy . The Superior Court held that Universal was entitled to disclaim coverage.
On appeal Cotto argued that Universal had failed to exercise due diligence in obtaining Bertholdt's cooperation.
In Cotto v. Universal Underwriters Ins. Co., 81 Mass. App. Ct. 1142, 2012 WL 2093331 (unpublished), the Massachusetts Appeals Court reversed.
The record on summary judgment showed that Universal had made various attempts to locate Bertholdt and seek her cooperation and that, at one point, she told insurance defense counsel that she was "not going to trial." The Appeals Court held those facts were insufficient to sustain a summary judgment verdict. "Especially given Bertholdt's youth and transient lifestyle, a trier of fact reasonably could conclude that due diligence required Universal to take further steps."
The court noted that after the reach and apply action was filed, Cotto testified at a deposition that she had been able to maintain contact with Bertholdt through text messages, MySpace, and Facebook. "In contrast, there is nothing in the record to indicate that such sites were consulted by Universal or its investigators, despite the importance of social media sites as centers of communication and sources of information. Nor does the record reflect that Universal considered Cotto, herself, as a source of information about Bertholdts' whereabouts."
Cotto filed suit. She obtained a default judgment as a result of Bertholdt's failure to answer interrogatories. Damages were assessed. Universal refused to satisfy the judgment, asserting that Bertholdt had breached her duty to cooperate.
Cotto filed an action to reach and apply coverage under the policy . The Superior Court held that Universal was entitled to disclaim coverage.
On appeal Cotto argued that Universal had failed to exercise due diligence in obtaining Bertholdt's cooperation.
In Cotto v. Universal Underwriters Ins. Co., 81 Mass. App. Ct. 1142, 2012 WL 2093331 (unpublished), the Massachusetts Appeals Court reversed.
The record on summary judgment showed that Universal had made various attempts to locate Bertholdt and seek her cooperation and that, at one point, she told insurance defense counsel that she was "not going to trial." The Appeals Court held those facts were insufficient to sustain a summary judgment verdict. "Especially given Bertholdt's youth and transient lifestyle, a trier of fact reasonably could conclude that due diligence required Universal to take further steps."
The court noted that after the reach and apply action was filed, Cotto testified at a deposition that she had been able to maintain contact with Bertholdt through text messages, MySpace, and Facebook. "In contrast, there is nothing in the record to indicate that such sites were consulted by Universal or its investigators, despite the importance of social media sites as centers of communication and sources of information. Nor does the record reflect that Universal considered Cotto, herself, as a source of information about Bertholdts' whereabouts."
Wednesday, May 30, 2012
Welcome back to the Cavalcade of Risk!
I am once again honored to be hosting the Cavalcade of Risk, a gathering of blog posts about various types of risk from around the web.
Life insurance
Russell Hutchinson at Chatswood Consulting has asked insurance companies to come up with old stock brochures and advertisements. In this post, check out the print ad “Could father be mother too?” as an insurer of yesterday tried to plug into the fears of at-home mums. While the mother's schedule speaks to a mythical past devoid of personal ambition or Valium, an updated version of the ad could work today. An occupational hazard for me as an attorney is that I am often confronted with the worst happening to others. As a result I make sure I have enough life insurance that if the worst happens in my family there will be enough money not just to make up for lost income, but for babysitters, housekeepers, and all the other sundry employees that would be necessary to make up for the things we do for our kids other than provide income to our family.
Personal risk
My Wealth Builder posts about a choice to treat high cholesterol with diet and exercise rather than drugs.
Perhaps he should try a coffee diet? Hank Stern at InsureBlog discusses a study showing that coffee drinkers live longer.
Free Money Finance offers advice on insurance and related topics. While much of the post is solid, I disagree with the advice about wills. If you care what will happen to your estate or if you want to prevent a big hassle for your closest relatives you should have a will, and you should have an attorney draft it.
Modest Money issues a reminder not to post personal information in blogs, as such posts can put you at risk for identity theft.
Investing
Here's a post for those of you who are already saving for retirement on a level that shows you’ll reach a comfortable amount of income-producing savings by the time you retire and do a good job of saving for holiday gifts, a vacation or two, and a new car every five years, and are saving for college for your kids, and have adequate insurance. For those of you who are still with us who are somehow nevertheless confused about how to save money, PT Money writes about strategies for long-term non-retirements savings.
At Risk Management Monitor, Emily Holbrook writes about The Good, The Bad, and The Ugly of the Facebook IPO.
The Financial Industry
Van Mayhall, at Insurance Regulatory Law, discusses arguments that credit default swaps are insurance transactions that should be regulated as such, and that “deregulation” of credit default swaps was a major cause of the financial crisis in the late 2000s.
Health Insurance
Jason Shifrin at Healthcare Economist writes in his post, "Heroes without Health Insurance" about about the sad phenomenon of U.S. veterans without health insurance.
Jay Norris at Colorado Health Insurance Insider writes about How Individual Health Insurance Measures Up. He writes that in Colorado the average premium for group coverage for a family in Colorado in 2010 was almost three times the national average for family coverage purchased in the individual market. He points out that the significant chunk of the premiums usually paid by the employer is not free money. If health insurance were less expensive, employee wages would likely be higher – the money has to come from somewhere, whether it’s paid directly from the employee in the form of payroll deduction, or by the employer. But people paying for their own insurance often gravitate towards lower-cost policies with higher out-of-pocket exposure in an effort to keep the premiums as low as possible.
While Jay points out the danger of low premium, high deductible plans, in my experience those plans can be excellent for someone who is aware of the risk. I had one of those plans for my family for a while. It cost a quarter of my current plan -- the cheapest legal plan now available in Massachusetts, which costs more than my mortgage -- and covered basically nothing under the first $10,000 of health care costs in a year. It worked for us because in Massachusetts we have had a law since the 1980's that people can switch health plans at will, regardless of preexisting conditions. That meant that we could accept the risk of a tragic sudden event -- a car accident requiring emergency room treatment, for example -- because we could switch to a regular plan with just a few days notice. We switched when my daughter needed to get her tonsils out, and then couldn't go back to our high deductible plan because the plan is no longer legal here.
Jaan Sidorov at Disease Management Care Blog describes some problematic similarities between Facebook and Accountable Care Organizations and asks if either entity has a business model that is built to last.
That's our carnival. The next one will be hosted by My Wealth Builder.
Life insurance
Russell Hutchinson at Chatswood Consulting has asked insurance companies to come up with old stock brochures and advertisements. In this post, check out the print ad “Could father be mother too?” as an insurer of yesterday tried to plug into the fears of at-home mums. While the mother's schedule speaks to a mythical past devoid of personal ambition or Valium, an updated version of the ad could work today. An occupational hazard for me as an attorney is that I am often confronted with the worst happening to others. As a result I make sure I have enough life insurance that if the worst happens in my family there will be enough money not just to make up for lost income, but for babysitters, housekeepers, and all the other sundry employees that would be necessary to make up for the things we do for our kids other than provide income to our family.
Personal risk
My Wealth Builder posts about a choice to treat high cholesterol with diet and exercise rather than drugs.
Perhaps he should try a coffee diet? Hank Stern at InsureBlog discusses a study showing that coffee drinkers live longer.
Free Money Finance offers advice on insurance and related topics. While much of the post is solid, I disagree with the advice about wills. If you care what will happen to your estate or if you want to prevent a big hassle for your closest relatives you should have a will, and you should have an attorney draft it.
Modest Money issues a reminder not to post personal information in blogs, as such posts can put you at risk for identity theft.
Investing
Here's a post for those of you who are already saving for retirement on a level that shows you’ll reach a comfortable amount of income-producing savings by the time you retire and do a good job of saving for holiday gifts, a vacation or two, and a new car every five years, and are saving for college for your kids, and have adequate insurance. For those of you who are still with us who are somehow nevertheless confused about how to save money, PT Money writes about strategies for long-term non-retirements savings.
At Risk Management Monitor, Emily Holbrook writes about The Good, The Bad, and The Ugly of the Facebook IPO.
The Financial Industry
Van Mayhall, at Insurance Regulatory Law, discusses arguments that credit default swaps are insurance transactions that should be regulated as such, and that “deregulation” of credit default swaps was a major cause of the financial crisis in the late 2000s.
Health Insurance
Jason Shifrin at Healthcare Economist writes in his post, "Heroes without Health Insurance" about about the sad phenomenon of U.S. veterans without health insurance.
Jay Norris at Colorado Health Insurance Insider writes about How Individual Health Insurance Measures Up. He writes that in Colorado the average premium for group coverage for a family in Colorado in 2010 was almost three times the national average for family coverage purchased in the individual market. He points out that the significant chunk of the premiums usually paid by the employer is not free money. If health insurance were less expensive, employee wages would likely be higher – the money has to come from somewhere, whether it’s paid directly from the employee in the form of payroll deduction, or by the employer. But people paying for their own insurance often gravitate towards lower-cost policies with higher out-of-pocket exposure in an effort to keep the premiums as low as possible.
While Jay points out the danger of low premium, high deductible plans, in my experience those plans can be excellent for someone who is aware of the risk. I had one of those plans for my family for a while. It cost a quarter of my current plan -- the cheapest legal plan now available in Massachusetts, which costs more than my mortgage -- and covered basically nothing under the first $10,000 of health care costs in a year. It worked for us because in Massachusetts we have had a law since the 1980's that people can switch health plans at will, regardless of preexisting conditions. That meant that we could accept the risk of a tragic sudden event -- a car accident requiring emergency room treatment, for example -- because we could switch to a regular plan with just a few days notice. We switched when my daughter needed to get her tonsils out, and then couldn't go back to our high deductible plan because the plan is no longer legal here.
Jaan Sidorov at Disease Management Care Blog describes some problematic similarities between Facebook and Accountable Care Organizations and asks if either entity has a business model that is built to last.
That's our carnival. The next one will be hosted by My Wealth Builder.
Wednesday, May 2, 2012
Coverage for innocent attorneys -- when their partners aren't so innocent
What happens when one lawyer at a law firm engages in fraudulent or criminal conduct, and his or her partners are sued even though they were unaware of the conduct? The American Bar Association Journal has an analysis of the insurance coverage issues here.
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