Category Archives: Business interruption

Coverage Disputes Over Data Breaches . . . (as summarized by HB Litigation Conferences)

On July 15, 2009, I gave a presentation regarding insurance coverage for data breaches for my friends at HB Litigation Conferences, along with Tim Delahunt and Arturo Perez-ReyesTom Hagy (yes, the “H” in “HB”) wrote a really nice blog post discussing and summarizing the content of the teleconference, which you can find by clicking here.

Tom opens the piece with a provocative title and subtitle, asking:

Coverage Disputes Over Data Breaches . . .

. . . A Deluge or a Dud?

He explains:

With hundreds of laws governing data privacy and the potential for billions of dollars in damages, you can’t help but think that insurance coverage disputes are about to fall on courts like confetti.

Maybe yes; maybe no.

Either way, companies need to pay as close attention to their insurance policies as they do their data protection policies.

Tom then gives a nice summary of the introduction and overview regarding potential insurance coverage for data breaches that I provided to the conference attendees:

Speaking on HB’s July 15 teleconference – “Private Data Breaches: Insurance Coverage Implications & Prevention – policyholder counsel Scott Godes [formerly] of Dickstein Shapiro told listeners that, despite what insurance counsel might say, “don’t write off your existing coverage” if looking for protection. He also said to know the window of time to get your notice in quickly to get your insurer “to partner up with you,” and to consider new cyber-security coverage – but “know its limitations.”

Tom also featured some of the fascinating data points that my co-presenter Arturo Perez Reyes provided on this burgeoning area of liability:

Co-presenter Arturo Perez Reyes said California alone has 81 separate privacy laws, and there are hundreds of laws outside the U.S. If you lose records, you will have to tell everyone that you lost them, he said, “essentially notifying a whole class of potential plaintiffs.”

There was a 44% increase in data losses last year that resulted in $50B in losses, Reyes reported, adding that nine million people were affected by identification theft.

“The concept of a firewall is a joke,” Reyes declared.

Tom also highlighted some back and forth between me and co-presenter Tim Delahunt:

Godes criticized insurance company arguments against coverage for data theft arising from failures on the part of the policyholder’s systems. “If there is no failure to maintain proper authentication and no failure of data security measures, there would be no potential liability and no lawsuits,” he said. “And if there never was a failure of proper authentication and never was a failure of data security, I suppose insurance companies would be thrilled because they would get your insurance premiums and nothing ever goes wrong.”Co-presenter Timothy Delahunt of Kenney, Shelton, Liptak & Nowak called this a “classic policyholder complaint – that insurance companies issue coverage then deny it.”

“The analogue is that courts will find coverage when they need to, to satisfy an underlying liability. Do I think the facts and policy language have changed?” Delahunt asked. “By and large no. Could the coverage landscape change as underlying liability expands? I believe that’s possible.”

For the rest of the analysis and the post, click here.  And thanks, of course, to Tom and HB Litigation Conferences for the write up!

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Disclaimer:

This blog is for informational purposes only. This may be considered attorney advertising in some states. The opinions on this blog do not necessarily reflect those of the author’s law firm and/or the author’s past and/or present clients. By reading it, no attorney-client relationship is formed. If you want legal advice, please retain an attorney licensed in your jurisdiction. The opinions expressed here belong only the individual contributor(s). © All rights reserved. 2009.

Total Cessation of Business Is Not Required for BI Coverage.

Advisen just published my article, Just How Much Business Disruption Is Required To Obtain Coverage Under Contingent Business Interruption Insurance Policies?.

In the piece, I explain that:

In insurance coverage cases relating to the application of contingent business interruption coverage, insurers consistently argue that there must have been a “total cessation” of operations, no matter the applicable policy language. They further argue that if there was no “total cessation” of business operations, the insurers are not obligated to provide contingent business interruption coverage. Those arguments, however, should not carry the day.

What is contingent business interruption insurance coverage?

“Regular business-interruption insurance replaces profits lost as a result of physical damage to the insured’s plant or other equipment; contingent business-interruption coverage goes further, protecting the insured against the consequences of suppliers’ problems.” Archer Daniels Midland Co. v. Hartford Fire Ins. Co., 243 F.3d 369, 371 (7th Cir. 2001) (“Archer v. Hartford”). In short, if a third party suffers a business interruption that affects the policyholder, such as “damage to [a third party’s] plant, which was neither owned nor operated by” the insured, “contingent business interruption insurance applie[s] to the losses suffered by” the named insured. CII Carbon, L.L.C. v. Nat’l Union Fire Ins. Co., 918 So.2d 1060, 1068 (La. App. 4 Cir. 2005).

The article discusses what sort of interruption is required under contingent business interruption policies. I argue that:

The plain language of policies that require only an “interruption of business” does not, by the terms, require a total “cessation” or “suspension” of business.

For the complete analysis, click here to read the complete article.

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Disclaimer:

This blog is for informational purposes only. This may be considered attorney advertising in some states. The opinions on this blog do not necessarily reflect those of the author’s law firm and/or the author’s past and/or present clients. By reading it, no attorney-client relationship is formed. If you want legal advice, please retain an attorney licensed in your jurisdiction. The opinions expressed here belong only the individual contributor(s). © All rights reserved. 2009.

Conflicts, mediation, and contingent business interruption insurance.

Attorney-mediator Victoria Pynchon recently posted that “you must create disputes to resolve conflicts.”  And from there, she cites my post about contingent business interruption insurance coverage.  Vickie explains that ADR professional should not see all conflicts as bad:

Most people think ADR professionals believe that all conflicts are bad. Quite the contrary.  Those of us who are trained and practiced in dispute resolution understand that conflict must ripen into one or more disputes for society to evolve along the arc of justice.

She continues, explaining that:

To “make room” for those “contradictory forces” we often must raise a ruckus or ask for something we never believed we might be entitled to.  Say, gay marriage.

She concludes by citing to my post about contingent business interruption insurance coverage.  How does she get there?  She reminds corporate policyholders that decades ago:

Corporations once had a cozy, apparently non-conflictual relationship with their carriers because no one questioned the carriers when they said a claim wasn’t covered.

Corporate policyholders, however, would be well-advised to consider closely an insurer’s denial of coverage.  Vickie  concludes that her “stream of consciousness” took her on the path to my post, which explains what contingent business interruption insurance is, and why “In insurance coverage litigation regarding contingent business interruption losses, it is important to turn a critical eye on insurers’ arguments if they have denied coverage.”

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Disclaimer:

This blog is for informational purposes only. This may be considered attorney advertising in some states. The opinions on this blog do not necessarily reflect those of the author’s law firm and/or the author’s past and/or present clients. By reading it, no attorney-client relationship is formed. If you want legal advice, please retain an attorney licensed in your jurisdiction. The opinions expressed here belong only the individual contributor(s). © All rights reserved. 2009.

Ensuring Contingent Business Interruption Coverage

Today, Insurance Law360 published a piece that I wrote regarding contingent business interruption coverage.  Are you wondering what is contingent business interruption insurance, and whether your business needs it?  I gave an overview of the coverage in the article:

First, an overview of contingent business interruption coverage. “Regular business-interruption insurance replaces profits lost as a result of physical damage to the insured’s plant or other equipment; contingent business-interruption coverage goes further, protecting the insured against the consequences of suppliers’ problems.” Archer Daniels Midland Co. v. Hartford Fire Ins. Co., 243 F.3d 369, 371 (7th Cir. 2001) (“Archer v. Hartford”).

Often times, however, when policyholders ask their insurers to cover losses stemming from contingent business interruption, the insurers refuse, asserting that there must have been a “total cessation” of business operations.  Insurers consistently argue that if there was no “total cessation” of business operations, they are not obligated to provide contingent business interruption coverage.  The insurers’ arguments, however, are wrong.  As I conclude in the article (advice that applies to many situations in which insurers have denied coverage for claims for their corporate policyholders):

In insurance coverage litigation regarding contingent business interruption losses, it is important to turn a critical eye on insurers’ arguments if they have denied coverage.

For the full article, click on over to Insurance Law360.com.

myspace profile views counter

Disclaimer:

This blog is for informational purposes only. This may be considered attorney advertising in some states. The opinions on this blog do not necessarily reflect those of the author’s law firm and/or the author’s past and/or present clients. By reading it, no attorney-client relationship is formed. If you want legal advice, please retain an attorney licensed in your jurisdiction. The opinions expressed here belong only the individual contributor(s). © All rights reserved. 2009.

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