Hunton Insurance Recovery Blog

On December 9, 2020, in Elegant Massage, LLC v. State Farm Mut. Auto. Ins. Co., No 2:20-cv-00265-RAJ-LRL (E.D.V.A. Dec. 9, 2020) , a Virginia federal court refused to dismiss a majority of the policyholder’s breach of contract claim and its request for bad faith damages, declaratory judgment and class certification, all stemming from the insurers’ denial of coverage for COVID-19 related business income losses. The policyholder, a spa, purchased an all-risk property insurance policy with coverage for, among other things, loss of business income and extra expense. The spa, a non-essential business, closed on March 16, 2020 as a result of state orders requiring all non-essential businesses to close due to the COVID-19 pandemic. It did not reopen until May 15. Once re-opened, however, the policyholder was required to implement operational controls and precautions to ensure the safety of the public and its employees. Following its closure, the policyholder sought coverage under its all-risk insurance policy. The insurer denied coverage for the claim, contending first that losses due to the COVID-19 pandemic and subsequent closure orders did not constitute “property damage” within the meaning of the policy and, second, even if the losses were because of “property damage,” the claim implicated various exclusions to coverage. The policyholder then initiated suit against its insurers.

On November 25, 2020, an Illinois federal judge ruled in Grinnell Mutual Reinsurance Co. v. S.B.C. Flood Waste Solutions, Inc., that an Iowa based insurance company must continue to defend a waste disposal company in an underlying trademark infringement and defamation lawsuit.

The US Securities and Exchange Commission has levied $125,000 in civil penalties on Cheesecake Factory as part of a settlement to resolve the agency’s allegations that the company made materially misleading statements to investors about the impact of the COVID-19 pandemic on its business. While this is the first such case reported by the SEC, it is only one in a string of recent third-party liabilities companies have faced that implicate directors’ and officers’ liability insurance coverage.

A D.C. federal judge recently held that an insurer could be responsible to a TV station for more than $25 million in an underlying malpractice suit where the insurer failed to send timely notice preserving its rights under the policy in violation of a Virginia statute.

The Hunton Andrews Kurth Insurance Coverage Practice Group has been awarded Tier 1 ranking by US News Media Group and Best Lawyers, placing them among the top practitioners nationally for policyholder insurance coverage representation. In addition to its Tier 1 ranking nationally, the Firm also received a regional Tier 1 ranking in Washington, DC and a Tier 2 ranking in Atlanta, GA.

It’s a cautionary tale of cyber fraud.  A title agent in a real estate transaction receives an email ostensibly from the mortgage lender providing instructions for transferring the loan proceeds into a settlement bank account.  After transferring the funds ($520,000), it becomes apparent that the transfer instructions came from an email address that was one letter off from the mortgage lender’s actual email address – it was a scam.  But it’s too late, the scammer has already withdrawn the funds from the settlement account and cannot be traced.

On November 19, 2020, a Delaware judge ruled in Indian Harbor Ins. Co. v. SharkNinja Operating LLC, et al., that insurer Indian Harbor must defend SharkNinja against underlying patent infringement and false advertising claims despite a patent infringement exclusion.

A federal judge has denied an insurance company’s motion to dismiss the claims of another insurer seeking reimbursement and contribution for the $15 million it paid to settle underlying claims arising from a product recall.

In March, we reported on the initial filing of several securities class action suits arising from the coronavirus pandemic (COVID-19). For example, at the start of the pandemic, shareholders of Norwegian Cruise Lines Holdings, Ltd. filed a class action alleging that the company and certain officers violated the Securities and Exchange Act of 1934. The lawsuit alleged that the cruise line made false and misleading statements about COVID-19 in order to persuade consumers to purchase cruises. This allegedly caused the share prices to be cut in half.

On November 10, 2020, a New York federal judge dismissed an insurer’s counterclaims seeking to cap its exposure under a $15 million sublimit and an order estopping the policyholder from pursuing any additional amounts.