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FMG Law Blog Line

Archive for December, 2019

California Lawyers Should Not Lie

Posted on: December 20th, 2019

By: Greg Fayard

It seems obvious, but lawyers shouldn’t lie. A new Rule of Professional Conduct applicable to California lawyers says that while representing a client, a lawyer shall not knowingly make a false statement of material fact or law to a third person.

Rule 4.1 is aimed at lawyers communicating with opposing counsel or an opposing party. This duty to not misrepresent facts or law to others includes a lawyer “agreeing” with statements he or she knows are false. For example, if a lawyer hears a factually untrue statement said in a court hearing, and orally agrees with that statement, knowing it is false, that verbal affirmation runs afoul of the rule.

However, if the lawyer remained silent after hearing the false statement, such silence would likely not violate the rule—as silence is not an affirmation. Of course, the best practice for all lawyers, in California and elsewhere, is to tell the truth, don’t lie to others, and correct statements that the lawyer knows are untrue, even if it may not necessarily help the client’s case.

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

Homeowner’s Insurance Coverage: An Issue For Those Who Home-Share?

Posted on: December 18th, 2019

By: Emily Williams

With home-sharing on the rise, homeowners should know what their insurance policies cover and exclude and, perhaps, update their coverage.  A business pursuits/rental exclusion is included in most homeowner’s insurance policies. A common form of this exclusion precludes coverage for losses occurring during a guest’s stay. A less common form might provide coverage depending on certain circumstances of the rental use –length or frequency of stays[1] or annual amount of rental income.[2] A rental endorsement may also be available. And, homeowners may need to buy additional types of coverage.

Some home-sharing sites offer insurance, but this coverage is usually minimal.  For example, under one form of Host Protection Insurance offered through Airbnb, there is no coverage for losses caused by pollution, fungi, bacteria, or intentional damage or injury, or for loss of earnings claims.[3] The coverage is liability insurance only, meaning that damage to the home or the homeowner’s property is not covered.[4] Airbnb also offers a so-called Host Guarantee in the event that a guest damages the home or homeowner’s property, but numerous exclusions apply, and this product is not insurance.[5]

Also available to homeowners is a commercial policy, such as a hotel or bed-and-breakfast policy.[6] One company, Slice Labs, has attempted to keep the costs of such insurance low through a product designed to provide on-demand pay-per-night home-sharing insurance, available to home-owners who rent through certain companies.[7]

Homeowners who use their homes as a business, or for a business, will want to have a solid understanding of whether and how they and their property are insured, or not, for the risks involved in such activities.

For more information about cybersecurity or breach response, contact Emily Williams at [email protected].

[1] Kathleen Pender, Airbnb hosts face conundrum when it comes to insurance, San Francisco Chronicle (March 24, 2018), https://www.sfchronicle.com/business/networth/article/Airbnb-hosts-face-conundrum-when-it-comes-to-12778219.php
[2] Ron Lieber, A Liability Risk for Airbnb Hosts, The New York Times (December 5, 2014), https://www.nytimes.com/2014/12/06/your-money/airbnb-offers-homeowner-liability-coverage-but-hosts-still-have-risks.html)
[3] Airbnb.com/host-protection-insurance (see Airbnb Host Protection Insurance Summary)
[4] Airbnb.com/host-protection-insurance (see Airbnb Host Protection Insurance Summary)
[5] Airbnb.com/guarantee
[6] Coverage for renting out your home, Insurance Information Institute (last visited December 13, 2019), https://www.iii.org/article/coverage-for-renting-out-your-home
[7] Slice.is/

A Recent Study on Cybersecurity Among Small Businesses

Posted on: December 18th, 2019

By: Michael Kouskoutis

A recently published report, entitled “Under Attack: The State of MSP Cybersecurity in 2019,” surveyed 200 managed service providers across the country to evaluate the state of cybersecurity among smaller businesses.  (A managed service provider is a company that handles its customers’ IT infrastructure, often remotely.)  The report reveals how small businesses and their managed service providers are underequipped to protect against the newest forms of cybersecurity threats.  In particular, the study found that nearly three-quarters of managed service providers suffered a cyberattack, and over 80% of their small-business customers experienced a cyberattack as well.

What’s most concerning is that two-thirds of managed service providers believe that they are not equipped to defend their customers against a cyberattack, and that this lack of confidence is likely linked to the widening gap among providers in technical skill, knowledge, certifications and accessibility to resources.  The report advises that managed service providers should seek top talent and facilitate training programs aimed at keeping staff up to date on the latest cyber threats and solutions.

Further, managed service providers are reporting difficulty in selling cybersecurity solutions to their customers, leaving customers increasingly vulnerable to the latest cyber threats.  However, prior studies show that small businesses are willing to spend 27% more money for cybersecurity, provided they feel confident in the security package’s ability to offer adequate protection.  In addition to strengthening their services, managed service providers should proactively engage in conversations with their customers about cybersecurity, and not wait until after an attack.  Customers and prospects should be aware of the evolving nature of cyber threats and that proper cybersecurity requires a deliberate and concerted effort among all small business employees.

For more information about cybersecurity or breach response, contact Michael Kouskoutis at [email protected].

Loss of Earnings Calculations – Experts – Damages – California

Posted on: December 16th, 2019

By: Chuck Horn

California just changed the law on recovery of loss of earnings.  Traditionally counsel, and experts, would look to the actual earnings history of the plaintiff, or plaintiff’s decedent, in the years before the accident or injury.  Subpoenas and Requests for Production of Documents would seek the personnel file, the W-2s, the date of initial employment and pay rate, and the person’s wage-increase progress, promotions, and likely future promotions and pay raises, and information to calculate life expectancy.  Then independent forensic economists would be given this information and would investigate the known statistics that apply to that person and calculate reasonably likely “past” earnings from the accident to trial, and reasonably likely “future” loss of earnings.  Seems simple, right?

California has just changed the way all this works.  The California legislature changed the law (Civil Code §3361, enacted by SB 41 in 2019) for civil damages for loss of earnings because the results of past practices “are a reflection of gender pay gaps and workforce discrimination,”  and “perpetuate systemic inequalities” and “disproportionately injure women and minority individuals by depriving them of fair compensation,” recognizing that “[a]ny generalized reduction of civil damages using statistical tables alone, based on a plaintiff’s membership in a protected class identified in Section 51 of the Civil Code, is counter to the public policy of the State of California.”

Effective 01/01/2020 Section 3361 has been added to the California Civil Code, as follows: “Estimations, measures, or calculations of past, present, or future damages for lost earnings or impaired earning capacity resulting from personal injury or wrongful death shall not be reduced based on race, ethnicity, or gender.”  This is a significant change to past practices of counsel and experts for all sides in civil litigation in California and must be taken into account in claim evaluation and trial preparation.

If you have any questions or would like more information, please contact Chuck Horn at [email protected].

Should It Stay or Should It Go? Jurisdictional Questions Raised in $39 Million Coverage Action Over Hurricane Maria Claims

Posted on: December 16th, 2019

By: Catherine Bednar

Plaintiff Capital Crossing Servicing Company, LLC (“Capital Crossing”), a loan servicing company, filed a lawsuit in Massachusetts against its insurer, Mapfre Praico Insurance Company (“Mapfre”). The lawsuit involves a coverage dispute over property damage claims following Hurricane Maria’s devastating impact on Puerto Rico. The parties are contesting whether Mapfre may be sued in Massachusetts, or instead the case belongs in Puerto Rico.

Mapfre moved to dismiss Capital Crossing’s lawsuit on the grounds that Mapfre lacks sufficient contacts with Massachusetts to establish jurisdiction over it. Mapfre argued that it is a Puerto Rico insurance company, it issued the policy in Puerto Rico, it insured real property in Puerto Rico, and it investigated and adjusted the claims in Puerto Rico. Mapfre contended the policy and payments were delivered to Capital Crossing in Puerto Rico to an appointed intermediary. Accordingly, Mapfre argued it never “purposefully availed” itself of the privilege of doing business in Massachusetts.

In response, Capital Crossing argued it is a Massachusetts company, the policy was actually delivered to Massachusetts, and it paid premiums from Massachusetts and received claims payments in Massachusetts. In addition, Capital Crossing pointed out that on more than one occasion, Mapfre representatives had met with Capital Crossing representatives face-to-face in Massachusetts to discuss the Hurricane Maria claims. In its briefing, Capital Crossing relied on Massachusetts legal precedent holding that only minimal contacts with a state are required for jurisdiction over insurers, based in part on the fact that litigation is a routine aspect of an insurance company’s business.

On October 31, 2019, at the request of the parties, the U.S. District Court of Massachusetts deferred any action on Mapfre’s motion to dismiss pending discovery between the parties. Whether the lawsuit remains in Massachusetts remains to be seen. This case is a reminder that jurisdiction is a fact-dependent inquiry; how an insurer conducts its business, both in issuing policies and handling claims, determines where it may be haled into court.

If you have any questions or would like more information, please contact Catherine Bednar at [email protected].