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Archive for the ‘Insurance Coverage and Extra-Contractual Liability’ Category

Statute of Limitations Tolled in California Amid Pandemic

Posted on: August 3rd, 2020

By: Matthew Jones

In response to the COVID-19 pandemic, California’s Governor Gavin Newsom issued a “state of emergency” for the entire State. In response, the California Judicial Council adopted several Emergency Rules to implement during the pandemic. In particular, Rule 9 states that all statute of limitations for civil causes of action are tolled from April 6, 2020 until 90 days after the state of emergency related to COVID-19 is lifted by the Governor. Therefore, if a party’s claim would have expired pursuant to the applicable statute of limitations during this timeframe, such claims are still very much alive. In regard to those claims, there is currently no deadline to file them since the “state of emergency” has yet to be lifted by the Governor. Once lifted, claimants will have six months to file their respective claims.

Additional Information:

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Insurance Requirements and First Amendment Rights of Freedom of Speech and Assembly

Posted on: July 6th, 2020

By: Jessi Samford and Bill Linkous

There is no doubt that the world as we know it has changed dramatically this year, and the protests and marches amidst the global pandemic have been in the forefront of recent news. While some protests have focused on broader awareness campaigns of injustice and inequality, others are geared toward current events that stir up longstanding tensions in the United States. There have even been a few protests about the pandemic itself. 

In recent history, some states have imposed insurance requirements on groups planning rallies or protests at certain locations, which presents an important constitutional question which should be considered carefully now, more than ever, in our country’s divisive climate. Can a government make and enforce a rule requiring that insurance be provided to cover risk of injury to protest participants or bystanders that that does not violate the First Amendment of the U.S. Constitution? 

Iowa, for example, faced criticism three years ago for having a one-size-fits-all rule that any organizer of such an event at the state’s capitol had to obtain a liability policy of at least $1 million. The blanket rule on its face made no exception based on the size or length of the event, but it was not always enforced. One organizer regularly provided proof of insurance while others who could not afford the premiums proceeded anyway at the capitol as planned and without interference.

Special event insurance is not a new concept to the insurance industry, as many carriers are in the market to underwrite risks for short-term gatherings of all kinds—from an outdoor car show, farmers market, or festival to an indoor convention or even wedding festivities. The insurance would likely be based off commercial general liability (CGL) policy forms, which mainly address risks against bodily injury or property damage claims by others. In the context of protests on public property, it would likely be the venue organizers who would be required to supply the policy and proof thereof to obtain a permit for the special event, assembly, or protest.

What is unique about this concept in the context of a protest is that it would be held in a public space and a governmental entity would need to be cognizant of the First Amendment implications of requiring the protest organizer(s) to pay insurance premiums to exercise First Amendment rights to free speech and peaceable assembly.

The requirement to obtain a permit and pay a fee, such as for insurance, before authority is given for public speaking, parades, or assemblies in traditional public forums is generally considered by courts to be a prior restraint on speech. Forsyth County v. Nationalist Movement, 505 U.S. 123, 129 (1992). The term “prior restraint” is used to describe administrative and judicial orders forbidding certain communications when issued in advance of the time that such communications are to occur, including injunctions and restraining orders. Alexander v. United States, 509 U.S. 544, 550 (1993).  Although there is a “heavy presumption” against the validity of a prior restraint, the Supreme Court has recognized that in order to regulate competing uses of public forums, government may impose a permit requirement on those wishing to hold a march, parade, or rally.  Cox v. New Hampshire, 312 U.S. 569, 574-576 (1941). Such a scheme, however, must meet certain constitutional requirements. It may not delegate overly broad licensing discretion to a government official. Freedman v. Maryland, 380 U.S. 51, 56 (1965). Moreover, a permitting scheme controlling the time, place, and manner of speech must not be based on the content of the message, must be narrowly tailored to serve a significant governmental interest, and must leave open ample alternatives for communication.  United States v. Grace, 461 U.S. 171, 177 (1983).

A local government wishing to impose a permit and insurance requirement for public gatherings in a public forum should follow the guidelines laid down by the U.S. Supreme Court. First, neither the imposition of an insurance requirement nor the amount of insurance required can be based in any way on the content of any anticipated message. For instance, the amount of insurance required cannot be tied to the expected backlash that the message will cause among citizens. Second, the permit/insurance requirement cannot give overly broad discretion to the official who is designated to issue the permit. Only objective criteria should be used.  Perhaps the insurance requirement would kick in once a threshold number of participants in the gathering is reached or when the gathering is expected to last for a threshold period of time, and the level of insurance required could increase incrementally as the number of participants (or the length of the gathering) increases. Third, the insurance/permit regulation should require that the permit be automatically issued within a short period of time once the application is filed if the permit is not denied by the government official. Finally, there should be a quick and efficient method for appeal of the insurance requirement and permit issuance decision, because a system of prior restraint avoids constitutional infirmity only if it takes place under procedural safeguards designed to obviate the dangers of a censorship system. Southeastern Promotions, Ltd. v. Conrad, 420 U.S. 546, 559 (1975).

As local governments consider the impact that public assemblies can have on counties and cities today, and the costs that may arise due to such assemblies, we can expect more local governments to explore the potential for a special event insurance requirement for such events. As they consider such requirements, it will be important for them to consider how they go about doing so to comply with constitutional mandates.

If you have questions or would like more information, please contact Jessi Samford at [email protected] or Bill Linkous at [email protected].

The Pandemic Risk Insurance Act of 2020 is Introduced in Congress

Posted on: June 29th, 2020

By: Wayne Hammack

Since March 2020 the House Financial Services Committee has considered the creation of a federal reinsurance program to provide a safeguard for businesses against future pandemic-related business interruption losses. An early memorandum calling for the creation of the Pandemic Risk Insurance Act (PRIA) has been revised and augmented, and on May 26, 2020 legislation was introduced by Congresswoman Carolyn B. Maloney (D-NY). The PRIA (H.R. 7011) is intended to provide for a transparent system of shared public and private compensation for business interruption losses resulting from a pandemic or outbreak of communicable disease. The legislation has been crafted to protect consumers by addressing market disruptions; to ensure the continued widespread availability and affordability of business interruption coverage for losses resulting from a pandemic or outbreak of a communicable disease; and to allow for a transitional period for the private markets to stabilize, resume pricing of such insurance, and build capacity to absorb any future losses, while preserving state insurance regulation and consumer protections. 

The proposed legislation would create the Pandemic Risk Reinsurance Program (PRRP), a system of shared public and private compensation or business interruption losses resulting from future pandemics or public health emergencies. In introducing the legislation, Congresswoman Maloney stated, “Millions of small businesses, nonprofits, mom-and-pop shops, retailers, and other businesses are being left out in the cold and will never be able to financially recover from the coronavirus crisis because their business interruption insurance excludes pandemics. We cannot allow this to happen again.” 

As drafted, the PRIA defines a “Covered Public Health Emergency” as any outbreak or infectious disease or pandemic for which an emergency is declared on or after January 1, 2021, under the Public Health Service Act, and is certified as a public health emergency by the Secretary of Health and Human Services. Under the PRIA, the PRRP will be administered by the Treasury Secretary, and participation will be voluntary for insurers, who may sign up on an annual basis. Participating insurers will be required to have business interruption policies, including event cancellation, that include coverage for pandemics. 

The PRRP would only be triggered when aggregate insured losses for a covered public health emergency exceed $250 million. Once triggered, the federal share of compensation would be equal to 95% of insured losses that exceed the insurer deductible. The PRIA would set each participating insurer’s deductible at 5% of the value of the insurer’s direct earned premiums during the preceding calendar year. 

The PRIA would provide for a $750 billion cap for federal compensation.  Should losses exceed that cap, the Treasury Secretary is authorized to determine the pro-rata share of insured losses beyond the cap. (In contrast, an early memorandum outlining the PRIA would have capped the amount insurers would have to pay out against a public health emergency at $500 billion per year). Insurers are not prohibited from purchasing reinsurance coverage in the private markets.

The proposed legislation gives the Treasury Secretary the authority to investigate and audit claims and prescribe regulations and procedures. Participating insurers are required to submit information relating to insurance coverage for business interruption resulting from covered public health emergencies, and the Treasury Secretary is required to submit annual reports to Congress on the PRRP.

Since the onset of the most recent coronavirus pandemic, there have been numerous state and federal legislative proposals to expand business interruption coverage to cover pandemic-related losses. For insurers participating in the PRIA as currently drafted, exclusions in effect on the date of enactment of the Act that specifically exclude losses covered under the PRRP would be deemed void, and any state approval of those exclusions would be preempted, unless the exclusion meets certain criteria, such as a written statement from the insured that affirmatively authorizes the reinstatement of the exclusion.

The legislation proposed by Congresswoman Maloney would terminate on December 31, 2027. 

While the proposed legislation has been endorsed by a number of industry groups including Marsh & McLennan Companies, the Retail Industry Leaders Association, and The Council of Insurance Agents & Brokers, among others, the National Association of Mutual Insurance Companies and the American Property Casualty Insurance Association are calling for an alternative approach. Whereas PRIA was modeled after the Terrorism Risk Insurance Act (TRIA), certain participants in the insurance industry have suggested a Federal Pandemic Loss Program as an alternative to PRIA, which as outlined would fully back future losses due to pandemic response initiatives, providing direct funding to businesses through a predetermined formula. 

While there remains significant work to be done to reconcile the competing interests, the introduction of PRIA and other alternative proposals are an indication that federal relief is an inevitability given the catastrophic losses suffered to date as a result of Covid-19 and the potential for a resurgence in the coming months and years.

We will continue monitoring developments related to the PRIA legislation and alternative proposals and provide updates as the legislative proposals move forward. 

If you have questions or would like more information, please contact Wayne Hammack at [email protected].

Hurricanes, Pandemics, and Shortages, Oh My: Considerations for Hurricane Season in the Time of Coronavirus

Posted on: June 18th, 2020

By: Anastasia Osbrink

According to forecasters with the Climate Prediction Center at the National Oceanic and Atmospheric Administration (“NOAA”), a division of the National Weather Service, the 2020 hurricane season has a 60% chance of being an “above-normal season.” (See https://www.noaa.gov/media-release/busy-atlantic-hurricane-season-predicted-for-2020.)

This forecast is based on several factors. According to the NOAA, there are “warmer-than-average sea surface temperatures in the tropical Atlantic Ocean and Caribbean Sea,” including record high temperatures in the Gulf of Mexico. That “coupled with reduced vertical wind shear, weaker tropical Atlantic trade winds, and an enhanced west African monsoon all increase the likelihood for an above-normal Atlantic hurricane season.” Hurricanes are formed when “a weather disturbance, such as a thunderstorm, that pulls in warm surface air from all directions” combines with “water at the ocean’s surface that is at least 80° Fahrenheit.” (https://oceanexplorer.noaa.gov/facts/hurricanes.html.) Warm sea water gives hurricanes their strength. Therefore, the warmer the seawater, the more fuel they get, and the stronger these storms can become. Additionally, hurricanes lose strength if high-altitude winds shear apart the top of the storm. Hence, reduced vertical wind shear and weaker tropical Atlantic trade winds will also enable stronger storms to form. (https://oceanexplorer.noaa.gov/facts/hurricanes.html.) Regarding the fourth of these conditions, a stronger west African monsoon season “allows wind patterns coming off Africa to more easily spin up storms.” (https://www.noaa.gov/stories/whirlwind-of-atlantic-hurricane-season-what-gives.) Additionally, as the NOAA explains, “El Nino Southern Oscillation (ENSO) conditions are expected to either remain neutral or to trend toward La Nina, meaning there will not be an El Nino present to suppress hurricane activity.” (https://www.noaa.gov/media-release/busy-atlantic-hurricane-season-predicted-for-2020.) The NOAA notes that when “similar conditions” have been present in the past, they have produced more active seasons than when these conditions are not present. In fact, this is the first time since records of hurricanes have been kept where there were three named storms before the official start of hurricane season on June 1st.

There is, though, another factor that will have an impact during this season’s hurricanes and storms – Coronavirus and COVID-19 – for several reasons.

First, during these initial months of response to Coronavirus and COVID-19, staples like toilet paper, water, disinfectants, and first-aid items often have been out of stock at stores and online. With storms heading their way, certain population centers will have to respond to the inevitable rush for food, bottled water, and other crucial supplies.

Second, many people living along the Southeastern Seaboard and the Gulf Coast rely on various businesses that provide hurricane preparation and storage services, such as window boarding, sandbagging, and securing of personal property. With many businesses struggling to remain open or maintain their workforce due to the pandemic, such services may be more difficult to find.

Third, if people have to head to evacuation centers, which are enclosed spaces crowded with people, the virus and COVID-19 may be more likely to spread.

Finally, as cities and states respond, they will need to put more time, effort, and resources into planning and setting up these centers to ensure social distancing can be practiced. One solution is more centers with more volunteers. Additional personal protective equipment (“PPE”) will be needed such as extra masks, gloves, hand sanitizer, and washing stations.

Some of the resources available to respond to these risks are provided in the following links:

https://www.ready.gov/hurricanes

https://www.cdc.gov/coronavirus/2019-ncov/index.html

https://www.fema.gov/news-release/2020/06/01/prepare-2020-hurricane-season-now

https://www.weather.gov/wrn/hurricane-preparedness

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

Additional Information:

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you. We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Comma Wars: NY Case Illustrates the Importance of Punctuation and Grammar in an Insurance Policy

Posted on: June 16th, 2020

By: Justin Boron

In the insurance coverage world, hundreds of thousands of dollars—and sometimes even millions—often come down to a comma.

On such case came before the Second Circuit on oral arguments last Thursday. In an IP coverage dispute with Hartford Fire Insurance Co.,[1] Spandex House has hung its claim for coverage on a pair of commas in an exception to the Hartford policy’s intellectual property exclusion. The underlying action arises from Rex Fabric’s copyright infringement suit against Spandex House, and Spandex House is seeking coverage for its defense in the suit. 

On Thursday, a Second Circuit panel heard on the coverage dispute on appeal from a New York federal judge’s decision holding that an exception to an expansively phrased intellectual-property exclusion did not apply because the alleged infringement did not stem exclusively from acts “in [Spandex House’s] advertising or on [its] website.” In her decision, U.S. District Judge Valerie Caproni reasoned that, while the underlying action alleged Spandex House infringed Rex’s copyrights by advertising the alleged copycat attire, it also claimed the company committed infringement through its sale and distribution of the garments.

The parties’ oral arguments were notable for the extensive parsing of grammar and punctuation that occurred on both sides. For Spandex House’s part, its counsel asserted that the phrase “in your advertising or on your website” is separated from the rest of the provision by commas on either side:

The IP Exclusion “does not apply if the only allegation in the claim or ‘suit’ involving any intellectual property right is limited to: (1) Infringement, in your ‘advertisement’ or on ‘your web site’, of: (a) Copyright….”

As a result, Spandex counsel argued, the exception is not restrictive and restores coverage where the underlying action solely concerns the company’s alleged infringement, even if the alleged infringement stemmed from a source other than advertising or the web site.

In response, Hartford’s counsel argued that New York law requires courts to consider punctuation or grammar only “if the words themselves are already ambiguous.” He contended that it was not and that the underlying action “is full of garden-variety copyright infringement allegations: copying fabric patterns, making fabrics with those patterns, and selling and distributing those fabrics. It is not limited to ads or websites.”

The panel took the case under submission. 


[1] The case is Spandex House Inc. v. Hartford Fire Insurance Company et al., case number 19-2784, in the U.S. Court of Appeals for the Second Circuit