SDV Insights

Claims-made insurance policies are designed to protect policyholders from liability for claims brought during the relevant policy period. From the perspective of the insurer, these policies have the distinct advantage of providing certainty that when the policy period ends without a claim having been made, the insurer will not be exposed to any further liability.

A recent federal court decision, applying California law to directors and officers liability policies, addressed two important issues: the importance of a policyholder's strict compliance with a claims-made-and-reported policy's notice provision, and the importance of accurate representations in an insurance application.

In a recent pro-policyholder decision, an Indiana federal court held that a common, broadly-worded exclusion in Directors & Officers ("D&O") insurance for "Interrelated Wrongful Act[s]" did not preclude coverage, since a literal interpretation would produce "absurd" results. In the past, the all-encompassing language of the exclusion has been abused by insurers who have sought to construe the concept of "interrelation" so broadly as to exclude coverage for otherwise covered claims.

In June, the New York Court of Appeals examined the application of a New York Choice of Law provision in a contract - a determinative issue for the case. In Ontario, Inc. v. Samsung C&T Corp., the issue was whether the plaintiff's claims were subject to Ontario, Canada's 2-year statute of limitations or New York's 6-year statute of limitations for breach of contract where the contract contained a broad New York Choice of Law provision.

Earlier this month, SDV reported on a recent Second Circuit case where the court broadly interpreted the "direct loss" requirement to find coverage for a cyber fraud, email spoofing scam. Now, the Sixth Circuit Court of Appeals has issued a similar opinion in American Tooling Center, Inc. v. Travelers Casualty & Surety Company, finding coverage for a company that lost $834,000 to a similar scam. These recent decisions may indicate a trend in favor of policyholders on the "direct loss" issue.

In June, the New York Court of Appeals examined the application of a New York Choice of Law provision in a contract - a determinative issue for the case. In Ontario, Inc. v. Samsung C&T Corp., the issue was whether the plaintiff's claims were subject to Ontario, Canada's 2-year statute of limitations or New York's 6-year statute of limitations for breach of contract where the contract contained a broad New York Choice of Law provision.

On Friday, July 6, 2018, the United States Court of Appeals for the Second Circuit held that a fraudulent email that caused a company to transfer $4.8 Million to the fraudster was a "direct loss" and was, therefore, covered by the company's computer fraud insurance.

Self-insured retentions ("SIRs") and deductibles are often confused with one another. In a recent decision, Henry v. Thyssenkrupp Elevator (Canada) Limited, the Ontario Superior Court of Justice found that an SIR is similar and functionally related to a deductible. Although the policy in question was subject to an SIR, the Court treated it like a deductible. This case may prove helpful to Canadian policyholders seeking additional insured coverage.

Additional insured coverage for bodily injury to a downstream party's employees is one of the foremost considerations in any traditional risk transfer scheme. Upstream and downstream parties alike generally intend for the downstream party's insurance to respond to these claims--before the upstream party's insurance and in lieu of a contractual indemnity claim.

As previously addressed in "Whose Contract Is It Anyway: Addressing the Contractual Privity Problem," additional insured coverage under Insurance Services Office, Inc. (ISO), standard blanket additional insured endorsements is often conditioned, in part, on the existence of a written contract requiring additional insured coverage.