Credit Card Payment Coverage Declined: Cyberinsurer Not Obligated to Reimburse P.F. Chang’s for PCI Liability

In the most significant cyberinsurance coverage decision to date, an Arizona federal district court in P.F. Chang’s China Bistro v. Federal Insurance Co., No. CV-15-01322-PHX-SMM (D. Ari. May 31, 2016), granted summary judgment to Federal Insurance Company, acknowledging it had no duty to reimburse P.F. Chang’s China Bistro for payment card industry liability assessments under the CyberSecurity policy issued by Federal to P.F. Chang’s corporate parent. This decision represents a significant victory for cyberinsurers insofar as it upholds insurers’ marketing strategy of making available …

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Citizenship of Unincorporated Associations: Insurers Warned to Take Consistent Positions on Diversity Jurisdiction

Certain insurers must now give pause to the common practice of filing in or removing to federal court on the basis of diversity. The U.S. District Court for the District of Oregon recently mirrored the majority of federal jurisdictions in ruling that reciprocal insurance exchanges are unincorporated associations, which are deemed to be a citizen of every state in which it has members, or policyholders, regardless of whether those policyholders are involved in the litigation.

In Staggs v. Farmers Insurance Exchange, the insured homeowners, …

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Insurers May Need a Doctor’s Note: Data Breach of Medical Records Triggers Coverage, Says Fourth Circuit

On Monday, April 11, 2016, the Fourth Circuit handed down a notable, albeit unpublished, decision with regard to an issue that has vexed the insurance industry, namely, do data breaches trigger a CGL insurer’s duty to defend under Coverage B? In Travelers Indemnity Company of America v. Portal Healthcare Solutions, L.L.C., the Fourth Circuit determined, under Virginia law, the underlying class action lawsuit, indeed, triggered Travelers’ duty to defend.

The underlying lawsuit was a class action complaint filed against, in pertinent part, Portal Healthcare …

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SCOTUS Orders Parties to Brief on Possible Compromise in ACA Case

On March 23, 2016, the U.S. Supreme Court heard oral arguments in Zubik, et al. v. Burwell, the case in which religious not-for-profits are challenging the process in which they can claim a religious exemption to the contraception requirement in the Affordable Care Act (ACA). On Tuesday, March 29, 2016, the court issued an unusual order hinting the court might be looking for some kind of compromise to deal with this highly controversial case.

The court’s order requests supplemental briefing on whether there is …

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Georgia Joins Growing Consensus that Lead-Based Paint is a Pollutant

For the first time, the Supreme Court of Georgia declared that lead-based paint is a “pollutant” as the term is used in the absolute pollution exclusion of a commercial general liability policy.

The plaintiff, Amy Smith, individually and on behalf of her daughter, sued her landlord, Bobby Chupp for injuries the daughter sustained as the result of ingesting lead from deteriorating lead-based paint at the house Smith rented from Chupp. Chupp held a CGL policy issued by Georgia Farm Bureau Mutual Insurance Company (GFB) that …

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Massachusetts’ Highest Court Rejects Targeted Tenders

Only three states have adopted the “targeted tender” rule. Massachusetts recently had the chance to join those ranks, but it firmly declined. The concept of “targeted tender” or “selective tender” allows a policyholder to single out one insurer among co-insurers and trigger only that insurer’s policy, leaving the insurer without entitlement to contribution from co-insurers.

In Insurance Company of the State of Pennsylvania v. Great Northern Insurance Company, an employee reported his injury to the insured employer, which then notified only one of two …

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GAO’s Update on ACA Enrollment Process: CMS Encouraged to Take Steps to Monitor Program Cost, Risk, and Performance

The issue of fraud is still alive and well with respect to the health care exchanges established by the Affordable Care Act (ACA). The Government Accountability Office (GAO) recently issued a new update with respect to fraud in the federal exchanges. In that report, the GAO recommended that the Center for Medicaid and Medicare Services (CMS) strengthen enrollment controls and manage Fraud Risk. The report notes that implementation of the new eligibility and enrollment provisions for the first year was “a broad, complex, and costly …

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NYDFS Notifies Federal Regulators of New Potential Cyber Security Regulations

On November 9, 2015, the New York State Department of Financial Services (NYDFS) sent a memorandum entitled Potential New NYDFS Cyber Security Regulation Requirements to several federal and state financial services regulators, including banking, securities and insurance regulatory, administrative and supervisory  bodies.

These potential regulations are based on results of two sets of surveys of financial entities about their “cyber security programs, costs and future plans.” NYDFS surveyed 150 banks and 43 insurance companies. The results of the May 2014 banking industry survey are here

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Maryland Joins the Rising Tide of States in Placing Limits on the Scope of Additional Insured Coverage

Maryland, home of the Chesapeake Bay, brings to mind the aphorism, “A rising tide lifts all boats.” Therefore, it should come as no surprise that Maryland has joined the rising tide of states that have adopted a proximate cause standard to determine when an additional insured is entitled to coverage for injuries “caused, in whole or in part, by” another’s acts or omissions. The Maryland Court of Special Appeals’ October 28, 2015 decision in James G. Davis Construction Corp. v. Erie Insurance Exchange, marks …

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NAIC and CSIS Host Cyber Risk Conference

This post first appeared on Goldberg Segalla’s Data Privacy & Security blog.

On September 10, 2015, the National Association of Insurance Commissioners (NAIC) and the Center for Strategic and International Studies (CSIS) hosted a conference entitled “Managing Cyber Risk and the Role of Insurance.” Over three hundred individuals attended, including more than 30 insurance regulators, senior representatives from the U.S. Departments of Treasury and Homeland Security, and representatives from the private sector.

The primary focus of the conference was to explore how the …

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