Courts Are Not Confused About Opioid Insurance Suits

By Bernard Bell, Tab Turano and Tae Andrews

A recent Law360 guest article by Adam Fleischer argued that confusion has seeped into a string of recent decisions holding that commercial general liability, or CGL, policies cover the defense of opioid-related lawsuits.

Courts correctly conclude that opioid lawsuits are covered

There are now five decisions, including two appellate decisions, holding that the allegations in the opioid complaints — including the public nuisance claims — are “because of” bodily injury, and therefore potentially covered under standard consumer general liability policy language, triggering the duty to defend.[1]

Conversely, no decision that remains good law holds that insurers need not defend opioid complaints. There is no confusion. The courts have not blurred the distinction between negligence-based claims for public nuisance and those for direct bodily injury: They have addressed this issue squarely and repeatedly found that this distinction makes no difference concerning the duty to defend.

Insurers are correct that the public nuisance claims in the opioid complaints are a frontal attack on foundational tort principles of causation, but that does not mean the claims are not covered. Insurers should be shoulder-to-shoulder with their policyholders fighting these claims, which threaten to transform our legal system into an extortion racket.

Instead, the insurance industry has abandoned opioid defendant policyholders in their time of greatest need. Some insurers have gone so far as to line up against their policyholders and parrot the plaintiffs’ attacks as a basis to deny coverage. Courts are having none of it and are uniformly enforcing the duty to defend.

This article will: (1) review standard-issue CGL coverage for damages “because of” bodily injury; (2) explain why opioid-related lawsuits seek damages “because of” bodily injury; and (3) debunk the myth that opioid suits must assert individual bodily injuries in order to be covered.

CGL policies cover claims for damages “because of” bodily injury.

Standard CGL policies require insurers to pay “those sums that the insured becomes legally obligated to pay as damages because of bodily injury.”[2] “Bodily injury” is defined to mean “bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time.”[3]

CGL policies provide that damages “because of” bodily injury include not simply damages claimed directly by an injured person but also damages “claimed by any … organization for care, loss of services, or death resulting at any time from the bodily injury.”[4] These are standard-issue coverage provisions.

Opioid-related lawsuits seek damages “because of” bodily injury.

The plaintiffs in the opioid lawsuits are typically governmental entities alleging that opioid use has led to a “dramatic increase in opioid abuse, addiction, overdose, and death throughout the United States.”[5] These entities seek damages for emergency medical treatment, detoxification, addiction treatment and recovery services related to opioid abuse by their citizens.[6]

Although the plaintiff governments assert various causes of action (including negligence and public nuisance), their claims are “effectively claims to recoup the costs of medical expenses,” services, and treatment for opioid abuse and addiction.[7]

As such, the opioid lawsuits constitute claims for damages “because of ‘bodily injury'” under the plain language of typical CGL policies, and trigger insurers’ obligations to defend policyholders against such claims.

Indeed, a string of recent decisions have consistently agreed that opioid lawsuits seek damage “because of” bodily injury, and have required insurers to defend policyholders against these claims.[8]

These decisions have involved policyholders who are sued for allegedly improper distribution and dispensation of prescription opioids, but the reasoning applies as well to policyholders sued in their role as manufacturers.

In reaching their decisions, all these courts rejected the argument that opioid lawsuits do not seek damages “because of” bodily injury because the plaintiffs do not seek damages for their own bodily injury, but instead seek damages because of the bodily injuries of their citizens.

This, according to the courts, is a distinction without a difference given the relevant policy language. CGL policies require only a causal connection between the bodily injury and the policyholder’s complained-of conduct.[9] Such causal connection is met where the governments seek damages as a result of costs and expenses incurred from providing treatment and services to citizens affected by opioid addiction.

This conclusion is further bolstered by the policy provision specifying that “damages because of ‘bodily injury’ include damages claimed by any person or organization for care, loss of services or death resulting at any time from the bodily injury.” An organization cannot sustain bodily injury; therefore, the express language of CGL policies refutes any notion that coverage is limited to claims by individuals seeking damages for their own bodily injuries.

Consider the following hypothetical: If a citizen suffered bodily injury due to his drug addiction and sued a policyholder for negligently distributing or dispensing opioids, even the insurers acknowledge that their policies would cover such a suit.[10]

Now suppose that the injured citizen’s mother spent her own money to care for her son’s injuries.[11] The mother’s suit is also covered, even though she seeks her own damages (the money she spent to care for her son), not damages on behalf of her son (such as his pain and suffering or lost wages).[12]

Legally, the result is no different because the opioid plaintiffs are governments, instead of mothers.[13] The insurers’ distinction thus makes no difference; CGL policies require insurers to defend against these opioid-related claims.

There is no requirement for claims to allege individual bodily injury to be covered.

Fleischer’s claim that the recent line of decisions “manufacture[s] insurance coverage where it was not intended” is based on a series of mischaracterizations and misperceptions.

First, Fleischer rewrites the language of CGL policies. Nothing in the language of CGL policies limits coverage to claims alleging bodily injury to specific individuals. Indeed, Fleischer’s conclusion is supported only by its repeated insistence that such policies cover damages for bodily injury rather than damages because of bodily injury.

While this mischaracterization may seem trivial, courts have recognized that policies covering damages because of bodily injury afford broader coverage than policies covering damages for bodily injury.[14] And, consistent with this broad coverage, courts have properly concluded that the costs and expenses incurred by governmental entities as a result of sickness, disease, and death of their citizens are indeed because of “bodily injury.”

Second, in effort to attack the recent decisions finding coverage, the insurer article miscasts the nature of the claims and relief sought in the opioid lawsuits. For instance, Fleischer asserts that the opioid plaintiffs “specifically have pled that [they] do not seek damages for death, physical injury to a person, or emotional distress.”

But, as the Delaware Superior Court explained in Rite Aid Corp. v. ACE American Insurance Co., this artful pleading is an attempt to avoid application of the Ohio Product Liability Act which abrogates product liability claims.[15]

Even if the opioid lawsuits do not seek compensatory damages directly for individuals’ death or physical injury, as abrogated by the act, the lawsuits undisputedly allege physical harm from opioid addition which constitutes “bodily injury,” and seek damages because of such bodily injury as required to trigger defense coverage.[16]

In short, the plaintiffs’ attempts to disavow damages for death or physical injury, taken in proper context, do not support insurers’ attempts to deny defense coverage for the opioid lawsuits.

Similarly, Fleischer’s suggestion that the opioid lawsuits simply seek “economic losses paid by governments for the unreasonable interference with a public right” is misguided. The lawsuits seek costs and expenses associated with government programs and services, and these programs are directly aimed at providing emergency, health and other services to individuals suffering from opioid abuse and addiction.

In other words, the services and programs, and the costs to fund them, are because of bodily injury to citizens. Once again, this triggers defense coverage under the broad language of CGL policies.

In sum, there is no confusion here: CGL policies cover the defense of opioid-related lawsuits because the suits seek damages “because of” bodily injury, as the case law clearly and consistently establishes. The courts have not blurred the distinction; they’ve addressed it — correctly. Any insurer that tries to tell you otherwise is not telling you the truth.

This article was also published in Law360.

[1] See, e.g., Cincinnati Ins. Co. v. H.D. Smith, L.L.C., 829 F.3d 771 (7th Cir. 2016); Giant Eagle, Inc. v. Am. Guar. & Liab. Ins. Co., No. 2:19-cv-00904, 2020 WL 6565272 (W.D. Pa. Nov. 9, 2020); Rite Aid Corp. v. ACE Am. Ins. Co., No. N19C-04-150, 2020 WL 5640817 (Del. Super. Ct. Sept. 23, 2020); Acuity v. Masters Pharm., Inc., No. C-190176, 2020 WL 3446652 (Ohio Ct. App. June 24, 2020); Cincinnati Ins. Co. v. Disc. Drug Mart, Inc., Case No. CV-19-913990 (Ohio Ct. Comm. Pls. Sept. 9, 2020).

[2] See, e.g., Giant Eagle, 2020 WL 6565272, at *4, *13.

[3] Id.

[4] Id.

[5] Id. at *5, *14.

[6] Id. In addition, some of the opioid plaintiffs are legal guardians asserting claims on behalf of children diagnosed at birth with opioid dependence, known as Neonatal Abstinence Syndrome (“NAS”). Id. at *5. The NAS plaintiffs allege that their children suffer from health conditions resulting from their in utero exposure to opioids and seek damages for ongoing care necessitated by the policyholders’ alleged wrongful conduct in distributing and dispensing opioids. Id. at *5.

[7] See, e.g., Acuity, 2020 WL 3446652, at *6 (citing In re Nat’l Prescription Opiate Litig., No. 1:17-md-2804, 2018 WL 6628898, at *9 (N.D. Ohio Dec. 19, 2018)); Disc. Drug Mart, No. CV-19-913990, at 15 (citing same).

[8] See, e.g., Giant Eagle, 2020 WL 6565272; Rite Aid, 2020 WL 5640817; Acuity, 2020 WL 3446652; Disc. Drug Mart, No. CV-19-913990.

[9] See, e.g., Giant Eagle, 2020 WL 6565272, at *14; Rite Aid, 2020 WL 5640817, at *15; Acuity, 2020 WL 3446652, at *6.

[10] H.D. Smith, 829 F.3d at 774.

[11] Id.

[12] Id.

[13] Id.

[14] Id. (noting that policies covering suits seeking damages “because of” bodily injury provide broader coverage than policies covering suits “for” bodily injury). This is not to concede that the opioid claims do not seek damages “for” bodily injury, but that was not the
language at issue in the five cases cited supra in note 1.

[15] Rite Aid, 2020 WL 5640817, at *13.

[16] Id. at *16.

Inconsistencies Haunt Environmental Insurers’ Covid-19 Claims Denials

While government shutdown orders caused by the pandemic threaten to put many corporations out of business, insurance carriers have launched an outright war against businesses, arguing that no kind of insurance policy provides business income relief to policyholders. Most claims filed for Covid-19 losses have come under commercial property policies.

Although policyholders have filed hundreds of lawsuits seeking coverage for Covid-19 losses, one suit filed on Oct. 13 in the U.S. District Court for the Southern District of New York stands out from the rest. (See Jemb Realty Corp. v. Greenwich Ins. Co.). Unlike most insureds, the New York policyholder seeks coverage under an environmental insurance policy, which covers business interruption caused by “pollutants.”

Environmental insurers are now claiming that coronavirus is not a “pollutant.” But in previous cases involving near-identical policy language and in representations made to regulatory agencies, insurers said the exact opposite—that viruses are “irritants” or “contaminants,” and thus are covered “pollutants.”

Business Interruption Caused by ‘Pollutants’

Environmental policies cover business-interruption losses caused by “pollutants.” Most environmental policies define “pollutants” as follows:

Any solid, liquid, gaseous or thermal pollutant, irritant, or contaminant, including but not limited to smoke, vapors, odors, soot, fumes, acids, alkalis, toxic chemicals, hazardous substances, and waste materials.

Environmental insurance carriers have denied coverage for Covid-19 losses, claiming that the virus is not a pollutant because it is not an irritant or contaminant.

There’s just one problem: For years, insurance companies have told courts and regulatory agencies around the country that viruses are “pollutants,” in order to avoid having to pay claims under different kinds of policies.

Insurers Have Told Courts and Regulators That Viruses Are ‘Irritants’ or ‘Contaminants’ and Thus ‘Pollutants’

Other kinds of policies—such as general liability and commercial property policies—often have exclusions for pollution. They bar coverage for damage caused by “pollutants,” including “irritants” and “contaminants.”

For years, under general liability and commercial property policies, insurers have denied claims for losses caused by viruses, arguing that viruses are “irritants” or “contaminants” and are thus excluded as “pollutants.”

Insurers have had some success these with these arguments. Several courts have even held that pollution exclusions bar coverage for losses caused by viruses, because harmful microbes are “contaminants,” and thus excluded “pollutants.”

For example, the U.S. Court of Appeals for the Sixth Circuit in U.S. Fire Ins. Co. v. City of Warren (2003) applied a pollution exclusion to bar coverage for a sewage backup containing viruses and bacteria.

Insurers have also told state insurance regulators that viruses are “contaminants.” Specifically, in order to get approval to add virus exclusions to commercial property policies, insurers told state regulators that microbes such as rotavirus, SARS, influenza, and avian flu were examples of viral “contaminants,” meaning that they were already excluded by pollution exclusions. Thus, they argued, adding virus exclusions would not shrink coverage without a corresponding reduction of premiums. [ISO Circular (July 6, 2006)].

For insurers, the question of whether viruses are “pollutants” is Schrödinger’s Cat: When a policy excludes “pollutants,” viruses are pollutants; when an environmental policy specifically covers “pollutants,” they are not. Either way, the outcome remains the same, in the insurers’ view: There is no coverage.

In reality, insureds may recover under both environmental and commercial property policies because the law construes coverage provisions differently than exclusions: Environmental coverage provisions for “pollutants” are interpreted broadly and in favor of coverage, whereas commercial property exclusions for “pollutants” are construed narrowly and against the insurer.

Fortunately for policyholders, legal doctrines like judicial estoppel and regulatory estoppel prevent insurers from taking inconsistent positions. These doctrines prevent litigants from “playing fast and loose” with the court system by switching legal positions to suit their own ends. (See Sunbeam Corp. v. Liberty Mut. Ins. Co. (Pa. 2001)).

Environmental Policyholders Should Push for Coverage

While environmental policies may be less common than commercial property policies, policyholders have had success in coverage lawsuits for similar losses.

For example, in one 2015 lawsuit filed in federal court in Minnesota, an insurer denied coverage under an environmental policy after an outbreak of avian influenza contaminated the policyholder’s farms, claiming that the bird flu was not a “contaminant.” (See Rembrandt Enters. Inc. v. Ill. Union Ins. Co.).

After discovery, the insurer withdrew this claim and admitted that bird flu was a “contaminant” and covered “pollution condition.” The case later settled.

By spending years insisting that viruses are “pollutants,” insurers have painted themselves into a corner. With respect to environmental policies, policyholders can hold insurance carriers to their word and obtain coverage for Covid-19 losses. See also A Surge in Pro-Policyholder Covid-19 Decisions

This article was published on November 18, 2020 in Bloomberg News.

Reproduced with permission from Copyright 2020 The Bureau of National Affairs, Inc. (800-372-1033)

Covid-19 Business Income Insurance Litigation: A Surge in Pro-Policyholder Covid-19 Decisions

Initial Covid-19 Court Decisions

In the first few months of the Covid-19 pandemic, a massive number of Covid-19 insurance lawsuits were filed by personal injury lawyers with minimal experience in insurance recovery litigation.

Recent Decisions Call Out Insurance Carrier Plea:
Don’t Make Us Pay Our Fair Share of Covid-19 Losses

They filed suit, asserting claims on behalf of nail salons, tattoo parlors and small family-owned restaurants, many times without even alleging the presence of coronavirus . The initial results were expected – insurers filed motions to dismiss in response to policyholders’ complaints, resulting in one court dismissal after another.  Understandably, policyholders took notice, particularly larger, more sophisticated companies, often times opting to defer litigation until the dust had settled. In the meantime the insurance industry continued its strategy of full claim denials, without exception, regardless of facts or policy language at issue.

Recent Pro-Policyholder Covid-19 Court Decisions

Recently, as the second wave of the coronavirus continues to infect tens of millions of more people and continues to impact most of the world’s business, additional insurance lawsuits were filed, this time by sophisticated companies with the help of experienced insurance coverage litigators, involving actual or suspected Covid-19 test positive cases on site and insurance policies without virus exclusions. 

Better Pleading – Better Results

The major issue in these cases is whether policyholders had adequately alleged in their complaints that they knew or suspected employees, vendors or guests were infected with the virus at the time they were on site, such that that these policyholders satisfied the pleading requirement that the virus had caused a risk of “physical loss or damage” to their property, i.e., the virus was present, and that it either caused damage to the insured premises or prevented use of insured property for its intended purposes. 

These recent business income Covid-19 lawsuits have resulted in a surge in the number of pro-policyholder Covid-19 court decisions, rejecting insurers’ motions to dismiss and properly allowing policyholders to proceed to discovery and ultimately to trial.  This time, it is the insurance companies that have taken notice, now realizing they’re looking at even more Covid-19 business income claims being filed, more litigation, and more risk of having to pay these claims. 

The Surge in Pro-Policyholder Decisions

Just in the past two months, nearly a dozen courts around the country have denied insurance companies’ motions to dismiss, finding that policyholder-plaintiffs have adequately alleged the virus had caused “physical loss or damage,”  and in one case involving a virus exclusion, a federal district judge ruled that the exclusion was ambiguous. 

1. The Presence of Coronavirus Damages Property

For example, the federal district court in St. Louis, Blue Springs Dental Care, LLC v. Owner’s Insurance Co., Case No. 20-CV-00383-SRB (W.D.MO Sept. 21, 2020), in noting that, like most property policies, the term “physical loss” is not defined in the policy, adopted a “plain and ordinary meaning” of that term –  physical means “having material existence; perceptive especially through the senses and subject to the laws of nature,” and “loss” means “the act of losing possession” and “deprivation.”  Applying these common sense definitions to Covid-19, the court concluded that because the insured had satisfied its pleading obligations by alleging that,

the presence of Covid-19 on and around the insured property deprived Plaintiffs of the use of their property and also damaged it

The Court logically concluded that “it is likely customers, employees, and/or other visitors to the insured properties over the recent months were infected with the coronavirus,” causing plaintiffs to suspend their business operations. 

2. Dismissal is Improper, Even if the Presence of Coronavirus is not explicitly Plead.

In New Jersey, a state court judge further advanced policyholders’ claims by denying an insurance company’s motion to dismiss on the issue of “physical loss or damage” even though the policyholders did not allege that any single person was infected with the virus while on site, concluding that the policyholders “should be afforded the opportunity to develop their case and provide the event of the Covid-19 closure may be a covered event under the Coverage C, Loss of Income, when occupancy of the described premises is prohibited by civil authorities.”  Optical Services USA/JCI v. Franklin Mutual Ins. Co., No. BER-L-3681-20 (N.J. Super. Ct., Law Div., Bergen Cty. Sept. 17, 2020).  

3. Virus Exclusions are Ambiguous and Construed in Favor of Coverage.

In a truly ground breaking decision and one certainly sending shock waves through the insurance industry, a federal judge in Florida denied an insurance company’s motion to dismiss in a claim involving a policy with an express virus exclusion which barred any claim for “loss or damage caused directly or indirectly by the presence, growth, proliferation, spread, or any activity of fungi, wet rot, dry rot, bacteria or virus.”  Urogynecology Specialist of Florida LLC v. Sentinel Ins. Co., Case No. 6:20-cv-1174-Orl-22EJK (M.D. Fla. Sept. 24, 2020).  Here, the court concluded that the case should proceed forward because none of the cases cited by the insurer, mostly involving pollution, “dealt with the unique circumstances of the effect of Covid-19 has had on our society – a distinction this Court considers significant.”[1]

Strategies to Capitalize on Recent Pro-Policyholder Covid-19 Court Decisions

These recent cases are just the front edge of a continuing surge in the number of pro-policyholder Covid-19 court decisions around the country.  As a result, policyholders can and should pursue their Covid-19 claims.  As we predicted at the start of the pandemic, Insurance Companies Will Pay For Covid-19 Losses.

As more courts follow suit, the pressure on insurers to settle claims will increase significantly, but litigation is likely a necessary first step towards this outcome. Insurers will not settle unless they face the prospect of adverse court decisions and the resulting risk of a jury trial.   Policyholders that opt to sit on the sidelines risk having their claims compromised by bad lawyering and bad fact claims pursued by unsophisticated, poorly represented businesses.   

[1] Other recent pro-policyholder Covid-19 court decisions include:  Studio 417, Inc. v. Cincinnati Ins. Co., No. 6:20-cv-03127 (W.D. Mo. Aug. 12, 2020); Somco, LLC v. Lightning Rod Mut. Ins. Co., No. CV-20-931763 (Ohio Cir. Ct. Aug. 12, 2020); K.C. Hopps, Ltd. v. Cincinnati Ins. Co., No. 4:20-cv-00437 (W.D. Mo. Aug. 13, 2020); Ridley Park Fitness LLC v. Phila. Ins. Cos., No. 200501093 (Pa. Cty. Ct. Aug. 31, 2020); SSF II, Inc. v. Cincinnati Ins. Co., No. 20CV002644 (Ohio Cty. Ct. Sept. 8, 2020); Francois Inc. v. Cincinnati Ins. Co., No. 20CV201416 (Ohio Cty. Ct. Sept. 29, 2020); and Best Rest Motel Inc. v. Sequoia Ins. Co., No. 37-2020-00015679 (Cal. Cty. Ct. Sept. 30, 2020); North State Deli LLC v. Cincinnati Ins. Co., No. 20-CVS-02569 (N. Carolina General Ct. Justice, Durham Cty.).

BIPA Claim Coverage Denials Lack Merit

The collection of biometric data is at issue in hundreds of class action lawsuits and insurance coverage disputes are finding coverage

Recently in American Family Mutual Insurance Co., SI, v. Investment Co., an insurer filed an action seeking a declaration that it does not have to defend its insured against an underlying class action brought under Illinois’s Biometric Information Privacy Act.[1]

This lawsuit joins a growing trend of similar actions brought by insurers seeking to escape from their contractual obligations and abandon their insureds in their hour of greatest need.[2]

In some cases, the insurer agrees to defend under a reservation of rights, meaning that the insurer will provide a temporary defense, while actively working behind the scenes to shirk or eliminate its coverage duties.[3] In others, the insurer denies coverage outright, then files a declaratory judgment action, forcing its insured to fight a war on two fronts: the defense against the BIPA class action and the coverage action against its insurer.[4]

The purpose of these lawsuits is clear: Put the insureds on the defensive, force them to incur attorney fees and intimidate them into dropping valid claims for BIPA coverage.

This article will (1) provide a brief summary of BIPA, as well as the kinds of underlying BIPA claims for which insureds are seeking personal and advertising injury coverage under liability policies; (2) explain how liability policies provide personal and advertising injury coverage for many BIPA claims; (3) refute the insurers’ arguments for denying coverage; and (4) provide recommendations for insureds facing these insurer lawsuits.

BIPA governs the collection, use, and dissemination of biometric data and imposes severe punishments for violations.

The Biometric Information Privacy Act is an Illinois statute regulating the collection, use and disclosure of biometric data, including fingerprints, retina and iris scans, voiceprints, and scans of hand and face geometry.[5] As a general proposition, BIPA prohibits private entities from disclosing a person’s biometric information without first obtaining his or her consent.[6]

Recently, there have been a series of BIPA class actions filed by employees alleging that their employers recorded their fingerprints as a method of keeping track of their time (i.e., when they clocked in or out of their shifts) before disclosing their biometric data to third parties, in violation of BIPA.[7]

For each negligent BIPA violation, claimants seek the greater of $1,000 or actual damages; for each intentional or reckless violation, claimants seek the greater of $5,000 or actual damages.[8] These potential damages can add up quickly. Class actions brought under BIPA can present tremendous potential liability and attract aggressive plaintiff attorneys.

Fortunately for corporate policyholders, most liability policies provide personal and advertising injury coverage for the existential threats presented by these kinds of claims.

General liability policies cover allegations of personal and advertising injury, including publication of material that violates a person’s right of privacy.

Many general liability insurance policies provide coverage for claims alleging personal and advertising injury, defined to include “oral or written publication, in any manner, of material that violates a person’s right of privacy.”[9] This is a standard-issue coverage provision.[10] These policies require the insurer to both defend provide defense counsel or reimburse defense invoices and indemnify the insured (pay for any resulting settlements or judgments).[11]

As discussed in more detail in the next section, the West Bend Mutual Insurance Company v. Krishna Schaumburg Tan Inc. case decided earlier this year held that this standard-form personal and advertising injury provision covers BIPA claims alleging disclosure of biometric data to one or more third parties.[12] Nonetheless, insurers facing claims for coverage for BIPA claims have resorted to a variety of tactics to try and wriggle out of their coverage obligations.

Consider coverage issues for BIPA claims under general liability policies.

Despite the holding in Krishna, insurance carriers continue to repeat coverage arguments already decided in favor of policyholders. In addition, some insurers have gone back to the drawing board and come up with additional reasons for denying coverage.

For example, in McEssy, the insurer asserted four main grounds for denying coverage: (1) the BIPA class action does not allege personal and advertising injury; (2) an exclusion for distribution of material in violation of statutes bars coverage; (3) an exclusion for employment-related practices precludes coverage; and (4) an exclusion for access or disclosure of confidential or personal information applies to prevent recovery.[13]

In Krishna, the insurer tried making the first two arguments, but lost. This section explains why the insurers’ first two arguments for denying coverage failed and why the McEssy insurer’s new arguments should fail as well.

BIPA class actions allege personal and advertising injury because disclosure of biometric data to a single third party constitutes publication.

The insurer in McEssy claims that the underlying BIPA class action does not allege personal and advertising injury because there is no alleged “publication of material that violates a person’s right of privacy,” as the underlying BIPA class action only alleges that the insured provided fingerprint data to a single third-party vendor.[14] The insurer in Krishna made this same argument — but lost.[15]

In Krishna, the insurer tried to argue that there was no personal and advertising injury because publication requires communication of information to the public at large, not simply a single third party.[16] The court rejected this argument, noting that both common understanding and dictionary definitions of the term “publication” include both “the broad sharing of information to multiple recipients” and “a more limited sharing of information with a single third party.”[17]

Krishna thus correctly decided this issue in policyholders’ favor: Disclosure of biometric data to a single third party constitutes “publication of material that violates a person’s right of privacy” sufficient to trigger personal and advertising injury coverage under a general liability policy.

The exclusion for distribution of material in violation of statutes does not apply because BIPA regulates biometric data, not methods of communication.

The McEssy insurer asserts another ground for noncoverage that the court in Krishna also rejected, claiming that an exclusion for distribution of material in violation of statutes bars coverage.[18] This exclusion bars coverage for personal and advertising injury arising directly or indirectly out of any action or omission that violates or is alleged to violate:

  • The Telephone Consumer Protection Act, including any amendment of or addition to such law; or
  • The CAN-SPAM Act of 2003, including any amendment of or addition to such law; or
  • Any statute, ordinance or regulation, other than the TCPA or CAN-SPAM Act of 2003, that prohibits or limits the sending, transmitting, communicating or distribution of material or information.[19]

Krishna also resolved this argument in policyholders’ favor. Specifically, the court held that this exclusion only applies to statutes that govern certain methods of communication, such as emails, faxes and phone calls.[20]

By contrast, BIPA “says nothing about methods of communication.”[21] Instead, BIPA regulates the collection, use, disclosure, retention and destruction of biometric data — certain types of information.[22] This exclusion does not apply to BIPA class actions claiming disclosure of biometric data, and the insurer in McEssy knows it.[23]

The employment-related practices exclusion does not apply because the BIPA claims in McEssy do not arise out of hiring, firing or job performance.

The insurer in McEssy also raises two new arguments not at issue in Krishna. First, the insurer claims that an employment-related practices exclusion bars coverage for the underlying BIPA class action, because the insured’s alleged fingerprint scanning to track its employees’ time arises out of an employment-related practice.[24] The employment-related practices exclusion bars coverage for personal and advertising injury to a person arising out of any:

  • Refusal to employ that person;
  • Termination of that person’s employment; or
  • Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or discrimination directed that that person.[25]

This exclusion does not apply because the underlying BIPA claims in McEssy do not arise out of the insured’s hiring, firing, or job performance-related decisions. Policy exclusions are construed narrowly against the insurer and in favor of coverage.[26] The insurer also has the burden of showing that a claim falls within a provision that limits or excludes coverage.[27]

Here, Illinois courts have held that whether the employment-related practices exclusion applies depends on the facts specific to each case, although the rationale remains consistent.[28] In order for the exclusion to apply, the complained-of employment-related practice must arise out of the employee’s hiring, firing or job performance.[29]

In McEssy, the BIPA claimants allege that the insured required them to use their fingerprints to clock in and out of their shifts, as a method for keeping track of their time.[30] This administrative system has nothing to do with the employees’ hiring, firing or job performance, so this exclusion should not apply.

The exclusion for access or disclosure of confidential or personal information does not apply because biometric data is not health information.

Finally, the insurer in McEssy raises a second, new coverage defense, arguing that an exclusion for access or disclosure of confidential or personal information applies to bar coverage.[31] This exclusion applies to personal and advertising injury arising out of any access to or disclosure of any person’s or organization’s confidential or personal information, including patents, trade secrets, processing methods, customer lists, financial information, credit card information, health information or any other kind of nonpublic information.[32]

This exclusion should not apply because biometric data is different from the listed examples of nonpublic information. Under the exclusion’s plain meaning, biometric data is not similar to virtually all of the listed examples of confidential or personal information.

Most of the examples are data that a person creates or generates, such as patents, trade secrets, processing methods, or customer lists; or financial information or credit card information. The statute specifically states that “biometrics are unlike other unique identifiers that are used to access finances or other sensitive information.”[33]

No one creates or generates biometric data; instead, biometrics are “biologically unique to the individual.”[34] Insurers may argue that biometric data is health information, but that argument should fail because the statute’s definition of “biometric identifiers” does not include information collected, used or stored for health care treatment, such as body weight, X-rays or MRIs.[35]

By contrast, health information such as body weight, cholesterol readings or blood pressure measurements provide insight regarding a person’s health, but is common to many people and does not uniquely identify them. Simply put, fingerprints are not health information, and the exclusion should not apply.[36]


Policyholders who find themselves slammed with insurer declaratory judgment actions are in a tight spot. At a time when they should be focused on the threat from the BIPA claims, when sued by insurance carriers, the policyholders must also retain counsel, incur attorney fees, and answer the insurers’ complaints.

Policyholders that find themselves in this situation need to quickly come up with a strategy to fight back against wrongful denials of coverage. One strategy is to answer the insurer’s complaint, and then quickly move for judgment on the pleadings, as the duty to defend is a question of law, ripe for early adjudication. These intimidation strategies will not work, as long as you are prepared to combat your insurance carriers’ misplaced aggression.

This article was also published in Law360.

[1] Compl. for Declaratory J., Am. Family Mut. Ins. Co. v. McEssy Inv. Co., No. 1:20-cv-05591 (N.D. Ill. Sept. 21, 2020).

[2] See, e.g., Am. Compl. for Declaratory J., Am. Family Mut. Ins. Co. v. Amore Enters., Inc., No. 20 C 1659 (N.D. Ill. Sept. 17, 2020); W. Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc., 2020 IL App (1st) 191834 (Ill. App. Ct. Mar. 20, 2020).

[3] See, e.g., McEssy Compl., at ¶ 15 (accepting the tender of the defense while reserving rights, then filing a declaratory judgment action against the insured); Krishna, at *1 (same).

[4] See, e.g., Compl. for Declaratory J., Am. Guar. & Liab. Ins. Co. v. Toms King LLC, No. 2020CH04472, ¶¶ 42-45 (Ill. Cir. Ct. June 5, 2020).

[5] Class Action Compl., Currie v. McEssy Inv. Co., No. 20CH00000467, ¶¶ 12-13, 25 (Ill. Cir. Ct. July 10, 2020) (citing 740 Ill. Comp. Stat. 14/10 (2008)).

[6] Id. at ¶ 26 (citing 740 Ill. Comp. Stat. 14/15(b) (2008)).

[7] See, e.g., Amore Am. Compl., at ¶ 58; Currie Compl., at ¶¶ 33-35; Toms King Compl., at ¶ 18; Third Am. Class Action Compl., Lark v. McDonald’s USA, LLC, No. 17-L-559, ¶ 122 (Ill. Cir. Ct. Nov. 5, 2019). [8] 740 Ill. Comp. Stat. 14/20 (2008).

[9] See, e.g., Insurance Services Office (“ISO”) Businessowners Coverage Form BP 00 03 01 06, Section II – Liability, § F. 14. e.

[10] For example, the definition of “personal injury” in the Businessowners Liability Coverage Form at issue in Krishna similarly included “injury, other than ‘bodily injury,’ arising out of one or more of the following offenses… oral or written publication of material that violates a person’s right of privacy.” Krishna, 2020 IL App (1st) 191834, at *1.

[11] See, e.g., Insurance Services Office (“ISO”) Businessowners Coverage Form BP 00 03 01 06, Section II – Liability, § A. 1. a. (“We will pay those sums that the insured becomes legally obligated to pay as damages because of… “personal and advertising injury to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages.”).

[12] Krishna, 2020 IL App (1st) 191834, at *9.

[13] McEssy Compl., at ¶ 18.

[14] Id. at ¶ 18(c).

[15] Krishna, 2020 IL App (1st) 191834, at *4-6.

[16] Id. [17] Id.

[18] McEssy Compl., at ¶ 18(e)).

[19] See, e.g., Insurance Services Office (“ISO”) Businessowners Coverage Form BP 00 03 01 06, Section II – Liability, § B. 1. s.

[20] Krishna, 2020 IL App (1st) 191834, at *7.

[21] Id.

[22] Id.

[23] McEssy Compl., at ¶ 18(e) n.1 (citing Krishna but nonetheless raising this defense “as a good faith challenge to existing law”). Under Rule 11 of the Federal Rules of Civil Procedure, every pleading must be signed by at least one attorney of record and by signing, the attorney represents that to the best of the person’s knowledge, the “claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law.” Fed. R. Civ. P. 11(b)(2).

[24] McEssy Compl., ¶ 18(f). The insurer did not raise this coverage defense in Krishna because the underlying BIPA claimants in that case were the insured’s customers, not its employees. Krishna, 2020 IL App (1st) 191834, at *2.

[25] See, e.g., Employment-Related Practices Exclusion, ISO Form No. BP 04 17 07 02.

[26] Am. All. Ins. Co. v. 1212 Rest. Grp., L.L.C., 794 N.E.2d 892, 897 (Ill. App. Ct. 2003) (“Provisions that limit or exclude coverage are to be construed liberally in favor of the insured and most strongly against the insurer.”).

[27] Id. (“The burden is on the insurer to show that a claim falls within a provision that limits or excludes coverage.”).

[28] Id.

[29] See, e.g., Am. Econ. Ins. Co. v. Haley Mansion, Inc., No. 3–12–0368, 2013 WL 1760600, at *5 (Ill. App. Ct. Apr. 23, 2013) (holding that the employment-related practices exclusion did not apply to alleged defamatory remarks because they had no bearing on the former employee’s previous work performance); 1212 Rest. Grp., 794 N.E.2d at 897-901 (surveying cases analyzing the Employment-Related Practices Exclusion across several jurisdictions and determining that it did not apply).

[30] Currie Compl., at ¶¶ 33-34.

[31] McEssy Compl., at ¶ 18(g).

[32] Exclusion – Access or Disclosure of Confidential or Personal Information and Data-Related Liability – with Limited Bodily Injury Exception, ISO Form No. BP 15 04 05 14.

[33] 740 Ill. Comp. Stat. 14/5(c) (2008).

[34] Id.

[35] 740 Ill. Comp. Stat. 14/10 (2008).

[36] See Cooper v. Westfield Ins. Co., No. 2:19-cv-00324, 2020 WL 5647015, at *8 (S.D. W.Va. Sept. 22, 2020) (applying the exclusion but to alleged disclosure of false information regarding a former employee’s health; i.e., that she had Hepatitis C).

Road Map to Insurance Coverage for COVID-19 Business Interruption Losses

Business Interruption Insurance for Covid-19 losses
The presence of Covid-19 triggers coverage under “all risk” property insurance policies

Insurance Should Be Part of the Covid-19 Solution

Roughly three thousand years ago, King Solomon was asked for a maxim that was true in both good and bad times. He offered, “This, too, shall pass away.” Most businesses will readily admit that, because of the presence of COVID-19, they are in the midst of some dismal times. The presence of coronavirus has rendered business premises unsafe and unusable for their intended purposes. Governmental closure orders have forced many companies to shutter or drastically reduce their operations. In addition, COVID-19 has prevented access to business premises and disrupted the supply chain. Businesses are losing billions of dollars due to the pandemic. These are the exact kinds of risks that “all risks” insurance policies are designed to cover. Yes, this too shall pass, and if history is a barometer of things to come, insurance payments will be part of the solution, not part of the problem.

Insurance Carriers are Part of the Problem

From the start, insurance carriers recognized that their universally sold “all risks” commercial property insurance policies could provide business income protection for COVID-19 losses. They were rightly concerned that their many policy forms might cover coronavirus-related losses. Given the risk, insurance carriers reserved billions to pay for COVID-19 losses. But rather than pay, the insurers have circled their wagons, leaving policyholders wondering how they can secure coverage for COVID-19 losses.

Given how insurance carriers are adjusting COVID-19 losses, recovery for many policyholders may prove to be difficult. Some insurance carriers initially denied COVID-19 claims without investigation, only to be sued for bad faith. Now, most insurance carriers are holding off on rapid denials in the hopes that policyholders will unwittingly compromise their claims. This adjustment process is designed to entice policyholders to make admissions against coverage that can later be used to deny claims. Unfortunately, the tactics being employed to minimize coverage can be difficult to spot. As a result, the road to recovery will likely be littered with businesses that unwittingly fell prey to expertly devised insurance company tactics.

Corporate Policyholders Need a Road Map to Recovery

Although insurance carriers have a road map for denials of coverage, most policyholders do not have a corresponding road map to recovery. While no two policies are exactly the same, “all risks” policies are standard form. Many of the COVID-19 issues raised by insurance carriers today, such as whether “physical loss or damage” has occurred or whether Civil Authority provisions require a complete prohibition of access to the insured premises, have been addressed before, and most of the case law on these issues is positive for policyholders. But not all businesses will recover. Some have difficult policy language. Others will unwittingly support insurance carrier denials by improperly responding to questions and information requests. Still others will make strategic errors in presenting and pursuing their claims.

To prevent these kinds of errors, policyholders need to understand the issues and devise a plan for recovery. This article addresses the issues that corporate policyholders need to consider in developing their specific road maps to coverage.

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This article has been published in PLI Current: The Journal of PLI Press,

Miller Friel Attorney Recognized as One of Four D.C. Insurance Lawyers to Watch by Best Lawyers

Best Lawyers recently recognized Miller Friel attorney Tae E. Andrews as one of four Ones to Watch for Insurance Law in the District of Columbia. 

Tae Andrews — Recognized as One to Watch in Insurance Law by Best Lawyers

Best Lawyers gives these recognitions to attorneys who are earlier in their careers for outstanding professional excellence in private practice in the United States.  All candidates must be nominated and vetted by their peers.

Cyber Insurance: What Case Law Teaches Us About Coverage

Policyholders have secured cyber insurance to guard against cyber attacks. How well have Insurers done? Lets look at the case law to find out.


Cybercrime has come a long way from the days of Nigerian Princes seeking aid from unsuspecting AOL subscribers to liberate their family fortunes from the grips of oppressive regimes. Cybercriminals today are far more sophisticated, and so too are their victims. Now, it is C-Suite executives and publicly traded corporations being swindled by ever-evolving “spoofing” scams, while some of the world’s largest healthcare providers, airlines and hotel companies fall victim to massive data breaches as a result of “phishing” schemes and other malware. Indeed, recently a handful of multi-national conglomerates had their operations virtually shut down by malware purportedly released by the Russian military.1 The costs to companies associated with these modern-day cyberthreats can be staggering. Cybercrime is among the most significant risks facing businesses today. Fortunately, in the event of an attack, companies may not have to go it alone. In many instances, insurance may be available to cover some or all of the loss.

This article highlights a few of the more recent massive cyber incidents inflicted on well-known U.S. companies, and discusses the various types of insurance products marketed and sold to protect businesses against such risks, as well as notable court decisions addressing the scope of cyber coverage under such policies. Finally, some practical pointers are offered for effectively insuring against the risks of modern cyberthreats.

The Growing Threat of Cybercrime

Earlier this year, Equifax, the multinational consumer credit reporting agency, finalized the largest data breach class-action settlement in history. The case arose from an incident in 2017 in which hackers accessed personal data, including names, dates of birth, social security numbers and driver’s license numbers from approximately 150 million consumers. Ensuing claims were brought by the Federal Trade Commission, the Consumer Financial Protection Bureau and various state attorneys general. More than 300 class-action lawsuits were also filed by consumers and financial institutions, which were consolidated in Federal District Court in Atlanta, Georgia.2

The Equifax litigation was ultimately resolved …

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This article has been published in PLI Current: The Journal of PLI Press,

Fifth Circuit’s “Windstorm” Ruling Holds Silver Lining For Policyholders

A recent decision from the U.S. Court of Appeals for the Fifth Circuit held that a higher deductible applied (so as to bar recovery for the policyholder), but reaffirms that policies covering the peril of windstorms include damages due to heavy rains and flooding accompanying hurricanes. The decision also serves as a warning for policyholders with high deductibles to buy deductible buyback insurance before hurricane season strikes.

Windstorms include wind, rain and flooding

The Pan Am Equities Decision

Pan Am Equities Inc. v. Lexington Insurance Co. presented the issue of which deductible to apply under a commercial property policy.[1] After Hurricane Harvey drenched the greater Houston area in more than 60 inches of rainfall, the policyholder suffered more than $6.7 million in flood damage to two of its properties.[2] The policyholder had a commercial property policy with two different deductibles: a $100,000 flood deductible, and a windstorm deductible with the following language:

5% of the total insurable values at the time of the loss at each location involved in the loss or damage arising out of a Named Storm (a storm that has been declared by the National Weather Service to be a Hurricane, Typhoon, Tropical Cyclone, Tropical Storm or Tropical Depression), in Tier 1 Counties including Florida, regardless of the number of coverages, locations or perils involved (including but not limited to all Flood, wind, wind gusts, storm surges, tornadoes, cyclones, hail or rain) and subject to a minimum deductible of $250,000 any one occurrence.[3]

A deductible is “a clause in an insurance policy relieving the insurer of responsibility for an initial specified small loss of the kind insured against.”[4] An insurer’s duty to pay only kicks in after the policyholder’s losses exceed the amount of the deductible. “The purpose of a deductible is to shift some of the insurer’s risk to the insured, which is accomplished by setting a limit on the value of covered losses below which the insurer is not obligated to pay.”[5] The calculation of a policy’s deductible is thus extremely important because if the policyholder’s losses don’t exceed the deductible, the insurer doesn’t have to pay anything.

In Pan Am, the total insurable value of the policyholder’s two properties exceeded $190 million.[6] If the $100,000 flood deductible applied, the policyholder could recover most of its losses.[7] However, if the windstorm deductible applied, the insured would not recover anything, because its $6.7 million in losses would not exceed the deductible (5% of the $190 million in total insurable values).[8]

The district court held that the higher windstorm deductible applied because the flooding that damaged the policyholder’s properties resulted from Hurricane Harvey, which was a windstorm.[9] Critically, the court noted that a hurricane is a windstorm by any definition.[10] The policyholder tried to argue that the windstorm deductible only applied to wind damage, but the court rejected this argument, noting that the windstorm deductible did not apply only to wind damage.[11]

On appeal, the Fifth Circuit affirmed, holding that the windstorm deductible applied to all loss due to windstorm, including flood damage to the policyholder’s buildings.[12] The court again rejected the policyholder’s argument that the windstorm deductible only applied to wind damage.[13]

Pro-Policyholder Implications of Pan Am Equities

While the Fifth Circuit ruled in the insurer’s favor in Pan Am, the decision may benefit policyholders more than insurers. Specifically, the policy at issue in Pan Am did not define what the term “windstorm” meant.[14] The Pan Am decision affirms that a hurricane is a type of windstorm[15] and hurricanes usually involve heavy rains.[16] Many policies provide coverage for the peril of windstorms and insurers routinely argue that the peril of windstorm does not include flooding.

The implication of the Pan Am decision is that the windstorm peril includes damage caused by heavy rains and flooding associated with storms such as hurricanes. This is a heavy blow to insurer attempts to distort the plain meaning of their policies as somehow only covering wind damage.

The Importance of Deductible Buyback Coverage

Policyholders can also take steps to minimize their potential exposure by purchasing deductible buyback insurance. A commercial property policy may have a relatively low flood deductible, but if the insured property suffers flood damage from a windstorm (such as Hurricane Harvey), Pan Am Equities holds that, in certain circumstances, the higher windstorm percentage deductible may apply.

Policyholders should consider purchasing deductible buyback insurance. These policies buy back, or restore, coverage for large deductibles under commercial property policies. For policyholders based in high-risk areas such as the Gulf Coast, now is a good time to review your coverage, before hurricane season arrives. As Pan Am makes clear, total insured value percentage deductibles for windstorms may leave businesses exposed to the elements when the next hurricane strikes.

This Article was also published in Law360.

[1] No. 19-20363, 2020 WL 2709351 (5th Cir. May 26, 2020).

[2] Pan Am Equities, Inc. v. Lexington Ins. Co., No. H-18-2937, 2019 WL 2115173, at *1 (S.D. Tex. May 2, 2019).

[3] Id.

[4] Penthouse Owners Ass’n, Inc. v. Certain Underwriters at Lloyds, London, 612 F.3d 383, 387 (5th Cir. 2010).

[5] Id.

[6] Pan Am, 2019 WL 2115173, at *2.

[7] Pan Am, 2020 WL 2709351, at *2.

[8] Id. at *1.

[9] Pan Am, 2019 WL 2115173, at *3 (citing Leonard v. Nationwide Ins. Co., 2006 WL 1674288, at *1 (S.D. Miss. June 13, 2006) (“a hurricane is a type of windstorm”).

[10] Id.

[11] Id.

[12] Pan Am, 2020 WL 2709351, at *3.

[13] Id. at *4.

[14] Id. at *1 n.1.

[15] Pan Am, 2019 WL 2115173, at *3.

[16] Id. (citing Seacor Holdings, Inc. v. Commonwealth Ins. Co., 635 F.3d 675, 681 (5th Cir. 2011)) (holding that “losses caused by a Named Windstorm, which under the policy’s definition includes hurricanes, could include losses caused by heavy rains”).

Miller Friel Proudly Announces the Newest Member of Its Insurance Coverage Team – Stephen R. Mysliwiec

Miller Friel, PLLC is pleased to announce that Stephen R. Mysliwiec has joined the firm as a partner, serving clients from Miller Friel’s Washington, DC office.  Steve was previously a partner in the Washington, DC office of DLA Piper, one of the world’s largest law firms, where he was a partner for over 30 years.
Steve is recognized as one of the leading insurance recovery lawyers in the country, representing some of the largest and best known companies in the world with respect to all lines of commercial insurance.  Steve has litigated numerous insurance coverage disputes involving policyholders in the real estate, construction, banking, healthcare, life insurance, hotel, assisted living, computer, transportation, steel, commodities, and food service industries.  Steve also represents trade associations, builders, and owners regarding various insurance coverage and liability issues arising from claims of defective workmanship and defective building materials. He has submitted numerous amicus briefs in appellate courts around the country on these issues.  Steve iscurrently representing a number of companies in connection with their business income losses caused by COVID-19.  

Steve’s practice also involves advising clients with respect to the insurance aspects of transactional matters. He helps developers, contractors, owners, lenders, landlords, tenants and other clients in the real estate, construction and financial services sectors deal with insurance and indemnity issues in complex real estate and construction transactions. He also advises clients regarding the insurance aspects of mergers and acquisitions, insurance for initial public offerings, insurance issues in bankruptcy proceedings, trade credit insurance, reps and warranties insurance, and environmental insurance. He also has substantial experience advising owners and lenders regarding insurance programs for professional sports stadium projects, including OCIP programs.

“Miller Friel is thrilled to have a lawyer of Steve’s experience, reputation and caliber,” said Brian Friel, Co-Founder and Managing Partner.  Brian added, “with the addition of Steve to our team, Miller Friel continues its path forward asone of the leading insurance policyholder law firms in the country, exclusively representing companies pursuing insurance recovery.” As noted by Co-Founder, Mark Miller, “Steve shares our vision as a single practice law firm, focused entirely on representing corporate policyholders without any conflicts or constraints imposed by insurers or brokers, in a team effort to maximize insurance recovery.” 

“I share Miller Friel’s belief that a boutique insurance recovery law firm is the right model to most effectively and vigorously represent corporate policyholders,” added Steve.  “Also, I am drawn to Miller Friel because of its cohesive team atmosphere, surrounded by other attorneys who have been fighting for insureds since the early days of this practice area.”  Steve further stated, “DLA Piper is a wonderful firm, and it was difficult for me to decide to leave.  But my practice is focused on representing policyholders, which I will be able to continue to do with Mark and Brian and the rest of the Miller Friel team. I look forward to helping expand the firm’spolicyholder client base andtoburnishing the firm’s reputation as one of the leading, if not the leading, corporate policyholder law firms in the country.  There is a sense of excitement and focus here at Miller Friel that is very special.  I am excited about continuing to represent my policyholder clients and to expanding my practice both nationally and internationally.”  Steve received his B.A magna cum laude fromthe University of Notre Dame in 1970 where he was a member of Phi Beta Kappa, his M.A. from the University of Notre Dame in 1972, and his J.D. from Yale Law School in 1975, where he was Notes Editor of the Yale Law Journal. Steve was a law clerk in the Fifth Circuit for the renowned Judge John R. Brown.


Twenty-six years ago, I sat in an overcrowded courtroom filled with insurance company lawyers ready to argue that insurance companies should not pay for environmental cleanup costs.  A distinguished grey-haired gentleman lawyer, my boss, was leading an assault on the insurance industry.  He walked slowly to the podium and said, “Your Honor, you see all of these men and women here in nice suits?  They are all liars.”  The question American businesses should ask with respect to coronavirus is whether history repeats itself.

The CEO of the insurance giant Chubb, Evan G. Greenberg, stated in a recent WSJ Opinion that it won’t help anyone “to try to pin the damage on insurers like my company.”  Decades ago, insurance carriers made this same argument with respect to the environment.  There, insurance companies were held responsible, and American businesses were helped greatly.    The same will likely hold true for coronavirus losses.

Mr. Greenberg’s is wrong to assert that “virus is not covered.” At a minimum, Mr. Greenberg begs a legal question that will be decided by the courts.  Insurance companies willingly and knowingly sold insurance policies covering “all risks.”  For decades, if not longer, it has been the law that “all risks” policies cover all risks of direct physical loss or damage unless specifically and unambiguously excluded.  And, courts throughout this country have held that coverage is provided in similar situations, where property cannot be used for its intended purposes, or is otherwise rendered unsafe to use.  COVID-19 is a covered risk.  It has rendered property unsafe and unusable.  The presence of Covid-19 alone triggers coverage. 

The only question, then, is whether COVID 19 is excluded from coverage.  On April 10, President Trump correctly noted that there is a problem with what insurance carriers are pushing, stating: 

In a lot of cases, I don’t see it. I don’t see reference, and they don’t want to pay up.  I would like to see the insurance companies pay if they need to pay.

No insurance policies, other than those being currently issued, contain COVID-19 exclusions. Some policies address viruses.  Others do not.  Each policy needs to be individually considered, and in a lot of cases, coverage clearly exists.

Mr. Greenberg claims that it would be “wildly counterproductive” to force big insurance companies to pay for losses they didn’t insure.  Insurance companies litigated what they claimed were uncovered environmental claims for decades, only to pay in the end.  The failure to pay covered claims is and has always been counterproductive. 

Recognizing this, numerous states are considering bills requiring insurers to pay for Covid-19 losses.  To this, Greenberg claims protections under Article I of the Constitution.  This classic “red herring” distracts us from the fact that most insurance policies address this issue head on.  Insurance is a regulated industry, and insurers are contractually bound to follow newly enacted laws and regulations.  Constitutional crises avoided. 

History repeats itself.  We are in for a fight.  But, businesses that fight for coverage will be rewarded. See The Good News About Coronavirus Insurance Claims