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July 6, 2015 Policy Conditions, Considerations, Construction, and Formation

New York Appellate Division Finds No Coverage Under Bond For Losses Arising From Madoff’s Ponzi Scheme

In Jacobson Family Investments, Inc. v. Nation Union Fire Insurance Co. of Pittsburgh, PA, 2015 N.Y. App. Div. LEXIS 5175 (1st Dep’t; June 18, 2015), the New York Appellate Division, First Department reversed the Supreme Court, New York County’s decision and found that National Union Fire Insurance Company of Pittsburgh, PA is not required to pay the claimant for losses arising out of Bernie Madoff’s infamous Ponzi Scheme.

National Union provides coverage to the insured pursuant to a Financial Institute Bond. The insuring agreement …

May 4, 2015 Regulatory / Reinsurance

New York Department of Financial Services Superintendent Continues Criticism of “Shadow Insurance” Transactions in Letter to U.S. Senate Committee

New York Department of Financial Services (DFS) Superintendent Benjamin Lawsky continued his attack against the use of so-called “shadow insurance” in an April 27, 2015 letter to the Honorable Sherrod Brown, Ranking Member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. In the letter, Lawsky called on regulators to initiate measures to address this “textbook example of regulatory arbitrage in order to protect the efficacy of our state-based system of regulation” and hopes to stimulate a national debate on these issues.

Lawsky …

April 8, 2015 Regulatory

New York Amends Controversial Provisions of Replacement Regulation

After almost two decades, the New York Department of Financial Services (DFS) has approved amendments to New York Insurance Regulation 60, which will now permit insurance agents to immediately bind coverage where an existing life insurance policy or annuity contract is being replaced. The Third Amendment to Regulation 60, effective April 21, 2015, will allow insurers to begin underwriting new applicants on an expedited basis and will make buying insurance over the internet more feasible. Insurance agents and insurers will have to decide whether they …

February 25, 2015 Regulatory

New York Department of Financial Services Seeks Stronger Cyber Hacking Defenses From Insurers

On February 4, 2015, Anthem Inc. disclosed that as many as 80 million customers’ sensitive personal information may have been compromised by criminal hackers. As a timely coincidence, but prompted in part by the breach, on February 8, the New York Department of Financial Services (DFS) issued its Report on Cyber Security in the Insurance Sector (DFS Report). DFS also announced its intention to take measures to ensure that insurers have strong cyber hacking defenses in place.

The measures to be taken by DFS …

October 10, 2014 Emerging Issues

Second Circuit Holds Insurer Need Not Show Prejudice to Assert Late Notice Where Policy Issued Outside of New York

In Indian Harbor Insurance Co. v. City of San Diego (2d Cir., No. 13-4244-cv, Oct. 2, 2014), the Second Circuit affirmed summary judgment in favor of Indian Harbor, finding based on a late notice defense that Indian Harbor had no duty to indemnify the City for three pollution claims. The main issue was whether New York Insurance Law § 3420(a)(5) applied and required Indian Harbor to prove prejudice as a result of the City’s untimely notice.

The policy in question, a pollution and remediation legal …

August 4, 2014 Emerging Issues

(Re)Stating the Obvious: 8th Circuit Looks to Policy’s New York Amendatory Endorsements to Resolve Choice of Law Dispute

In George K. Baum & Co. v. Twin City Fire Insurance Co., 2014 U.S. App. LEXIS 14368 (8th Cir. July 25, 2014), the United States Court of Appeals for the Eighth Circuit addressed the choice-of-law issue with respect to a Twin City Fire Insurance Co. (Twin City) policy, which did not contain a choice-of-law provision. Disagreeing with the lower court’s conclusion that Missouri law governed the policy, the court ruled that New York law applied.

As background, George K. Baum & Company (Baum) underwrote …

July 23, 2014 Policy Conditions, Considerations, Construction, and Formation

New York Court Reaffirms Limitations on Policy Claims Arising Out of Superstorm Sandy

In Sikarevich Family L.P. v. Nationwide Mutual Insurance Co., No. 13-cv-05564, 2014 U.S. Dist. LEXIS 92254 (E.D.N.Y. July 3, 2014), the United States District Court for the Eastern District of New York addressed a policyholder’s claims for: (1) breach of the covenant of good faith and fair dealing, (2) unjust enrichment, (3) consequential damages, and (4) punitive damages. Notably, the policyholder alleged a breach of contract cause of action. The policyholder’s claims arose out of Nationwide’s denial of coverage for the policyholder’s first party …

September 4, 2013 Emerging Issues

New York Court of Appeals to Re-Hear K2

The New York Court of Appeals granted a rehearing of a coverage decision that has wide ranging implications for the insurance industry. In K2 Investment Group LLC v. American Guarantee & Liability Insurance Co., decided on June 11, 2013, the Court of Appeals rejected American Guarantee’s argument that it was entitled to a trial over whether a policy exclusion applied after it had breached its duty to defend. In new found precedent, the Court of Appeals held that because the insurer had breached its …

August 27, 2013 Reinsurance

New York Court Predicts California’s Future: Allows Bad Faith Exception in Reinsurance Late Notice Defense

Ins. Co. of the State of Penn. v. Argonaut Ins. Co.
U.S. Dist. Ct., S.D.N.Y. (August 6, 2013)

In this case, the cedent sued its reinsurer when it denied coverage because of late notice of its claim. Both parties filed a motion for summary judgment arguing the applicability of the late notice defense. The court granted the reinsurer’s motion.

From 1980-2009, a series of disputes and negotiations arose regarding asbestos claims against the underlying insured. It was not until 2009, through an “initial loss advice,” …