Insurance Coverage & the Cannabis Industry

Properly insuring cannabis businesses, and companies that are involved in the industry but that are not themselves regulated under state cannabis law, can be a tricky undertaking. I recently wrote an article for the Oregon State Bar Cannabis Law Section about things to watch out for when advising clients in this space about insurance. (You can find the full article on our website, here, or in pdf form here.)

Key points are the following: 1) the insurance industry is marketing “specialty” policies for cannabis businesses that may exclude the most common risks, particularly regarding products liability; 2) non-regulated businesses involved in the cannabis economy (vendors, commercial landlords) should question whether their “general” insurance policies will respond if there is a loss caused by or involving cannabis products or activities. The insurance industry is increasingly make explicit that “mainstream” coverage does not apply to cannabis risks, and has at times taken an aggressive approach to denying such claims, even where policies are unclear.

The article goes into some detail about the legal issues, so we are not posting it as a blog piece. Happy reading!

Will Your Cyber Insurance Cover GDPR Fines & Penalties?

The GDPR, the European Union’s Global Data Protection Regulation (GDPR), took effect on May 25. As my colleagues have written, the regulations apply to many US companies that hold data on EU customers, vendors, or employees. Businesses are still scrambling to comply with the regulation, including getting consent from EU contacts to continue to send marketing materials. There are significant questions about how the regulations will be enforced, but one fact is clearly worrisome: under GDPR’s graduated penalty scheme, companies found in violation may be hit with fines of up to the greater of 4% of annual global revenue or 20 million Euros. Fines at that level could destroy many businesses.

Therefore, in addition to taking steps to comply with GDPR, companies should be assessing their insurance program to determine whether their current policies are likely to provide coverage in the event of a GDPR enforcement action or suit. Continue Reading

Allocation-Process Information Shielded by Mediation Privilege, not Available to Insurer: Wash. Fed. Court

In a decision with important implications for “long-tail” environmental contamination coverage claims in the Northwest, a federal court in Washington state has held that information from a confidential “allocation” proceeding in a Superfund site does not need to be produced to an insurer for one of the parties. The decision provides comfort to those hoping that this mediation-like process for resolving liability for historical contamination would not impair their insurance rights. If the decision had gone the other way, the allocation ADR proceeding might have ruptured, forcing parties into expensive and lengthy litigation. Continue Reading

Common Gaps in Coverage for Data Security Incidents

Businesses of all sizes are now commonly purchasing “cyber insurance” coverage to protect against financial losses from data security incidents. But these policies—which are not written on standardized forms—can vary widely in what they cover. Here are some common gaps in coverage to watch out for.

Inadequate business income or business interruption coverage.
Many businesses that have had a data-security incident find that the disruption to their business is more harmful than the data that is stolen or otherwise compromised. Coverage is available for business income lost due to an incident, but it is often subject to a sub-limit that may be inadequate, or there may be a waiting period before the coverage will kick in and it may be too late to provide real relief.

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Considering Employment Practices Liability Insurance? Some Things to Consider.

The upsurge in sexual harassment complaints and gender-based pay discrimination has many employers understandably concerned about their exposure. More and more employers are looking to protect themselves against employment-related claims using Employment Practices Liability (EPL) insurance. The attorney fees alone to defend a claim by an employee can be staggering. EPL coverage can certainly provide some peace of mind – but there are things to watch out for.

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In-House Counsel: Take Care in Contracting for Additional Insured Coverage from Foreign Suppliers

Most businesses, and particularly retailers, require that their suppliers name the retailer as an “additional insured” on the supplier’s general liability policy. This means that if a customer is injured because of the supplier’s product, and the customer sues the retailer, the supplier’s insurance will have to pay to defend the retailer in the lawsuit. Demanding to be added as an “additional insured” is a standard part of contractual risk-transfer in retail, as in most businesses. But two recent rulings demonstrate that “additional insured” coverage may not be worth much – if the supplier’s insurer is outside of the U.S. Companies can try to avoid this problem by revising their contract language.

The first decision, Dick’s Sporting Goods v. PICC, involved a supplier of an inflatable yoga ball to Dick’s, a large sporting-goods retailer. One of the balls burst, injuring a customer, who sued Dick’s. Dick’s demanded that the supplier’s insurer, PICC, defend it, based on Dick’s status as an additional insured. PICC refused. Dick’s sued PICC in Pennsylvania federal court, but PICC moved to dismiss on the basis that the insurance contract required that any disputes be resolved in a court where PICC was located – China. The court agreed. Continue Reading

Lessons in Contracting for Additional Insured Status from New Oregon Case

The dispute in Security National Insurance Company v. Sunset Presbyterian Church, __ Or. App.__ arose out of construction claims involving a church, its general contractor, a subcontractor, and the subcontractor’s liability insurer. In an underlying lawsuit, the church brought claims against the general contractor (Andersen), who brought third-party claims against its subcontractors, including its masonry subcontractor (B&B). In settlement of the claims, Andersen assigned its rights against subcontractors to the church (Sunset).

In subsequent litigation between Sunset and B&B’s insurer (Security National), Security National sought a judgment declaring that it had had no duty to defend Andersen, thus defeating Sunset’s assigned claims. The Oregon Court of Appeals reversed the trial court, and held that Security National did have an obligation to defend. Continue Reading

“Contractors Special Conditions” Endorsement Sets Traps for Policyholders and Defense Counsel

An endorsement that has become common in general contractors’ insurance policies can function as a trap for both the policyholder and defense counsel. The “Contractors Special Conditions” endorsement requires that the policyholder must have written contracts with each subcontractor that it uses on a project, and that those agreements must meet certain requirements. If there is a loss involving those subcontractors, and if contract conditions were not met, the insurer may deny coverage. The problem, of course, is that if the policyholder does not read the policy before the loss, and didn’t get the right contracts in place, there may be no way to “cure” the problem. And defense counsel may be put in a bind as well when they are asked to report to the insurer.
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Miller Nash Graham & Dunn Represents United Policyholders on Pollution Exclusion in Ninth Circuit

We are honored to represent United Policyholders (a non-profit advocacy organization for policyholders) on an issue of great concern to many of our commercial clients, and in particular those in the construction industry: the scope of the so-called “absolute pollution exclusion.” Our amicus brief to the Ninth Circuit for UP on the issue was filed on November 2 and is available here.

As my colleague Frank Langfitt explained here, earlier this year a federal trial judge in Oregon, in the case Colony Insurance v. Victory Construction, interpreted the exclusion very broadly, holding that almost any substance could be a “pollutant.” In that case, a spa and pool contractor was sued because a pool heater allegedly allowed carbon monoxide to build up, causing bodily injury to a home’s occupants. The court held that the insurer had no duty to defend the contractor because carbon monoxide—a naturally occurring substance that was not being handled by the contractor—was a “pollutant.”

Victory Construction chose to appeal to the Ninth Circuit and United Policyholders asked us to represent it as amicus curiae, in order to present the concerns of policyholders generally that the pollution exclusion—as interpreted by insurers—is so broad that it could apply to almost any substance, contrary to the interpretation of ordinary purchasers of insurance and undermining the purposes of general liability coverage. In addition, we addressed the recent Xia decision (which we previously wrote about here), in which the Washington Supreme Court adopted an entirely different approach to this exclusion (and exclusions in general), partially to avoid the tremendously harsh results of the insurance industry’s view of the exclusion.

UP is on the front lines (literally) of the issues of greatest concern to policyholders—including conducting education and training sessions for victims of wildfires and hurricane damage—and it is a privilege to represent such a great organization.  This is the third amicus brief that we have done for UP in either the Oregon state courts or the Ninth Circuit.

Insurance Coverage Can Help Businesses Impacted by Wildfires or Hurricanes

Many Northwest businesses are being impacted by the wildfires close to home, and also by the hurricanes that have or will hit Texas, Florida and other Gulf states. Can commercial insurance help to mitigate losses from these natural disasters? In many cases, yes.

“All risk” property-insurance (fire) policies may provide coverage for property damage from wildfires, including damage to facilities, equipment, and sometimes stock and inventory. Wildfires and other natural disasters may also disrupt operations and force temporary closures. In that case, business income (also called “business interruption”) insurance, including civil authority coveragemay cover lost profits and related costs. And, if your company was not directly impacted, but was unable to procure parts or make shipments because of wildfire or hurricane, contingent business interruption coverage may apply.

The devil is often in the details with this kind of coverage. This post will outline some things that business owners and their advisers should look out for in common scenarios.

My company property was damaged by wildfire – what coverage might I have?  Continue Reading