Volume 35, Number 4
Insurance Coverage for "Cyber-Losses"
David R. Cohen and Roberta D. Anderson
Insurance Contracts and Judicial Decisions over Whether Insurers Must Defend Insureds That Violate Constitutional and Civil Rights: An Historical and Empirical Review of Federal and State Court Declaratory Judgments 1900–2000
Willy E. Rice
Coverage of Discrimination Claims Under Standard Workers’ Compensation and Employer’s Liability Insurance Policies
Michael J. Marone, Kevin E. Wolff, and John T. Coyne
By: David W. Lannetti
This article recommends revisions to the recently approved definition of "product" in the Restatement (Third) of Torts: Products Liability. The author suggests that the definition unnecessarily limits what qualifies as a product and thereby threatens the application of strict liability to emerging technologies. The purpose of incorporating these revisions is to better restate products liability law while harmonizing it with sales law and, perhaps more important, provide flexibility for the continued evolution of this dynamic field of law. After a brief introduction, Part II discusses the role of a Restatement of the Law and the evolution of the Torts Restatements. Part III reviews the various definitions of "product" that have been used by courts in the context of strict products liability. The judicial application of the "product" definition is traced in Part IV. Part V discusses the dilemma of creating a bright line of demarcation between products and services in light of emerging technology. Part VI analyzes the policy considerations underlying an appropriate definition of "product" and the need to reconcile products liability law with emerging technologies and with sales law. Finally, Part VII offers recommended revisions to the definition of "product" in the Products Liability Restatement to better accommodate the inevitable expansion of strict products liability.
By: David R. Cohen and Roberta D. Anderson
This article provides an overview of typical first-party business insurance coverage that may respond to e-commerce-related risks. After an introductory statement of the problem, part II briefly describes some of the relevant risks, focusing on potential sources of economic loss that may be covered by traditional property insurance policies. These include hardware, software, or data loss; remediation costs; and business interruption expenses. Part III provides an overview of some of the issues that may arise if a policyholder seeks coverage for these risks under its first-party insurance program. Among the most common are repair or replacement of damaged property, remediation, business interruption coverage, and additional coverage for funds necessary to ensure that the operation can continue without interruption. Finally, Part IV provides a summary of other types of traditional insurance, including comprehensive general liability policies, errors and omissions coverage, and directors and officers insurance, that may be available to cover e-commerce-related risks.
By: Michael Sean Quinn
This article explores the duty that defending liability insurers have to settle cases from varied points of view, including those related to philosophy, jurisprudence, public policy, economics, legal principles, doctrines, and practicality. Discussed at length are the legal theories (primarily breach of contract and a series of tort actions) on the basis of which failures to settle can be made actionable. The article also covers the three types of legal relationships that apply to defending liability insurers and their policyholders—arm’s length, fiduciary, and the "special relationship that falls between the first two kinds—followed by a critique of the equal consideration rule and the no limits rule. The article concludes with a discussion of what a liability carrier should do to reduce its exposure to excess judgments.
Insurance Contracts and Judicial Decisions over Whether Insurers Must Defend Insureds That Violate Constitutional and Civil Rights: An Historical and Empirical Review of Federal and State Court Declaratory Judgments 1900–2000, 35 Tort & Ins. L.J. 995
By: Willy E. Rice
Empirical findings reported in this article suggest that extralegal factors—such as geographic location, ethnicity, gender, disability, perceived sexual orientation, and age of third-party victims—influence judicial decisions as to whether liability carriers must defend or reimburse the costs of defending various lawsuits. After a brief introduction, Part II of this article presents a brief discussion of state and federal declaratory judgment statutes and of the public policy behind liability and indemnification insurance contracts. Part III examines the origin and scope of insurers’ duty to defend, duty to pay legal expenses, and duty to reimburse litigation costs when third-party victims sue policyholders. Part IV argues that extralegal variables are significantly more likely than state and federal legal doctrines to influence whether courts order insurers to defend alleged civil rights violators. More specifically, Part IV reports that courts are split over whether a legal defense or indemnification is warranted when the allegation concerns "disparate treatment" and "disparate impact" discrimination. Parts V through VIII discuss whether insurers must defend or indemnify the costs of defending specific types of discriminatory conduct. In Parts VI, VII, and VIII, it is demonstrated that insureds and insurers are more likely to receive favorable declarations depending on whether courts categorize the alleged discrimination in the underlying suit as "disparate treatment" or "disparate impact." Finally, Part IX presents an empirical investigation of duty-to-defend and duty-to-indemnify declaratory judgments in state and federal courts between the years 1900 and 2000. In this author’s view, courts permit nonlegal factors to influence when and to whom they will award declaratory relief. The reported data suggest that judges’ subtle biases and notions about who should receive the financial benefits flowing from liability coverage lead to convoluted and ultimately unfair declarations.
Michael J. Marone, Kevin E. Wolff, and John T. Coyne
In Schmidt v. Smith, the New Jersey Supreme Court held that civil employment discrimination claims may be covered under the employers’ liability section of a standard workers’ compensation insurance policy. The potential impact of the decision is enormous to the insurance industry, especially given the fact that workers’ compensation is compulsory in all states and that the financial stakes are significant. The tide of discrimination claims throughout the country remains high in terms of both numbers of suits and magnitude of awards. Schmidt has attracted
no support from other jurisdictions primarily because of the uncharacteristically weak reasoning that underlies the decision. The article starts by critiquing the decision and pointing out its obvious flaws, including the court’s misinterpretation of compulsory insurance legislation and its undermining of the New Jersey Law Against Discrimination. Also discussed are some of the issues raised by Schmidt (absence of coverage for individual departments, limits of liability, definition of bodily injury, etc.) and strategies for dealing with them.
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