Every day, class actions are commenced on behalf of consumers against manufacturers, retailers, financial institutions, and service providers. Those actions raise a wide range of allegations including, to name just a few, breach of warranty for product defects, deceptive practices in the marketing of products or services, undisclosed or improper fees or other charges, and invasion of privacy through the electronic collection of personal data.[3] Some companies assume that such cases are not covered by their insurance because in order to be certified, class actions must be crafted so that issues common to all of the plaintiffs predominate over individual issues and therefore tend not to seek monetary damages that are covered by liability insurance.[4] That skepticism is understandable because many, or even most, consumer class actions seek only relief that is not covered under standard form policies, such as damages for products failing to perform as intended,[5] or an injunction against deceptive practices barred by consumer protection statutes.[6]
However, all class action complaints should be read carefully for any potentially covered claims, bearing in mind that most companies have broad coverage under a variety of insurance policies. For example, commercial general liability (CGL) policies cover damages because of third-party property damage and bodily injury, and they also typically insure for personal and advertising injury offenses. Companies may also have coverage for a variety of “wrongful acts” under directors’ and officers’ (D&O), errors and omissions (E&O), and employment practices liability (EPL) policies. Further, invasion of privacy claims may be covered under cyber policies or under cyber coverage parts found in other policies, as well as under CGL policies’ advertising injury and personal injury coverage parts.
Most importantly, even if a class action complaint does not clearly contain incontrovertible covered allegations, it may assert claims that are potentially covered, and that is all that is needed to trigger valuable defense coverage.[7] Defense coverage can provide two benefits: (1) the payment of litigation fees and costs, and (2) giving the insurance company an incentive to contribute to settlements even if it has asserted defenses to coverage.
This article discusses types of class action complaints that may be covered, in whole or in part, by corporate insurance policies.