Thirty-two years ago, a major California newspaper urged Californians to vote “no” on a ballot initiative commonly referred to as “Prop 65,” which would require certain businesses to include warning labels on products that contained a compound known to the State of California to cause cancer, birth defects or reproductive harm. However, the editorial board dismissed what it viewed as “exaggerated” claims by other opponents of Prop 65, reassuring voters that even if the measure passed, it would “not lead to the banning of ordinary table salt or require warning labels on every apple sold or cup of coffee served in California.” But last month, a California Superior Court judge ruled that businesses may have to do just that – require warning labels on cups of coffee served in California.

The complaint in the case, Council for Education and Research on Toxics v. Starbucks Corporation, et al., alleges that dozens of companies in the coffee business violated Prop 65 in failing to warn consumers that brewed coffee contains acrylamide, a substance believed to be a carcinogen by the State of California. Defendants in the case were previously unsuccessful in persuading the court that Prop 65’s warning requirements were unnecessary because the alleged acrylamide exposure posed “no significant risk.”

Continue Reading Coffee and Cancer Warnings in California

Montrose v. Superior Court and the Future of Exhaustion Under California Law.

When a policyholder faces a “long-tail” claim (i.e., a claim involving injury that remains undetected for some time after the alleged wrongdoing, and the harm may have been sustained over a number of years—even decades), like property damage and bodily injury claims arising out of alleged environmental contamination or asbestos exposure, there are often multiple years and layers of primary and excess insurance policies that provide coverage. However, there are also many issues that may arise, making it difficult for insureds to collect all relevant coverage. For example, the insured may have trouble finding all applicable policies that were in place at relevant times, there may have been mergers and acquisitions that complicate matters, some coverage may have become insolvent, etc.

A key legal issue that impacts the manner in which policyholders may collect all relevant coverage is whether the insured must first exhaust all underlying primary coverage in place during the time of alleged harm before it is allowed to tap into valuable excess coverage (often called “horizontal” exhaustion), or whether it may choose to first collect the primary and excess coverage in any given year before seeking to collect other years of coverage (often called “vertical” or “all sums” exhaustion). While horizontal v. vertical exhaustion (or some variant thereof) is a state-by-state issue, the Supreme Court of California in Montrose Chemical Corp. v. Superior Court, 406 P.3d 327 (Cal. 2017) recently set the stage for potentially one of the most impactful coverage decisions on this issue in decades. There, the California Supreme Court recently granted the policyholder, Montrose’s, request to decide whether it must exhaust all its primary policies on the risk before recovering under any of its excess policies for environmental damages.

The Montrose coverage dispute began in 1990 and arose out of the policyholder, Montrose’s, long-running efforts to procure coverage for over $100 million in damages incurred in a CERCLA action. The action arose out of Montrose’s production of the pesticide DDT at its facility in Torrance, California, between 1947 and 1982 and implicates nearly two dozen insurers that issued both primary and excess policies to Montrose.

Continue Reading Must Policyholders Exhaust All Underlying Policies Before Pursuing Excess?

In a recent webinar, Lathrop Gage Partner Mike Abrams and Hays Companies Vice President and Cyber Liability Practice Leader Dave Wasson covered several common pitfalls to avoid in buying cyber liability risk policies. In summary, the cyber insurance market is not a mature one, and policies differ significantly. It’s important to be working with a broker or lawyer who is familiar with potential issues and terms that can be negotiated.

Continue Reading Cyber Insurance – What You Don’t Know COULD Hurt You!

The modern accessibility of DNA testing has led to an unprecedented rise in exonerations of the wrongfully imprisoned and a surge in civil rights lawsuits against public officials and municipalities for suppressing exculpatory evidence. These lawsuits present complex liability issues including qualified immunity, Monell liability, statute of limitations bars, etc.

One of the most complex ancillary issues is whether these public entities are protected for civil rights claims under their insurance programs. Particularly for financially distressed municipalities, the availability of insurance proceeds is often the most critical issue because of the potentially enormous liabilities these entities face resulting from law enforcement misconduct claims.

More often than not, the dispute over coverage hinges on the “trigger issue.” “Trigger” is a shorthand insurance concept used to describe what event must occur before a particular liability policy applies to a given loss. What events “trigger” coverage wholly depend upon the language of each particular insurance contract, just like any other private contract negotiated between two parties. If there is a governing rule in insurance jurisprudence (or Contracts 101), it’s that an insurance contract should be construed as written. 

Continue Reading Insurance Coverage for Civil Rights Abuse Cases: an Introduction to the “Trigger Issue”

From the “Bomb Cyclone” winter storm that roared across the East Coast; to Hurricanes Harvey, Irma, Maria and Jose that exacted an enormous human, financial and business toll; to the California wildfires that killed 43 people, consumed 10,000 structures and devastated numerous wineries – it seems that we cannot escape news these days of disasters that have a deep and wide-ranging impact on lives, property, and commercial activity. We begin the New Year with a hope that we will see fewer, less severe disasters but also with the question in mind: “What can I do today to be prepared for a disaster that could affect my business?”  Of course, a critical component of preparing for disasters is taking the necessary precautions to avoid or limit losses in the first place. But some losses may be unavoidable, so companies should also prepare ahead of time to maximize their recovery of insurance for the losses that do arise. Some steps to take that will help:

  • Take the time to assess the types of catastrophic events to which your company might be vulnerable. Speak to those responsible for day-to-day operations and ask which type of losses or disruptions would be most costly not only to the immediate bottom line, but also in terms of intermediate or long-term displacement of the company’s competitive advantage or its reputation. Think outside of the box and do not constrain your assessment to the types of disasters that come easily to mind. It is those that we did not see coming, or the severity of which we underestimated, that we are least prepared for.

Continue Reading Natural Disasters in 2017 Caused Billions in Losses: Are Companies Ready for 2018?