Insights

On February 18, President Trump issued an Executive Order titled “Ensuring Accountability for All Agencies” that directs independent agencies (as well as Cabinet Departments and their sub-agencies) to route all “proposed and final significant regulatory” and budgetary actions through the White House and the Office of Management and Budget. If implemented to its full extent, this action will significantly strengthen the authority of the White House by weakening the political autonomy of these independent agencies. As an assertion of the President’s inherent powers under Article II of the U.S. Constitution, it also stands to weaken congressional influence over these independent agencies, both through the appropriations and confirmation processes.

On Thursday, July 18, 2024, Judge Paul Engelmayer, U.S. District Judge for the Southern District of New York, dismissed the bulk of the Securities and Exchange Commission’s (SEC’s) landmark civil securities law claims against SolarWinds and its Chief Information Security Officer (CISO) Timothy Brown.  The Court dismissed all allegations based on SolarWinds’ public disclosures made after SolarWinds became a victim of the well-publicized SUNBURST cybersecurity attack, and also dismissed the SEC’s claims relating to SolarWinds’ internal accounting controls and disclosure controls and procedures.  However, the Court declined to dismiss claims of securities fraud against SolarWinds and its CISO based on SolarWinds’ pre-SUNBURST disclosures, finding that the SEC had properly pleaded that the company’s publicly-posted “Security Statement” was materially false and misleading. 

On November 15, 2023, the Attorney General of New York filed suit against PepsiCo, Inc., seeking to hold the soft drink and snack food manufacturer liable for plastic waste on the shores of the Buffalo River under multiple theories including public nuisance, strict product liability for failure to warn, violation of New York General Business Law Section 349 (deceptive trade practices) and New York Executive Law Section 63 (12) (persistent fraud or illegality in conduct of business).  

On March 2, 2023, the District of Columbia Court of Appeals affirmed the grant of summary judgment to Erie Insurance Exchange in Rose’s 1, LLC, et al. v. Erie Ins. Exch., a COVID-19 business interruption claim filed by several restaurants and food service businesses in the District of Columbia. In doing so, the court “join[ed] the majority of other courts in determining that ‘direct physical loss of or damage to property’ requires some sort of tangible, material alteration, which does not include ‘loss of use.’” Opinion at 26.

On February 17, 2023, the Illinois Supreme Court ruled 4-3 that violations of the Biometric Information Privacy Act (“BIPA”) (the country’s first biometric privacy legislation) accrue for each incident of capture or dissemination of biometric information, and not only once for each data subject. Cothron v. White Castle Systems found based on the plain language of the statute that violations for collecting or disclosing biometric information occur at every scan or transaction. Cothron v. White Castle Sys., 2023 IL 128004. The court reached this conclusion while admitting the “absurd” implications, including that the ruling could result in damages of $17 billion. Id. at ¶ 40.

On February 8, 2023, Florida’s intermediate appellate court quashed a trial court order that had erroneously compelled discovery of work product materials from an insurer’s claim file in a breach of contract action concerning property damage to its insureds’ home. Family Security Ins. Co. v. Stein, et. al., No. 4D22-1468 (Fla. 4th DCA Feb. 8, 2023). After the insurer asserted work product protection for certain claim file materials sought in discovery, the trial court granted the insureds’ motion to compel and ordered the insurer to produce its field adjuster loss report, nonfinal estimate, and supporting documentation. Florida’s District Court of Appeal then stepped in, granting the insurer’s petition for a writ of certiorari and quashing the trial court order.

Yesterday, New York Governor Kathy Hochul vetoed Senate Bill S74A, better known as the Grieving Families Act (“the Act”), which was meant to overhaul the state’s wrongful death statute. The Bill was delivered to the governor's desk on December 28 and, after she was unable to secure last-minute support to proposed changes to the Bill, Governor Hochul vetoed the bill on January 31.

Today, in Wilson, et al. v. USI Insurance Service LLC, et al., the U.S. Court of Appeals for the Third Circuit affirmed district court orders ruling in favor of insurers in COVID-19 business interruption claims, becoming the latest federal circuit court to conclude that there is no coverage for such claims. Specifically, applying the law of Pennsylvania and New Jersey, the court held that “the loss of use of a property’s intended business purpose is not a physical loss of property covered by the businesses’ insurance policies.” Opinion at 22. With this ruling, the federal circuit courts for the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth and Eleventh Circuits now have all determined that there is no coverage for COVID-19 business interruption claims.

On October 14, 2022, the district court for the Western District of Pennsylvania dismissed business interruption claims in multidistrict litigation against Erie Insurance Group. The court concluded that “in all jurisdictions whose law applies to the actions in this MDL, ‘direct physical loss of or damage to’ property occurs when a structural alteration to property is evident and that alteration requires that the affected property be repaired, rebuilt, or replaced before the property can be used again.” Order at 41. According to the court, “the COVID-19 virus did not harm [the plaintiffs’] properties in a way so as to generate a loss of or to the property itself, and Plaintiffs have not plausibly pleaded that the situation at their properties was or would be any different.” Id. at 49. The court also rejected the plaintiffs’ contention that they are entitled to coverage under the reasonable expectations doctrine, finding that they did not plausibly plead any misconduct by Erie and that they “did not have a reasonable expectation of coverage based on the ‘all risk’ nature of the Policies or the Policies’ ‘complicated terms.’” Id. at 55-56. The court further found that a virus exclusion in one of the relevant policies “would be enforceable and unambiguously would preclude coverage here.” Id. at 59. The case is In re: Erie COVID-19 Business Interruption Protection Insurance Litigation.

On September 20, 2022, the U.S. Court of Appeals for the Fifth Circuit affirmed the dismissal of a jeweler’s COVID-19 business interruption lawsuit. The court held that income lost while being closed due to pandemic-related orders was not the result of “direct physical loss.” Order at 4. The court relied on its earlier decision in Q Clothier New Orleans LLC v. Twin City Fire Insurance Co., 29 F.3d 253 (5th Cir. 2022) and said loss of use from the shutdown orders did not tangibly alter the property.  Id. at 4, 6. The court also affirmed the dismissal of the negligent procurement claims against the jeweler’s insurance brokers, finding that they did not have an affirmative duty to advise the company about the availability of pandemic-related insurance coverage. Id. at 8. Instead, the court said, an agent’s duty ends once the insured receives the insurance it requested; it is the policyholder’s responsibility to request the type of insurance it wants. Id. at 11-12. The case is Coleman E. Adler & Sons, L.L.C. v Axis Surplus Insurance Co.

On September 13, 2022, the Oklahoma Supreme Court reversed a district court’s grant of summary judgment to a Native American tribe on its COVID-19 business interruption claim. Noting that “nearly all jurisdictions deciding this issue in the context of COVID-19 business interruption claims have found that ‘direct physical loss or damage’ is not ambiguous,” the court “follow[ed] those jurisdictions” and held the tribe’s losses were not covered because implementation of COVID-19 mitigation measures at its properties “constitute[d] measures to stop the spread of the virus from one person to another, not repairs to or replacement of damaged or lost property.” Opinion at 13, 17-18. The case is Cherokee Nation v. Lexington Ins. Co.