Litigation Trifecta Keeps Insurers Busy

Suits related to violations of the TCPA Act, cyber breaches and concussions remain at the top as far as litigation trends go, according to industry experts. And while insurers are unlikely to be targeted as a direct defendant in a concussion suit, companies should be cognizant of the risks related to cyber breaches and violations of the TCPA Act.
TCPA

Attorneys from the Sutherland Asbill & Brennan law firm, with locations across the U.S., issued two legal alerts on litigation related to the Telephone Consumer Protection Act (TCPA) in August, noting that any insurer that issues text alerts or uses an automated telephone dialing system could face litigation under the Act. In addition, insurers could face allegations of vicarious liability if companies use agents to market their products and those agents violate the TCPA.

The firm cited an Illinois federal court case where a vicarious liability claim was raised against an insurer for the actions of its agents and the agent’s third party marketer.
TCPA cases are lucrative because the statute allows recovery of damages of $500 per violation with up to $1500 for willful violation. In addition, there is no maximum cap.

The Sutherland alert stated “The trend of high-dollar TCPA settlements has spurred a large increase in TCPA filings over the past few years, including an increase in complaints filed against the insurance industry. The issues facing insurers in these cases are similar to the issues facing companies in other industry segments: consent and the scope of that consent, vicarious liability issues arising from the acts of agents and third-party marketers, and large potential exposure due to TCPA statutory damages. Companies are continuing to adjust to new Federal Communications Commission rules that went into effect in late 2013, which set a high standard for the type of written consent required for marketing calls made to cell phones. With the new FCC rules and ongoing litigation risk, companies should obtain written consent where appropriate and maintain adequate records of the specific details of that consent.”

Gail Gottehrer, a partner with the East Coast firm of Axinn, Veltrop & Harkrider who often represents insurers, said that she expected to see more of these cases because settlements are lucrative and it’s an easy to understand type of class action.

A record number of new TCPA cases have been filed, according to the Sutherland firm alert.

Recent settlements of TCPA class action suits range from four to 75 million dollars. The largest settlement to date occurred in July when 75 million dollars was awarded by a federal court in Illinois against Capital One.

Though recent jury award amounts seem high, many plaintiffs in class action suits receive very little in the end.

“As these putative class actions settle and the settlements are granted preliminary approval by the courts, we’re likely to see “serial” objectors challenging the terms of the settlements on the grounds that the monetary relief for class members is inadequate, as it’s far less than the $500 in statutory damages per violation provided for in the TCPA. In one putative class action settlement that received preliminary approval last week, class members who file claims will receive between 98 cents and $32.67, depending on how many class members file claims, while plaintiff’s counsel will receive over $2.1 million and over two million will go to pay settlement administration costs. These numbers will draw objectors,” said Gottehrer.

Technology

Data breaches continue to make headlines and Gottehrer said that insurers should expect to see more claims from insureds seeking coverage for costs associated with them. Data breaches often lead to class action suits resulting in large settlements, she said.

“They’re also big dollars in potential fines from regulators. With more and more states having, like California does, regulations about exactly what you have to do if there is a breach, what kind of notice you have to give. It gets very expensive very quickly,” said Gottehrer.

Global law firm Mayer Brown hosted a presentation earlier this year on trends in data breach and cybersecurity regulation, legislation and litigation. The presentation noted that data breach class actions are increasing, though case law continues to support defendants.

Typical causes of action in data breach class actions are: negligence, common law invasion of privacy, violation of state notification, unfair competition and violation of consumer protection laws.

According to the presentation, the application of commercial general liability policies to data breach depends on whether customer information was published.

Gottehrer said insurers are likely to see claims on older policies where breaches may qualify as personal advertising injury. In addition, insurers can expect to see more business interruption claims as a result of a cyber breach.

Concussions

In an interview earlier this year with Claims Journal, Robin Dusek, a partner and member of Freeborn & Peters Insurance/Reinsurance Industry Team, said that as concussion-related lawsuits continue to be filed against professional sports teams, equivalent claims and litigation will soon be seen in a variety of youth sports and non-professional organized sports leagues.

Both attorneys said insurers should prepare for increasing claims arising from players and their families against non-professional sports leagues, including college, high school and junior high football, soccer, hockey, rugby and lacrosse.

“It’s going to be against little leagues and helmet manufacturers, everybody who’s in that trail of protecting and trying to prevent these kind of concussions and these medical ramifications from concussions,” said Gottehrer.

“We live in a litigious culture. There’s more awareness of this as a problem. I think that’s going to cause more people to take action and make them see it looking a lot of different ways because deep pockets are always an issue with litigation. I think it’s going to be particularly apparent with youth sports, because a lot of park districts and schools will be protected or protected to some degree by governmental immunity, and so they won’t be a viable target for a lawsuit,” Dusek said.

“We’ve already begun to see insurers filing declaratory judgment actions seeking a determination of their obligations to defend and indemnify their insureds in connection with these concussion class actions. In one such case, TIG Insurance Co. sued its insured, the NHL, for a determination of whether it has to defend and/or indemnify the league under the NHL’s primary, umbrella and excess liability policies. The defenses asserted by TIG include that the policies don’t provide coverage for intentional wrongdoing or bodily injury that the NHL expected or intended,” Gottehrer said.

The claims could impact several lines of insurance, according to Dusek. A medical malpractice claim could arise if a doctor failed to properly diagnosis a head injury and allowed an athlete to return to play. A homeowners’ insurance claim could arise as a result of a coach being sued for his or her alleged role in an injury claim.

“Individual coaches may be sued because a lot of coaches will have homeowners’ policies or other umbrella policies that protect them from liability. Or protect their exposure to liability, I should say. Doctors who don’t take the necessary steps to make sure a kid doesn’t have a concussion and then it turns out they have a concussion and they play and they get hit again and maybe have a more lasting impact because of that,” said Dusek.

Despite the possibility of governmental immunity, both attorneys expect school districts will continue to be targeted.

“I think you may see some suits against school districts that, to get around the governmental immunity are alleging more willful or wanton acts against the school district; that they should have known and the fact that there’s not a trainer on the sidelines, for example, during practice. That’s something that is not just negligent, but rises to a level that’s beyond negligence to try to get around the governmental immunity protection that a lot of schools will have,” Dusek explained.

Director and officer liability policies could also be implicated.

“If you look at, I guess a situation where a school board hasn’t authorized enough trainers to be available for games and practices or they know that there’s a coach that is known to take risks with players and they don’t replace him or her. I think that’s certainly an area of exposure with school boards and with universities, with their board of directors and those types of situations,” the Chicago-based attorney said.