Attorneys and Counselors at Law
1251 AVENUE OF THE AMERICAS NEW YORK, NY 10020-1182
TELEPHONE: 212-278-1000 FAX: 212-278-1733
William G. Passannante, Esq.
Re: Anderson Kill’s Annual Insurance Coverage Overview and Best Wishes for 2022!
As the end of this extraordinary year approaches, we at Anderson Kill wish you a safe, healthy, and prosperous 2022. We mark the New Year with our annual overview of emerging risks and insurance coverage trends, along with news about our own court victories, new hires and kudos.
Insurance Coverage Trends
SPACS spanked: As markets approached peak SPAC mania (almost 600 SPACs were filed this year), the SEC issued a trio of warnings between December 2020 and April 2021, cautioning that SPAC disclosures were in many cases inadequate, that investors should not blindly follow celebrities into the market, and that SPACs do not clearly offer reduced liability compared to other IPOs. A spate of lawsuits alleging inadequate disclosures, conflicts of interest and sometimes bad faith in SPAC transactions were filed this year (surveyed by my colleague Howard Mulligan in the New York Law Journal), and some of those suits are likely to raise D&O coverage issues.
D&O Liabilities Remain Prominent: One possible flashpoint is the so-called “bump-up exclusion,” which D&O insurance companies deploy against coverage of any settlement or adverse judgment in a post-merger lawsuit that can be characterized as an increase of the price paid for a target company. As my colleague Raymond A. Mascia, Jr. and I wrote in the American Bar Association’s Coverage, this exclusion should generally not apply to liability stemming from a SPAC for several reasons, e.g., that courts have found the exclusion to apply only to an acquisition, not a merger. I addressed various other D&O coverage issues related to SPAC liability in the New York Law Journal. D&O insurance issues also figure prominently in a recent case in the New York Court of Appeals, which I wrote about in the New York Law Journal, and in which the Court subsequently adopted an approach to the insurance industry’s D&O ‘disgorgement’ dodge which honors the insurance policy language. Business Insurance interviewed me on the topic.
ESG scrutiny: Regulatory and investor pressure is mounting on companies to analyze and mitigate their risks of loss and liability stemming from Environmental, Social and Governance (ESG) factors. In March, the SEC announced the formation of a Climate and ESG Task Force in the Division of Enforcement that will seek “to proactively identify ESG-related misconduct,” e.g., “to identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules.” In May, President Biden signed Executive Order No. 14030, pushing a host of federal agencies “to advance consistent, clear, intelligible, comparable, and accurate disclosure of climate-related financial risk.” In compliance with the Order, the federal Financial Stability Oversight Council issued a comprehensive report in October, identifying climate change as “an emerging and increasing threat to U.S. financial stability.” The report urges member agencies to “enhance climate-related disclosures to give investors and market participants the information they need to make informed decisions.” Similarly, the Commonwealth Climate and Law Initiative, published, Fiduciary Duties and Climate Change in the United States (CCLI October 2021). The CCLI report argues that failing to have adequate regard for climate change-related issues could fail to satisfy a director’s standard of care and potentially increase litigation exposure.
Cyber peril: Cyber crime continued to escalate in 2021, as businesses and governments were plagued by supply chain attacks, ransomware demands (sometimes supported by state actors), disinformation attacks (also government-supported), mobile malware attacks, and large-scale data breaches. This month, a vulnerability in Log4j, “an incredibly popular and common software tool, could potentially impact billions of devices,” NPR reported. Cyberattacks also started to have an impact in the burgeoning cryptocurrency markets, as my colleagues Joshua Gold and Stephen Palley noted in Risk Management Magazine. On the coverage front, Josh continued to track court decisions finding coverage under traditional forms of insurance, including crime, CGL and D&O policies. Josh and Daniel Healy, our Cyber Insurance Recovery Group co-chairs, are also authors of a forthcoming treatise on cyber insurance risk and insurance, to be published by the Practicing Law Institute.
Fiduciary liability heats up: Class action suits brought against employee retirement plans and plan sponsors, alleging excessive fees, have spiked in the last couple of years, and underwriters are demanding much more detailed information from fiduciary policyholders in a hardening market. Bloomberg Law reports that retirement plan investors have filed about 140 proposed class actions challenging their plans’ fees in 2020 and 2021, and plaintiffs are going after smaller plans. Retentions for such cases are hitting seven figures, according to a Bloomberg source.
Sweet uses of adversity: As is generally the case in “interesting times,” the property casualty insurance industry did well in 2021 despite (or because of) substantial policyholder losses. Fitch Ratings reported this month that despite “unusual first quarter winter storm losses, up to $40 billion in estimated losses from Hurricane Ida, and... up to $10 billion in losses from an active California wildfire season,” property casualty insurance companies are on track to post underwriting profits in 2022, as they are “reducing capacity in catastrophe-prone regions leading to further price increases.”
Court Victories in 2022
We resolve many claims without litigation, but we also had some notable wins in court:
Our laurels remain hardy
For the fifteenth consecutive year, Chambers USA ranked Anderson Kill among the nation’s top insurance recovery practice groups. The firm’s New York office was also recognized for insurance dispute resolution, and its New Jersey office for insurance litigation. Chambers recognized individual AK attorneys Bob Horkovich, myself, Finley Harckham, Josh Gold, Rhonda Orin, Robert Chesler, and Steven Pudell. The Legal 500 ranked the insurance recovery group in Tier 1 nationally, also for the fifteenth year running, naming Bob and me to the Legal 500 Hall of Fame, recognizing Finley Harckham, Rhonda Orin, Josh Gold, and Daniel Healy as Key Lawyers, and naming Raymond Mascia, Jr. to the Next Generation Partners list. For the eighth year straight, Best Lawyers named us a National Tier 1 Best Law Firm in Insurance Law, also recognizing Bob, myself, Marshall Gilinsky, Rhonda Orin, Daniel Healy, Stephen Palley, Michele Gallagher, Pamela Hans, Robert Chesler, and Steven Pudell as Best Lawyers. Finally, Benchmark Litigation ranked Anderson Kill a National Tier 1 firm in Insurance Litigation for the ninth year running, naming Bob Horkovich, Finley Harckham and me national litigation stars and Josh Gold a future star. On the publication front, Business Insurance named us the Legal Team of the Year for third time in four years, and we will have more publication kudos (currently embargoed) to announce in coming weeks.
New Colleagues and New Initiatives
This year we welcomed a quartet of talented attorneys into the Anderson Kill fold as shareholders. In January, Paul M. Kaplan, a litigation heavyweight who focuses much of his practice on antitrust, joined us in New York and took on co-chairmanship with Larry Kill of our Antitrust Group. In March, former Acting New York State Supreme Court Justice Ethan Greenberg joined our Corporate and Commercial Litigation group in New York. May brought Corporate and Securities stalwart Howard Mulligan to the New York office, and in September, Noah Axler added his heft to the firm’s cutting-edge Technology, Media and Distributed Systems (TMDS) Group, working out of the firm’s Philadelphia office. TMDS was also bolstered by the addition of associate Jeff Karas in New York. Noah and Jeff are both working with TMDS group chair Stephen Palley to represent several clients responding to SEC subpoenas. The firm was also pleased to welcome as new associates (in New York unless otherwise noted) Alexander Greene, Earl Kirkland III, Dylan LaMorte, Keith Lazare, Anthony Risalvato (Newark), and Joseph Vila (Newark). Late this year, Diana Shafter Gliedman joined the firm’s Executive Committee, and John M. Leonard and Bruce Strong were named shareholders, effective January 1, 2022.
Anderson Kill branched out in other ways in 2021. In May, Carrie Maylor DiCanio opened an office for the firm in Denver, Colorado, expanding the firm’s base to serve clients based in the West and Midwest. In November, we launched a Climate Change and Disaster Recovery Group to help clients maximize property and business income insurance coverage in the wake of intensifying natural disasters. The new group will also serve clients seeking coverage for third-party claims stemming from climate change, including alleged failures to disclose climate change risks and litigation seeking damages for alleged contributions to climate change. Late this year we also launched a Regulatory, Investigations and White Collar Group, tapping the experience of senior shareholders and young attorneys alike in the Department of Justice, state DA offices, and in the judiciary as well as in corporate and in-house practice in regulatory defense and compliance.
Looking Forward to 2022
We wish you health, safety, and prosperity in the coming New Year.
We look forward to helping you fulfill your business goals and protect your interests.
William G. Passannante
1251 Avenue of the Americas
New York, NY 10020