CM Report of Recent Decisions – 2018 Volume 3

October 16, 2018 / CM Reports

Three Federal Appeals Courts Find Coverage For Cyber-Fraud

In Spec’s Family Partners, Ltd. v. Hanover Ins. Co., No. 17-20263, 2018 U.S. App. LEXIS 17246 (2d Cir. June 25, 2018) (“Spec’s Family Partners”), Medidata Sols. Inc. v. Fed. Ins. Co., 729 Fed. Appx. 117 (2d Cir. 2018) (“Medidata Solutions”), and Am. Tooling Ctr., Inc. v. Travelers Cas. & Sur. Co. of Am., No. 17-2014, 2018 U.S. App. LEXIS 19208 (6th Cir. July 13, 2018) (“American Tooling”), three federal courts of appeal found insurance coverage for various cyber-frauds under Texas, New York, and Michigan law, respectively.

Old And Somewhat Forgotten: Dusting Off Supreme Court Law On Emotional Distress Damages

It’s amazing what we can find by going through the attic. There’s the old black and white television, complete with rabbit ears and TV tubes. Should be easy to hook up to the digital entertainment system, right? And look at this: a pile of tie dye tunics and foot-wide bell bottoms. Add headbands, and they’ll be perfect for the Woodstock 50-year reunion. Oh my, it’s the orange tuxedo and ruffled shirt! Wanna make a statement no one will forget? They’re all you’ll need. Have fun rummaging up there. But be careful not to step on that pet rock.

No Coverage For Fraudulent Wine Purchases Under “Private Collections” Policy

Earlier this year, we wrote about a California Appellate Court case holding that an unsuspecting wine collector who purchased millions of dollars’ worth of counterfeit wine from a “villainous wine dealer” sustained a financial loss, but no loss to property that was covered by his “Valuable Possessions” property insurance policy. “In other words, the wine collector is stuck with the devil wine without recompense. A Shakespearean tragedy, to be sure.” Doyle v. Fireman’s Fund Ins. Co., 21 Cal. App. 5th 33 (Cal. App. 4 Dist. 2018). See CM Report 2018 Vol. 1, “No Coverage For Counterfeit Wine Under ‘Valuable Possessions’ Policy”.

Federal Law Governs Arbitration Determination Where At Least One Party To Policy Not A U.S. Citizen

In a question involving the propriety of arbitration in a Hurricane Irma property insurance dispute, the federal trial court for Florida’s Southern District held that federal law applied and that it had original jurisdiction over the matter, rather than the state court, under 9 USCS § 203, because the arbitration clause fell within both the Federal Arbitration Act and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. VVG Real Estate Invs. v. Underwriters at Lloyd’s, 2018 U.S. Dist. LEXIS 129938 (S.D. Fla. August 1, 2018).

Ohio’s Rejection Of ALI Restatement Of The Law Of Liability Insurance Underscores Need For ALI To Reconsider Use Of Custom, Practice And Usage Evidence

The American Law Institute’s (“ALI”) draft Restatement of the Law of Liability Insurance’s (“Restatement”) use of “custom, practice and usage” evidence to determine the plain meaning of unambiguous terms does not find support in a majority of states, highlighting the need for the ALI to rethink this and other decisions prior to the issuance of the Restatement’s final version. The urgency for these revisions is underscored by Ohio’s recent rejection of the Restatement in its totality. 

Silver Lining: Illinois Municipalities Gain Discretionary-Acts Immunity For Failure To Maintain Property

Given a choice, most people would rather be happy than sad. Laugh than cry. Succeed than fail. Of course, it’s not always possible. Life just doesn’t work that way. It can rain cats and dogs on our best-planned parades.

But life is often what we make of it. The poet John Milton must have thought so when he penned, “Every cloud has a silver lining.” For those willing to look, good can be found even in seemingly bad situations. It’s often true in tort litigation, where the possibility of losing is always present. And now it’s true for Illinois municipalities faced with the daunting task of maintaining public property. Monson v. City of Danville, 2018 IL 122386.

California Supreme Court Holds Clients Are Entitled To Notice Of Conflicts Of Interest Without Exception

The Rules of Professional Conduct heavily regulate an attorney’s ability to represent clients with conflicting interests. Some attorneys try to circumvent these limitations by providing advance waivers to clients, relieving lawyers of liability for conflicts of interest that don’t yet exist. However, in Sheppard, Mullin, Richter & Hampton, LLP v. J-M Mfg. Co., No. S232946, 2018 LEXIS 6399 (Cal. Aug. 30, 2018), the California Supreme Court recently bolstered these restrictions, making it harder for attorneys to waive future conflicts. 

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