The Complex Insurance Coverage Reporter

CYBER INSURANCE

Kane v. Syndicate 2623-623 Lloyd’s of London, 2025 N.M. App. LEXIS 38 (N.M. Ct. App. June 16, 2025)

New Mexico appeals court holds that the language of a cyber insurance policy providing liability coverage “for” a security breach^* is ambiguous and, therefore, must be construed broadly to cover a breach-of-contract claim against the insured “because of,” “resulting from,” or “on account of” a security breach. It reasoned that, because the policy did not define “for,” it was appropriate to consider other language of the policy, dictionary definitions, case law, and industry practice and drafting history to determine the meaning. Concluding that those aids supported multiple reasonable interpretations of “for,” the court found the term ambiguous and construed it in the insured’s favor to include coverage for a claim “because of,” “resulting from,” or “on account of” a security breach – here, a claim by a vendor alleging failure to pay invoices for which the insured had transferred funds to a fraudster who had gained access to the insured’s computer system and posed as the vendor. The court also found that policy exclusions for loss of money did not bar coverage, reasoning, as to one of the exclusions, that the funds were within the “care, custody and control” of the insured’s bank, rather than the insured, at the time of loss within the meaning of New York law.^**

^* The policy affords coverage for damages and claims expenses that “the [i]nsured is legally obligated to pay because of any claim first made against an insured during the policy period for . . . a security breach.” It defines “security breach” as “a failure of computer security to prevent . . . unauthorized access or use of [the insured’s] computer system . . . .”

^** The exclusion states that coverage does not apply to loss arising out of “any loss, transfer or theft of monies, securities or tangible property of the insured or others in the care, custody or control of the insured organization”. The court construed the exclusions under New York law in accordance with the policy’s choice-of-law provision, but otherwise applied New Mexico contract interpretation principles because the parties agreed there was no conflict with those of New York.

EMPLOYERS LIABILITY INSURANCE

May v. Cooper/T. Smith Stevedoring Co., Inc., 2025 La. App. LEXIS 1098 (La. Ct. App. 4th Cir. June 11, 2025)

Louisiana appeals court holds that an exclusion allegedly contained in workers compensation and employers liability (“EL”) insurance policies^* that limited coverage for “bodily injury by disease” to claims made within a certain period was ambiguous and, therefore, did not apply as a matter of law to mesothelioma. Addressing a threshold evidentiary issue, it held that, because the insurer-defendants had offered only affidavits and deposition testimony to show that the policies contained the exclusion, and did not enter the policies themselves or “direct evidence” into the record, there was a question of fact whether the policies included the exclusion. Turning to the interpretative issue, the court concluded that the policies’ definition of “bodily injury by accident” and “bodily injury by disease,” which stated that “the contraction of a disease is not an accident within the meaning of the word ‘accident’ in the term ‘bodily injury by accident,’” did not unambiguously except mesothelioma from “disease caused by accident.” Stating that “the lack of a clear definition in the policies allow for some diseases to be classified as accidental injury,” the court concluded that the definition was susceptible to more than one reasonable interpretation and, consequently, did not unambiguously confine mesothelioma to “bodily injury by disease.”

^* The policies state that the EL coverage “applies only to injury (1) by accident occurring during the policy period, or (2) by disease caused or aggravated by exposure of which the last day of the last exposure, in the employment of the insured, to conditions causing the disease occurs during the policy period.” The exclusion at issue provides that the EL coverage does not apply “to bodily injury by disease unless prior to thirty-six months after the end of the policy period written claim is made or suit is brought against the insured for damages because of such injury or death resulting therefrom.”

OCCURRENCE

State Farm Fire & Cas. Co. v. Giannone, 2025 U.S. App. LEXIS 19854 (6th Cir. Aug. 5, 2025)

Sixth Circuit, applying Michigan law, holds that underlying claims (negligence, assault, and battery) arising out of an accidental killing during a gunfight did not allege a covered “occurrence” under the homeowner’s policy at issue even though the victim was not the intended target and the insured claimed he was acting in self-defense. The policy defines “occurrence” as “an accident” that results in “bodily injury” or “property damage” and also includes an intentional acts exclusion.^* The court explained that Michigan applies a subjective standard (unless the policy provides otherwise) and defines an accident as “an undesigned contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated, and not naturally to be expected.” Unforeseen consequences of an intentional act are not accidental when “the intended act created a direct risk of harm from which the consequences should reasonably have been expected by the insured.” Here, there was no “occurrence” since harm to the victim while unintended was a foreseeable result of the insured aiming a gun and shooting at a vehicle in which she was an occupant. Even if the insured was validly acting in self-defense (and within the exception to the refereenced exclusion), according to the opinion, his actions would not be accidental under available Michigan authority.^**

^* The exclusion precludes coverage for injury/damage that was (1) “a result of a willful and malicious act or omission of the insured;” (2) “intended by the insured;” or (3) “would have been expected by the insured based on a reasonable person standard.” It provides that parts (2) and (3) “do not apply to bodily injury or property damage resulting from the use of reasonable force to protect persons or property.”

^** It cites for example to Auto Club Group Ins. Co. v. Burchell, 642 N.W.2d 406 (Mich. Ct. App. 2001) as saying “the insured’s actions were either unforeseeable accidents or intentional actions taken in self-defense; they cannot be both.” A concurring opinion asserts that other actions taken in self-defense could be found to result in a covered occurrence under this policy language. Audio of the argument is available here.

UNFAIR CLAIMS SETTLEMENT PRACTICES

Washington Office of the Insurance Commissioner proposes amendments to regulations* that would “clarify[] and updat[e] minimum standards for claims handling” under the state’s Insurance Fair Conduct Act**. The amendments would introduce stricter timelines and expand insurer obligations, such as reducing the claim acknowledgment period from ten to five business days; requiring written status updates every thirty days if investigations exceed the initial thirty-day limit; and requiring insurers to notify claimants within thirty days of receiving notice whether the claim is accepted or denied – eliminating the prior requirement to wait for a completed and executed proof of loss. In addition, the amendments would require insurers to provide claim file documents to first-party claimants within fifteen business days of a request and disclose data sources used for repair estimates and total loss valuations. Other provisions include a three-business-day deadline to approve or reject non-emergency mitigation scopes as well as new standards for virtual inspections and communications with repair facilities. The public comment period for the proposed amendments closed on August 8, 2025.

* WAC 284-30-300, et seq.

** RCW 48.30.010, et seq.