Author Archives: Robert J. Cosgrove

Getting What You Need in PA Bad Faith Law.

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Yesterday, in the case of Matthew Rancosky, et al. v. Washington National Insurance, et al., the Pennsylvania Supreme Court ruled on what qualifies as insurer bad faith. In Rancosky, the decedent plaintiff purchased a cancer insurance policy as a supplement to her health insurance. Unfortunately, some 11 years after first purchasing this insurance, she was diagnosed with cancer. She battled cancer on and off for several years, but ultimately the insurer denied any additional benefits because of a mistake made by plaintiff’s physician as to when her disability began. The insurer, despite having access to forms, never sought to rectify or clarify the mistake although it had access to the information and was advised of the mistake’s existence.

An §8371 PA bad faith claim was ultimately brought. The trial court found for the insurer, but the appellate court found for the plaintiff. The question before the PA Supreme Court was whether under the Terletsky standard, a PA bad faith claim still turns on evidence that (1) the defendant did not have a reasonable basis for denying benefits under the policy, and (2) that the defendant knew or recklessly disregarded its lack of a reasonable basis in denying the claim.

The Supreme Court has answered that question in the affirmative. In answering that question, the Supreme Court made a few interesting observations. First, the Court noted that the first prong of the Terletsky test is an “objective inquiry into whether a reasonable insurer would have denied payment of the claim under the facts and circumstances presented.”

Second, in respect of the second prong of the Terletsky test (and the part of the opinion that will no doubt generate the most public comment), the Court held that “proof of an insurer’s motive of self-interest or ill-will, while potentially probative of the second prong, is not a mandatory prerequisite to bad faith recovery.” In other words, to prove the “reckless disregard” requirement, the insured need not prove almost intentional insurer misconduct.

Third, and perhaps most significantly, and almost as an aside, the PA Supreme Court also noted that “mere negligence is insufficient for a finding of bad faith under Section 8371.” This part of the opinion runs contrary to some recent federal case law that suggests that a bad faith claim can sound in mere negligence.

To us, the decision is good news for the insurance world. While it might have been nice to have the PA Supreme Court hold that intentional misconduct is a condition precedent to a bad faith claim, reconfirmation of the Terletsky standard and a repudiation of the idea that mere negligence can give rise to a bad faith claim are good, solid developments. As the Rolling Stones sang, you can’t always get what you want, but if you try sometimes, you might find, you get what you need.

For more information about this post please e-mail Bob Cosgrove.

Cyber Rules About to Get Real.

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We have previously reported on NY’s onerous cyber rules. The rules go into effect by month’s end.

Specifically, n August 28, 2017, insurance companies that do business in NY will be obligated to institute policies and procedures that preserve and protect PII of clients, insureds, and other entities in accordance with 23 NYCRR §500 (et seq.). The rationale of the policy was explained by the Superintendent of the DFS:
Consumers must be confident that their sensitive nonpublic information is being protected and handled appropriately by the financial institutions that they are doing business with. DFS designed this groundbreaking proposed regulation on current principles and has built in the flexibility necessary to ensure that institutions can efficiently adapt to continued innovations and work to reduce vulnerabilities in their existing cybersecurity programs. Regulated entities will be held accountable and must annually certify compliance with this regulation by assessing their specific risk profiles and designing programs that vigorously address those risks.

Insurance companies, and other covered entities, are required to perform cybersecurity assessments in accordance with a written policy developed by the covered entity, that includes:
• An evaluation of encryption of data containing PII (both in transit and at-rest);
• The development of a Crisis Response Team (“CRT”) to respond to a breach;
• TFA or MFA;
• Identify and assess internal and external cybersecurity threats;
• Utilize defensive infrastructure in conjunction with appropriate policies and procedures to protect PII;
• Capability of detecting and responding to any intrusion;
• Ability to fulfill the statutorily required breach notification statutes.

Moreover, the regulations require a specific policy that regulates 14 different aspects of the covered entities operations. If this is not enough to develop specific in-house policies, the regulations also require that insurance companies ensure that other entities it does business with and transfers materials containing PII, to maintain and adhere to strict cybersecurity regulations that include a requirement for TFA, encryption, written policies, and periodic assessments of the efficacies and compliance to the policies. The insurance company is required to promulgate a policy for its third-party service providers that complies with the above requirements. If not, the insurance company may be held liable.

Furthermore, we note that this will soon be the policy in all 50 states. It is easier to implement these changes and requirements now as opposed to being forced to implement the policies at a rush and possibly not achieving full compliance.

Special thanks to Matt Care for his contributions to this post.

For more information about this post please e-mail Bob Cosgrove.

WCM Philadelphia Associate Recognized by ABA’s Section of Science and Technology Law.

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Philadelphia associate Sathima Jones was recently recognized by the ABA’s Section of Science and Technology Law, which included her 2015 article entitled Blurring the Lines Between Infringement and Inspiration in a CLE Presentation at the 2017 ABA Annual Meeting on August 10, 2017 in New York City.

The CLE entitled Unblurring the Lines: Navigating the Complex Relationship between Technology, Music and Copyright Law, included a distinctive panel of musicians, musicologists and prominent experts in the music copyright litigation field. Notably, Bob Kohn, author of Kohn on Music, who won the 1996 case, Lotus v. Borland (a Supreme Court decision that set wide precedent on the extent of software copyright) spoke on the difficulties in bringing and proving an infringement case. Also in attendance was Jonathan D. Davis, a trademark and copyright litigator with over 35 years of experience and an impressive roster of clients, including Shawn Combs, Usher, and Timbaland.
The panel discussion focused most prominently on the 2015 federal case involving the smash hit “Blurred Lines”, in which the Estate of Marvin Gaye won a substantial award based on claims that Robin Thicke and Pharrell used multiple elements form Gaye’s song “Got to Give it Up.” Similar themes were explored with respect Sprit’s 2016 challenge of Led Zeppelin’s song “Stairway to Heaven” and Tom Petty’s 2015 challenge alleging Sam Smith’s Song Stay With Me shared a similar chorus with “I won’t Back Down.”

Drawing parallel themes from Ms. Jones’ article, the CLE explored the nuances of copyright law that pose difficulty in determining whether an artist has infringed a work or merely been inspired, and the challenges that litigators in proving these cases.

For more information about this post please e-mail Bob Cosgrove.

WCM Partner to Speak at Privacy Shield Certifications Webinar.

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WCM Partner Bob Cosgrove, a CIPP-US and CIPM, will be one of two speakers at an August 31, 2017 webinar entitled Privacy Shield Certifications: Things You Need to Know. Mr. Cosgrove will focus his portion of the presentation on:
1. Privacy Shield: Requirements and advantages of participating in the event of litigation.
2. Serving Two Masters: The litigation process, discovery, and data transfer from the European Union.
a. Why discovery involving European Data is a challenge and what Privacy Shield does and does not do to remedy the problem.
3. There is Nothing New Under the Sun: The implications of Privacy Shield on member state data blocking legislation.
a. Blocking legislation in member countries is still effective.
b. How the United States courts have handled blocking legislation and data transfer restrictions.
4. Privacy Shield Enforcement: The arbitration process and liability for failure to comply with Privacy Shield requirements.
If you are interested in the webinar, more information can be found here, or e-mail Bob Cosgrove.

WCM Wins Summary Judgment in Philadelphia Penile Numbing Cream Products Case.

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Partner Bob Cosgrove and associate Matt Care were awarded summary judgment in Philadelphia County in the case of Lowe v. The Kama Sutra Company, et. al. In Lowe, the plaintiff, a MMA fighter, sued the designer, manufacturer, and distributor of a prolonging gel, meant to prevent premature ejaculation, after alleging injuries to his penis after repeated use. Lowe utilized the gel in combination with other products and alleged that the gel caused permanent disfigurement to his member and decreased sexual performance.

After years of discovery and countless depositions, WCM was able to convince the court that our client, a wholesale distributor of adult novelties and romance products, did not distribute a defective product. Consequently, the court dismissed all of the plaintiff’s negligence, strict product liability, breach of express warranty, breach of implied warranty of merchantability, and breach of implied warranty of fitness for a particular purpose claims, and all cross-claims against our client.

For more information about this post please e-mail Bob Cosgrove.

WCM Is Pleased to Announce That Colleen Hayes Has Been Promoted to Counsel.

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Effective July 1, 2017, WCM is pleased to announce that Colleen Hayes has been promoted to the rank of counsel. Colleen, who is based in WCM’s Philadelphia office, focuses her practice on commercial work and specifically insurance contract interpretation and coverage and bad faith litigation. Colleen joined WCM after her 2011 graduation from Villanova University School of Law where she graduated magna cum laude and was elected to the Order of the Coif. She is also a cum laude graduate of Villanova University where she received a B.A. in Psychology. Colleen is barred in New Jersey and Pennsylvania (with a pending admission in New York). She was recently elected to the Executive Committee of the Philadelphia Association of Defense Counsel.

WCM Philadelphia Partner Becomes President Elect of Philadelphia Association of Defense Counsel.

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On June 6, 2017, WCM Partner Robert J. Cosgrove was elected to the position of President-Elect of the Philadelphia Association of Defense Counsel, one of the oldest local defense organization in the country (now in its 70th year). Bob is the managing partner of WCM’s Philadelphia office and serves clients in a mix of commercial and defense related matters. As President-Elect, Bob is responsible for supervising all of the PADC’s committees which run the gamut from judicial relations to pro bono.

WCM PA Associate Is Recipient of Defense Association Award.

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On June 6, 2017, the Philadelphia Association of Defense Counsel, one of the oldest local defense organization in the country (now in its 70th year), awarded the 2017 Joseph H. Foster Young Lawyer Award to Hillary Ladov, a coverage and commercial litigator in Wade Clark Mulcahy, LLP’s Philadelphia office. The award is given to a “young lawyer who best exemplifies the qualities of professionalism and dedication as defense counsel in the practice of law and in the promotion of the highest ideals of justice in the community”. Hillary received the award in recognition of her quality legal work as well as her pro bono work with non-profits, low-wage workers, and Jewish graduate students in Philadelphia as well as her service to the Philadelphia Bar Association. A donation will be made by the PADC to Hillary’s designated charity.

Continuous Trigger Coverage Expanding in PA or Still Only About Asbestos?

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That was the question (effectively) posed before the Commonwealth Court in the case of Pennsylvania Manufacturers’ Association Insurance Company v. Johnson Matthey, et al. In the case (which was brought in the Commonwealth Court because PA’s Department of Environmental Protection was a defendant), Pennsylvania Manufacturers sought a declaration that it did not owe coverage for an environmental contamination lawsuit filed by DEP against Johnson Mathey. In the underlying lawsuit, DEP alleged that from 1951 through to 1969, a Johnson Mathey predecessor company allowed hazardous substances (arising out of the manufacture of alloy tubes) to escape into Chester County, PA. Pennsylvania Manufacturers insured Johnson Mathey from 1969 through to 1971. The contamination was not discovered until 1980 and thus no contamination at the Site was detected during the Policy period.

Pennsylvania Manufacturers, which assumed its insured’s defense under a reservation of rights, argued that for coverage to attach, the property damage must manifest itself during the policy period. The Commonwealth Court agreed with this basic coverage principle and noted that the “trigger of coverage under an “occurrence” insurance policy is ordinarily the first manifestation of the injury that is alleged to have been caused by the insured.” If only the decision had ended there!

However, the court went on to write that under the reasoning of the J.H. France Refractories Co. v. Allstate Insurance Co., 626 A.2d 502 (Pa. 1993) decision (which expanded the trigger of coverage with respect to asbestos bodily injury claims and held that all “occurrence” policies from the date of exposure to the date of first manifestation are triggered), there was no specific reason for continuous trigger coverage to be limited to asbestos cases. The Commonwealth Court wrote that “the justification for the multiple trigger of coverage was not the peculiar nature of asbestos disease, but the long latency of the claim for which coverage was sought.” Applying this reasoning to the facts at bar, the Commonwealth Court held “On the record before us, this case therefore presents the long latency of continuing, undetected injury or damage that supports a trigger of insurance coverage prior to manifestation under the Supreme Court’s decisions in J.H. France Refractories Co. and St. John.”

So, what does this mean for the insurance marketplace? What it means is that there are now, at least, two possible scenarios in which continuous trigger exposure applies in PA – asbestos and environmental pollution. We suspect to see the plaintiff’s bar citing Pennsylvania Manufacturers’ Association Insurance Company v. Johnson Matthey, et al. in other contexts – and our suspicion is that the attack will start in the construction defect arena. Stay tuned for what happens next!

For more information about this post please e-mail Bob Cosgrove.

Sad Times for Lloyd’s of London.

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All good things must come to an end, and, so at last, it seems that lunches with Lloyd’s will now become more American with salads and iced teas rather than two courses and bottles of wine. The reason? Because Lloyd’s has now banned drinking during working hours. Hard times for we coverage lawyers who rely upon the afternoon underwriting of risks to ensure gainful employment! To say nothing of the poor pubs and restaurants!

Thank goodness for a trip I was able to make to Lloyd’s a few weeks back, where there was no visible sign of prohibition at work and drinks still flowed freely during the working day.