Best's Review


2021 Liability Forecast: COVID, Cyber, Opioids, Sex Abuse

Claims and lawsuits regarding insurance coverage show no signs of abating.
  • Alan Rutkin
  • February 2021
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As 2020 came to an end, my thoughts turned to expectations for 2021. We can predict insurance coverage issues that will emerge by looking at the new liability issues that have emerged. Four liability issues stand out: COVID, opioids, sexual abuse and cyber.

COVID has disrupted many businesses. But are these disruptions covered by business interruption insurance? Policies generally cover losses due to the necessary suspension of operations. The suspension must be caused by direct physical loss of or physical damage to property. COVID, though awful, did not physically damage properties. And many of these policies also contain virus exclusions. Insurers have mostly been winning in these disputes, and I expect this trend—and the battle—to continue.

Opioids have led to coverage issues, particularly on the duty to defend. Local governments are suing manufacturers and distributors. Plaintiffs claim that manufacturers should have rejected suspicious orders. Localities are seeking to recover various costs arising from the epidemic. We are generally seeing disputes under two types of coverage—commercial general liability policies and directors and officers policies.

With respect to CGL coverage, insurers contend that these are not suits seeking “damages because of bodily injury,” as required in these insurance contracts. Governments are generally seeking to recover their own financial losses from providing additional law enforcement and medical services to opioid victims. Is there a duty to defend? Courts have split.

Turning to D&O policies, some companies and their executives—in agreements with federal authorities to resolve criminal charges on their opioid distribution—have admitted to illegal acts. As a result, D&O insurers have asserted exclusions for claims arising from willful illegal conduct. The issue often centers around whether there has been a “final adjudication.” Earlier this year a federal judge in the U.S. District Court for the Western District of New York held that a deferred prosecution agreement with the Department of Justice in a criminal matter was not a final adjudication for purposes of the exclusion. It similarly found that the drug distributor's civil settlement did not establish any deliberate criminal or fraudulent act, making it unnecessary for the court to decide if the stipulation was a final adjudication. The judge also rejected known loss defenses raised by the insurer. Consequently, the insurer in that case was required to continue funding the company's defense through trial.

Sexual abuse cases have been filed under statutes that allow victims to sue for abuse that happened many years ago. Statutes such as New York's Child Victims Act have led to many suits. Coverage questions similar to those arising in other latent injury cases are prevalent here. When did the acts and injuries take place and are they within the scope of the statute? Which policies are triggered, if triggered at all? Is there an “occurrence”? Do restrictions against expected or intended injury apply? Did the policyholder give timely notice? How are defense and indemnity costs allocated? We expect to see courts addressing these and other issues in 2021.

Cyber continues to create many coverage questions. I've written about many of these before (what is hacking, when is injury directly caused by a computer, etc.). As 2020 ended, we were just learning about hacking that was being attributed to the Russian government. We are not at war with Russia. But rogue nations hostile to the United States might attempt similar hacking efforts. Would these acts implicate the war risk exclusion? At least one such claim is now being litigated. We may see more in the future.

I expect 2021 to be an interesting year from an insurance coverage perspective. And I hope that 2021 will be a better year from most other perspectives.

Best’s Review contributor Alan Rutkin is a partner in the law firm Rivkin Radler LLP. He can be reached at

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