Leading Out Loud: CMPL

Three cyber, management, and professional liability experts weigh in on the future of these lines

August 07, 2020 Photo

How is COVID-19 affecting professional liability matters? What trends are developing in lines like cyber, which might catch insurers off guard? And what does the future hold in terms of emerging risks, exposures, and litigation trends? Three experts weigh in with their thoughts.

How is COVID-19 affecting professional liability matters? Is this a real threat or just perceived?

Paul Roach, Alan Gray: In light of the COVID-19, emergency declarations have been issued in all 50 states, and 23 states have enacted some form of protections and immunities for health care providers, including some of the hardest hit states like New York, New Jersey, and Massachusetts. These protections and immunities are generally designed only for the duration of the length of the pending emergency declarations and will not be permanent in nature. To defeat the protections granted during the emergency, a plaintiff would generally have to show that the health care provider acted with willful or intentional criminal misconduct, committed reckless misconduct, intentionally inflicted emotional harm, or was grossly negligent.

Given the magnitude of the potential damages at stake, creative plaintiff’s attorneys will undoubtedly craft theories of liability to attempt to establish breaches in these raised standards of care, and there will undoubtedly be a significant number of claims on the horizon in virtually all states as plaintiff’s attorneys begin to mobilize. Their success will be based in large part on how well they can attack new standards of care established in many states. These cases will ultimately be a battle of experts in establishing the ultimate level of care and preparation that was provided by the health care providers during the pandemic.

Michelle Arbitrio, Wood Smith Henning & Berman: With so much economic disruption, we see creative lawyering by the plaintiff’s bar impacting a variety of professional liability issues. As business interruption claims grounded in COVID-19 are denied, intense focus is placed on theories of liability that trigger professional liability policies. Already, we are fielding an increase in activity in some sectors of the professional lines market, including accountants, securities brokers, and other financial lines professionals. We have also seen an increase in claims against insurance agents and brokers for failing to obtain business interruption coverage for pandemic exposures. I also see a rise in creative contracting and attempted release/waivers in all lines in an effort to reduce or minimize the professional risks in the future in the event of a second wave.

Lori Rosen Semlies, Wilson Elser: This is not only a real threat but a reality. Lawyers were advertising just weeks into the pandemic for claims against hospitals and nursing homes. This is true even in the states with some level of immunity for health care workers or facilities. The litigation costs alone to determine if immunity will be afforded will be unprecedented.

Forget about COVID. What other trends are you seeing in professional liability risk and exposure?

Michelle Arbitrio, Wood Smith Henning & Berman: We are seeing a definite uptick in employment practices liability claims emanating from furloughs, layoffs, and a tough job market. As benefits run out and jobs are scarce, we see more creative claims being made. Construction in many states was deemed essential, so we are seeing claims remain relatively constant in the area of design professional issues.

What about cyber liability coverage? What kinds of scams are proliferating? Are any falling off in popularity? What’s “catching” businesses and therefore insurers off guard and causing claims or litigation?

Michelle Arbitrio, Wood Smith Henning & Berman: Working remotely has given rise to a whole cottage industry of cyber claims. Phishing scams are common in every industry, and training is critical to avoid getting trapped. Reputable law firms have been subjected to ransomware demands with data losses, from which they may never recover. As the workplace moves into the home, levels of security in cyberspace vary greatly from tightly controlled work environments. 

Look into your crystal ball: What is the future of professional liability in terms of risks and exposures? What about litigation trends?

Lori Rosen Semlies, Wilson Elser: This is political, but the judiciary will have to enforce nursing home immunity in the states that have it, or the federal government will have to enact similar protections. Without either of those, a fund will have to be set up like for the victims of the 9/11 attacks. Otherwise, the nursing home industry may not survive.

Michelle Arbitrio, Wood Smith Henning & Berman: The market for professional liability insurance is expected to see further growth and expansion and will likely include new and different types of professionals in the panoply of covered professions in the “miscellaneous” or “specialty risk” markets.

The future of professional liability risk will likely include further growth in new areas that were not relevant even five years ago, including players in the sharing economy and the cannabis industry, as well as a marked increase of independent contractors. We also expect to see an emergence of climate change claims as another area of professional liability exposure that threatens industries and businesses, including any industry linked to hydrocarbons and greenhouse gas emissions, such as oil and gas companies, transport, manufacturing, agri-business, and finance. 

Lori Rosen Semlies is partner at Wilson Elser. lori.semlies@wilsonelser.com 

Michelle Arbitrio is partner at Wood Smith Henning & Berman LLP. marbitrio@wshblaw.com 

Paul M. Roach is president of Alan Gray LLC. proach@alangray.com 

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