Colorado takes steps to create wildfire insurer of last resort, first-in-nation environmental justice regulations announced in New Jersey, and, in Louisiana, a court decision that found business interruption coverage for COVID-19-related losses has been reversed.
Creating Wildfire Insurer of Last Resort
Colorado is moving toward becoming the first state in 41 years to create a state-chartered property insurer of last resort, as record-setting wildfires have prompted insurance companies to stop covering some homes in fire-prone areas. The Fair Access to Insurance Requirements (FAIR) Plan program would sell insurance to anyone who cannot obtain coverage elsewhere—and would require every Colorado resident with property or auto insurance to pay the program’s claims if it runs out of money. The bill has wide support, both with state lawmakers and Gov. Jared Polis. The legislation would require insurance premiums to be “actuarially sound” so they generate enough money to pay every claim and other expenses. It also would authorize the program to impose assessments on every property insurer in the state if it ran out of money. Many insurance programs in other states have the same authority. —From Mark Friedlander, Insurance Information Institute
Supreme Court Overturns Rare COVID-19 Ruling
The majority of COVID-19 business interruption claims have been unsuccessful for policyholders. However, in Cajun Conti, LLC v. Certain Underwriters at Lloyds, the Fourth Circuit Court of Appeals found COVID-19 constituted “a direct physical loss of or damage to” the insured’s New Orleans restaurant. Now, on appeal, the Louisiana Supreme Court reversed and affirmed what most courts around the country have held: COVID-19 does not constitute physical loss or damage triggering insurance coverage. The court found the policy in question was not ambiguous. The court also found it prudent to follow the ordinary meaning of “direct physical loss or damage.” In other words, the damage must be “direct, not indirect.” Applying these meanings, the court found that COVID-19 did not cause direct physical loss of or damage to the insured’s property. Insureds and insurers should no longer rely on the Cajun-Conti decision issued by the Louisiana Fourth Circuit now that the Louisiana Supreme Court has ruled. —From CLM Members Lori D. Barker and John M. Falgout, Wood Smith Henning & Berman
Storms Cause $100 Million in Insured Losses
Severe storms on March 24 that spawned deadly tornadoes caused insured losses in Mississippi that are approaching $100 million, according to the state’s department of insurance. Insurance Commissioner Mike Chaney says uninsured losses will exceed that figure, and he notes that data is still being collected. According to NOAA, the storms left a path of devastation from Texas to the Mid-Atlantic from March 24 to March 28. On March 24, NOAA says, the storms impacted a 170 mile stretch across Mississippi and Alabama, leaving 26 people dead. One EF-4 tornado around Rolling Fork, Miss., lasted over and hour and traveled almost 60 miles. —From Senior Managing Editor Phil Gusman
Coverage Warning for Renters
Ballentine, a commercial trucking entity, entered into a rental agreement with Enterprise. As part of it, Ballentine elected to obtain business travel insurance through Enterprise, which allegedly “provided primary coverage sufficient to comply with both state and federal law.” Following an accident and lawsuit, Ballentine sought to obtain $750,000 from Enterprise, the amount of coverage required under the Motor Carrier Act (MCA) and Federal Motor Carrier Safety Regulations (FMCSR). Enterprise argued that the liability coverage in the agreement provided only $100,000 in coverage because Enterprise was not a commercial freight carrier or an insurer for commercial freight carriers. The court ultimately agreed with Enterprise and held that “the MCA and FMCSR do not create statutory obligations for insurers to determine whether a motor carrier seeks or obtains conforming coverage.”—From CLM Member Christian Foster, Tyson & Mendes
Murphy Announces Nation’s First Environmental Justice Regulations
On April 17, the first day of Earth Week, Gov. Phil Murphy announced the final adoption of regulations to implement the state’s Environmental Justice Law. The law was signed in September 2020, and the regulations were developed by the New Jersey Department of Environmental Protection (DEP). The regulations require enhanced upfront community engagement before pollution-generating facilities are proposed in New Jersey’s already overburdened communities. They further direct permit applicants to avoid and minimize environmental and public health stressors, and enable the DEP to establish permit conditions to better protect vulnerable communities. Generally, the Environmental Justice Law “enhances existing environmental laws that did not previously enable DEP to consider environmental and public health stressors on a community level and empowers DEP to evaluate pollution potential on a facility-wide basis and apply conditions that will help facilities avoid and minimize adverse impacts.”—From CLM Member Erin Miter Scanlon, Goldberg Segalla
What Constitutes An Adverse Employment Action?
In Jones v. Walmart Store No. 2585 et al., an assistant operations manager alleged Walmart discriminated against him based on his race. He alleged he was subjected to disparate treatment through vague and conclusory allegations of racially charged comments, poor performance reviews, and a minor change in his working hours. Generally speaking, a plaintiff who asserts a discrimination claim must allege a materially adverse change in the terms or conditions of their employment. Here, the U.S. District Court for the District of Connecticut dismissed the claims and held that the plaintiff failed to establish a prima facie case of discrimination. He did not allege that he suffered an adverse employment action because he did not identify a “termination or a demotion, reduction in pay or position, or a loss of material benefits or responsibilities.” Employers facing a discrimination claim should analyze early on whether an employee has been subject to any adverse employment actions when attempting to resolve a claim.—From CLM Members Jody Cappello and Tara Sheldon, Freeman Mathis & Gary