M&A Representation and Warranty Insurance Considerations in the Wake of the Coronavirus Pandemic
April 06, 2020 —
Lori Smith & Patrick Devine - White and Williams Taking Care of Business BlogIncreasingly, M&A transactions are using representation and warranty insurance (RWI) to bridge the gap between a buyer’s desire for adequate recourse to recover damages arising out of breach of representations in the purchase agreement and a seller’s desire to minimize post-closing risk and holdbacks or purchase price escrows traditionally used as the means to satisfy such obligations. When it works, RWI provides a significant benefit to both parties: it mitigates the buyer’s risk in the event that the seller’s representations and warranties prove untrue, and it permits the seller to reduce the portion of the purchase price that it would otherwise have to leave in escrow to cover future claims for breach of those representations and warranties. However, as the coronavirus pandemic ravages the global economy, insurers are now expressly adding COVID-19 exclusions to their RWI policies. If RWI insurers decline coverage for these losses, the allocation of risk in the representations and warranties (and related indemnity provisions) will be more critical than the parties contemplated when they negotiated the transaction documents.
Unlike in the case of a natural disaster, insurers cannot quantify the economic fallout that may result from the coronavirus pandemic. This uncertainty breeds systemic concern about the number of insurance claims that covered parties of all varieties will bring, which in turn creates an industry-wide reluctance to cover the claims. Based on discussions with market participants, we understand that, at the present time, 70% to 80% of RWI insurers are broadly excluding losses resulting from COVID-19 and similar viruses, epidemics, and pandemics (including government actions in response thereto), 5% to 10% are narrowly excluding specific coronavirus-related losses that are more likely to be implicated in a particular transaction (e.g., losses caused by business interruption), and 10% to 15% may be willing to narrow their exclusions upon completion of the underwriting process, depending on their comfort level after conducting rigorous and heightened diligence. Insurers’ concerns are wide-ranging, but the representations and warranties causing the greatest distress appear to be those regarding customer retention, supply chain matters, undisclosed liabilities, and the absence of changes between the date of the seller’s most recent financial statements and the transaction closing date.
Reprinted courtesy of
Lori Smith, White and Williams and
Patrick Devine, White and Williams
Ms. Smith may be contacted at smithl@whiteandwilliams.com
Mr. Devine may be contacted at devinep@whiteandwilliams.com
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It’s Too Late, Lloyd’s: New York Federal Court Finds Insurer Waived Late Notice Defense
June 05, 2023 —
Latosha M. Ellis & Janine A. Hanrahan - Hunton Insurance Recovery BlogA New York federal judge recently ruled that an insurer waived its late notice defense because a generic reservation of rights was insufficient to preserve it. As a result, the policyholder’s claim was preserved despite being submitted more than three months after the loss—a delay which would ordinarily be fatal under New York law. The decision underscores the importance both of timely submission of claims and careful attention to reservation of rights letters.
Background
Mave Hotel Investors LLC (“Mave”) owns a small hotel in Manhattan that was insured by Certain Underwriters at Lloyd’s, London (“Lloyd’s”). From October 2017 to October 2020, Mave contracted with a housing network to temporarily house homeless families and their children in the hotel. When the contract with the housing network terminated in October 2020, Mave alleged that the rooms were severely damaged and that it had to pay $1.4 million to repair them.
Reprinted courtesy of
Latosha M. Ellis, Hunton Andrews Kurth and
Janine A. Hanrahan, Hunton Andrews Kurth
Ms. Ellis may be contacted at lellis@HuntonAK.com
Ms. Hanrahan may be contacted at jhanrahan@HuntonAK.com
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Lack of Workers Holding Back Building
May 10, 2013 —
CDJ STAFFBuilders are hiring again, or at least they’re trying to. According to an article in the Los Angeles Times, many of the workers who were laid off during the construction bust have gone on to work in other areas. John Nunan of Unger Construction told the Times that “we’re starting to see spot shortages of labor.”
One problem is that despite the boom, wages haven’t risen. Rising costs for materials and land have put an additional squeeze on builders. One building supervisor noted that during the boom, he was making $26 an hour and entry level workers $17. Now he earns $16 an hour.
From bust to recovery was about five years, and its labor pool could not just wait those years. Industry representatives told the Times that it has created a perception that construction is not a stable form of employment. Brian Turmail of the Associated General Contractors of America cited “pretty consistent news coverage about the fact that there are no jobs in construction.”
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Surfside Condo Collapse Investigators Uncover More Pool Deck Deviations
September 12, 2023 —
James Leggate - Engineering News-RecordThe investigation into the 2021 collapse of the Champlain Towers South condominium in Surfside, Fla., has uncovered more deviations between the as-built conditions of the pool deck and the building’s design. But investigators emphasize their data are still preliminary as they continue to gather and test evidence from the collapse that killed 98 people.
Reprinted courtesy of
James Leggate, Engineering News-Record
Mr. Leggate may be contacted at leggatej@enr.com
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State of Texas’ Claims Time Barred by 1982 Nuclear Waste Policy Act
June 13, 2018 —
Anthony B. Cavender - Gravel2Gavel Construction & Real Estate Law Blog On June 1, the U.S. Court of Appeals for the Fifth Circuit decided the case of State of Texas v. U.S., et al. The Court of Appeals held that the petition for mandamus filed by the State of Texas essentially seeking to compel the Nuclear Regulatory Commission (NRC) to establish a schedule for the operation of the Yucca Mountain, NV nuclear waste depository was untimely filed. The depository is very controversial in Nevada, and as a consequence, none of the many deadlines established by Congress have been met.
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Anthony B. Cavender, Pillsbury Winthrop Shaw Pittman LLPMr. Cavender may be contacted at
anthony.cavender@pillsburylaw.com
Traub Lieberman Partners Ryan Jones and Scot Samis Obtain Affirmation of Final Summary Judgment
February 28, 2022 —
C. Ryan Jones & Scot E. Samis - Traub LiebermanTraub Lieberman Partners Ryan Jones and Scot Samis recently obtained affirmation of final summary judgment in favor of a windstorm and general insurance provider (“Insurer”) in the Florida First District Court of Appeal. The Appellant, a restoration service provider (“Restoration Service”), provided emergency mitigation services in the wake of hurricane damage to a residential home that was covered by an insurance policy issued by the Insurer. The Restoration Service invoiced the Insurer and, following an investigation, the Insurer paid a portion of the invoiced amount and invoked the policy’s appraisal clause to resolve the dispute over the difference. The Restoration Service brought suit against the Insurer, arguing that the appraisal process did not apply to mitigation services. The Insurer countered that it was entitled to resolve the claim by appraisal and, following arguments, the Court determined that the appraisal provision applied to mitigation services.
Reprinted courtesy of
C. Ryan Jones, Traub Lieberman and
Scot E. Samis, Traub Lieberman
Mr. Jones may be contacted at rjones@tlsslaw.com
Mr. Samis may be contacted at ssamis@tlsslaw.com
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Biden Administration Focus on Environmental Justice Raises Questions for Industry
March 22, 2021 —
Karen C. Bennett, Jane C. Luxton, Rose Quam-Wickham & William J. Walsh - Lewis BrisboisThe Biden Administration has left no doubt that it intends to prioritize environmental justice (EJ) in implementing energy and environmental policy. While EJ is not new – in fact, President Clinton signed the first EJ Executive Order (EO 12898) in 1994 – the new Administration’s plan to expand the concept to include “climate justice” and “health equity” is both novel and undefined. Similar to actions taken on climate change (see our previous alert from January 28), President Biden has announced plans for elevating EJ by designating new Cabinet level offices, intensifying enforcement, and advocating for Congressional action. Given the likelihood of serious impacts from these sweeping changes, industry will need to step up engagement as these concepts are integrated into regulatory decisions and U.S. positions globally.
Authority for addressing injustice caused by environmental pollution that disproportionately affects certain communities is found in Title VI of the Civil Rights Act of 1964. The Act imposed a responsibility on the Environmental Protection Agency (EPA or Agency) to ensure that its funds are not being used to subsidize discrimination, based on race, color, or national origin, making EPA’s Office of Civil Rights responsible for the investigation and enforcement of Title VI within the Agency. President Clinton relied on this authority in signing EO 12898, which directed federal agencies to identify and address disproportionately high adverse human health and environmental effects of their programs, policies, and activities on minority and, going beyond the protections covered by Title VI, low-income populations.
Reprinted courtesy of
Karen C. Bennett, Lewis Brisbois,
Jane C. Luxton, Lewis Brisbois,
Rose Quam-Wickham, Lewis Brisbois and
William J. Walsh, Lewis Brisbois
Ms. Bennett may be contacted at Karen.Bennett@lewisbrisbois.com
Ms. Luxton may be contacted at Jane.Luxton@lewisbrisbois.com
Ms. Quam-Wickham may be contacted at Rose.QuamWickham@lewisbrisbois.com
Mr. Walsh may be contacted at William.Walsh@lewisbrisbois.com
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Is Your Website Accessible And Are You Liable If It Isn't?
January 06, 2020 —
Kyle Janecek and Jeffrey Dennis - Newmeyer DillionTo anyone who does business online - beware. While the ADA has been in play for years, it did not necessarily account for all the technological advances that have been made over time. Specifically, when it comes to accommodations - what accommodations can and should be made within a website, and whether accommodations should be made on all websites or just some. However, because of this, a new type of lawsuit has emerged, and is slowly becoming more prominent. Since the Supreme Court refused to clarify this particular area of law, we must turn to the recent Ninth Circuit Ruling in Robles v. Domino's for guidance.
What Happened in Robles v. Domino's?
As part of a spree of litigation, Guillermo Robles had sued Domino's Pizza due to the lack of accessibility for the Domino's smartphone application and website. Mr. Robles is blind, and neither the website nor application, which allowed users to order Domino's food for pickup or delivery, and offer exclusive discounts, were accessible to him. The Domino's website and application were both incompatible with his chosen software, prompting a lawsuit in 2016. After a short success in the trial court due to the lack of guidance given to websites and applications in how to accommodate for the ADA, the Ninth Circuit overruled the trial court, finding that: (1) the ADA applied to Domino's as there was a nexus between the Domino's website and app, and physical restaurants; and (2) the lack of guidance to Domino's did not violate its right to due process.
The ultimate effect of Robles v. Domino's found that businesses cannot necessarily avoid ADA litigation, even though the federal government hasn't given guidelines on how to make a website or mobile application accessible.
What Happened at the Supreme Court?
Back in June, Domino's appealed the Ninth Circuit decision, prompting a flurry of amicus briefs. This was done, in part, because there is a circuit split between the Sixth, Ninth, and Eleventh Circuits requiring that a website has a physical nexus to a place of public accommodation (i.e. a "brick-and-mortar" location), and the First, Second, Fifth and Seventh Circuits, which will rule that a website is a place of public accommodation if it does something a place of public accommodation would do (i.e. Netflix showing films). In addition, parties aside from Domino's have been looking for further guidance given the lack of comments from the Department of Justice and Congress. This is especially relevant because the Department of Justice has been considering the application of the ADA to the internet from 1996 to 2018, resulting in some inconsistent comments regarding the need for rule making.
This had pushed Domino's and others to attempt to end the ongoing regulation through litigation and furthermore, due to the decision in the Ninth Circuit, to avoid the Domino's holding from creating a "defacto" requirement.
How Do You Prepare?
While there is an off-chance that this kind of civil ADA litigation will resurface to the Supreme Court, these claims tend to settle relatively quickly, and ultimately may prevent courts from providing any solid or concrete guidance on accessibility until either the Department of Justice provides guidelines or Congress amends the ADA to specifically address website accessibility.
However, a determination of what is "accessible" may be put forward due to the new proposed regulations for the CCPA set forth by California's Attorney General. The proposed regulations specifically state that a privacy policy should be accessible to consumers with disabilities, and at a minimum, should provide information on how a consumer with a disability can access the notice in an alternative format. Importantly, this removes the arguments on whether or not the website would have to be a place of public accommodation. It is now widely applicable to every website. Given the CCPA is to be enforced by the Attorney General, this presents a possible situation where the state of California will determine what is accessible through enforcement actions.
In the absence of guidelines however, you have four actions you can take to protect your business.
- Learn the standards. There are unofficial accessibility guidelines such as WCAG 2.0AA that are treated as an industry standard. While this may not completely protect you from claims made by litigants, this will help your business move towards compliance.
- Know and negotiate. When dealing with third party service providers or developers, make sure that accessibility is brought up, discussed, and addressed before moving forward with using that service provider or developer. If the developer or service provider cannot assure that their product is accessible, be prepared to walk away. A business may be found liable for the inaccessibility of an online service provider used by the business to provide the business's services.
- Beta test often. As technology changes or websites are updated to be more device-friendly, new code or functions may make a website less accessible for accessibility devices and software. In addition, just because a website meets the WCAG 2.0AA, this may not account for all accessibility issues, so it would be prudent and beneficial to be thorough.
- Get help. Consider hiring third parties to help you evaluate a plan for accessibility and keep you up-to date for online accessibility issues.
Nonetheless, there is still a significant risk and uncertainty for anyone who does business online, as any business has to be aware of the current general framework of laws and industry accessibility guidelines to hope they meet the murky definition of "accessible."
Kyle Janecek is an associate in the firms Privacy & Data Security practice, and supports the team in advising clients on cyber related matters, including policies and procedures that can protect their day-to-day operations. For more information on how Kyle can help, contact him at kyle.janecek@ndlf.com.
Jeff Dennis (CIPP/US) is the Head of the firm's Privacy & Data Security practice. Jeff works with the firm's clients on cyber-related issues, including contractual and insurance opportunities to lessen their risk. For more information on how Jeff can help, contact him at jeff.dennis@ndlf.com.
About Newmeyer Dillion
For 35 years, Newmeyer Dillion has delivered creative and outstanding legal solutions and trial results that align with the business objectives of clients in diverse industries. With over 70 attorneys working as an integrated team to represent clients in all aspects of business, employment, real estate, privacy & data security and insurance law, Newmeyer Dillion delivers tailored legal services to propel clients' business growth. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California and Nevada, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949.854.7000 or visit www.newmeyerdillion.com.
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