An insured who purchased insurance specifically for privacy injury liability was recently forced to sue its insurer after it denied coverage. The insured allegedly “installed web beacons and cookies on its platforms so that third parties could intercept and track users’ PII and/or PHI.” (Compl. Para. 31). The complaint brings claims for breach of contractual duty to indemnify the insured for an FTC payment and breach of contractual duty to defend and indemnify the insured for a class action lawsuit filed against it for the disclosure of private health information.
The coverage issues being litigated are:
- Whether the FTC action and the class action lawsuit against the insured are “Related Claims” under the policy; and
- Whether an exclusion for the prior wrongful acts of a subsidiary apply.
Policyholders should remember:
- All insurance policies have exclusions and pitfalls, and it is important to retain coverage counsel if a coverage dispute arises.
- A coverage denial is not the end of the story.
- Examine who bears the burden of proof. Is the insurer or the insured required to show that an exclusion applies? Insurers are normally required to prove that an exclusion applies.
- Who benefits from a question of fact? Generally, an insured benefits from a question of fact because the insurer will be forced to defend the lawsuit.
Online counseling company BetterHelp told a California federal court that its insurer must cover a $7.8 million Federal Trade Commission payment and must defend it in underlying litigation brought by consumers who claim the company violated laws via its collection, use and disclosure of private health information.
