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Published on 10 January 2022

In this chapter of our Annual Insurance Review 2022, we look at the main developments in 2021 and expected issues in 2022 for the USA.

Key developments in 2021

The COVID-19 pandemic again was a dominant issue in 2021, which featured a return of social inflation, considerable cyber and security activity, and a significant increase in attention to sustainability.


Environmental, social and governance (ESG) criteria or standards – often referred to simply as sustainability – are having a significant impact on all sectors, including, and perhaps particularly, the insurance and financial sector. First and foremost, insurers are focused on their own practices and operations. They are setting and implementing goals regarding their own emissions, carbon blueprints, diversity and governance. Insurance companies are being viewed – with increasing frequency and severity – as agents for imposing affirmative ESG change on other entities such as their policyholders and vendors. The underwriting, pricing, investment, claims and business practices of insurance companies are under increased scrutiny, both internally and externally. State regulators and rating agencies are laser focused on ESG. The Biden administration is implementing an “all of government” focus on ESG, with the Federal Office of Insurance poised to increase the federal regulation of insurance, using climate change as a  jumping-off point. ESG factors are driving losses and litigation with increasing frequency. 

COVID-19 Business Interruption and Other Pandemic Coverage Litigation

The issuance of various governmental orders requiring businesses to temporarily modify or close their operations led to an almost immediate avalanche of claims and lawsuits involving first-party commercial property policies. By 1 November 2021, there have been approximately 2,062 COVID-19 coverage cases filed, with 1,863 involving business interruption, 1,680 extra expense, 1,600 civil authority, 190 ingress/egress, 106 contamination, 86 event cancellation, and 82 sue and labour. More than 450 cases were filed as putative class actions and 717 cases include allegations of bad faith.

At the trial court level, insurers have prevailed in almost 75% of the rulings on motions to dismiss in state courts and nearly 95% of the rulings by federal courts, mostly on the grounds that the virus claims do not involve “direct physical loss or damage” to property as required under most US policy wordings, governmental orders do not constitute loss of property, and/or virus exclusions preclude coverage. There are numerous motions to dismiss outstanding and many appeals pending.  The first six appellate court rulings have all come from US Circuit Courts of Appeal, with insurers prevailing in each case in decisions rendered by the Sixth, Eighth, Ninth and Eleventh Circuits (involving the laws of ten states).  The first state appellate court decision, from California, resulted in a victory for the insurer.  There have been numerous federal and state legislative proposals addressing COVID-19 coverage, but to date none have become law.  


To date, the vast majority of cyber coverage decisions have involved traditional first-party, third-party and crime/fraud policies. Claims under those policies commonly are referred to as silent cyber claims. A key decision under commercial crime and fidelity coverage was rendered by the Indiana Supreme Court.  Most insurers in the cyber-insurance market have now issued several iterations of cyber-specific policies. Cyber-insurers experienced an increase in claim activity, driven primarily by ransomware, often coupled with data extraction, and business email compromise events. 

Privacy violations

In the absence of comprehensive federal laws, individual states continue to adopt their own privacy laws and regulations. Despite the 2020 enactment of the California Consumer Privacy Act, California residents voted in November to approve the California Consumer Privacy Rights Act (CPRA), which further expands consumer privacy rights. The CPRA also creates a state-wide privacy agency that will be charged with enforcement of privacy laws. This likely will lead to increased enforcement actions for privacy violations in California.

The Illinois Supreme Court found that a claimed violation of Illinois’ Biometric Information Privacy Act fell potentially within the coverage of businessowners liability policies affording personal and advertising injury coverage. The plaintiff in the underlying suit alleged she purchased a membership from the policyholder, a salon that granted her access to other salons. Enrolling in the programme required that the plaintiff have her fingerprint scanned in order to verify her identity. Because the policies did not define “publication,” the court turned to the dictionary definition and case law, and held that “publication” has at least two definitions and means both the communication of information to a single party and the communication of information to the public at large.” As such, the salon’s disclosure of fingerprint data to another party constituted a “publication.” The court the held the violation of statutes exclusion did not bar coverage for the claim since BIPA was dissimilar from the statutes enumerated in the exclusion. Subsequently, a Massachusetts federal court held that a broader exclusion barred coverage for BIPA claims.

Civil Unrest, Riots, and Strikes

Although 2021 did not see the unprecedented protests and civil unrest activity that was witnessed in 2020 in the wake of demonstrations in response to the killing of George Floyd, the activity continued in 2021. Demonstrations over climate change, police brutality, criminal trials and labor strikes have been on the radar for insurers and policyholders.  Civil unrest – coupled with the defund the police movement – has produced a variety of losses for which coverage has been sought under first-party property, third-party liability, and SRCC (strike, riot, and civil commotion) policies.   

Lead Paint

Coverage issues relating to the USD $400 million-plus lead paint abatement fund involving three lead paint manufacturers are being addressed in three separate coverage actions. The courts have reached different conclusions in each on motions for summary judgment.  The California coverage action involving ConAgra – in which the trial court granted insurers’ motion to dismissed based California’s known loss statute – is on appeal.  

Long-Tail Claims – Contribution Among Insurers

Traditionally, Florida courts did not allow contribution claims among liability insurers for defence costs. Fl. Stat. § 624.1055 was enacted to expressly provide that courts shall allocate defence costs among liability insurers that owe a duty to defend the policyholder against the same claim, suit or other action “in accordance with the terms of the liability insurance policies”. The statute does not apply to motor vehicle liability insurance or medical professional liability insurance, but now brings Florida within the majority of states permitting contribution of defence costs.  

Opioids Coverage

In the wake of the nationwide opioids epidemic, various state and local governments sued numerous entities involved in the manufacture, sale, distribution and prescription of opioid pharmaceutical products. Facing staggering potential liabilities, these entities have turned to their insurance companies for coverage under CGL and other policies.

November was a key month in the litigation as the Oklahoma Supreme Court overturned a USD465 million judgment that Johnson & Johnson sustained in the nation's first opioid trial. Also, a California judge handed a complete victory to drug manufacturers after the nation's second opioid trial.  The third trial did not go well for defendants, with pharmacy companies CVS Health, Walmart, and Walgreens being found liable for contributing to an opioid abuse epidemic in two Ohio counties. This marked the first time a jury has weighed in on the controversial “public nuisance” legal theory at the heart of many similar suits nationwide in the context of opioids.

Previously, several significant settlements reached, including pharmaceutical distributors' USD215 million settlement with two Ohio counties, the distributors' USD1.179 billion settlement with the State of New York and some political subdivisions, Johnson and Johnson's USD230 million settlement with the State of New York, and a USD26 billion global settlement between drug distributors and a group of state attorneys general in the National Prescription Opioid MDL.  

Disgorgement, D&O, and Securities Law 

New York's highest court reversed an intermediate appellate court ruling and held that a USD140 million settlement payment by J.P. Morgan Securities Inc.'s predecessor to the U.S. Securities and Exchange Commission was not an uninsurable penalty.  The court concluded that the insurers failed to prove the disgorgement payment — “a component of the SEC settlement that serves compensatory purposes and was measured by the profits wrongfully obtained and losses caused by the alleged wrongdoing” – fell under the exclusion for “penalties imposed by law.”

On June 21, 2021, the U.S. Supreme Court issued its decision in Goldman Sachs holding that, at the class action certification stage, a court may consider whether a company’s alleged misstatements were too generic to have impacted its stock price. The decision is expected to make it more difficult to certify a class action in suits alleging securities fraud based on generic company statements.

The Delaware Supreme Court in the Dole case ruled Delaware law governed the excess D&O policy even though most contacts were in California, perhaps representing the court’s desire to maintain Delaware’s status as the home to more US companies than any other state.  The court ruled that the profit/fraud exclusion did not apply on the narrow ground that one of the two underlying matters was resolved by settlement and, therefore, did not satisfy the requirement of the exclusion that the underlying matter be resolved by adjudication.  It also affirmed the trial court’s application of the “larger loss” rule as opposed to the “relative exposure” rule to defence costs and costs of settling one of the two  underlying matters.

What to look out for in 2022

  • Social inflation and ESG will continue to dominate in 2022
  • Additional appellate and trial court COVID-19 decisions will be rendered, with a decrease in the number of new business interruption claim filings expected. 
  • Cyber and privacy claims will continue to mount.  Silent coverage decisions will continue to be rendered with decisions under cyber specific policies expected.   
  • Civil unrest, riots, and strikes are likely to remain the major political risks in the US.
  • Cyber attacks, data loss, regulatory risks, health and safety, COVID-19, ESG, climate and employment claims likely will remain among the leading D&O emerging risk areas.  

Although most special purpose acquisition company (SPAC) securities class action lawsuits are filed after the de-SPAC transaction has been completed, more suits are being filed before the merger becoming effective. In addition to merger objection lawsuits, more full-blown 10b-5 class actions are being filed. The trend of SPAC-related state court actions being asserting as state law causes of action rather than federal securities law violations likely will continue, with counsel fees being a major consideration. The future of SPACs remains somewhat uncertain. 

Written by Co-Chairs Global Insurance Services Practice Group Scott M. Seaman and Pedro E. Hernandez of Hinshaw & Culbertson LLP.
Download our full Annual Insurance Review 2022 for more insights.