1. Does Addiction Constitute Physical Injury?

In re: Soc. Media Adolescent Addiction/Personal Injury Products Liability Litigation,

Northern District of California Case No. 4:22-md-03047

Takeaway: A federal court in California is poised to find that adolescent addiction to Instagram

and Facebook constitutes physical injury, which will push coverage to CGL policies (which cover

bodily injury) and away from E&O and Cyber policies (which often exclude bodily injury).

In the social media addiction product liability suit against Meta, District Court Judge Yvonne

Gonzalez Rogers heard oral argument in October 2023 on whether addiction harming a teenager’s

mental health constitutes a “physical injury.” While not an insurance coverage case, the decision

may impact whether coverage for such suits triggers bodily injury insuring grants (as in CGL

policies) or exclusions (as in E&O and Cyber policies). The 2013 ISO form defines “bodily injury”

as “bodily injury, sickness or disease sustained by a person ...” So, mental sicknessis not obviously

a “bodily injury” unless there is a proven physical impact. CGL and E&O carriers fought this same

battle in the Opioid addiction litigation.

Judge Rogers seemed poised to find that addiction is physical: “How is the brain different from a

finger? Why isn't the injury to the brain physical? And why isn't the brain's interaction with the

device physical?” The District Court decision is expected before the end of the year. Stay tuned

for our next update!

2. The United States Supreme Court Takes Up Two Insurance Cases

~ for the First Time Ever?

Truck Insurance Exchange v. Kaiser Gypsum Co. Inc. et al., USSC No. 22-1079, cert Oct. 13, 2023

Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC, USSC No. 22-500, cert. May 6, 2023

Takeaway: The U.S. Supreme Court is hearing two insurance cases this term, which may be

unprecedented. Insurance is generally a state law matter. The decision in Raiders Retreat

Realty should be read carefully for implications on the enforceability of choice of law clauses in

insurance policies.

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Serving up your favorite coverage litigation updates from the bar, best enjoyed with coffee or tea.

State law governs insurance contracts and federal courts are generally reluctant to decide novel

issues of state law – indeed sometimes they are reluctant to hear insurance cases at all. So, it is

unusual, to say the least, thxat two insurance cases will be argued before the U.S. Supreme Court

this term. We cannot recall any prior U.S. Supreme Court term to hear two insurance cases. The

cases raise federal law issues under bankruptcy law and admiralty law, respectively.

In the first, Truck Insurance seeks standing to challenge its insured’s bankruptcy reorganization

plan, which could result in billions in liabilities for the insurer. (Truck had a $500k per occurrence

policy with no aggregate limit.) This case is somewhat unique to bankruptcy cases, where

proposed plans of reorganization typically place insurance into the plan to pay future claims, and

carriers often object given how the plan might impact their payment of claims. While

reorganization plans purport to be “insurance neutral,” i.e., preserving insurers’ rights to deny or

pay claims, insurers assert that the plan impairs their ability to adjust claims fairly.

In the second case, Great Lakes seeks to enforce a New York choice of law provision in a marine

insurance policy, which are generally governed by United States admiralty law. Although, on the

surface, this would appear limited to marine policies, the case puts at issue concepts frequently

debated in the insurance context, such as whether insurance policies are contracts of adhesion

due to the policyholder’s inability to negotiate terms, and consequently whether choice of law

provisions can be enforced. Oral arguments were recently heard on October 10, 2023 and a

decision is expected in the Spring.

3. Nevada Limits Law Requiring Defense Outside of Limits

Nevada A.B. 398, amended November 6, 2023

Takeaway: Nevada’s new law requiring defense outside of limits was amended and narrowed

to situations that are mostly uncontroversial. However, health E&O policies remain surprisingly

at issue, as health E&O policies are frequently eroding but this law would require such policies

to provide defense outside of limits. This may push such coverage to surplus lines carriers, who

are allowed better policy language, even under this statute.

When Nevada A.B. 398 was signed by the governor in June 2023, it created quite a stir. Insurers

were concerned that it required all liability policies to cover defense costs outside the limits.

Insureds were worried that insurers would exit the Nevada market or that liability insurance

would become prohibitively expensive. On November 6, 2023, A.B. 398 was amended and now

appears to apply only to certain auto, homeowners, CGL, and E&O health care policies by

admitted insurers on or after October 1, 2023. It does not, as amended, seem to apply generally

to management liability or professional liability policies.

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