Coronavirus (COVID-19)

While businesses and their employees continue to operate in the “new frontier” of working-from-home during the COVID-19 pandemic and the gradual reopening of the economy, a serious risk continues to present itself: the threat of cybercrime. The increased use of remote access to work systems and related applications has made businesses a prime target for those unscrupulous individuals seeking to encroach on companies’ cyber-landscape. Flaws in VPNs, firewalls, and videoconferencing, for example, have exposed many companies’ electronic infrastructures to these incursions. Similarly, the at-home workforce has increasingly been subjected to social engineering attacks often cloaked as communications purporting to provide information about pandemic-related issues.

In addition to the technical measures necessary to confront these threats, businesses would be well-advised to ensure that their cyber insurance is up to date and responds to this challenging new environment. Such coverage may be found in a variety of insurance, including property policies, commercial crime bonds or in stand-alone cyber risk policies. Regardless of where it resides, cyber insurance typically provides coverage for data breaches, ransomware attacks and employee wrongdoing, and for loss of business income occasioned by covered occurrences.

While the jurisprudence related to these issues continues to develop, some recent cases provide insight into how courts may decide cyber coverage questions in the current environment. 

Ransomware – Covered

Earlier this year the U.S. District Court for the District of Maryland considered the issue of how first-party “computer coverage” responded to data loss resulting from a ransomware attack. In National Ink & Stitch, LLC v. State Auto Property & Casualty Ins. Co., No. SAG-18-2138, 2020 WL 374460 (D. Md. Jan. 23, 2020), the insured was an embroidery and screen printing business that stored business-related art, logos, designs and graphics software on a server that became compromised by a ransomware attack. Id. at *1. As a result, the insured needed to recreate stored data that it was unable to access because of the incursion. Id. Further, after the software was replaced and reinstalled by experts, there remained a likelihood that remnants of the virus lingered on the system, leaving the insured with the unpalatable choice of either “wiping” the entire system or purchasing a new server. Id.

The policy at issue responded to “direct physical loss of damage to Covered Property at the premises…caused by…any Covered Cause of Loss.” Id. “Covered Property” included electronic data processing, recordings or storage media such as film, tapes, disks, etc. in addition to data stored on such media. Id. at *1-2. Software was included as “covered property” in the policy. Id. at *1. The insurer denied the claim on the basis that the insured had not experienced direct physical loss or damage to its computer system to justify reimbursement of the cost of replacing the entire system. Id. at *2. That is, because the insured “only lost data and could still use its computer system,” the insurer took the position that there was no “direct physical loss” and, therefore, no coverage. Id.

In finding that the insured should be reimbursed for its losses, the court determined that the plain language of the policy “contemplates that data and software are covered and can experience ‘direct physical loss or damage’” Id. at *3. The court refused to credit the insurer’s argument that a loss of software and its related functionality was not a direct loss to tangible property simply because the insured could still use the system albeit in a diminished fashion. Id. Instead, relying on relevant case law, the court it recognized that the insured’s computer system, while still functional, had been rendered inefficient and its storage capability was damaged in a way that its data and software could not be retrieved. Id. at *4. Accordingly, the court ruled that the policy did not require the computer system to be completely unable to function in order to constitute covered “physical loss or damage”. Id. at *5.

In granting summary judgment in favor of the insured, the court viewed the system’s loss of use and reliability and impaired function to be consistent with the “physical loss or damage to” language in the policy. Id. This was so because “not only did [insured] sustain a loss of its data and software, but [it] is left with a slower system which appears to be harboring a dormant virus, and is unable to access a significant portion of software and stored data.” Id.
Continue Reading Cyber Coverage in the Age of COVID-19 Need Not Result in Pandemonium

Much ink has been spilled in recent weeks about how some recipients of Paycheck Protection Program (“PPP”) relief obtained their loans through mistakes or false pretenses. Now banks are coming under fire for their lending practices in connection with this hastily prepared and implemented program, which left them grappling with how to properly issue loans

Just a few months ago, the idea of a virtual jury trial probably seemed inconceivable to most judges and lawyers.  Now, with the COVID-19 pandemic shuttering courthouses throughout the nation and most in-person proceedings suspended, many judges and attorneys are left wondering when and how civil jury trials will be able to safely resume.  We suspect that most prospective jurors will not be enthralled with the idea of sitting shoulder to shoulder in a jury box while the outbreak is still raging.  As litigators and the courts become comfortable with Zoom and other videoconferencing tools, it is apparent that we have the technology to hold virtual trials – the questions is should we?

The prospect of remote jury trials raises a host of serious issues ranging from how to overcome the constitutional hurdles to ensuring that witnesses, parties and jurors have access to high-speed internet so that they can participate in the first place.  Some potential solutions for accessibility concerns are having pre-wired government offices for those who lack access or distributing common technology (such as an iPad, with a cellular connection).  In addition to technology access, there will also be questions of whether a potential juror has access to a room where they can be alone and deliberate in private.
Continue Reading Will Virtual Jury Trials Be Part of the “New Normal” Ushered in by the COVID-19 Pandemic?

The Paycheck Protection Program (“PPP”) provided forgivable loans to assist small businesses with expenses during the COVID-19 shutdown, seemingly creating a lifeline for many of these enterprises.  As explained here, a borrower could obtain a loan equal to the lesser of $10 million or the sum of its average monthly payroll costs for 2.5

On March 23, 2020, Governor Phil Murphy signed Executive Order 109, which “limit[ed] non-essential adult elective surgery and invasive procedures, whether medical or dental, [in order to] assist in the management of vital healthcare resources during this public health emergency.” The purpose of EO 109 was to “limit[] exposure of healthcare providers, patients, and staff to COVID-19 and conserve[] critical resources such as ventilators, respirators, anesthesia machines, and Personal Protective Equipment (‘PPE’) [that] are essential to combatting the spread of the virus.” At the time EO 109 was executed, coronavirus cases were rapidly increasing within the State. On March 23rd, New Jersey had 2,844 coronavirus cases in all 21 counties, an increase of 935 over the previous day, and at least 27 people had died.

In the weeks that followed, New Jersey saw the surge in cases for which it was preparing. On April 4, the three-day average of new confirmed positive COVID-19 cases peaked at 4,064 cases, and by April 14th, there were 8,084 of COVID-related hospitalizations and a staggering 1,705 patients on ventilators. But since that time, thanks to social distancing and New Jersey’s ability to flatten the curve, these numbers have fallen drastically. By May 11th, the three-day average of new, positive cases had fallen to 1,572 new cases—a 61 percent decrease. Likewise, the three-day average of new hospitalizations had fallen to 4,277 patients—a 48 percent decrease.

In light of this decreased burden on the healthcare system, Governor Murphy signed Executive Order 145, which allows for elective surgeries to resume as of 5 am on May 26, 2020. EO 145 provides that elective surgeries and invasive procedures may proceed at both licensed healthcare facilities and in outpatient settings not licensed by the Department of Health (e.g., health care professional offices, clinics, and urgent care centers), subject to limitations and precautions set forth in policies to be issued by the Division of Consumer Affairs, in consultation with the Department of Health, by Monday, May 18, 2020. EO 145 further states that the Department of Health and/or the Division of Consumer Affairs may issue supplemental or amended policies concerning elective surgeries and elective invasive procedures on or after Monday, May 18, 2020.

Continue Reading Guidance Issued on Resuming Elective Surgeries in New Jersey

Consumer complaints regarding alleged price gouging have been increasing as the COVID-19 pandemic continues. Generally, price gouging occurs when there unreasonable increase the price of a consumer good (or service) during a public emergency. Although we are facing a national emergency, except for a March 23, 2020, executive order issued by President Trump prohibiting hoarding

On March 23, 2020, shortly after the Governors of California, New York, Connecticut and New Jersey issued orders closing non-essential businesses, we recommended that businesses review their insurance policies to determine if they had either business interruption coverage or civil authority coverage that might be available to lessen the economic blow of COVID-19.  As explained

Sometimes a crisis can be an opportunity to embrace new technologies and changes that were already on the horizon – albeit at a much more expedited pace.  As employees are required to work remotely and practice social distancing due to the COVID-19 pandemic, the federal government and several state governments (including New York and New

Across the nation, authorities are scrambling to meet the new challenges posed by COVID-19. The United States Centers for Disease Control and Prevention (“CDC”) has recommended that individuals remain six feet apart in order to prevent the spread of COVID-19. On March 13, 2020, the White House proclaimed a national emergency and many State governments have ordered non-essential businesses to close, and residents to self-distance. However, these emergency measures conflict with the rules for personal service of process established by Federal Rule of Civil Procedure 4.

Personal service of process is among the oldest and commonest means by which a court can obtain personal jurisdiction over a defendant. F.R.C.P. 4(e) provides that personal service of process can be accomplished by handing the process papers to the defendant personally or leaving the papers with a responsible person at the defendant’s dwelling.

In most cases, personal service involves the physical act of handing papers from one person to another. The very act of accomplishing personal service therefore violates the CDC’s recommendation that individuals remain six feet apart. However, it can also run contrary to more stringent restrictions imposed by State governments.

Continue Reading Personal Jurisdiction in a Time of Social Distancing

Imagine these scenarios:

  • Your company cannot perform a contract because of the COVID-19 pandemic.
  • A vendor informs you that she cannot provide your company with necessary goods because of supply chain issues caused by a governmental emergency declaration.
  • A subcontractor cannot perform because its employees are self-quarantining.

These are not hypotheticals. Scenarios like these are playing out around the country. The real-world impact of the COVID-19 pandemic is colliding with contractual requirements, and there is new attention to the legal doctrines of “impossibility,” “frustration of purpose,” “impracticability, and “force majeure.”

What do they mean? In a nutshell, traditional contract law says that an unforeseeable event occurring after the contract was formed can excuse contract performance, and determining whether an event was unforeseeable will depend heavily on the specific facts and the language of the contract.

Continue Reading A World Turned Upside Down: Contract Performance During the COVID-19 Pandemic