A California federal court held that an excess carrier had no obligation to pay defense costs because the antitrust exclusion applied to all claims in the underlying litigation and, alternatively, the primary insurance policy had not been exhausted. The dispute at issue was whether an excess carrier was obligated to pay defense costs arising from a class action litigation alleging that poultry farmers illegally fixed the price of chicken. The underlying litigation included violations of federal and state antitrust laws, state consumer protection, and unfair competition laws, as well as unjust enrichment "by the receipt of unlawfully inflated prices and unlawful profits of Broilers."

The followed policy included an antitrust exclusion stating: “The [carrier] shall not be liable to make any payment for Loss in connection with any Claim made against an Insured: ... for any actual or alleged violation of any law, whether statutory, regulatory or common law, respecting any of the following activities: antitrust, business competition, unfair trade practices or tortious interference in another's business or contractual relationships.” Based on this exclusion, the primary and excess carriers denied coverage. Subsequently, the primary carrier and the insured mediated their coverage dispute over the application of the exclusion resulting in the primary carrier agreeing to pay 45% of defense costs subject to a cap in exchange for a release.

Coverage under the Excess Policy attached "only after all of the Underlying Limits have been exhausted through payments by, or on behalf of, or in place of the insurers of the Underlying Insurance [i.e., the Followed Policy] of amounts covered under the Underlying Insurance." The excess carrier sued seeking a declaratory judgment that (1) the Excess Policy excluded coverage for antitrust claims; and, alternatively, (2) the limits of the primary policy had not been exhausted.

The insured argued the exclusion did not bar coverage because many of the cases consolidated in the litigation included causes of action for unjust enrichment and violations of state consumer protection laws, along with allegations of fraud and false advertising, which did not concern antitrust. Despite courts generally narrowly construing exclusions, the court found that these claims were “derivative of, and entirely dependent upon, the antitrust claims,” and the exclusion applied to all claims in the underlying litigation.

Further, the court determined that even if the antitrust exclusion did not apply to all the claims, the excess insurer would still owe no duty to advance defense costs because the primary layer of insurance had not been exhausted. The primary carrier’s payments were capped, and the court held that payments made by the insured beyond the cap were not considered payments of "amounts covered" "on behalf of" or "in place of" the primary carrier for the purposes of exhaustion. 

On August 9, 2024, Illinois Governor signed HB 3773, amending the Illinois Human Rights Act (the “Act”) regarding employers’ use of Artificial Intelligence (“AI”) and the potential for discrimination.  The amendment focuses on “algorithmic discrimination” in AI programs employers may use when making certain employment decisions. 

Under HB 3773, an employer cannot use AI that effectively discriminates against employees with respect to, recruitment, hiring, promotions, discharge, discipline, or the terms, privileges, or conditions of employment. In addition, the Act prohibits employers from using zip codes as a proxy for protected classes. Illinois employers must notify employees of the use of AI to make or aid in making employment-related decisions. HB 3773 applies to any person employing one or more employees within Illinois.

An employee alleging a violation of the AI provisions in HB 3773 must first file a complaint with the Illinois Department of Human Rights (the “IDHR”). Within 100 days of the filing, the IDHR will determine if there is substantial evidence to support that the alleged violation occurred. If not, the charge will be dismissed, but the aggrieved party can seek review of the dismissal before the Illinois Human Rights Commission (the “Commission”). However, if the IDHR does determine there is substantial evidence of a violation, the IDHR must file a complaint with the Commission. When a complaint is filed with the Commission, any party may elect to have the claim decided in an Illinois circuit court within 20 days of receiving the complaint. Available remedies include actual damages, civil penalties, attorneys’ fees, compliance reporting obligations, and any other action as may be necessary to make the complainant whole.

The Second Circuit Court of Appeals reversed a lower court’s decision regarding timing of notice in favor of a major online dating company (the “Company”). In the underlying matter, the Company filed a lawsuit against its insurance carrier (the “Carrier”) seeking indemnity and defense following a settlement with a product developer for non-payment. In its denial, the Carrier argued that the Company’s notice of the suit was untimely under the policy. Therefore, according to the Carrier it was under no contractual obligation to cover any defense costs.

The court relied on the policy’s definition of a “Claim” as well as state statutes governing insurance contracts in deciding whether the Company’s notice was submitted within the applicable policy period. The court focused on an initial demand letter (the “letter”) sent by the product developer and held it was relevant to its timeliness analysis as it led to the filing of the developer’s suit against the Company. The Company was made aware of the suit the day after it was filed and subsequently asked its insurance brokers to notice the claim to the Carrier. At issue here, was that this request for notice was given on a Friday, and the Policy Period was set to expire that weekend. Notice was submitted to the Insurer the following Monday and was deemed untimely.

The court ordered reconsideration based on a New York statute regarding insurance contracts that allows for an extension of time to the following business day when a contractual performance is required on a weekend. The statute allowed a party seeking enforcement on a specified hour on the extended business day if a specific hour of performance was in original contract. The Carrier argued that, if the statute applied to its policy, notice would still have been untimely because notice was given hours after the specified time laid out in the policy period. However, the Company argued that the statute granted it an extension to notice the claim at any time on that following business day. The lower court must now reconsider which part of the statute it will use to determine timeliness. 

Investors in a SPAC filed a securities class action alleging they were “duped” into purchasing shares prior to a planned merger and De-SPAC transaction involving a privately held automaker. The investors alleged that prior to the merger, the acquisition target’s CEO made false and misleading statements in relation to the automaker’s production capabilities and financial performance. The SPAC investors further alleged the misrepresentations materially affected the stock price of the de-SPAC entity and, thus, dramatically reduced the value of their investment.

At the initial motion to dismiss stage, the federal trial court held that the shareholders failed to plead materiality and dismissed the case. The shareholders appealed.

The Ninth Circuit affirmed the dismissal but based their decision on a different legal theory—standing to sue. Generally, the standing doctrine refers to a given party’s capacity to bring a case in court. Here, the Court relied on a U.S. Supreme Court case which confined Section 10(b) standing to the “purchasers or sellers of the stock in question,” known as the “purchaser-seller rule.” Under this bright-line rule, the stock in question is “the security to which the prospectus, representation, or omission relates.” In this case, the stock in question would be the acquisition target, the automaker.

The Ninth Circuit also noted a prior ruling from the Second Circuit held that purchasers of a security of an acquiring company do not have standing to file a securities fraud case against the target company for alleged misstatements the target company made prior to the merger. The court rejected the plaintiffs’ contention that they had standing to sue because there was a sufficient direct relationship between the target’s alleged misstatements and the price of the acquirer’s shares.

In the subject case, the Ninth Circuit noted that it is “undisputed” that the alleged misrepresentations concerned the automaker’s securities. Because the Investors did not purchase or sell the automaker’s stock, the Investors lacked standing under federal securities law. The fact that the SPAC later acquired the automaker did not change the analysis noting that there is no exception for SPACs.