August 2017 – Consumer Financial Services Watch

Important Insurance Coverage Considerations for Losses Caused by Hurricane Harvey

Aug 30 2017

While the full extent of damages caused by Hurricane Harvey is unknown at present, the storm has already caused unprecedented damage in Texas. That damage arises in the midst of pending legislative change that may affect significantly losses governed by Texas law.

Specifically, for losses governed by Texas law, a recent change in Texas law thrusts an immediate decision upon policyholders. The Hailstorm Bill signed into law earlier this year and effective September 1, 2017, will thereafter apply to all first-party claims under a policy providing coverage for real property or improvements to real property that “arises from damages to or loss of covered property caused, wholly or partly, by forces of nature, including …a hurricane.” While the Hailstorm Bill contains many substantive changes,[1] a notable change is the reduction in the 18% penalty under Chapter 542 of the Texas Insurance Code (the “Prompt Payment Statute”) if an insurer fails to timely pay a covered claim. Any claim made before September 1, 2017, however, is governed by the current law, including the 18% penalty in the Prompt Payment Statute. Thus, for claims governed by Texas law, policyholders must file a claim on or before Thursday, August 31, in order to benefit from the current 18% penalties (and other provisions) provided under pre-September 1, 2017 Texas law.

As policyholders begin to evaluate their losses, careful consideration will need to be given not only to direct damage or destruction of insured property, but also from the interruption of business resulting from that property damages, contingent business interruption caused by damage to the property of important suppliers, customers, and other business partners; extra expenses incurred to resume normal operations; lack of access to property due to damage to buildings, roads, docks, etc.; interrupted electric, gas, and water services; and other circumstances depending on the particular business involved.

Spokeo Redux: Ninth Circuit Holds That a Statutory Violation under FCRA May, without More, Establish a Concrete Injury for Purposes of Article III Standing

Aug 25 2017

By: Andrew C. Glass, Gregory N. Blase, Roger L. Smerage, Hollee M. Watson

The Ninth Circuit has opined, again, on whether a statutory violation of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681, et seq.—by itself—constitutes a concrete injury for Article III standing purposes. Last year, in Spokeo, Inc. v. Robins, the United States Supreme Court vacated and remanded the Ninth Circuit’s original opinion on the issue. Although the Ninth Circuit had reviewed the plaintiff’s allegations for existence of a particularized injury, it had not separately analyzed whether they described a sufficiently concrete injury. In Spokeo, the Supreme Court ruled that “a bare procedural violation [of a federal statute], divorced from any concrete harm,” does not suffice to “satisfy the injury-in-fact requirement of Article III.” But the Court declined to define a “bare procedural violation” in favor of allowing the Ninth Circuit to first consider the question. Now that the Ninth Circuit has done so, the Supreme Court may take up the question once more.

To read the full alert, click here.

Into The Breach: D.C. Circuit Weighs in on Circuit Split Regarding Standing in Data Breach Class Actions

Aug 14 2017

By Andrew C. Glass, David D. Christensen, and Matthew N. Lowe

The D.C. Circuit recently gave its opinion as to whether pleading an increased risk of future injury is sufficient to establish Article III standing to sue in a data breach class action filed in federal court. The issue has divided federal circuit courts of appeals.

In answering in the affirmative, the D.C. Circuit joined the view of the Sixth, Seventh, and Eleventh Circuits. Compare Attias v. CareFirst, Inc., — F.3d —-, No. 16-7108, 2017 WL 3254941 (D.C. Cir. Aug. 1, 2017), with Resnick v. AvMed, Inc., 693 F.3d 1317 (11th Cir. 2012); Galaria v. Nationwide Mut. Ins. Co., 663 Fed. Appx. 384 (6th Cir. 2016) (unpublished); Lewert v. P.F. Chang’s China Bistro, Inc., 819 F.3d 963 (7th Cir. 2016); and Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688 (7th Cir. 2015). In Attias, the plaintiffs did not allege that they had suffered identity theft as the result of a hacking incident involving a system containing their data. The defendant argued that the mere threat of future harm was too speculative to give rise to standing. But the D.C. Circuit held that it was plausible that the unauthorized party had “the intent and the ability to use [the] data for ill” and thus that the plaintiffs had jurisdictional standing at least at the pleading stage. Id. at *1, *5-*6. Notably, the standing issue arises under Fed. R. Civ. P. 12(b)(1) as an issue of subject matter jurisdiction. The D.C. Circuit did not otherwise decide whether the plaintiffs’ allegations stated a claim that could withstand a motion to dismiss under Fed. R. Civ. P. 12(b)(6), allowing the district court the opportunity to first review the question.

By contrast, the Second and Fourth Circuits have held that data breach plaintiffs lack standing where they plead nothing more than an increased risk of future injury. See Whalen v. Michaels Stores, Inc., — Fed. Appx. —-, No. 16-260, 2017 WL 1556116, at *1 (2d Cir. May 2, 2017) (unpublished); Beck v. McDonald, 848 F.3d 262 (4th Cir. 2017), cert. denied sub nom., Beck v. Shulkin, No. 16-1328, 2017 WL 1740442 (U.S. June 26, 2017).

Notwithstanding the circuit court split, the United States Supreme Court has yet to grant certiorari to review the issue. We will continue to monitor and report on developments in data breach standing law as they occur.

Upcoming Amendments to Bankruptcy Rule 3002 to Impact Bankruptcy Filing Practices for Mortgagees

Aug 09 2017

By: Phoebe S. Winder, Ryan M. Tosi, David A. Mawhinney

Effective December 1, 2017, certain amendments to the Federal Rules of Bankruptcy Procedure (“the Bankruptcy Rules”) recently adopted by the Supreme Court will impact the allowance of secured claims in bankruptcy. Below, we focus on the amendments to Bankruptcy Rule 3002, which will serve to:

Clarify that Rule 3002 applies to secured claims in cases pending under chapters 7, 12, or 13 of the Bankruptcy Code.

Shorten the deadline for filing proofs of claim to seventy (70) days after the bankruptcy filing.

To read the full alert, click here.

CFPB Promulgates, House Seeks to Repeal, Final Arbitration Agreements Rule

Aug 02 2017

By Andrew Glass and Roger Smerage

Recently, the Consumer Financial Protection Bureau (CFPB) promulgated its final arbitration agreement rule. The rule comes more than 11,000 comments, 13 months, and one change in presidential administration after the CFPB issued its proposed rule in May 2016. (K&L Gates previously reported on the issuance of the proposed rule here.) Yet despite its long history, Congress began taking steps to repeal the rule almost immediately.

Archive:August 2017