Tragic House Fire and Explosions in Trenton, NJ: What You Need to Know
In the early hours of Wednesday, April 30, 2025, a devastating house fire in Trenton, New Jersey, left five people injured and caused nearby evacuations after loud explosions were heard from the scene. The fire and subsequent explosions have raised significant concerns about the safety of the neighborhood and the immediate aftermath of such a tragic event. Here’s a closer look at what happened, the aftermath, and the legal options available for victims of such devastating incidents.
The Incident in Trenton
At approximately 1 a.m., neighbors near Boudinot Street and Murray Street were awakened by the sounds of loud explosions and the sight of a blazing fire. Firefighters rushed to the scene to contain the fire, which had started in a duplex home and quickly spread, heavily damaging the neighboring house. According to reports, one male victim suffered severe burns to his face, and four other people were hospitalized, though their injuries were not considered life-threatening.
The explosion, as captured in eyewitness videos, added a frightening element to an already tragic situation. While the exact cause of the fire and explosions remains unclear, the aftermath left neighbors in shock, with some expressing fear that the fire might spread further, fueled by the wind. Fortunately, firefighters were able to contain the blaze before it could cause more widespread damage .
The Impact on the Community
The explosion and fire not only affected the victims directly involved but also caused widespread disruption for the surrounding community. Trenton Police went door-to-door evacuating nearby residents, ensuring their safety from the growing danger posed by the fire. A nearby resident, described his emotional state after the incident, stating, “Emotional still. Scared. I’ve never experienced anything like that.” This testimony highlights the trauma that often accompanies such disasters, not only for the victims but also for the wider community affected by the destruction.
In addition to the physical injuries sustained by the victims, the fire has also caused significant emotional and psychological distress for both the victims and the witnesses. The fear of further explosions, the potential for the fire to spread, and the loss of homes and belongings can all take a long-term toll on the affected individuals.
What Caused the Fire?
As of now, the cause of the fire and the explosions remains under investigation. Various factors, including possible gas leaks or faulty electrical wiring, could have contributed to the blasts heard during the incident. However, until authorities complete their investigation, it’s impossible to say for sure what caused the explosions that escalated the fire so quickly.
While we await further information, it’s crucial for all homeowners and renters to take proactive steps in ensuring their homes are safe from fire hazards. Regular maintenance of electrical systems, heating systems, and gas lines can significantly reduce the risk of house fires. Additionally, ensuring that fire safety measures, such as smoke alarms and fire extinguishers, are in place and working can save lives during such emergencies.
Legal Options for Victims
In the wake of such a tragic event, it’s essential to understand the legal rights of the victims and their families. If you or a loved one has been injured in a house fire or explosion caused by negligence, you may be entitled to compensation for medical bills, pain and suffering, and other related damages. In this case, several legal options may be available to the victims:
1.Personal Injury Lawsuits
Victims who sustain injuries in accidents like house fires and explosions may have the right to file a personal injury lawsuit. Depending on the cause of the fire, the responsible parties could include landlords, utility companies, or other third parties. For instance, if faulty wiring or gas lines caused the fire, the company responsible for installing or maintaining those systems could be held liable.
2.Insurance Claims
In addition to pursuing legal action, victims should also contact their insurance providers to report the damage to their property and personal injuries. Depending on the specifics of the case, homeowners’ insurance or renters’ insurance may cover certain types of damages. However, insurance policies can be complex, and it’s important to understand what is covered and what isn’t.
Top Ten Regulatory and Litigation Risks for Private Funds in 2025
Confession: writing this in May 2025, we cannot predict with confidence what the rest of 2025 will bring. The year has already seen four months of change and upheaval – political, regulatory, and economic. The new US administration has touted a business-friendly regulatory environment, with actual and promised tax cuts and deregulation. However, geopolitical tensions, tariff trade wars and political instability have introduced new risks and created a climate of extreme unpredictability. We should expect 2025 to hold several surprises still, whether that is a breakout of peace or new political themes obtaining prominence in one or more jurisdictions.
Against this backdrop, it can be tempting to adopt the view of legendary film writer William Goldman declaring that “nobody knows anything” and that publishing our annual “Top Ten Litigation and Regulatory Risks for Private Funds” is simply a fool’s errand. We have, after all, already rewritten this introduction multiple times before new developments make it out of date again. However, whatever happens, sponsors with strong foundations and nimble mindsets will be best placed to take advantage of any new opportunities that arise and be able to pivot as needed in new, more promising directions.
We have therefore focused on two sub-themes to support those strong foundations:
Topics to ensure “your house is in order” to give those strong foundations (e.g., how to navigate ESG in 2025, the use of insurance products by sponsors, best practice with MNPI, dealing with whistleblowers and global anti-corruption compliance)
Risks arising now from the trends of 2024 (e.g., risks from the growth of the private credit market, the rise in earn out disputes in portfolio companies and navigation of end-of-life funds)
To complete our list of ten, we will engage in some tentative crystal ball gazing, including the role of the SEC in a non-regulatory environment and outward investment restrictions and tariffs, but will, like our clients and readers, seek to remain “nimble” to ensure we remain relevant.
With this backdrop, we are pleased to present the Top Ten Regulatory and Litigation Risks for Private Funds in 2025.
ESG in 2025: Finding the Sweet Spot in a Complex World
Regulatory Scrutiny on Potential MNPI in the Credit Markets
SEC Regulation in a Non-Regulatory Environment
Global Trade in 2025: Tariffs and Outbound Investment Restriction
Three Risks to Monitor in Private Credit
End Of (Fund) Life Issues and Zombies
Navigating Earn-Out Disputes: Key Considerations for Portfolio Companies
Why the DOJ’s New Whistleblower Program Remains Relevant
Protecting Sponsors from Emerging Portfolio Company Risks through Insurance
FCPA & Anti-Corruption Enforcement: Shifting Global Dynamics in Light of New US Regime
Additional Authors: Dorothy Murray, Joshua M. Newville, Todd J. Ohlms, Robert Pommer, Seetha Ramachandran, Nathan Schuur, Bryan Sillaman, Robert Sutton, John Verwey, Jonathan M. Weiss, William D. Dalsen, Rachel Lowe, Adam L. Deming, Adam Farbiarz and Hena M. Vora
GT Legal Food Talk Episode 28: Insurance and Protecting Your Food, Beverage, and Supplement Business [Podcast]
In this episode of Greenberg Traurig’s Legal Food Talk podcast, host Justin Prochnow sits down for a roundtable discussion with guests Christopher Morey and Chris Strachan, alongside co-host and commercial litigator Stacy Carpenter.
Together, they delve into the critical role of insurance in the food, beverage, and supplement industries, covering everything from general liability and product recall coverage to stock throughput and directors and officers (D&O) insurance.
With real-world anecdotes, practical advice, and a touch of humor, the panel highlights the importance of working with specialized brokers, understanding policy exclusions, and discussing what to do to protect your business from unexpected risks.
Top Mistakes to Avoid After Suffering a Personal Injury
Suffering a personal injury can turn your life upside down in an instant. Between medical appointments, missed work, and emotional stress, it’s easy to feel overwhelmed and even easier to make a misstep without realizing it. Whether you were injured in a car accident, at work, or somewhere else, avoiding these common mistakes can protect both your health and your ability to recover financially.
1. Not Getting Medical Attention Right Away
Even if your injuries seem minor, seeing a doctor as soon as possible is important. Some injuries, such as whiplash or concussions, can take time to show symptoms. Delaying medical treatment can worsen your condition and give the insurance company a reason to argue that your injuries were not serious.
2. Talking Too Much to the Insurance Company
Insurance adjusters might sound friendly on the phone, but their job is to save their company money. Giving a recorded statement or signing paperwork too soon can harm your case. It is your right to tell them you would like to speak with your lawyer first.
3. Not Following Doctor’s Orders
If your doctor tells you to rest, go to physical therapy, or avoid certain activities, you should follow their orders. Ignoring medical advice not only risks your health, but it can also make it look like you’re not as injured as you say you are.
4. Waiting Too Long to Take Action
Every state has time limits for filing personal injury claims, called statutes of limitations. If you wait too long, you could lose your right to compensation forever. Not acting soon enough also makes it more difficult to gather evidence and talk to witnesses. The sooner you act, the better.
5. Trying to Handle It All on Your Own
Navigating a personal injury claim without a lawyer can be overwhelming, especially with strict deadlines, complex paperwork, and tough negotiations involved. Insurance companies often have teams working to minimize payouts, which can make the process even more challenging. Having a knowledgeable personal injury lawyer can help ensure your rights are protected and that you understand your options every step of the way.
Conclusion
Recovering from a personal injury is a process—physically, emotionally, and financially. By avoiding these common mistakes, you give yourself the best chance to heal and move forward. Focus on your recovery, keep records of everything, and don’t hesitate to seek help.
Mitigation Grant Program Offers Benefits to Homeowners and Communities
The Federal Home Loan Bank (FHLB) of Dallas FORTIFIED Fund Grant Program is entering its third year of operation with more capacity than ever before. The program provides grants through FHLB Dallas members to help income-qualified homeowners install FORTIFIED Roof systems designed to prevent damage from hurricanes, high winds, and other severe weather events.
Funding
The FORTIFIED Fund Grant Program began in 2023 with FHLB Dallas making $1.75 million in grant funds available. In 2024, FHLB Dallas increased the amount to $4 million. Both years, the funds were exhausted. This year, $10 million has been allocated to the FORTIFIED Fund. As of April 18, 2025, $9,131,285 remained available.
Application Process
FHLB Dallas began accepting grant applications on April 15, and the offering will remain open until June 13. Applications are reviewed on a first-come, first-served basis. In the event funds remain available, a second offering will open July 7 and remain open until October 31, or until funds are exhausted. All applications must be submitted by FHLB Dallas member institutions and may request up to $500,000 for up to 50 preapproved households. Grants are capped at $15,000 per home for roof renovations and $7,500 per home for new construction. Members may work with an intermediary organization to identify and qualify households, find roofers and evaluators, and facilitate payments to appropriate parties. Alternatively, members may assume these responsibilities themselves. Application forms and required documentation are available from FHLB Dallas.
FORTIFIED Roof Standards
The FORTIFIED Fund Grant Program helps homeowners replace or upgrade their roofs to meet FORTIFIED Roof standards established by the Insurance Institute for Business & Home Safety (IBHS), an independent, nonprofit scientific research and communications organization. IBHS’s building safety research helps to create more resilient communities. FORTIFIED is a nationally recognized set of construction methods to retrofit or build a home, business, or multifamily development designed to prevent damage that commonly occurs during high winds, hurricanes, hailstorms, severe thunderstorms, and tornadoes up to EF-2. FORTIFIED is based on decades of research, testing, and observations by IBHS. FORTIFIED Roof standards have specific requirements beyond what is required by most building codes that provide a high level of protections from storms.
FORTIFIED Benefits
It is well recognized within the construction and insurance industries that regardless of the type of roof — shingles, metal, or tile — FORTIFIED Roof requirements (including stronger edges, better attachment, sealed roof deck, and impact-resistant shingles) make a home stronger. It has been proven effective repeatedly in real-world severe weather events, lowering insurance premiums and adding financial value. For example, during the record-breaking 2020 hurricane season (hurricanes Laura, Sally, Delta, and Zeta), approximately 95% of the nearly 17,000 FORTIFIED homes impacted by hurricanes experienced little to no damage and had no insurance claims. Additionally, homes with a FORTIFIED designation generally receive discounts/credits on the wind portion of their homeowner’s insurance premium that could be as great as 55% in some states. Furthermore, studies have shown that FORTIFIED homes sell for nearly 7% more than non-FORTIFIED homes.
Eligibility Criteria
The FORTIFIED Fund Grant Program targets owner-occupied, income-qualified primary residences within the FHLB Dallas District, Arkansas, Louisiana, Mississippi, New Mexico, and Texas. Households must meet specific income limitations (120% or less of Area Median Income) and comply with IBHS standards for FORTIFIED Roof systems. All homes included in applications must be precertified as eligible to receive a FORTIFIED Roof by an IBHS-certified evaluator. Documentation requirements include proof of income, homeownership, and compliance with FORTIFIED standards.
Grant Funds
Grant funds are disbursed to FHLB Dallas member institutions prior to renovations for the member to disburse to contractors and evaluators as roofs are completed and certified. FORTIFIED Fund grants can cover costs associated with the pre- and post-construction evaluations to verify that FORTIFIED compliance standards are met. Also, grant funds can be used to cover intermediary fees for roof renovations. Intermediary fees are paid to organizations for their work in sourcing applicants and identifying contractors. These fees are included in the $15,000-per-home maximum grant. Any funds not used in accordance with program requirements must be returned to FHLB Dallas.
Conclusion
While the FORTIFIED Fund Grant Program application process and rules may at first glance appear somewhat daunting, it may be worth the time and effort to consider the opportunities presented by the program. Members not already participating in the program may wish to start with a modest number of homes and plan for greater participation in subsequent years, as indications are that FHLB Dallas will continue the program in the future.
MORE IS REQUIRED: Senior Life Insurance Company Out of TCPA Class Action For Too Thin Allegations
Quick one for you this am TCPAWorld.
Senior Life Insurance Company–which has the unfortunate acronym of SLIC– was sued in a TCPA class action in Virginia recently. It moved to dismiss arguing the complaint did not actually state FACTS to show it made the calls at issue.
Earlier this week the Court agreed in Matthews v. Senior Life Insurance 2025 WL 1181789 (E.D. VA April 22, 2025).
Interestingly the complaint actually did allege the calls were “from” SLIC and that a caller was an “employee” of SLIC. Indeed Plaintiff even alleges that during one of the calls he was asked “regarding qualifying for SLIC life insurance.”
Still the court found these allegations too conclusory to state a claim. Unstated here is the assumption that someone else might have been making calls on SLIC’s behalf–which shows a pretty sophisticated court that understands SLIC’s business model likely does not include a bunch of captive w-2 agents calling out to sell policies.
Pretty interesting one that TCPA defendants should keep in mind.
NO INDEMNITY: ReNu Solar Loses Effort to Obtain Default Judgment Against TechMedia Group and It Highlights the Issue With Indemnity Agreements
So here’s one you haven’t heard before.
Company buys lead, makes calls, gets sued under the TCPA.
Ok ok you’ve heard THAT one before.
But then company sues lead seller for indemnity and lead seller doesn’t show up in court. Company seeks default judgment against lead seller.
What result?
Well in Jackson v. Renu, 2025 WL 1162491 (M.D. Pa. April 21, 2025) the Court held no judgment against the seller is possible until the underlying TCPA defendant actually tasted defeat in the TCPA case.
In Jackson the contractual agreement between ReNu and TechMedia called upon TechMedia to comply with the TCPA and indemnify ReNu for any judgment that was entered against it. But since no judgment has yet been entered against ReNu the Court found TechMedia did not yet owe ReNu indemnity.
Ouch.
Notably the judgment probably could have (should have) asked for recovery of attorneys fees but apparently ReNu’s lawyers didn’t advise the court of whether ReNu had chose its own lawyers to defend it or those chosen by TechMedia. So NO award was entered at all.
My goodness.
Setting aside the potential screw up here, Jackson underscores a huge problem with indemnity agreements in lead generation. Lead buyers often assume such agreements make them bullet proof against suit.
Ridiculous.
The lead buyer that made the call is always the first one to be sued and a mere indemnity agreement does not mean the buyer will be out of the case. AT BEST it means the lead buyer will recover money against the leas seller one day. But as Jackson points out that “one day” is usually after the lead buyer has already faced a potentially massive judgment.
Not good.
Relying on indemnity agreements in lead gen contracts is NOT a smart path folks. Yes, you still need to include those terms in your contracts but VETTING your vendors and working with QUALITY PARTNERS you can trust (preferably those that abide by the R.E.A.C.H. standards) is essential.
Professional Services Exclusion Leaves Pharmacy’s Coverage Order Unfilled
Coordinating various insurance products to avoid coverage gaps can be a complex undertaking as exposures are shifted from one policy to another across different insurers, policy forms, and coverages. One recent case, Singh, Rx, PLLC, et al. v. Selective Insurance Company of South Carolina, et al., No. 24-1678, left a pharmacy without coverage when a professional services exclusion barred coverage that was not covered under a separate professional liability policy geared at covering those risks. The case is a reminder of the importance of understanding insurance policy exclusions, particularly in the context of professional services, and especially where the excluded risks are not covered by other policies.
Factual Background
SRX’s coverage dispute arose when a pharmaceutical manufacturer sued a specialty care pharmacy for allegedly distributing counterfeit HIV medication. The lawsuit included multiple claims, including trademark infringement and unfair competition, which prompted the pharmacy to seek defense and indemnification from its general liability and professional liability insurers.
The general liability insurance policy covered business liabilities arising out of bodily injury, property damage, or personal and advertising injury. However, the policy explicitly excluded claims related to the performance of professional services, including the practice of pharmacy. The professional liability policy covered professional liability due to a medical incident and liability for personal injury claims. But coverage was limited to claims made by a natural person. The underlying claim involved professional services and was brought by a company (not an individual). Both insurers denied coverage based on the exclusions and limitations in their respective policies.
The Sixth Circuit
The Michigan district court and the United States Court of Appeals for the Sixth Circuit agreed with the insurers’ denials, granting summary judgment and affirming that the claims made by the pharmaceutical manufacturer fell outside the coverage of the policies. For their analysis under the general liability policy’s professional services exclusion, the courts relied on Michigan law, which defines professional services as acts “involving specialized skill of a predominately intellectual nature.” The Sixth Circuit explained that Michigan courts have interpreted professional services exclusions broadly to encompass “acts reasonably related to the overall provision of professional services.”
In this case, the Sixth Circuit determined that even routine tasks associated with pharmacy practice required a level of expertise that placed them under the umbrella of professional services. For example, according to the court, buying and selling medications constitute actions that “implicate a pharmacist’s specialized knowledge, because pharmacists need to select the right drugs to target specific conditions.” The court reasoned that the alleged injury was the pharmacy’s failure to perform its professional duty to prescribe the right medicine to treat HIV and, as a result, held that the general liability policy’s professional services exclusion barred coverage.
Unfortunately for the policyholder, the professional liability policy did not cover the lawsuit either. That policy contained a limiting endorsement modifying the definition of “claim” to mean only “a demand for money or services alleging injury or damage” brought “by a natural person.” Because the lawsuit was brought by a pharmaceutical manufacturer—a corporate entity and not a natural person—the “claim” definition was not met.
The Sixth Circuit rejected the policyholder’s arguments that the limited endorsement conflicted with definitions of “claim” elsewhere in the policy and that the endorsement rendered coverage illusory. Accordingly, the court held that the professional liability insurer had no duty to defend or indemnify the claims.
Conclusion
This case underscores the importance for all companies, especially those providing specialized services, to understand not only what kinds of liability policies they have but whether those policies are tailored appropriately to work together and avoid unexpected denials. It serves as a cautionary tale for businesses that may assume they are covered for a broader range of claims than their policies actually allow.
As the critical endorsement showed in the SRX dispute, liability policies are highly negotiable and customizable. Policyholders should ensure they are adequately protected against potential liabilities by conducting a holistic review of their insurance programs, as coordinating insurance coverage across various insurance products is often key to protecting a business against potential coverage gaps.
Is Insurtech a High-Risk Application of AI?
While there are many AI regulations that may apply to a company operating in the Insurtech space, these laws are not uniform in their obligations. Many of these regulations concentrate on different regulatory constructs, and the company’s focus will drive which obligations apply to it. For example, certain jurisdictions, such as Colorado and the European Union, have enacted AI laws that specifically address “high-risk AI systems” that place heightened burdens on companies deploying AI models that would fit into this categorization.
What is a “High-Risk AI System”?
Although many deployments that are considered a “high-risk AI system” in one jurisdiction may also meet that categorization in another jurisdiction, each regulation technically defines the term quite differently.
Europe’s Artificial Intelligence Act (EU AI Act) takes a gradual, risk-based approach to compliance obligations for in-scope companies. In other words, the higher the risk associated with AI deployment, the more stringent the requirements for the company’s AI use. Under Article 6 of the EU AI Act, an AI system is considered “high risk” if it meets both conditions of subsection (1) [1] of the provision or if it falls within the list of AI systems considered high risk and included as Annex III of the EU AI Act,[2] which includes, AI systems that are dealing with biometric data, used to evaluate the eligibility of natural persons for benefits and services, evaluate creditworthiness, or used for risk assessment and pricing in relation to life or health insurance.
The Colorado Artificial Intelligence Act (CAIA), which takes effect on February 1, 2026, adopts a risk-based approach to AI regulation. The CAIA focuses on the deployment of “high-risk” AI systems that could potentially create “algorithmic discrimination.” Under the CAIA, a “high-risk” AI system is defined as any system that, when deployed, makes—or is a substantial factor in making—a “consequential decision”; namely, a decision that has a material effect on the provision or cost of insurance.
Notably, even proposed AI bills that have not been enacted have considered insurance-related activity to come within the proposed regulatory scope. For instance, on March 24, 2025, Virginia’s Governor Glenn Youngkin vetoed the state’s proposed High-Risk Artificial Intelligence Developer and Deployer Act (also known as the Virginia AI Bill), which would have applied to developers and deployers of “high-risk” AI systems doing business in Virginia. Compared to the CAIA, the Virginia AI Bill defined “high-risk AI” more narrowly, focusing only on systems that operate without meaningful human oversight and serve as the principal basis for consequential decisions. However, even under that failed bill, an AI system would have been considered “high-risk” if it was intended to autonomously make, or be a substantial factor in making, a “consequential decision,” which is a “decision that has a material legal, or similarly significant, effect on the provision or denial to any consumer of—among other things—insurance.
Is Insurtech Considered High Risk?
Both the CAIA and the failed Virginia AI Bill explicitly identify that an AI system making a consequential decision regarding insurance is considered “high-risk,” which certainly creates the impression that there is a trend toward regulating AI use in the Insurtech space as high-risk. However, the inclusion of insurance on the “consequential decision” list of these laws does not definitively mean that all Insurtech leveraging AI will necessarily be considered high-risk under these or future laws. For instance, under the CAIA, an AI system is only high-risk if, when deployed, it “makes or is a substantial factor in making” a consequential decision. Under the failed Virginia AI Bill, the AI system had to be “specifically intended to autonomously make, or be a substantial factor in making, a consequential decision.”
Thus, the scope of regulated AI use, which varies from one applicable law to another, must be considered together with the business’s proposed application to get a better sense of the appropriate AI governance in a given case. While there are various use cases that leverage AI in insurance, which could result in consequential decisions that impact an insured, such as those that improve underwriting, fraud detection, and pricing, there are also other internal uses of AI that may not be considered high risk under a given threshold. For example, leveraging AI to assess a strategic approach to marketing insurance or to make the new client onboarding or claims processes more efficient likely doesn’t trigger the consequential decision threshold required to be considered high-risk under CAIA or the failed Virginia AI Bill. Further, even if the AI system is involved in a consequential decision, this alone may not deem it to be high risk, as, for instance, the CAIA requires that the AI system make the consequential decision or be a substantial factor in that consequential decision.
Although the EU AI Act does not expressly label Insurtech as being high-risk, a similar analysis is possible because Annex III of the EU AI Act lists certain AI uses that may be implicated by an AI system deployed in the Insurtech space. For example, an AI system leveraging a model to assess creditworthiness in developing a pricing model in the EU likely triggers the law’s high-risk threshold. Similarly, AI modeling used to assess whether an applicant is eligible for coverage may also trigger a higher risk threshold. Under Article 6(2) of the EU AI Act, even if an AI system fits the categorization promulgated under Annex III, the deployer of the AI system should perform the necessary analysis to assess whether the AI system poses a significant risk of harm to individuals’ health, safety, or fundamental rights, including by materially influencing decision-making. Notably, even if an AI system falls into one of the categories in Annex III, if the deployer determines through documented analysis that the deployment of the AI system does not pose a significant risk of harm, the AI system will not be considered high-risk.
What To Do If You Are Developing or Deploying a “High-Risk AI System”?
Under the CAIA, when dealing with a high-risk AI system, various obligations come into play. These obligations vary for developers[3] and deployers[4] of the AI system. Developers are required to display a disclosure on their website identifying any high-risk AI systems they have deployed and explain how they manage known or reasonably foreseeable risks of algorithmic discrimination. Developers must also notify the Colorado AG and all known deployers of the AI system within 90 days of discovering that the AI system has caused or is reasonably likely to cause algorithmic discrimination. Developers must also make significant additional documentation about the high-risk AI system available to deployers.
Under the CAIA, deployers have different obligations when leveraging a high-risk AI system. First, they must notify consumers when the high-risk AI system will be making, or will play a substantial factor in making, a consequential decision about the consumer. This includes (i) a description of the high-risk AI system and its purpose, (ii) the nature of the consequential decision, (iii) contact information for the deployer, (iv) instructions on how to access the required website disclosures, and (v) information regarding the consumer’s right to opt out of the processing of the consumer’s personal data for profiling. Additionally, when use of the high-risk AI system results in a decision adverse to the consumer, the deployer must disclose to the consumer (i) the reason for the consequential decision, (ii) the degree to which the AI system was involved in the adverse decision, and (iii) the type of data that was used to determine that decision and where that data was obtained from, giving the consumer the opportunity to correct data that was used about that as well as appeal the adverse decision via human review. Developers must also make additional disclosures regarding information and risks associated with the AI system. Given that the failed Virginia AI Bill had proposed similar obligations, it would be reasonable to consider the CAIA as a roadmap for high-risk AI governance considerations in the United States.
Under Article 8 of the EU AI Act, high-risk AI systems must meet several requirements that tend to be more systemic. These include the implementation, documentation, and maintenance of a risk management system that identifies and analyzes reasonably foreseeable risks the system may pose to health, safety, or fundamental rights, as well as the adoption of appropriate and targeted risk management measures designed to address these identified risks. High-risk AI governance under this law must also include:
Validating and testing data sets involved in the development of AI models used in a high-risk AI system to ensure they are sufficiently representative, free of errors, and complete in view of the intended purpose of the AI system;
Technical documentation that demonstrates the high-risk AI system complies with the requirements set out in the EU AI Act, to be drawn up before the system goes to market and is regularly maintained;
The AI system must allow for the automatic recording of events (logs) over the lifetime of the system;
The AI system must be designed and developed in a manner that allows for sufficient transparency. Deployers must be positioned to properly interpret an AI system’s output. The AI system must also include instructions describing the intended purpose of the AI system and the level of accuracy against which the AI system has been tested;
High risk AI systems must be developed in a manner that allows for them to be effectively overseen by natural persons when they are in use; and
High risk AI systems must deploy appropriate levels of accuracy, robustness, and cybersecurity, which are performed consistently throughout the lifecycle of the AI system.
When deploying high risk AI systems, in-scope companies must carve out the necessary resources to not only assess whether they fall within this categorization, but also to ensure the variety of requirements are adequately considered and implemented prior to deployment of the AI system.
The Insurtech space is growing in parallel with the expanding patchwork of U.S. AI regulations. Prudent growth in the industry requires awareness of the associated legal dynamics, including emerging regulatory concepts nationwide.
[1] Subsection (1) states that an AI system is high-risk if it is “intended to be used as a safety component of a product (or is a product) covered by specific EU harmonization legislation listed in Annex I of the AI Act and the same harmonization legislation mandates that he product hat incorporates the AI system as a safety component, or the AI system itself as a stand-alone product, under a third-party conformity assessment before being placed in the EU market.”
[2] Annex 3 of the EU AI Act can be found at https://artificialintelligenceact.eu/annex/3/
[3] Under the CAIA, a “Developer” is a person doing business in Colorado that develops or intentionally and substantially modifies an AI system.
[4] Under the CAIA, a “Deployer” is a persona doing business in Colorado that deploys a High-Risk AI System.
Insurance Cybersecurity Certifications: An (Updated) State Roundup
Over half of US states require annual compliance certifications from insurance providers. While the filing time frames for this year draw to a close, companies may want to keep them in mind not only for next year, but as a reminder of the information security programs that are expected to be in place.
When we last wrote about this, in 2021, only nine states (Alabama, Delaware, Louisiana, Michigan, Mississippi, New Hampshire, Ohio, South Carolina, and Virginia) had adopted certification obligations. Since then, 17 more states have followed suit, adopting the Insurance Data Security Model law (from which the obligations stem). These states are Alaska, Connecticut, Hawaii, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Minnesota, North Dakota, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Vermont, and Wisconsin. Additionally, while New York has not adopted the NAIC model law, it imposes a similar annual filing requirement.
Filing deadlines are set out below:
Deadline
States
February 15
Alabama, Alaska, Delaware, Kentucky, Louisiana, Michigan, Mississippi, Ohio, South Carolina, Virginia
March 1
New Hampshire, Wisconsin
March 31
Hawaii
April 15
Connecticut, Illinois, Indiana, Iowa, Maine, Maryland, Minnesota, New York, North Dakota, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Vermont
Those who might need to certify are those registered under the various state insurance laws. This includes insurance companies and insurance professionals, like agents and brokers. When making their filing, covered entities must certify that they have an Information Security Program in place. That program must include risk management and incident response procedures, as well as board oversight. Certification records and supporting materials need to be retained for five years after submission.
Putting it Into Practice: Those with insurance certification obligations should keep in mind the varying filing deadlines, as well as the accompanying obligations like having a compliant information security program in place.
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James O’Reilly also contributed to this article.
Windy City Wins: Seventh Circuit Backs Coverage for Chicago’s $3.75M in Attorneys’ Fees
In a significant decision, Starstone Ins. SE v. City of Chicago, No. 23-2712 (7th Cir. Apr. 02, 2025), the US Court of Appeals for the Seventh Circuit has ruled that an insurer must cover $3.75 million in attorney fees incurred by the city of Chicago in an underlying civil rights lawsuit that settled for over $18 million.
Case Background
This coverage dispute arose from an underlying lawsuit involving a man who served over 20 years in prison for murder. After being released, the man sued the City of Chicago and several Chicago police officers for violating his civil rights. The jury in the civil rights case returned verdicts in his favor, amounting to more than $17 million, and his lawyers then sought more than $6 million in attorney’s fees and costs. The case was settled for $18.75 million, of which $3.75 million represented attorney’s fees and costs. The central issue in the coverage dispute was whether the insurer was responsible for covering these legal fees/costs under the city’s insurance policy. The insurer argued that the policy it had issued to the city only covered “damages,” and legal fees/costs did not fall within the policy’s definition of “damages.”
Seventh Circuit’s Decision
The Seventh Circuit began the opinion with a discussion of federal jurisdiction over the insurer which is organized as an “SE,” a form of a European company under the European Union’s European Company Statute. The court grappled with the question of whether the insurer was a corporation for purposes of federal jurisdiction. The court compared the insurer to other non-traditional corporations from other parts of the world, and ultimately found the insurer to have the essential characteristics of a corporation. Therefore, the court found that it could exercise jurisdiction over the insurer.
The focal point of the decision, however, was whether the insurer was responsible for the component of the settlement attributed to underlying plaintiff’s attorneys’ fees and costs. The Seventh Circuit upheld the district court’s decision, affirming that the insurer must cover these fees and costs. The policy’s main coverage clause stated: “We shall pay you, or on your behalf, the ultimate net loss, in excess of the retained limit, that the insured becomes legally obligated to pay by reason of liability imposed by law or assumed under an insured contract because of bodily injury or property damage arising out of an occurrence during the Policy Period.”
In reaching this conclusion, the court observed that the policy stated the insurer would cover the “ultimate net loss” in excess of the retained limit, and that under Illinois law, language in an insurance policy must be taken to mean what the words in the policy say. The district court found that the $18.75 million settlement was an “ultimate net loss” under the policy that the city was “legally obligated to pay by reason of liability imposed by law.” It reasoned that an ordinary reader would interpret the policy’s language of “ultimate net loss” to mean the amount the insured pays out of pocket, and “legally obligated to pay” to mean “legally obligated to pay” and not some version of “legally obligated to pay as damages.” Because the city was liable for the settlement from underlying litigation, the district court found the city’s liability was an ultimate net loss that the city was legally obligated to pay. As a result, the insurer had a duty to indemnify the city as its policyholder for its attorney’s fees in the underlying action, and the Seventh Circuit concurred.
Key Takeaways
This ruling has significant implications for policyholders.
Governing Law Matters: The district court sat in Illinois, so Illinois law applied to the policy language dispute. If the court determined it could not have exercised jurisdiction over the insurer, the law of the European Union could have applied to the dispute, which would have changed the outcome. Starstone re-emphasizes the outcome-determinative role that governing law can have on the interpretation of policy language.
Policy Language is Paramount: This decision turned on the wording of the policy—not the general principles of fee-shifting or the American Rule. The court found that the terms of the policy, and not the insurer’s supposed intentions, controls.
Insurers Can Not Re-Write Coverage After the Fact: Courts will hold insurers to the language they drafted and put in their policies—no matter how expensive the outcome. Here, the court held the insurer to the language that it drafted and included in the policy.
Final Thoughts
The Seventh Circuit’s ruling serves as a crucial reminder for policyholders to carefully examine the language of their insurance policies. A policy’s language remains crucial to the resolution of any coverage disputes between policyholders and insurers. Experienced coverage counsel can help policyholders understand the language of their policies.
Replacement Cost Insurance Coverage in Turbulent Times
After the wildfires in Los Angeles, extreme weather events throughout the United States, and recently enacted tariffs, it seemed like a good time to revisit the calculation of replacement cost under policies insuring against loss or damage to property. The concept of replacement cost — sometimes referred to as “new for old” — seems simple, but issues often arise over the calculation and various policy terms and conditions. So, let’s dig in.
What Is Replacement Cost Coverage?
Replacement cost coverage is the most common type of insurance found in first-party property insurance policies, including standard business property policies and builder’s risk policies (for property in the course of construction). It usually applies to both “building” coverage and to business personal property (BPP) coverage, with some exceptions. It is referred to as “new for old” because it pays to replace lost or damaged property with new property of the same type.
Insurance companies frequently argue that because they cover only loss or damage to covered property, policyholders must prove that a particular item of covered property was damaged before the insurance company has an obligation to repair or replace it. Insurance policies, however, rarely are specific on this point. In Windridge of Naperville Condo. Ass’n v. Philadelphia Indem. Ins. Co., 932 F.3d 1035, 1040 (7th Cir. 2019), for example, the court held that “the unit of covered property to consider under the policy (each panel of siding vs. each side vs. the buildings as a whole) is ambiguous.” Thus, the court construed the policy in favor of the policyholder under the well-settled rule that ambiguous language in an insurance policy must be construed in favor of coverage and strictly against the insurance company.
The Windridge court also examined the so-called “matching” issue that often arises with partial damage. Specifically, where new materials will not match the existing undamaged materials, does the insurer have an obligation to pay for changes in the undamaged portions of a building so that the new and old will match? The court noted that the case law is “mixed” in answering this question. The court followed the case law holding that the insurer must account for matching, noting that “buildings with mismatched siding are not a post-storm outcome that the insured was required to accept under this replacement-cost policy.” Id. at 1041.
What Is “Like Kind and Quality”?
“New for old” is usually not difficult when property is a total loss, but it becomes a challenge when property is only damaged or partly destroyed. It can often be difficult, if not impossible, to replace only part of a damaged structure. Issues like tying the new into the old, matching the new and the old, material and technology changes, and code requirements for new versus old often arise.
Most policies require replacement of lost or damaged property with property of “like kind and quality,” or similar words. The standard ISO form uses the phrases “comparable material and quality…used for the same purpose.” These words usually are not further defined.
As discussed above, several courts and/or state statutes provide that replacement materials must match the undamaged portions of the property to qualify as like kind or comparable. For other issues, whether replacement materials are “comparable” often involves expert testimony. In Republic Underwriters Ins. Co. v. Mex-Tex, Inc., 150 S.W.3d 423 (Tex. 2004), for example, the court held that “comparable” does not mean “identical” and affirmed the trial court’s ruling finding coverage for a different type of roof based on expert testimony that the replacement roof was comparable, even though it was different from the damaged roof and cost more to replace.
What if Building Codes Have Changed?
The standard ISO replacement cost form states that the “cost of building repairs or replacement does not include the increased cost attributable to enforcement of or compliance with any ordinance or law regulating the construction, use or repair of any property.” However, some coverage is available for “Increased Cost of Construction,” which includes coverage for the increased cost necessary to comply with the minimum costs of complying with building codes or ordinances, subject to certain conditions. This additional coverage also is sometimes referred to as “Ordinance or Law” coverage. It is limited to certain amounts in the standard ISO form ($10,000 or 5% of the applicable limit), but additional coverage can be purchased.
How Is My Value Determined?
At a high level, replacement cost valuation is straightforward — it is cost to repair or replace the lost or damaged property with comparable property. The standard ISO form limits recovery to the maximum of “the amount actually spent that is necessary to repair or replace the lost or damaged property.” But the total replacement cost can be affected by the issues discussed above (e.g., matching or whether the replacement property is “comparable”), as well as a host of other issues.
The number of factors that can affect replacement cost vary based on the type and age of construction, materials, geography, and macroeconomic events like weather, tariffs and the labor market. These factors affect things like:
The availability of replacement materials
The cost of replacement materials
Alternatives to the damaged property
Lead times for materials
Labor rates and intensity of different repair options
Market or aesthetic changes
The schedule for repairs or replacement
Most insurance companies and their experts use software programs to calculate replacement costs. These programs contain regularly updated labor and materials costs by geographical regions. In calculating replacement cost estimates, they also consider additional costs, such as overhead, profit, permitting, and other costs that may be included in a general contractor’s “general conditions.”
While these programs are the insurance industry’s standard for calculating replacement cost, they are the map and not the territory. Nothing in the policy requires the use of estimates to calculate replacement cost, and recovery ultimately is based on the actual costs of repairs or replacement, subject to the policy’s terms and conditions, such as those discussed above.
Contractors and builders generally do not use the same programs that insurance companies use — they base their cost estimates on sub-contractor bids and their general knowledge about the costs and time involved in a potential job. In tight labor markets or times of rapidly rising or fluctuating prices, the replacement cost estimates in an insurance company’s software program may not reflect the events on the ground.
The numbers in the estimating software used by insurance companies also necessarily reflect figures among a range of possible costs a policyholder might receive from a contractor in an estimate for actual repair or replacement work. The costs of the most available or desirable contractor may be higher than the cost reflected in an insurance company’s insurance program. In addition, the accuracy of an estimate will only be as good as the information entered into the program. If the details of the loss are entered incorrectly, or if the scope changes as additional work becomes necessary or additional damage is uncovered during demolition, the estimate will need to be corrected or updated.
Policyholders should not accept software driven estimates as final costs, but as useful tools for receiving early partial payments on a claim and for setting a general framework for replacement costs. Policyholders should not settle claims until after they fully understand the scope of their loss and the actual costs they will incur in repairing or replacing damaged or destroyed property.
Do I Get Replacement Cost if I Don’t Rebuild or Rebuild Something Different?
Many policy forms state that the insurer will pay only the “actual cash value” or “ACV” of property damage until after repairs are made. Some courts have held that this condition may be waived by an insurer’s handling of a claim. In Rockford Mut. Ins. Co. v. Pirtle, 911 N.E.2d 60 (Ind. Ct. App. 2009), for example, the court held that this condition was waived where the insurer waited six months and until after foreclosure proceedings were initiated to offer an ACV payment.
Most insurers define ACV as replacement cost less depreciation, and some policies define the term in this way. But many policies do not define ACV. In the absence of a policy definition of ACV, or where the policy language allows, many states use the “broad evidence rule” for calculating ACV. This rule is a “flexible rule” that permits consideration of “any relevant factor” in determining ACV. Travelers Indem. Co. v. Armstrong, 442 N.E.2d 349, 356 (Ind. 1982).
Some policies allow recovery of replacement cost where the policyholder rebuilds at another location, or even if the policyholder rebuilds something different from the damaged or destroyed property. Other policies go so far as to allow a replacement cost recovery where the policyholder does not rebuild, if the proceeds are used elsewhere in the policyholder’s business. These provisions often also require that the proceeds are used on unplanned expenses. In these situations, disputes center on the “hypothetical” replacement cost of repairing or rebuilding with like kind or comparable property, given that no actual costs are incurred for that work.
Who Decides What I Get?
There are three ways disputes over replacement cost may be decided. If the dispute involves a question of what the insurance policy language means, then the issue is usually decided by a court. But courts only decide what the law mandates or what the insurance policy language means. Juries typically decide factual disputes or issues that turn on experts’ credibility.
In the case of disputes over the amount of replacement cost, property insurance policies usually contain a third remedy, called appraisal. The appraisal process involves each side choosing an appraiser and those appraisers choosing an umpire. The appraisers and the umpire then evaluate the differences in replacement cost calculations and the umpire’s agreement with one of the party’s appraisers is binding. Appraisals too can be fraught with issues, which is discussed in a prior article linked here.
Conclusion
Disputes over replacement cost raise legal and factual issues in normal times, but they present enhanced challenges when costs, climate, and market forces are changing and uncertain. Policyholders should navigate those challenges thoughtfully to ensure they obtain the benefits they paid for under their property insurance policies.