Contingent Business Interruption Coverage: Insuring the Far-Reaching Effects of Tropical Storm Harvey

Manufacturers and producers are keenly aware of the value provided by business interruption coverage. Typically, this coverage is sold to companies as one of several coverages under their commercial property insurance package. Business interruption coverage is generally triggered by physical damage to a company asset (e.g., a manufacturing plant), which causes a suspension of business activities resulting in a loss of business income.

Tropical Storm Harvey has forced manufacturers and producers across Southeastern Texas to shut down operations while repairing their damaged facilities. These companies will turn to their business interruption carriers to recoup their business income lost during this period. However, for companies doing business in that region, but physically located outside the reach of Harvey, business interruption coverage may not protect them from lost profits caused by the storm.

For example, say a company owns a manufacturing facility in California where it assembles cars. The manufacturer purchases its engines from a company located in the flood-ravaged portions of Texas. If the Texas company is unable to build and deliver engines to California, the manufacturer might be unable to assemble cars for days, possibly weeks. Any business income losses incurred by the California company are unlikely to trigger standard business interruption coverage because the California manufacturing facility did not suffer any physical damage. To fill the gap, manufacturers and producers often purchase contingent business interruption coverage (CBI).

CBI coverage is, in effect, an extension of business interruption coverage to the business activities of suppliers and customers. If an upstream supplier or downstream customer suffers an interruption in business activities, CBI coverage should kick in to reimburse the policyholder for certain lost profits. CBI coverage can be written on specific properties owned by suppliers or customers and/or on a blanket basis.

The value of CBI coverage may vary depending on the precise language of the coverage grant.

Compare Millennium Inorganic Chems. Ltd. v. National Union Fire Ins. Co., 744 F.3d 279, 285-86 (4th Cir. 2014) (CBI coverage was expressly limited to “direct contributing properties” therefore, the presence of an intermediary between policyholder and supplier precluded coverage) to Archer-Daniels-Midland v. Phoneix Assur. Co., 936 F. Supp. 534, 544 (S.D. Ill. 1996) (CBI coverage was not limited to “direct suppliers,” therefore, CBI coverage was appropriate despite an intermediary in the supply chain).

There are a myriad of issues that arise when a company tenders a claim for CBI coverage, all of which need to be carefully considered on a case-by-case basis. For manufacturers and producers that rely on companies in Southeastern Texas, CBI coverage may become vital.

This post was written by Joshua B. Rosenberg of BARNES & THORNBURG LLP© 2017
For more Insurance Law go to The National Law Review

Federal Immigration Resources Assisting in Hurricane Response in Texas

U.S. Customs and Border Protection (CBP) is deploying staff and equipment for search and rescue efforts and to work at local, state, and federal emergency operations centers in Texas in response to Hurricane Harvey.

Hurricane Harvey hit Texas just as the state’s plan to outlaw sanctuary cities is about to go into effect.  Texas also has joined other states in threatening to sue President Donald Trump if he does not phase out DACA starting on September 5th.

Some of Houston’s more than 500,000 undocumented immigrants reportedly are afraid to seek shelter, fearing deportation.

To encourage undocumented workers in need of assistance to come into shelters, FEMA issued a statement, “Hurricane Harvey Rumor Control,” asking “all persons to follow the guidance of local officials and seek shelter regardless of their immigration status.”

ICE and CBP explained that:

It is not conducting immigration enforcement at relief sites such as shelters or food banks. In the rare instance where local law enforcement informs ICE of a serious criminal alien at a relief site that presents a public safety threat, ICE will make a determination on a case-by-case basis about the appropriate enforcement actions.

In an effort to assuage fears, the Mayor of Houston has offered to personally represent any individual facing deportation after seeking disaster relief.

In the meantime:

  • 50 CBP agents are staffing a U.S. Coast Guard Emergency Operations Center in Robstown, Texas

  • CBP is providing assistance to border patrol agents in Corpus Christi

  • CBP aircraft from Tucson are in Texas, along with 12 aircrew members, 5 support personnel and 3 agents certified in swift-water rescues

  • CBP’s Air and Marine Operations sent 4 hoist-capable Blackhawks to Houston to help with rescues

  • 50 Tucson area Special Operations Detachments agents are supporting public safety operations

Once the immediate danger subsides, workers will be needed to participate in the billion-dollar rebuilding effort. “Eduardo Canales, director of the South Texas Human Rights Center, said the state is at risk of losing much-needed low-wage workers – cleaners, cooks, carpenters and landscapers – who because of the crackdown may not stick around to help Texas communities recover from the storm.” Even before the hurricane, there was concern that undocumented workers would be leaving the state because of perceived anti-immigrant sentiment.

Beyond the emergency rescue and relief efforts, international trade and travel also has been affected and CBP is coordinating with the U.S. Coast Guard and port authorities to resume operations as soon as possible.

This post was written by Meredith K. Stewart of Jackson Lewis P.C. © 2017

For more legal analysis go to The National Law Review

The ABA presents: User Guide to HUD’s Previous Participation Review Process (aka “2530 approval”)

Available as an e-book and a hard copy from the ABA available here.

ABA HUD Review Process

 

The Previous Participation Review is only one component of HUD’s review of an application. Previous Participation Review is generally applicable to multifamily projects and healthcare facilities. This guide explains the key features of the revised process.

Available for purchase here.

meting trade globe Trans Pacific Partnership

US Launches Investigation into China’s Technology Transfer & IP Practices

United States Trade Representative (“USTR”) Robert E. Lighthizer launched an investigation under Section 301 of the Trade Act of 1974 (“Section 301”) into acts, policies, and practices of the Chinese government as they relate to “technology transfer, intellectual property [IP], and innovation.” The August 18 announcement of the investigation came just days after President Donald Trump signed a memorandum directing the USTR to consider whether to launch an investigation of China’s IP laws and practices that “may inhibit United States exports, deprive United States citizens of fair remuneration for their innovations, divert American jobs to workers in China, contribute to our trade deficit with China, and otherwise undermine American manufacturing, services, and innovation.”

While Section 301 was a frequently used tool between the 1970s and 1990s (including when Ambassador Lighthizer was Deputy USTR during the 198os), the number of such investigations declined significantly after the World Trade Organization (WTO) dispute settlement system was established. Use of Section 301, however, is consistent with this Administration’s apparent willingness to use a broader range of trade tools to more aggressively combat potential unfair trade practices.

Section 301 allows—and, in certain circumstances, requires—the USTR to investigate and take unilateral retaliatory action in response to certain trade-related harms. The USTR must take appropriate action if the rights or benefits of the United States under any trade agreement are denied, violated, or otherwise harmed, or if its international legal rights are infringed in a way that burdens or restricts U.S. commerce. The USTR may take action at his or her discretion if an act, policy, or practice is unreasonable or discriminatory and burdens or restricts U.S. commerce. Among other things, a Section 301 action may be taken if a foreign country denies adequate and effective intellectual property protection or fair and equitable market opportunities, even if its behavior is consistent with its obligations under the World Trade Organization’s (“WTO”) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).

The Federal Register notice launching the investigation highlights concerns that the Chinese government uses the transfer of foreign technology and intellectual property to advance its industrial policy goals. The USTR investigation will first examine acts, policies, and practices of the Chinese government that fall into the following four categories:

  1. The use of “a variety of tools, including opaque and discretionary administrative approval processes, joint venture requirements, foreign equity limitations, procurements, and other mechanisms to regulate or intervene in U.S. companies’ operations in China, in order to require or pressure the transfer of technologies and intellectual property to Chinese companies;”

  2. Acts, policies, and practices that “reportedly deprive U.S. companies of the ability to set market-based terms in licensing and other technology-related negotiations with Chinese companies and undermine U.S. companies’ control over their technology in China;”

  3. Direction and/or unfair facilitation of “systematic investment in, and/or acquisition of, U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property and generate large-scale technology transfer in industries deemed important by Chinese government industrial plans;” and

  4. Conduct or support of “unauthorized intrusions into U.S. commercial computer networks or cyber-enabled theft of intellectual property, trade secrets, or confidential business information” (as well as the harm they may cause to U.S. companies and the competitive advantages they may bring to Chinese companies).

Beyond the categories enumerated above, which are focused on technology/IP transfer and cyber-theft, the USTR notice also invites submissions of “information on other acts, policies and practices of China relating to technology transfer, intellectual property, and innovation described in the President’s Memorandum,” leaving open the possibility for the investigation to widen. The announced scope of the investigation highlights the discretionary factors to be considered under the statute, indicating that USTR is not focused solely on actual violations of China’s obligations under international trade law.

Consistent with the statute, the notice provides that USTR has 12 months to make a determination as to whether action is warranted. If it is determined that action is warranted, USTR may consider a broad range of retaliatory tools, including the withdrawal of trade concessions, the imposition of duties or other import duties, and “all other appropriate and feasible action within the power of the President that the President may direct the Trade Representative to take…to enforce such rights or to obtain the elimination of such act, policy, or practice…[with actions that may be taken being] within the power of the President with respect to trade in any goods or services, or with respect to any other area of pertinent relations with the foreign country.” Retaliatory actions may be targeted at industries other than those directly linked to the identified harm. USTR also has the discretion to come to an agreement with the foreign country’s government to eliminate or obtain compensation for the identified harm. As required by law, USTR has requested formal consultations with the Chinese government regarding the issues under investigation.

The behavior targeted by this Section 301 investigation reflects concerns of the international business community in China. For instance, 43 percent of companies responding to AmCham China’s annual Business Climate Survey in 2017 reported that reducing the need to engage in technology transfer would have at least a somewhat significant impact on increasing their investment levels in China. These companies may find this investigation to be an opportunity to advance their specific concerns. Meanwhile, Chinese companies that may be at risk for retaliatory action under Section 301, and U.S. companies potentially vulnerable to counter-retaliation by Chinese authorities, should carefully monitor the situation.

The Chinese government has expressed its concerns about the investigation. Suggesting that the United States is sending the wrong signal to the international community, a statement from the Ministry of Commerce asserts, “The United States’ disregard of World Trade Organization rules and use of domestic law to initiate a trade investigation against China is irresponsible, and its criticism of China is not objective.” While launching an investigation of China’s unfair trade practices is not, in and of itself, inconsistent with U.S. WTO obligations, imposition of some—though not all—of the retaliatory measures authorized under U.S. law could potentially violate WTO rules. China’s statements indicate that should the U.S. investigation lead to unilateral retaliatory action, China will respond in various ways, including by considering a challenge to such measures at the WTO.

The USTR notice calls for written comments by interested persons to be submitted by September 28. The interagency Section 301 Committee, which is chaired by the USTR, is scheduled to hold a hearing in Washington, D.C., on October 10. Requests to appear at the hearing are also due on September 28.

Zhijing Yu  contributed to the preparation of this article.

 This post was written by Ashwin Kaja, Gina M. Vetere and Timothy P. Stratford of  Covington & Burling LLP © 2017
For more legal analysis go to The National Law Review

EPA Ready to Support FEMA, State Efforts on Hurricane Harvey

EPA has an organized emergency response program for responding to man-made and natural disasters and is positioned to support the Federal Emergency Management Agency (FEMA), state, local, and tribal partners in response to Hurricane Harvey.

“I am in regular contact with EPA Region 6 and want to commend them for their leadership and preparation,” said EPA Administrator Scott Pruitt. “EPA is closely coordinating with state and regional partners, and we have teams standing by to support FEMA.  EPA is ready to respond to anything that may occur due to Hurricane Harvey.”

EPA headquarters emergency operations center is monitoring the storm closely and making preparations to activate in order to support states and regions affected by the storm.

EPA’s Region 6 office in Dallas is taking action to ensure that Superfund sites are secured in advance of the storm, to assist approximately 300 public drinking water system rapid assessments, and to seamlessly integrate emergency response activities with Texas, Louisiana, and other federal response agencies.

EPA supports hurricane preparedness and response in a number of ways, including:
•    Addressing Fuel Shortages: The Clear Air Act allows EPA Administrator Pruitt, in consultation with Energy Secretary Perry, to waive certain fuel requirements to address shortages that occur as a result of the storm. If Administrator Pruitt determines that extreme and unusual fuel supply circumstances exist in a state or region as a result of the hurricane, a temporary waiver can help ensure an adequate supply of gasoline is available in the affected area, particularly for emergency vehicles. EPA has an experienced team standing by to expedite handling of any fuel waiver requests by the states.

•    Monitoring Public Water Systems: Water systems can be severely impacted during hurricanes due to storm surge, flooding, or loss of power. EPA Region 6 has developed a tracking system for us to identify systems in the storm’s pathway. About 300 public drinking water systems are in the path (red zone) of hurricane Harvey in Texas. Both Texas Commission on Environmental Quality and Louisiana Department of Hospitals have uploaded their potentially impacted systems into Response Manager, which enables planning for rapid assessments to restore water systems after the storm passes and flood waters recede. Following the storm, and if the state requests federal assistance, EPA conducts damage assessments of both drinking water and wastewater systems to identify impacts to critical assets and assist in the recovery.

•    Securing Superfund Sites: EPA assesses conditions at the NPL Superfund sites in the storm’s pathway and tasks each Superfund National Priorities List (NPL) remedial site manager to assess conditions and make on-site preparations for high winds and heavy rainfall.  Following the storm and receding floodwaters, EPA conducts rapid assessments to identify damage at sites and initiate cleanup plans if necessary. Any on-site activities at sites located in the storm’s path are ceased until the all clear is given and on-site equipment is secured.  In addition, freeboard for lagoons or ponds is increased to accommodate forecasted rainfall if possible. After a hurricane makes landfall and any flooding recedes, the EPA remedial managers will conduct assessments of each Superfund NPL site to ensure no damage has occurred.

•    Assessing Conditions at Major Industrial Facilities: EPA assesses conditions at the major industrial facilities in the storm’s pathway to identify potential impacts and countermeasures. Following the storm and receding floodwaters, spills and releases are reported to the National Response Center. NRC notifies US Coast Guard or EPA based on preapproved jurisdiction boundaries. EPA conducts follow up inspections and damage assessments in response to reports within EPA jurisdiction.

As EPA prepares to support FEMA and its local and state partners, it continues to focus its message on the importance of public safety. For information and updates from EPA, please visit EPA’s emergency response website, www.response.epa.gov/Hurricaneharvey2017.

This post was written by the United States Environmental Protection Agency © Copyright 2017
For more Environmental Law analysis, go to The National Law Review

Steer Clear from Military Bases if You Want to Keep Your Drone (and Yourself) Out of Trouble

There has been a growing security concern posed by drones, especially in light of increased use by both private citizens and companies. With the aim of keeping personnel and equipment safe in connection with its domestic military bases, the Pentagon recently issued classified rules that provide guidance to the U.S. military on how to deal with private and commercial drones that are found flying over or around its domestic military bases.

During the drafting process of the rules, the Pentagon consulted with the Federal Aviation Administration (FAA) to determine how best to deal with drones. Although the specifics of the rules are classified, the rules generally allow for a variety of different responses to drones including tracking, disabling, and destroying the drones. The response may depend on the circumstances as well as the installation the drone is spotted near (i.e. the drones may even be seized afterwards for use in subsequent investigations). Further, the military already has several options in place such as using traditional ammunition to disable or destroy the drones as well as relying on radio waves to commandeer the drones from their operators.

However, the drones may not be the only things targeted if found operating near military bases. Back in April of this year, the Pentagon and the FAA announced a rule that prohibited drone flights near various domestic military bases. Although the previous rule regarding drones did not indicate that the drones would be specifically targeted by the military, it did state that pilots caught violating the restriction would be subject to arrest. The Pentagon has indicated that it will support civilian law enforcement investigations and the prosecution of unauthorized drone operations over military installations. Violators could potentially face fines or jail time.

For reference, a map can be found on the FAA website that provides information for the general public regarding areas and altitudes where drones can be operated safely. The map also highlights the various restricted airspace in connection with the domestic military bases.

This post was written by Thomas Nguyen of Polsinelli LLP in California © Polsinelli PC

For more legal analysis go to The National Law Review

Farm, Green, Feild

President Trump Signs the “Securing our Agriculture and Food Act”

President Trump recently signed the “Securing our Agriculture and Food Act” (H.R. 1238). The bill amends the Homeland Security Act of 2002 to direct the Assistant Secretary for Health Affairs for the Department of Homeland Security (DHS) to carry out a program to coordinate DHS efforts related to defending the food, agriculture and veterinary systems of the United States against terrorism and other high-consequence events that pose a high risk to homeland security.

According to Michigan Farm News, the law will:

  • Provide oversight and management of DHS’s responsibilities pursuant to Homeland Security Presidential Directive 9 – Defense of United States Agriculture and Food;
  • Provide oversight and integration of DHS activities related to veterinary public health, food defense and agricultural security;
  • Lead DHS policy initiatives related to food, animal and agricultural incidents and to overall domestic preparedness for, and collective response to, agricultural terrorism;
  • Coordinate with other DHS components on activities related to food and agriculture security and screening procedures for domestic and imported products; and
  • Coordinate with appropriate federal departments and agencies.
This post was written by Aaron M. Phelps of  Varnum LLP© 2017
For more legal analysis go to The National Law Review
NAFTA, USA, Mexico, Canada

U.S., Mexican, and Canadian Officials Conclude First Round of NAFTA Modernization Talks

On August 20, trade officials from the United States, Mexico, and Canada concluded the first round of negotiations to modernize the North American Free Trade Agreement (NAFTA). In a joint statement released following five days of talks, trade officials reiterated their commitment to updating the deal, continuing domestic consultations, and working on draft text. They also pledged their commitment to a comprehensive and accelerated negotiation process to set 21st Century standards and to benefit the citizens of North America.

Their agenda covered a wide range of existing and new NAFTA chapters, including: updating the Rules of Origin, adding and amending trade remedies provisions, addressing transparency, combatting corruption, increasing intellectual property protections, and addressing issues facing financial services and investment. The U.S. reportedly tabled roughly 10 proposals updating existing chapters or proposing new ones. Officials expect the modernized NAFTA deal will include a total of 30 chapters (the current agreement is comprised of 22 chapters and seven annexes).

The NAFTA negotiating teams are being led by Assistant U.S. Trade Representative for the Western Hemisphere John Melle, veteran Canadian trade expert Steve Verheul, and Director of the Embassy of Mexico’s Trade and NAFTA Office Kenneth Smith Ramos. In addition to negotiators, a number of Canadian and Mexican stakeholders – including eight members of the Mexican Senate and 150 representatives of Mexico’s private sector – were present on the margins of the talks. However, U.S. negotiators have acknowledged that their accelerated schedule leaves little time for formal business stakeholders to be included in events like those organized during the Trans-Pacific Partnership talks.

Negotiators are expected to head to Mexico City for the second round of talks from September 1 to 5, and to Canada for their third round in late September (reportedly September 23-27). Negotiators will continue at this rapid pace, moving back to United States in October and planning additional rounds through the end of the year. The NAFTA parties hope to finish talks by the end of 2017 or early 2018, ahead of Mexico’s July 2018 presidential elections.

This post was written by Mayte Gutierrez and Ludmilla L. Savelieff of Squire Patton Boggs (US) LLP © Copyright 2017
For more legal analysis go to The National Law Review
Labor Law Hiring

Illinois Passes Religious Garb Law Clarifying Religious Protections Under Illinois Human Rights Law

On August 11, 2017, Illinois Governor Bruce Rauner signed into law Public Act 100-100, known as the “Religious Garb Law.”  The law amends the Illinois Human Rights Act (“IHRA”) by clarifying the scope of protection for sincerely held religious beliefs.

Specifically, the amendment makes clear that it is a violation of the IHRA for an employer to impose a requirement that would cause an employee to “violate or forgo a sincerely held practice of his or her religion including, but not limited to, the wearing of any attire, clothing, or facial hair in accordance with the requirements of his or her religion.”  However, the law indicates that “[n]othing in this Section prohibits an employer from enacting a dress code or grooming policy that may include restrictions on attire, clothing, or facial hair to maintain workplace safety or food sanitation.”  Moreover, employers may still prohibit attire, clothing and facial hair if failing to do so would result in an undue hardship to the employer’s business.

In essence, this amendment clarifies the scope of religious protections that exist under the IHRA.  Notably, the EEOC has taken the position that Title VII protects religious garb.

This post was written by Steven J Pearlman and Alex C Weinstein of  Proskauer Rose LLP.© 2017
For more on Labor & Employment Law go to The National Law Review
H-1b petition

Suspension of Visa Operations in Russia

The U.S. Embassy and Consulates in Russia announced that “[a]s a result of the Russian government’s personnel cap imposed on the U.S. Mission, all nonimmigrant visa (NIV) operations across Russia will be suspended beginning August 23, 2017.”

This is the most recent volley in the diplomatic back-and-forth that started with the reports of possible Russian involvement in U.S. elections. Following U.S.-imposed sanctions, Russia ordered the withdrawal of 755 U.S. diplomatic personnel from Russia.

Generally, the announcement means:

  • The U.S. Mission has begun cancelling current nonimmigrant visa appointments countrywide.
  • As of September 1, nonimmigrant visa interviews will be conducted only at the U.S. Embassy in Moscow.
  • NIV applicants whose appointments are cancelled can reschedule for a later date in Moscow.
  • Some immigrant visa interviews also will be affected.
  • The Embassy in Moscow and the Consulate in St. Petersburg will no longer accept new visa applications from residents of Belarus, who are encouraged to schedule NIV appointments in Warsaw, Kyiv (Kiev), or Vilnius.
  • The current plan is to offer a block of visa appointments for students in early September.
  • The Embassy in Moscow will continue to process NIV applications without an interview for those who qualify.

The U.S. Embassy in Moscow and the three consulates in St. Petersburg, Yekaterinburg, and Vladivostok will continue to provide emergency and routine services to American citizens, although hours may change.

This post was written by Michael H. Neifach  of Jackson Lewis P.C. © 2017

For more Immigration Legal News go to The National Law Review