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Insurance Coverage in Consumer Class Actions

By Justin F. Lavella and John W. McGuinness
September 29, 2010

The business world is an increasingly difficult environment to navigate, particularly for companies providing goods and services to consumers. With each new year, federal and state legislators and regulators establish additional well-intentioned but labyrinthine statutes and regulations regarding consumer protection, including in the areas of privacy, data security, and credit reporting. The requirements placed on corporate America as a result of these laws have created significant new potential liabilities, often in the form of statutorily mandated damages, that even conscientious companies can find themselves inadvertently facing. Simultaneously, those laws have created potential opportunities for plaintiffs' attorneys to exploit.

For example, a number of retail stores employing a nationally integrated credit card processing system found themselves facing significant potential liability when California, four years ahead of the federal government, enacted a law prohibiting the printing of electronic receipts with the full 16 digits of a customer's credit card. While their actions may have been inadvertent, these companies became subjects of class action lawsuits with significant potential liabilities.

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