In an article published on February 25, 2018 in Atlanta Inno, Gregg Jacobson discusses the benefits of smart contracts over standard contracts in business, including increased security, efficiency and cost savings. Jacobson provides guidance for companies interested in streamlining processes with smart contracts and addresses potential concerns as the technology emerges.

In an article published in the Winter 2018 issue of the Journal of The American College of Construction Lawyers, Gregg Jacobson discusses the enforcement of limitation of liability and exculpatory clauses in construction contracts. “These types of protective clauses are typically enforced by courts. The protection afforded by these clauses, however, is far from air-tight,” Jacobson explains. “There are legal exceptions that give parties numerous ways to get around exculpatory and limitation on damage clauses.” Though different risks are theoretically protected against through different clauses, many states have made the paternalistic decision that a finding of bad faith bars all protections. This means that sophisticated entities of relatively equal bargaining power do not have the freedom to agree to contractual provisions barring recovery for bad faith actions. “Any companies that want to agree to a contract with the broadest possible protections, however, are unable to do so. This overprotection is unnecessary in the modern commercial industry,” he writes. In the article, Jacobson describes the history of paternalism in the legal world and bad faith laws of New York, Pennsylvania and Delaware as they relate to limitation on liability clauses and exculpatory provisions. He then analyzes each state’s position on bad faith and poses three concerns that states without strong objection to a bar on bad faith recovery may nonetheless have. In addition, he discusses why each concern does not warrant protections by the state, and why Delaware’s lead in this area should be followed.

In an article published in the January issue of Business Insurance, Phil Karter and Katherine Jordan discuss the U.S. Tax Court’s decision in Benyamin Avrahami and Orna Avrahami v. Commissioner of International Revenue and its impact on the use of microcaptives. In the case, the court sided with the IRS, as Karter and Jordan state, “Deductions claimed for insurance premiums were disallowed, but the Tax Court concluded that no penalties should be imposed because the taxpayers still “acted reasonably and in good faith” in relying on the advice of their professional advisers.” However, despite the potentially chilling effect of Avrahami, taxpayers engaging in microcaptive transactions should remain confident that their captive arrangements will be respected in a most situations. In the article, Karter and Jordan explain several scenarios that demonstrate a captive investing in life insurance should not be treated any differently than a captive investing in other types of assets, assuming it meets requirements imposed on insurance companies by the jurisdiction in which it operates. “There are no grounds to create an artificial distinction between captive investments in life insurance as opposed to other investment assets. Captives should remain free to make decisions about how to invest their surplus capital, including the purchase of an asset long considered a safe and highly flexible investment choice, without fear that it might lead to an IRS challenge to the legitimacy of the underlying captive insurance arrangement.”