Don’t Get Caught in the Bubble
Insurance Experts' Forum, December 5, 2013
Technology is evolving so quickly that, as an industry, we have to continuously work to understand all of the complex risks our mutual clients face.
Companies often are scrambling to obtain the policies they need to protect themselves from all possible scenarios — sometimes without really understanding where both coverage overlaps and gaps exist. This can create a situation where companies unknowingly double pay for coverage, or don't realize that they are not being covered at all. In these situations where the coverage lines are blurred, major claim disputes can ensue, leaving companies vulnerable when they need the help the most.
So how do you avoid falling in the bubble?
First of all, you should ask questions and compare the coverages: What coverage does my client need most? What are their most likely loss scenarios? Under which policies of their program would the loss be covered? You should then explore possible scenarios that may occur within the major areas of convergence for technology risks, namely: general liability, error & omissions and information risk.
Here is a real life example: Your client manufacturers a sensor that controls the traffic lights at a major intersection. You place general liability, errors & omissions and umbrella liability coverage on behalf of your insured. You include contingent bodily injury and property damage on the errors & omissions policy. Then, a worst-case scenario happens: The software within the sensor fails, all the lights at an intersection turn green at the same time and two school buses collide, resulting in multiple injuries.
The general liability policy is primary coverage, but what if there is a professional services exclusion eliminating all bodily injury resulting from a software failure? The other insurance provision on the errors & omissions and the umbrella policies is excess. Does the E&O step up and pay? In absence of a professional services exclusion on the general liability policy, does the E&O or the umbrella policy pay when limits are exhausted on the general liability? And what happens when this coverage is placed with three different insurance carriers?
As you can see, claim disputes can get very complicated, especially when you throw in multiple carriers. For this reason, it’s often helpful to place the general liability, E&O, international and umbrella coverages with one carrier for technology risks. This will help avoid coverage battle fights during a claim scenario when you need the support the most.
Especially in support of technology clients, carriers and producers alike need to move beyond a siloed approach to insurance coverage and gain a better understanding of other parts of the program, even if not directly involved in all lines, to adequately protect our customers.
We need to plan for all exposures and ask the questions up front about how we plan to handle the convergences and gaps. We must also remain flexible and continue to revisit these questions as today's technology industry is already changing to meet the needs of the future.
This blog has been published with permission from CNA Insurance.
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