Blog

Don’t Get Caught in the Bubble

Valynda Murphy
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.

Readers are encouraged to respond to Valynda Murphy directly at valynda.murphy@cna.com, or using the “Add Your Comments” box below.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments...

Already Registered?

If you have already registered to Insurance Networking News, please use the form below to login. When completed you will immeditely be directed to post a comment.

Forgot your password?

Not Registered?

You must be registered to post a comment. Click here to register.

Blog Archive

Data Governance in Insurance Carriers

As the insurance industry moves into a more data-centric world, data governance becomes more critical for ensuring the data is consistent, reliable and usable for analysis.

Fear This

Just days before this Issue, which contains our security cover story, went to press, we got some interesting news: 1.2 billion unique usernames and passwords and 542 million email addresses were reportedly stolen from 420,000 websites, according to The New York Times. The websites ranged from Fortune 500 companies down to small online retailers.

Should You Back Up Enterprise Data to the Cloud?

Six questions that need to be asked before signing on with an outside service.

Modernizing Information Management

While better reporting and actuarial analysis help to support financial decisions, improved analytics and decision making greatly assist the rest of the organization.

5 Strategies to Change the Game

Allstate's director of technology and operations says disruptive innovation has the power to completely change industries — ours included.

Strategic Planning: Here and Now

Insurers’ annual strategic planning efforts can benefit from an infusion of tactical reality.

Advertisement

Advertisement