Heads up and be ready to duck in 2016 as risks emerge on the liability landscape. Here’s our take on a few things to watch for and why.
The scariest risk: data breach
We have entrusted the federal government to protect us. It provides for the common defense and promotes the general welfare. Which is why the theft of roughly 21.5 million Social Security numbers from the Office of Personnel Management is so unsettling. If the feds can’t safeguard their data, how can any business or individual hope to protect itself from determined hackers? These evil geniuses invent new ways to infiltrate and steal personal information daily. Their technology moves at explosive speeds, so insurers need to remain on guard.
Invest in the best system protections and monitoring software possible for all the data your company stores and creates, then doggedly monitor your coverage language to make sure you are clearly covering or not covering whatever flavor of exposure these hackers are inventing. ISO, the International Organization for Standardization, has a few data liability exclusions in the market to consider. However, these forms arguably leave room for inventive attorneys to articulate facts to skirt the exclusions, so heads up and be prepared to manuscript if necessary to control your exposure. Also, you will want to read the fine print of your company’s software contracts. Software service provider contracts often shift liability onto the user in the case of for data breach, reverse engineering and other cyber liability. Not cool.
Let’s thank “Shark Tank” for the increase in patent filings
Welcome to the age of Shark Tankian invention. This past year saw an uptick in patent litigation. However, the verdict is still out as to whether this is a trend or an anomaly caused by folks filing before a Dec. 1, 2015, federal rule change eliminating Form 18 used to plead direct infringement claims. What is certain is that we have a world economy, and other countries have different administrative procedures, fewer resources and less interest in prosecuting intellectual property violations. Patent infringement is an ever-present risk that costs companies billions of dollars to fix. As a result, we predict a hardening market for patent insurance providers in 2016.
The growing market of marijuana-related liability coverage
The legalization of marijuana for medical use (and for recreational use in some states) and the increase in illegal grow house operations have caused much confusion in the insurance industry, especially in the area of claims coverage. The disparity between state and federal laws has further complicated the already hazy (no pun intended) coverage picture for risks and hazards not previously anticipated in personal and commercial insurance. In response to all the confusion, insurers will enter and exit this line in 2016 - enticed to carve out a book from what is projected to be a $19 billion market by 2019. However, insurers are skittish about the unknown exposure. Agents and brokers are wise to be careful here too. Know the laws, watch developing legislation, survey the liability landscape, and read and re-read the policies before you even think about placing coverage.
Humans are causing earthquakes
Hydraulic fracturing is a technique to stimulate oil or gas well production. Pressurized liquid is pumped into wells to break up rock, allowing natural gas and oil to flow more freely. While fracking increases production, there is danger of pollution near the wells. There is also the possibility that fracking may lead to increase seismicity – earthquakes! Because traditional earthquake insurance policies exclude coverage for man-made damage, agents and brokers should advise consumers to broaden their coverage to include fracking-related earthquake damage in areas where this is a possibility.