Business Insurance: Are You Really Covered?

“With the potentially extraordinary costs of remedying a [data] breach and breach-related litigation, affected companies are turning to their insurers. Insurers are responding that claims arising out of data breaches are not covered under traditional insurance coverage.” (From 2011 — The Year of The Breach: Consumers, Companies, Insurers, and Legislators Stake Out Positions after Rash of Data Breaches by Zelle Hofmann Voelbel & Mason LLP)

Choosing business insurance coverage can often be a daunting task, and it’s not made any easier when you go beyond the obvious policies and start to consider what you might actually be missing. To guide your assessment of the additional types of coverage your business (and you!) might need, here’s a roundup of recent insurance law commentary from lawyers and law firms on JD Supra:

On Cyber-Risk Insurance:

“Cyber-risk insurance is a fairly new method to transfer a portion of the unavoidable risk of an attack on the confidentiality, integrity, and availability of network data assets. In evaluating such coverage, a risk manager must assess a highly technical set of security risks … matching those against both an existing portfolio of first-party and third-party insurance coverages and a new insurance product offered in numerous forms by various carriers. A mistake could devastate the company in the event of a data breach.” (From Data Breaches – The Coverage Question by Gregg Rapoport)

“Cloud Computing may create new risks and exposures, financially as well as reputationally. Traditional and more recent insurance coverage may come into play… More recently, data privacy and security policies (sometimes called ‘cyber’ policies) should be considered as well.” (From Transcending The Cloud – A Legal Guide to the Risks and Rewards of Cloud Computing: Cloud Coverage by Reed Smith)

On Business Interruption Insurance:

“As with the 2005 hurricanes in the Gulf of Mexico, Hurricane Irene and Tropical Storm Lee will spawn many commercial insurance claims, and many of the claims will be Business Income (or Business Interruption) claims, seeking to recover lost profits arising from property damage or other commercial dislocations. And like claims stemming from previous mass catastrophes, many of these claims – especially the large ones – will be strenuously resisted by insurance companies.” (From Disaster and Business Interruption Coverages in the Wake of Hurricane Irene & Tropical Storm Lee by Reed Smith)

“An unexpected or catastrophic loss can force any company out of business, even if it’s insured. You must understand your company’s risks and how your insurance policies cover those risks in order to manage them and maintain stability.” (From Is Your Company Prepared For A Disaster? The Property And Business Interruption Insurance Checklist by Lowenstein Sandler PC)

On Directors and Officers Insurance:

“Purchasers of directors and officers insurance policies often focus on the wrong things. Premiums, of course, are an important consideration. But when it comes to policy terms, purchasers too often rely on general checklists or brief summaries… That is a little like buying a suit without ever trying it on, just because it is on sale. Protection, not just price, should be an important consideration.” (From 15 Questions You Should Ask Before Buying D&O Insurance by Morrison & Foerster LLP)

“The Federal Deposit Insurance Corporation’s recovery efforts against the directors and officers of failed financial institutions raise numerous insurance issues that highlight the importance of negotiating favorable coverage terms before a serious claim arises… [T]hese issues highlight the importance of negotiating terms favorable to directors and officers … at the time of policy placement or renewal, before a serious claim arises.” (From FDIC Recovery Efforts Highlight D&O Insurance Issues by McDermott Will & Emery)

On Advertising Injury Coverage:

“On October 17, the U.S. Court of Appeals for the Tenth Circuit, applying Colorado law, reversed a district court decision and held that a patent infringement claim may constitute an ‘advertising injury,’ thereby triggering, at a minimum, defense coverage under a variety of provisions in commercial general liability policies providing coverage for ‘misappropriation of advertising ideas.’ (From Tenth Circuit Finds Potential Insurance Coverage for Patent Infringement Claims Under “Advertising Injury” Provisions by Morgan Lewis)

“Although the insurers pointed out that the policy did not expressly promise coverage for patent litigation, the Court concluded that ‘advertising injury’ coverage applied. The Court reasoned that the complaint alleged a potentially covered claim because the patented technology ‘could theoretically be used for advertising purposes,’ and the complaint left open the possibility that the insured used the technology to promote its products.” (From Federal Appeals Court Requires Insurers to Defend Patent Infringement Suit Under Standard Commercial Liability Policies by Foley Hoag LLP)

“The … policies provided coverage for ‘advertising injury,’ which included injury arising out of misappropriation of advertising ideas, but only if committed ‘in the course of advertising’ the insured’s goods, products or services. The District Court found, and the Fifth Circuit assumed, that allegations regarding pricing promotions did not involve misappropriation of advertising ideas. (From It’s No Secret: Misappropriation of Trade Secrets Claim Without Advertising Will Not Trigger Coverage by Sedgwick LLP)


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