Insights

When going to market for professional and management liability insurance, most policyholders, brokers and attorneys, go to great lengths to assess policy terms, and rightfully so. Of secondary importance however, is assessing the insurer itself - as task that too often gets overlooked. Here are some considerations for policyholders when underwriting prospective carriers.

Cyber risk is a broad term, often used to refer to a wide range of computer, and digital/online related claims. Some of these claims have been traditionally insured under typical liability and property policies for years, which gave rise to the term "silent cyber coverage". With cyber insurance now a mature product, many carriers are developing firmer lines in the sand, eliminating any silent cyber within their forms, clearly isolating the risks they insure, however there are still many cyber risks that can be insured both on and off cyber policies.

When reviewing a cyber policy, nothing creates more confusion that the computer crime insuring agreements. Business email compromise is often insured under a social engineering insuring clause, except when it’s referred to as e-theft or fraudulent instruction, which sounds a lot like funds transfer fraud which is an entirely different insuring agreement (sometimes). That’s also not to be confused with computer fraud which is also different. Dizzy yet?

Lost income and expenses related to business interruptions account for some of the most significant damages incurred during an intrusion. In fact, the damages can be so significant that one of the primary considerations organizations make when deciding whether or not to pay a ransom demand, is the potential lost income that would result from refusing such a payment. While almost all cyber policies provide coverage for breach related business income losses, there are some critical differences among carriers’ coverage triggers and the damages they insure against.

Broad indemnification agreements are a staple protection for corporate officers of both public and private companies alike. Unfortunately, corporate indemnification isn’t a guarantee. There are a number of situations in which such protections may become unavailable or indemnification may be wrongfully denied by the company. In such situations, the only source of funds available to executives, are those provided by a the Side A insuring agreement of a D&O policy which provides coverage for non-indemnifiable claims.

Private companies face many of the same risks as public companies; litigation from investors, derivative suits, regulatory actions, and bankruptcies, etc. The only real difference are the applicable laws and the nuances of the allegations. There are also some key differences among their D&O insurance programs as well. Generally speaking, public company D&O policies are more expensive per limit and contain higher retentions, which can easily exceed 1 Mill. The towers themselves are often a bit different.

Sophisticated directors and officers insurance programs are generally built in layers, with a full ABC underlying policy, topped with excess limits and/or a Side A DIC (difference in condition) cap. In contrast to the full D&O policy which provides coverage for the company’s balance sheet, Side A DIC D&O policies provide broader coverage solely for non-indemnifiable claims against insured persons.

Despite all the nuances and intricacies of D&O insurance, nothing generates more questions than the simple ABC insuring agreements. We’ve previously provided a general D&O guide here, but in the interest of any lingering confusion, here’s an over-simplified example of the ABCs, in plain English, that everyone can easily understand.

Digital accessibility lawsuits, once perceived as litigation trend that would quickly die down, have now become commonplace, creating a headache for many companies. These lawsuits allege that a company’s website, mobile app or its digital features violate the American’s with Disability act by denying access to those with visual or hearing impairment or other disabilities. Many of these suits arise from very simple formatting and programming errors such as:
 

ESG initiatives are creating emerging exposures for public companies at a rapid rate. Greenwashing claims, emission litigation, cyber/privacy failures, and lawsuits related to diversity and inclusion failures are creating disclosure challenges and fueling litigation. Additionally, the SEC’s newly developed climate and ESG task force, and newly proposed cybersecurity rules signal tighter ESG oversight resulting in an increased potential for regulatory enforcement.