Insurance Online : Preventing Social Engineering Fraud

Social Engineering Fraud, also called email piracy or Business Email Compromise (BEC), is hard to prevent because it is based on deception (see here and here). While comprehensive protection is available within some Cyber Risk Insurance policies (also called Data Breach, Privacy and Network Security insurance coverage), a strong prevention program is also important. Here are a few prevention tips along with the sources: From our prior post, Tips for Preventing Email Piracy: Be suspicious of requests for secrecy or quick action Utilize a two-step verification process Know your customers & vendors From Chubb’s Guide to Preventing Social Engineering Fraud: It is essential that employees across an entire organization be educated and trained on how to detect and prevent this...

Follow our page in Facebook "Insurance Online". from Specialty Insurance Blog

Read more.. bloggeradsenseo

Insurance Online : Insurers' Communications Through Brokers Not Privileged

   The court granted the insured's motion to compel documents withheld for privilege by the insurers. Certain Underwriters at Lloyd's v. Amtrack, 2016 U.S. Dist. LEXIS 27041(E.D. N.Y. Feb. 19, 2016).     Plaintiffs were insurers who did business in the London Insurance Market and who issued one or more liability policies issued to Amtrak. Amtrak demanded coverage under the policies for alleged environmental contamination and/or asbestos exposure. Coverage was denied and the insurers filed for a declaratory judgment.     Discovery disputes arose in the litigation. Amtrak sought communications deemed privileged by the insurers even though, due to the unique structure of the London insurance market, the communications were shared with third parties.    Through a declaration,the insurers described how the London insurance market operated. Coverage for a major corporation like Amtrak would involve insurance placed in layers with each policy attaching at the exhaustion point of the underlying policy. A single policy might have one to dozens of insurers.    To facilitate communications between insurers and their attorneys, the attorneys did not communicate directly with all of the insurers on a policy. Instead, the attorneys communicated with the lead underwriter, and relied on a London broker to make their reports available to all subscribers on a policy who were represented by such counsel. U.S. lawyers representing insurers in the London Market would send attorney reports to a servicing company for the London insurers. The servicing company would then forward the attorney reports to the London brokers, who placed them in a claim file for distribution to the participating insurers. The London brokers would use messengers to take the claims file to various claims handlers, who would review the file. The file was then returned to the broker's office.    In seeking documents the insurers withheld as privileged, Amtrak argued that because the London brokers were neither attorneys nor clients, the attorney reports through the London brokers waived any privileged. In opposition, the insurers argued that using brokers to distribute privileged communications was standard in the London market and not understood to waive the privilege.    The court found the documents were not protected by attorney-client privilege. The fact that a particular method of distributing and/or retaining documents was standard in an industry did not determine whether that method of distribution complied with the law governing attorney-client privilege. The insurers failed to establish that attorney-client communications like the attorney reports were distributed through and/or retained by the London brokers were intended to be kept confidential. Amtrak's motion to compel was therefore granted. 

Follow our page in Facebook "Insurance Online". from Insurance Law Hawaii

Read more.. bloggeradsenseo

Insurance Online : Improper Efficient Proximate Cause Instruction Mandates Reversal

   The court reversed judgment in favor of the policyholder after finding that the trial court erred in giving its jury instruction on the efficient proximate cause doctrine. Citizens Prop. Ins. Corp. v. Salkey, 2016 Fl. App. LEXIS 2840 (Fla. Ct. App. Feb. 26, 2016).     The Salkeys had an all-risk homeowners policy from Citizens. The policy contained an exclusion for loss caused by sinkholes, but the Salkeys purchased a sinkhole loss coverage endorsement which provided coverage for "direct physical loss" caused by sinkhole activity.     The Salkeys presented a sinkhole claim to Citizens. The claim was denied after Citizens determined that the loss was caused by soils in a reclaimed mine zone. The Salkeys then sued for breach of contract.    At the trial, the parties disputed causation. The Salkeys' expert agreed that the reclaimed mine zone contributed to the damage, but testified that the sinkhole activity was the most substantial factor in the loss. Citizens' expert testified that there was no sinkhole activity and that the damage was caused by soils in the reclaimed mine zone.     The jury instructions stated that the burden of proof was on Citizens to prove that all of the damage was caused by conditions excluded by the policy. More specifically, Citizens had the burden to prove that all of the damage was non-sinkhole related.     During closing arguments, the Salkeys' attorney emphasized the burden-of-proof instruction, arguing that Citizens had to prove the damage was 100 percent non-sinkhole related. The jury returned a verdict for the Salkeys.    On appeal, the court ruled that the trial court erred as a matter of law by requiring Citizens to prove that no portion of the Salkeys' loss was sinkhole related. Once the insured proved a loss occurred during the policy period, the burden shifted to the insurer to show that the loss resulted from an excluded cause. Under a first party policy that involved multiple perils, the fact finder had to apply the efficient proximate cause doctrine to determine the cause of the loss. Under the efficient proximate cause doctrine, the jury had to determine which peril was the most substantial factor in the loss. If the efficient proximate cause of the loss was a covered peril, the loss was covered; if it was an excluded peril, the loss was not covered.     Here, instead of requiring Citizens to prove that the efficient proximate cause of the Salkeys' loss was an excluded peril not related to sinkhole activity, the trial court imposed a higher burden. It required Citizens to prove that all of the damage was excluded and non-sinkhole related. Therefore, the final judgment was reversed and the mater was remanded for a new trial.

Follow our page in Facebook "Insurance Online". from Insurance Law Hawaii

Read more.. bloggeradsenseo

Insurance Online : Law Firms are Cyber Targets

As we have noted in a prior post (see here), law firms have valuable information and are vulnerable to cyber attacks – and need Cyber Risk Insurance (also called Data Breach, Privacy and Network Security insurance coverage). Recent events have highlighted and heightened this exposure, starting with reports of attacks on large law firms. Reports from the FBI and others (see here, here, here and here) have noted that hackers have targeted the largest law firms in the US and have stolen confidential client information. Experts are speculating that confidential information was stolen to assist with trading on insider information, but it is too early to know what was stolen and why. In our prior post we noted why law...

Follow our page in Facebook "Insurance Online". from Specialty Insurance Blog

Read more.. bloggeradsenseo

Insurance Online : Resulting Loss Provision Does Not Salvage Coverage

   The court confirmed that there was no coverage for damage to the policyholder's building caused by a large volume of water. Praetorian Ins. Co. v. Arabia Shrine Ctr. Houston,  2016 U.S. Dist. LEXIS 20186 (S.D. Texas Feb. 19, 2016).    The damage occurred when water began seeping through the baseboards of the Shrine. Employees saw a large amount of water entering the building. Eventually, the city shut off a water main valve. It was later determined that an 8 inch diameter fire suppression metal pipe failed at the elbow, causing over one million gallons of water to be released into the building. Damages were estimated at nearly $1.7 million. Clean up and repair costs amounted to $237,156.       The Shrine held a commercial property policy. The insurer eventually agreed to pay $62,376. This consisted of $12,376 to remove and replace the pipe, $25,000 for limited additional coverage for water damage under a Masonic Coverage Extension in the policy, and $25,000 for damage to personal property. The insurer then filed suit for a declaratory judgment.    Under the property policy, there were two coverage requirements. First, the loss or damage had to be to "Covered Property." Second, the cause of the loss or damage must have been from a "Covered Cause of Loss." "Covered Property" included a building and personal property used to maintain the building. "Covered Property" did not include foundations of buildings or underground pipes.     The parties disagreed whether the concrete slab that heaved and cracked qualified as a foundation. The court did not reach this issue because the Water Exclusion Endorsement applied. The endorsement stated the insurer would not pay for damage caused by "water under the ground surface pressing on, or flowing or seeping through . . . foundations [or] walls."      Nevertheless, the Shrine argued that the ensuing loss clause for sprinkler leakage restored coverage. Under this provision, if sprinkler leakage occurred, the insurer would "pay for the loss or damage caused by . . . sprinkler leakage (if sprinkler leakage is a Covered Cause of Loss)." The insurer argued the ensuing loss provision did not bring coverage back because there was no new loss to property that was not excluded by the policy.     The court agreed. The policy required a particular sequence of events. First, an excluded cause of loss had to occur. Then, that excluded cause of lost had to result in sprinkler leakage. Finally, the sprinkler leakage had to cause loss or damage. Here, the second and third steps were missing. Although an excluded cause of loss occurred, there was no evidence that the water under the surface of the ground from the failed pipe "resulted in" sprinkler leakage or that a subsequent sprinkler leakage caused further loss or damage. 

Follow our page in Facebook "Insurance Online". from Insurance Law Hawaii

Read more.. bloggeradsenseo