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Category Archives: Insurance

Product Recall Insurance

Product recall insurance helps safeguard a business from the financial impact of a recall, specifically the first and third-party costs associated with identifying and addressing the issue, conducting the recall and keeping the business operational.

When considering product recall insurance, it’s important to remember that the cost of a recall includes much more than the cost of getting the goods off shelves or back from customers.

Recalls of any kind can impact cash flow, squeezing a company’s ability to pay staff, purchase raw materials or even continue production. For some businesses, a product recall can present a true crisis.

For more information about CFC’s product recall policy click here to download the full infographic below.

Source: www.cfcunderwriting.com

 

 

 


Apples and Pears: The IP Dispute that’s Making Headlines

The David vs Goliath battle began when Apple tried to stop Prepear from trademarking a pear logo, claiming it was too similar to its own. Angered by Apple’s stance, Prepear launched a petition to stop Apple from pursuing the legal action and prevent the company from undertaking similar complaints in the future.

Apple vs Prepear: How it happened

When small business owner Natalie Monson filed a trademark application on behalf of her recipe and meal planning app, Prepear, she had no idea of the legal fight that would quickly ensue.

The small business owner was faced with a notice of opposition from tech giant Apple, because the company believed Monson’s logo to be too similar to its own. Apple’s complaint to the US patent and trademark office cited concerns over the pear logo hurting its brand, due to its similarities with the company’s world famous apple logo.

Apple’s filing noted that the pear logo being used by Prepear “consists of a minimalistic fruit design with a right-angled leaf, which readily calls to mind Apple’s famous Apple Logo and creates a similar commercial impression, as shown in the following side-by-side comparison.” Regulators were therefore asked to reject the trademark application.

While Apple is, primarily, a technology and software company, its legal team argued that the brand’s minimalist logo is so recognizable that consumers may see the Prepear logo and immediately associate it with Apple.

Apple’s statement said that as the company has “services related to computer software, as well as healthcare, nutrition, general wellness, and social networking” consumers could mistakenly believe the recipe planning service was one of its new apps.

Why this case matters

The legal battle that Prepear has on its hands is an extreme example of what can happen when small businesses come up against far more powerful brands. While many companies believe themselves to be immune from the threat of IP disputes, this is rarely the case.

When considering the risks posed by IP disputes, companies tend to focus exclusively on competitors within their industry. But the case of Apple vs Prepear shows that cases can easily be brought by those outside of a company’s sector. It’s therefore incredibly difficult for brands to predict every single IP risk that might be out there.

Cost is another important factor in IP disputes. Small businesses like Prepear have just a fraction of the resources of some of their much larger counterparts, meaning that when an IP case does emerge, they are often not in a position to defend themselves. In fact, many small companies whose logos were deemed too similar to Apple’s have already been forced to stop using logos and foot the bill of a complete redesign.

Legal disputes are often very harmful to a company’s reputation, and this can have an impact no matter who is in the right, and who is in the wrong. If a dispute is ongoing, consumers can be quite reluctant to spend money with a company due to worries about its future. Similarly, partner brands and wholesale contacts are often hesitant to work with a company undergoing a dispute with an established brand.

IP infringement litigation is another risk to organizations and infringement allegations can sometimes arise following an IP opposition. The cost of IP litigation can be considerable, and for small businesses the spiraling costs of a legal dispute can become seriously problematic. Many simply do not have the resources to fight legal battles with brands that have far greater resources at their disposal. But smaller companies are far from powerless when it comes to issues relating to IP. They just need to take steps to protect their brand, products and services from IP complaints before any problems arise.

How can brands protect themselves?

IP insurance enables companies of all sizes to defend themselves from any claims of IP infringement. These policies can also help brands pursue other companies that might be infringing on patents, copyrighted materials or trademarks.

Contact your insurance broker to find out more about our IP insurance policies.

Source: www.cfcunderwriting.com


Liability Concerns from Working Remotely

As COVID-19 disrupts our economy, it’s been remarkable to watch how different businesses adapt to the new normal. Across the board, companies have been arranging their workforce for full-time remote work. These changes have been implemented with impressive efficiency, yet there are still significant areas to watch out for in terms of increased liability that comes along with a remote workforce.

  • Privacy concerns. Does your virtual meeting software of choice track whether users are “paying attention” or not? Some programs will do this by informing the organizer when certain viewers don’t have the meeting or presentation in full screen for a certain amount of time. What about the data that the attendees are generating by using the software—is it being sent to any third parties for data mining? Are “private” chats being monitored?
  • Cyber risks. Bad actors are already tying phishing and other types of messages to COVID-19 in order to entice clicks. For example, some phishing messages are even impersonating the Centers for Disease Control and Prevention or World Health Organization and offering “help” or “important updates” so that the reader clicks through. Is your workforce trained on how to resist these kinds of traps? Do all employees know to use private, secured Wi-Fi networks while working remotely? Have information technology business continuity plans been tested recently?
  • Wage and hour exposures. Adjusting to remote work can make some routine timekeeping tasks more difficult. If you have workers that usually clock in and out in the office or at a worksite, are they set up to do this easily at home now? Do they know to still record their breaks as they would if they were in the office? When appropriate, are they being reimbursed for reasonable expenses that come along with working remotely?
  • Workers compensation adjustments. When employees switch to working from home, some workers compensation insurers may want to change insureds’ classification codes.

For additional resources, visit IRMI’s frequently updated page that compiles several free online resources related to COVID-19.

Source: www.irmi.com


Climate Change Litigation and D&O Insurance

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With climate change firmly at the top of the news agenda, companies with large carbon footprints are under pressure to dampen their impact on the planet.

Growing concern has led to an upsurge in the numbers of litigation cases centered on companies’ disclosures related to their potentially harmful practices, with lawsuits against companies alleging misleading statements regarding their environmental practices and commitments.

Litigation has, so far, focused primarily on energy companies and big-name polluters, but it’s not beyond the realm of imagination to expect manufacturers and other greenhouse gas emitting organisations to come under scrutiny, too.

Here’s what you need to know about climate change litigation and D&O insurance:

What could climate change litigation mean for businesses? 

Companies are under pressure to lessen their environmental impact, and any disclosures they make relating to their greenhouse gas (GHG) emissions and environmental exposures are being scrutinized more than ever before – boilerplate disclosures are not acceptable. Any challenges made to such disclosures can lead to expensive and high-profile lawsuits, as seen with ExxonMobil, 3M and Australia’s Commonwealth Bank.

Companies should also be mindful of the rise in remediation suits, similar to the ones brought by the State of Rhode Island and Cities of San Francisco and Oakland. These entities sought damages from energy companies to repair and rebuild coastlines as a result of rising tides brought about by climate change, for which these companies were deemed responsible. With the nationwide cost of building new or rectifying existing seawalls estimated at over $400 billion, companies may well find themselves caught in a storm of defending wave after wave of liability lawsuits.

But this litigation only concerns energy companies, doesn’t it?

Not exactly. While litigation has focused primarily on energy companies, this doesn’t mean that other industries are safe. Essentially any company that emits greenhouse gases could be in the firing line – like transportation companies, agricultural businesses or businesses that manufacture products that emit GHGs. Even financial institutions. In fact, Barclays recently came under shareholder pressure to reduce its investments in fossil fuel companies, and many of the big banks have notably declared their intentions to curtail investments and loans in the fossil fuel sector.

To settle or fight: What happens in climate change disclosure cases?

Now that the world’s leading GHG emitters are showing a desire to adapt and change, any company found guilty of not pulling their climate change “weight” would suffer considerable reputational harm. When cases like this are taken to court it can prove expensive and timely. Large corporations like ExxonMobil can clear their name, but this is not always true for smaller companies which may be constrained by their financial means. Not every business can afford a protracted and expensive trial to prove their innocence.

Companies that settle out of court may find this to be a quicker, cheaper or less disruptive route, but with no admission of guilt, question marks tend to hang over what might have been the outcome had the case gone to trial.

Are current D&O insurance policies likely to respond to climate change litigation?

Aside from the bespoke terms and conditions set out in your standard D&O insurance policy, there are a few exclusions which (depending on how they are negotiated) could come into play when dealing with climate change litigation:

  1. The conduct exclusionThis excludes claims arising out of the gaining of financial advantage, personal profit or by committing a fraudulent act or omission. The latter is the most pertinent here as plaintiffs may allege that a company’s directors and officers knowingly disclosed false or misleading information about their climate change statistics. Policies, however, would likely still look to defend the accused against these allegations during the litigation process, but if a guilty verdict was issued, then the exclusion would be brought into play.
  2. The pollution exclusionThis exclusion typically excludes claims relating to the discharge or release of ‘pollutants’. The language of this exclusion will differ policy to policy and the decision as to whether any substance released, discharged or dispersed by an insured can be defined as a pollutant will be a matter for interpretation. Other factors to consider will be if the language in the exclusion is the ‘absolute’ version or the softer ‘for’ language version or if the exclusion provides securities or non-indemnifiable claims carve-backs. It is, however, worth noting however that on a D&O policy, loss will not extend to clean up costs.
  3. The bodily injury / property damage exclusionThis looks to exclude claims involving damage to property and bodily injury, death and mental anguish. Depending on the policy, this exclusion might include ‘absolute’ language or the softer ‘for’ language and may include non-indemnifiable or securities carve-backs.

How can policyholders protect themselves?

It’s crucial that businesses maintain adequate levels of D&O insurance and environmental liability insurance. The size of the limit should be a consideration, as should the terms and conditions of policies. Additionally, companies need to take proactive steps to reduce emissions and/or by becoming ‘greener’.

For boards of directors this might mean the nomination of a board member or establishment of a separate committee with clear responsibility for the company’s climate change objectives.

For energy companies, diversifying into cleaner energy or investing capital into negative emissions technology would strongly help in placating go-forward concerns.

Other steps might be to review fossil fuel operations and/or set emissions targets – Rio Tinto, for example, has put a stop to its coal mining operations altogether, while the world’s largest shipping company Maersk has committed to net zero emissions by 2050 (per Climate Action 100+’s progress report). Working with organizations such as the Institutional Investor Group for Climate Change, or Climate Action 100+ would show a further commitment to achieving their objectives.

What impact will climate change cases have on D&O insurance rates?

We may see an increase in the cost of D&O insurance on a case by case basis, but it’s more likely that insurers will be looking to mitigate exposures via exclusionary language, unless they are entirely confident in a company’s eco-friendly credentials.

Every move and declaration made by these companies will be under scrutiny, so any perceived inaction, false statement or dragging of heels will likely bring about a fierce reaction from investors, lobbyists, social movement organisations and government bodies alike. Should this ultimately turn into litigation, companies will likely incur sizable legal costs – whatever the outcome of the litigation.

Source: www.cfcunderwriting.com


Hard Market Survival Tips

Once upon a time, the insurance market cycled from hard to soft and back to hard again in a pattern that was reasonably predictable—about every 5 to 7 years. For the past 25 years or so, however, there has been no discernible pattern, and soft, or buyers’, markets typically last much longer than hard, or sellers’, markets. We recently entered a hard market for most commercial lines of insurance, characterized by significant increases in rates and reductions of coverage with much tighter scrutiny by underwriters. Hard markets are much more difficult to navigate for insurance buyers, agents/brokers, and even underwriters.

With lengthy soft markets the norm, many younger risk professionals have never experienced a hard market, and those who have may still find themselves brushing up on the fundamentals. With that in mind, Jack Gibson, President & CEO of IRMI, offers a few tips below:

  • Verify the accuracy of current loss reports, and make sure any discrepancies are corrected. Develop a written narrative explaining actions taken to address negative trends or large losses.
  • Review reserves on open claims, and meet with adjusters to make sure they are reasonable and accurate.
  • Prepare an in-depth description of safety and other risk control programs and evidence of top management’s commitment to them to provide to underwriters.
  • Review the organization’s capacity to retain loss, and think through areas where it will make sense to retain more risk in return for reductions in premiums.
  • Establish a game plan for insurance renewals, identifying which markets to approach, what risk financing options to consider, and what steps to take in the event proposed terms are unacceptable.
  • Begin the renewal process at least 4 months prior to a program’s expiration.
  • Prepare a well-organized, high-quality underwriting submission that will help distinguish your account from others.
  • If possible, arrange to meet underwriters in person to showcase the organization’s risk management program, financial position, and future business plans.

These are some of the basic steps that will help any organization better navigate the rocky waters of a hard market. What additional advice would you like to share? Please add your suggestions to the discussion in the IRMI LinkedIn Group and check out the tips provided by your fellow readers.

Source: www.irmi.com


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