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Category Archives: Insurance

Licensing Liability Risks

Many businesses such as food companies, manufacturers, fashion firms use third party intellectual property (IP) provided to them by way of a license agreement.

CFC specialist product provides protection for unintentional breaches of this agreement. Check out some of our recent risks in this area.

Celebrity endorsement deal

A drinks company had an endorsement agreement with a renowned music artist with the intention that the artist would promote and market the drinks on the artist’s social media platforms, as well as at concerts and events. The agreement required the artist to purchase insurance for breach of contract, as well as IP infringement and breach of confidentiality. The artist had media liability insurance for their music but didn’t have anything in place for the endorsement agreement.

CFC’s license agreement liability policy provided a solution for this, specific to the drink’s company’s contract.

Merchandise license agreement

A manufacturer of collectibles had an agreement with a major toy company to use popular imagery on some merchandise. The manufacturer carried a small errors and omissions sub-limit on their package policy, but their policy’s $250k sub-limit for IP infringement did not meet the toy company’s requirements for a $2m limit, and the existing insurer had no capacity to increase it.

CFC were able to write a contract specific policy which met the toy company’s requirements, enabling the manufacturer to sign the agreement and earn profit from the merchandise sales.

Brand sponsorship of events

A car company and a credit card company sponsor a popular food festival in the USA. As part of their agreement with the festival organizer, they license the use of their logos, trademarks and promotional videos to the festival for a short period of time. As licensors, they are concerned with the protection of their IP and trademarks and request the licensee to purchase IP infringement cover, as well as breach of the sponsorship agreement, so they insert a $5m insurance requirement into the agreement.

The festival organizer was able to purchase cover from CFC for both sponsorship agreements under a single policy.

Naming rights

A cryptocurrency exchange wanted to become sponsors of their local basketball team in the USA to show their support and increase the visibility of their brand. The sponsorship involved a change in name of the basketball arena that the team trained in. Originally it was named after the previous sponsor, an airline, but it would now be changed to the name of the cryptocurrency exchange.

The contractual agreement presented an IP exposure that the sponsored party did not have cover for, since they were granted rights to use players’ images and team logos in their own advertising, CFC’s license agreement liability policy was able to satisfy this need.

Source: www.cfcunderwriting.com


Metaverse and Healthcare in Tandem

There is already an ongoing move towards digital healthcare, which enables patients and healthcare professionals to view, share, exchange, create, or otherwise interact with digital content. In practice, it means the ability to do things such as make appointments online, provide consultations by video conferencing, and maintain patient files digitally and in the cloud.

The metaverse moves things on and offers a more interactive experience. It uses virtual reality, augmented reality and/or merged reality to create a fully synthetic or enhanced physical experience.

So, how does this play out in practice? Well, let’s take a few examples. In 2020, EndeavorRX became the first virtual reality game to be approved by the United States Food and Drug Administration as a prescribed treatment for children with attention deficit hyperactivity disorder. Increasingly, healthcare professionals are exploring how virtual reality games could help to treat other conditions such as depression and post-traumatic stress disorder.

Metaverse technology is also breaking new ground in the operating theatre. One example is xvision, which is an augmented reality surgical navigation system. The headset projects CT scan images on to the surgeon’s retina, enabling them to maintain their focus on the patient during surgery and avoid the need to look back and forth at a screen during the operating procedure.

Money in a healthy metaverse
Metaverse technologies might not yet be the common staple of the digital health market, but they are gaining traction quickly. There’s been $198m in funding for US digital health startups integrating VR or AR technologies in 2021, more than double that of 2020.

There is a lot of interest in the patent and trademark status of these technologies and the licenses in place to use them.

The importance of this protection in the healthcare market was underscored recently by CVS Health. It wants to be recognized as the first pharmacy in the metaverse and has made an application to the United States Patent and Trademark Office to trademark its logo and the activities of its online store.

The healthcare metaverse future is largely unknown
As the healthcare metaverse expands, so do the risks. We don’t know everything, but we can prepare for as much as we can. Healthcare companies will need to protect the proprietary and licensed technology and products they are using in this space, as well as the patients they are attending to. The competition will be fierce and access to insurance protection and expertise will be increasingly valuable.

Source: www. cfcunderwriting.com


What to Know when your Client is Selling their Business

M&A transactions are complicated and often fraught with risk. As your client looks to you as a trusted advisor during a business sale, what advice can you offer them to make sure they exit with the sale-price proceeds in their pocket?

Here are 4 key things you should know when your SME client is selling their business, and the important role of M&A insurance in facilitating their deal.

The buyer can claim against your client even after the deal closing
During an M&A transaction, SME owners can be mistaken in thinking that their contractual obligations are complete once the deal closes. However, many risks in M&A come after the deal closes and may not arise for a significant amount of time. In fact, a buyer can make a claim against the seller for breach of sale contract up to 6 years after the business has been sold!

If a buyer asserts a breach of a representation or warranty in the sale contract, the seller would be responsible for defense costs, as well as reimbursing the buyer for the loss suffered if the claim is valid or settled.

For some small business sellers who don’t have adequate protection in place, they risk having to hand back some, or all, of their proceeds.

Innocent misrepresentations can damage a deal
One of the biggest risks when it comes to M&A transactions is innocent misrepresentations. An innocent misrepresentation is a statement by the seller that is neither fraudulent nor negligent, but that is still untrue. Often unknowingly. Your client may claim to know their company inside out, but in an evolving and fast-changing regulatory environment, even the most well-intentioned seller can have blind spots. These accidental misrepresentations can still be claimed against after the deal is done and the seller would be responsible.

Existing insurance is unlikely to provide adequate cover
Many SME sellers will have E&O or D&O cover for their businesses, but they can be caught off guard when they learn those policies won’t protect them during the sale of their business. The most common misunderstanding is that D&O policies will cover breach of representation in a sale, which is almost universally untrue.

M&A insurance can really help small deals
A key benefit of M&A insurance is that it provides SME sellers with cover for indemnity and defense costs arising from a claim, giving sellers peace of mind should the worst happen. It can also help the seller negotiate to reduce, or eliminate, their escrow obligations and unlock the sale proceeds immediately after the deal closing. In many cases, M&A insurance can even put the seller in a better negotiating position and enable them to maximize the sale price of their business.

CFC recently launched a first-to-market transaction liability policy created specifically to protect small business sellers in M&A deals.

If you have any questions, please follow the link below.

Source: www.cfcunderwriting.com


‘Spooky’ Risks Covered by CFC

Think those of us working in insurance are too boring to celebrate Halloween? Witch, please. Believe it or not, CFC has some serious appetite for spooky risks. From mortality consultants to synthetic humans, they’ll consider more than your bog standard risk! Check out the some of the haunting risks from their healthcare, management liability, professions and tech teams:

Childhood fears

Exposure therapy is designed to help you overcome your deepest and darkest childhood fears. Put on a VR headset that simulates scary clowns chasing you through a funhouse. That’ll sort you out, right?

We provide healthcare, tech and cyber cover (including affirmative bodily injury language arising out of multiple triggers) for digital health exposure therapy companies, all under our eHealth policy.

Hello from the other side

If you’re looking to speak to a loved one who is deceased, a platform now exists to connect consumers with psychics via the telephone or messaging. However, all is well until a client claims to be defrauded by a psychic’s services.

We covered the tech platform under our management liability policy.

Synthetic humans

A medical device manufacturer is developing a synthetic human to be used by hospitals and medical schools to reduce the need for human donors and animals for use in training. A fa-boo-lous idea!

We provided D&O coverage to meet the requirements of the manufacturer’s seed investors.

Modern day grim reaper

Goodbye grim reapers, hello mortality consultants. These professionals develop computer-based models of how long an individual or population is likely to live and the most likely causes of death.

We provided professional liability cover for the mortality consultancy.

Horror games

Not everyone likes to get their fill of thrills, but those who do have probably dabbled in a few of the popular horror games developed by a well-known mobile games developer who we insured.

We provide cover for tech E&O, including contingent BI/PD, cyber and media, as well as excess coverage over D&O for game developers.

Bonus: We did not write that…

As much as we love our extraterrestrial friends, our K&R team had to decline a submission for alien abduction and impregnation. Regrettably, we also did not cover a Sasquatch sighting which caused severe shock and emotional distress.

Source: www.cfcunderwriting.com


Esports Accelerating into Mainstream Entertainment Market

Imagine a nascent but fast-growing global market generating revenues running to billions of dollars and annual audiences well into the hundreds of millions. Now stop imagining – what you’re thinking about is the world of esports.

Moving mainstream

Esports have been developing for some years now, and the growing numbers and sophistication of the market prove it is here for the long haul.

Most of us are familiar with online gaming. Esports takes things one step further. Instead of people playing video games on their own, esports has created an entire online and in-person spectator experience around these games.

Professional players compete alone or as part of teams, battling each other in tournaments or as part of a league. Audiences fill out arenas, watching players fight it out on massive screens, or supporters log in online and watch their favourites play remotely.

In 2017, esports generated almost $700m in revenues worldwide and a global audience of almost 400 million.

In 2021, despite the impact of COVID-19 on physical spectator events, the market is forecast to have revenues of almost $1.1bn and an audience of 475 million.

Market stakeholders

There are many different stakeholders in the world of esports. There are the publishers who make the games that people play. There are then the tournament organizers. In many cases, publishers run their own tournaments, but there are also lots of third parties organizing events.

Streaming platforms such as Twitch or YouTube Gaming allow players to record and broadcast themselves to online audiences, who can then engage with supporters as they play. These players are often part of professional teams.

There are then the fans, who watch online or attend live events. They spend significant sums on merchandise and can support players through donations and subscriptions.

On top of all this sit the sponsors who provide the lion’s share of the market’s revenue and in 2021 this segment will account for almost 60% of the money generated by esports.

Investment interest

Understandably, investors want to get involved in a market that is generating revenues that will exceed $1bn this year and where live stream viewer numbers are exploding.

The COVID-19 lockdown restrictions accelerated the growth in these numbers, which will continue to grow as more games are tailored for watching on mobile devices and the experience for remote users improves.

FaZe Clan has led the way in monetizing interest in gaming through an entertainment-first model which has garnered a global fanbase of 339 million combined across all social platforms.

Audiences of this scale offer significant opportunities and it is no surprise that most of the money generated in the esports market comes from outside of competitive play.

New concepts are being developed quickly and are proving hugely successful. For example, a Travis Scott concert was hosted and broadcast within the game Fortnite. Players could drop in and watch the concert as part of their playing experience. They could also buy digital merchandise as part of the show.

The concert attracted 27.7 million unique viewers across five showings within the game, demonstrating the potential of these innovative events to engage new and sizeable audiences.

Risk and reward  

In 2024, esports is on track to appear at the Paris Olympics as a side event. This sort of mainstream exposure will further accelerate its already stellar growth and make it even more attractive to big brands and sponsors.

In recent months, the restrictions on live events created by COVID-19 have seen many professional sports turn to esport alternatives to maintain audience engagement.

It is also the case that as a developing market, esports has not yet been standardized, increasing the number of opportunities to engage with the multiple structures surrounding the various players, teams, leagues and tournaments.

In the same way that professional football, or any other established global sport, relies on insurance, elite level esports has the same need for safeguards and protections, and demand is growing.

It is a market that is brimming with potential from media, entertainment and advertising to sponsorship, contingency and individual players.

Source: www.cfcunderwriting.com


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