The Los Angeles Lakers are still dealing with the fallout from having sent confirmatory text messages to spectators in 2013, after having invited text messages from those spectators for potential display on the scoreboard. The ensuing Telephone Consumer Protection Act (TCPA) class action settled, but the Lakers’ suit against its insurer seeking coverage for defense costs and indemnification remains pending. The outcome of this dispute could have deep implications for any business using text messaging as part of its platform.

Oral argument in the Lakers’ appeal from the district court’s judgment of no coverage was held on February 15, 2017, with the opinion pending. See Recording of oral argument in LA Lakers v. Fed. Ins. Co., No. 15-55777 (9th Cir.).At issue in the case is whether Federal Insurance Company (Federal) had to defend and indemnify the Lakers with respect to the underlying class action (the Class Action) under the Lakers’ Directors and Officers policy (the Policy). The district court ruled that there was no coverage because TCPA claims are by definition claims for invasion of privacy, and such claims fall under the Policy’s exclusion for claims against the Lakers “based on, arising from, or in consequence of . . . invasion of privacy.” Los Angeles Lakers, Inc. v. Fed. Ins. Co., No. CV 15-7743 DMG (SHx), 2015 WL 2088865 (C.D. Cal. Apr. 17, 2015). On appeal, the parties’ central positions are laid out below. 
Continue Reading Coverage for Third-Party Claims Alleging Non-Fax-Related TCPA Violations

The potential for cyberattacks and data breaches continues to loom large in any company’s calculus of risk, with events like the recent WannaCry attack only highlighting the threat. For years, the insurance industry has responded in kind by offering variations on forms of cyber risk insurance. However, not all policies are created equal. It is important for the insured to be aware of what is covered—and what is not.

At its most basic level, cyber risk insurance can be divided into first-party and third-party coverages. Most policies will contain some combination of these coverage types. Both of these coverages potentially contain pitfalls for the unwary. 
Continue Reading How to Protect Against Cyber Liability Threats

Smart contracts are changing the way businesses conduct routine transactions to make them more efficient and, in many ways, less prone to human error. But this new technology has associated risks. Is your company adequately prepared?

Basics of Smart Contracts

Smart contracts, sometimes known as self-executing contracts, are contracts that are written in computer code and connected to a blockchain so that an individual or entity can instantly be bound to the terms of the contract. Computing devices may also be bound via a smart contract, which has led to the Internet of Things. 
Continue Reading What’s the Insurance Coverage for Smart Contracts?

In an all too common scenario, someone in your organization’s finance department receives an email that purports to be from a supplier informing your organization of the supplier’s supposedly changed bank account and a request for you to make all future payments to the new account. Even after some likely back and forth via phone and/or email with the “supplier,” your employee ultimately changes the payment information in your systems, and future invoices are paid to the new pay-to account. Everything seems fine for a while, and then the problems begin.

Eventually, your company receives an email from the supplier asking why it hasn’t received payment of its recent invoices. When the supplier insists that it has not received payment, in spite of your company’s assurances that all invoices have been paid, your IT department investigates. The IT team figures out that the emails with the new payment information and the phone calls were fraudulent—they were not from your supplier but from a bad actor. It is, of course, too late to recover the fraudulently obtained payments, and in the interest of keeping the supplier, your company pays again.
Continue Reading Social Engineering Fraud: Can You Expect Coverage?

Many contracts require that parties be added as “additional insureds,” but few contain specifics on what type of coverage should be provided. The gambit of additional insured provisions is far-ranging. Being proactive and ensuring that the additional insured coverage you are expecting is actually provided on the front end will eliminate a host of issues should you need to invoke coverage under the provision.

Additional insured coverage is normally provided by endorsement, at times listing specific entities or individuals and at other times providing blanket coverage for all that require it via contract. In theory, being included as an additional insured provides protection as if your company was a named insured on another’s policy. In reality, however, there are many variations of additional insured coverage that often contain restrictions on the rights of additional insureds under the policies. 
Continue Reading How to Maximize Protection Under Additional Insured Provisions

Thinking about including an unmanned aerial vehicle as part of your business? What could be cooler than having a UAV deliver your product to customers? Many companies are already using UAVs or drones not only for delivery but also for video surveillance, property surveying for agriculture or unique promotional videos. Your business will want to consider the basic rules for drone operation—like having an experienced pilot and a well-maintained drone— as well as other ways to manage potential risks.

Possible Risks

There are a number of risks if your business has a connection to drones. What happens if a drone crashes or if a bystander shoots it down? In the evolving high-tech world, there are also real threats of someone hacking into your remote system and interfering with your controls. If there is a crash, there is a possibility you might be liable for the property of others. Drones can be a significant investment, and you will want to protect your asset and yourself if someone blames you for some loss.
Continue Reading Attack of the Drones: How to Protect Your Business

Cryptocurrencies, including bitcoin, may be the wave of the future, as more and more companies and countries accept them as valid forms of currency. As with any new technology, however, the potential for risk and error is prevalent. Although cryptocurrencies are backed by various blockchains designed to reduce risk, a certain amount of risk is unavoidable. And where there is risk, insurance follows.

For example, the Mt. Gox scandal, which is speculated to involve a bitcoin insider taking bitcoins from the exchange, is estimated to result in losses of more than $400 million. Traditionally, insureds attempted to find coverage for risks related to cryptocurrencies by finding novel constructions of provisions in extant insurance policies. Often, the insured was simply left without any coverage. But certain insurers have begun taking the bull by the horns and marketing a new kind of product—cryptocurrency insurance.
Continue Reading Prepare for the Future With Cryptocurrency Insurance

Some estimates calculate that over 23 billion “things” were connected through the internet in 2016. This number is projected to rise to over 50 billion by 2020. The broad category is known as the Internet of Things (IoT), and the new technology connects everything, from household devices to cars to industrial machinery, to the internet via enhanced sensors. The exponential growth in connectivity and new product development carry additional risks for companies investing in IoT technology. We offer some ways to protect your interests.
Continue Reading Insurance Coverage for a Connected Technical World

Consumer privacy actions continue to be a huge, costly risk for any business handling customer data over the internet. Lawsuits alleging improper collection of consumer data, such as zip codes or contacts, have become commonplace. Is your company at risk? We share several recent settlements and lawsuits highlighting the risks of privacy claims.

Neiman Marcus. In March 2017, retailer Neiman Marcus agreed to a proposed settlement to pay $1.6 million in a consumer class action filed in response to a 2013 data breach that allegedly compromised the credit card data of approximately 350,000 consumers. The class alleged that Neiman Marcus failed to protect consumers’ privacy and further harmed consumers by waiting 28 days to inform them of the breach.
Continue Reading Are You Protected Against Privacy Claims?

Even though cyber breaches—hacks, ransomware attacks, denial or delay of service attacks, malware, phishing and the like— have existed for years, coverage under actual cyber policies (as opposed to CGL, D&O, or crime policies) is now starting to be litigated. One of the early issues that has been addressed under a cyber policy is if cyber policies provide coverage for Payment Card Industry (PCI) fees assessed by credit card companies in case of a data breach for which the insured is ultimately liable. In P.F. Chang’s China Bistro, Inc. v. Federal Insurance Co., No. CV-15-01322-PHX-SMM,  2016 WL 3055111 (D. Ariz. May 26, 2016), the court answered that question in the negative under the cyber policy at issue there.
Continue Reading Cyber-Policy Coverage for Payment Card Industry (PCI) Fees