Major League Liability
The concept of “safe!” is integral to the distinctively American game of baseball.
But until last winter, fans were pretty much on their own — i.e., unsafe — when it came to errant, sometimes lethal, but always punishing, foul balls or broken bat shards striking unfortunate spectators.
Many fans will remain at risk this season, but back in December, Major League Baseball finally decided it was time to act, sort of.
Looking to beef up fan safety, MLB issued recommendations — not hard and fast rules — that the 30 league teams extend the netting from behind home plate farther out, towards the dugouts and along the baselines.
The idea is that netting will practically eliminate line drive foul balls or bat shards reaching the crowd.
VIDEO: Shawn Cunningham saved his eight-year-old son Landon from being hit in the face by a bat during a spring training match in Florida between the Pittsburgh Pirates and Atlanta Braves.
According to MLB’s official statement, clubs are “encouraged to implement or maintain” netting (or another effective protective screen or barrier of their choosing) that shields from line-drive foul balls all field-level seats that are located between the near ends of both dugouts (the ends of the dugouts located closest to home plate, inclusive of any adjacent camera wells) and within 70 feet of home plate.
“Major League Baseball prides itself on providing fans in our ballparks with unparalleled proximity and access to our players and the game taking place on the field,” MLB Commissioner Rob Manfred said in December.
“At the same time, it is important that fans have the option to sit behind protective netting or in other areas of the ballpark where foul balls and bats are less likely to enter.”
As of early March, four MLB teams — The Phillies, Dodgers, Red Sox and Nationals — heeded the recommendation and agreed to extend the nets during the 2016 season (though some reports say all 30 teams will extend the netting by the season openers).
A high profile fan injury occurred last June 5 when Boston Red Sox fan Tonya Carpenter was seriously injured by a piece from a broken bat at Fenway Park.
Early on, Carpenter’s injuries were life threatening. She underwent extensive rehab but then faced a custody battle when her husband alleged she was too impaired to care for their 7-year-old son.
“I continue to believe the best way to incentivize the proper level of care is to impose strict liability on MLB clubs on the injuries to fans that result from game play.” — Ken Greenfield, a law professor and dean’s research scholar at Boston College.
So far, there have been no financial repercussions for the Red Sox.
The Role of Insurance
Baseball teams are protected by the century-old “baseball rule,” which puts the assumption of risk on fans (they know the risks when they sit in certain seats).
In 1998, yet another Red Sox fan, Jane Costa, was hit by a foul ball traveling at nearly 90 miles an hour while she sat behind the dugout. She suffered disfiguring injuries and amassed medical bills in the range of $500,000. Her lawsuit against the team was tossed out of court via summary judgment.
Dan Burns, president of PFS Specialty Risk Underwriters in Chicago, said Major League Baseball has consistently taken action on cases contributing to fan safety, such as raising the height of railings in upper decks of stadiums, cutting off alcohol sales across the league in the 7th inning of all games, and increasing security both in and outside the stadiums.
He is confident MLB will act as swiftly as possible regarding investigating the installation of protective netting.
“There are many things the MLB had to consider before taking action, including insurance,” Burns said.
For example, he said, while many people are concerned with safety around the home plate area (the “hot zone”), there are many others who want an unobstructed view to feel as close to and part of the game as possible.
Also, Burns said, if the league implements a new policy or procedure that is deemed to improve fan safety, the impact to various developmental leagues has to be considered since they may be obligated to implement the change as well.
“The sports industry is unique and has, since its inception, been on the cutting-edge of insurance design and innovation to protect their players and employees,” he said.
For example, a number of insurance products have been created to cover players’ guaranteed salaries while they are injured, as well as potential future earnings lost to career-ending injuries, he said.
In Burns’ view, the solution to addressing the risk of foul balls and broken bats in the “hot zone” may not be to mandate the installation of more netting across major league ballparks.
It could be to create a specialty insurance product to cover the exposure (medical costs, lost wages, etc.) of people in seats located in areas where they could potentially be injured.
Currently, because teams have been protected from liability on foul balls and broken bats, the demand for such an insurance product has been nonexistent.
Ken Greenfield, a law professor and dean’s research scholar at Boston College and the author of “The Myth of Choice: Personal Responsibility in a World of Limits,” called the idea of added insurance coverage a “no brainer.”
Until that happens, however, he likes the idea of added netting. It means the MLB is heading in the right direction by finally recognizing the real problem of fan safety brought about by the nature and speed of the game; i.e., the proximity of the fans, and the inability of fans to protect themselves by way of constant vigilance during games, he said.
“Even the most vigilant fan will occasionally succumb to the myriad distractions, like buying a beer, that are part of the baseball experience.” — Ken Greenfield, a law professor at Boston College.
It’s a good start, but not enough in his view.
“I continue to believe the best way to incentivize the proper level of care is to impose strict liability on MLB clubs on the injuries to fans that result from game play,” said Greenfield.
He added that with such a rule, clubs can determine the efficient level of risk/care on their own, without intervention from the league.
Different clubs will have the freedom to make different choices as to the level of risk they feel comfortable with, and the mechanisms to deal with them.
“That flexibility makes sense, since each ballpark is different and the risks inherent in the fan experience are different in different parks,” he said.
To Greenfield, the existing legal rule protecting the MLB teams as it stands today has two main problems.
For one, fans, through no real fault of their own, have to pay their own medical expenses even though they are technically innocent bystanders and have no real idea of how bad the risks will be if they get unlucky.
Two, with teams off the hook financially, they don’t need to make hard judgments that balance the fans’ experience with their safety.
In fact, they can generate more revenue by making the game seem more intimate, including building seats closer to the action and minimizing protective netting that obscures views — without suffering a downside.
Just because smartphones and tablets are now part of the game day atmosphere and experience doesn’t mean it’s a fan’s fault for being hit by a ball or bat fragment, Greenfield said.
“It’s difficult to stay on alert for the entire duration of a game no matter what,” he said.
“Even the most vigilant fan will occasionally succumb to the myriad distractions, like buying a beer, that are part of the baseball experience.” &
New Sheriff in Town?
In early March, the Consumer Financial Protection Bureau (CFPB) took action against Dwolla, an online payment platform provider in Des Moines, Iowa, for deceiving consumers about its data security practices and system safety.
For the first time ever, the CFPB, which is authorized under the Dodd-Frank Wall Street Reform and Consumer Protection Act, levied a fine related to protecting consumer data security.
The fine was not earth-shattering, at $100,000. But the action signaled the CFPB’s arrival as a new sheriff in town for protecting consumer data against companies engaged in “unfair, deceptive or abusive acts or practices, or that otherwise violate federal consumer financial laws,” according to the CFPB.
“This way, if you follow the guidelines you can stay off the CFPB’s radar and out of trouble.” — Colin Hite, practice leader, data privacy and security practice, Hirschler Fleischer
The agency also ordered Dwolla to fix its security practices.
Legal and data security experts say the CFPB’s action further strengthens the need for both strong data security safeguards and for cyber insurance coverage, especially if you are going to handle consumers’ personal data.
“The thing that stands out is this is one more enforcer stepping up to the plate when it comes to cyber risk,” said Mark Greisinger, president at NetDiligence, a cyber risk assessment service that works with insurers that offer cyber coverage.
“They have teeth to enforce the law, but how they are doing it is under unfair and deceptive trade practices,” he said.
“What’s interesting is not only are they a new enforcer, but the CFPB went after Dwolla proactively, before a breach even occurred.”
Richmond, Va.-based Collin J. Hite, practice leader at Hirschler Fleischer’s data privacy and security practice, said it was interesting that the CFPB’s consent order puts the responsibility squarely on Dwolla’s board of directors.
And, he noted, the $100,000 civil fine cannot be paid by cyber insurance, so the CFPB is essentially saying “we will hit you right in the pocketbook when we fine you.”
“It’s gotten people to pay attention,” he said. “This way, if you follow the guidelines you can stay off the CFPB’s radar and out of trouble.”
Sending a Signal
He added that federal agencies assessing fines that are not covered by insurance has been done in the past relating to D&O coverage, but this is the first time he has seen it in the cyber arena.
“The CFPB is clearly sending a signal to the entire marketplace that if the businesses are not going to implement and adhere to best practices, the government will step in and set the standards,” Hite said.
In this case, he said, Dwolla got off relatively lightly and may have benefited from the situation because it forced them to get ahead of the curve. If the enforcement action had come after a data breach, it would have been more expensive, as the cost of post-breach processes, such as credit monitoring can be high.
In fact, the silver lining in the legal action taken against Dwolla is that the CFPB recommendations can — and should — be used as a roadmap for all companies.
Many of the necessary steps laid out by the CFPB in its decision are best practices for data security, he said. Companies that are not doing these kinds of security procedures would have a very hard time obtaining cyber insurance in the first place.
Jennifer Coughlin, a partner in Lewis Brisbois Bisgaard & Smith’s Philadelphia office, said the CFPB’s action in Dwolla is in line with the trends her firm has seen over the past decade or so: Regulators are using long-held enforcement power to investigate and seek penalties for violations of consumer protection and data security laws.
Such investigations can result in agreements by the entity to not only pay a fine, but also be under the thumb of the regulator for several years after the agreement is reached, she said.
Her firm expects that trend will continue, and that there will be an increase in the list of regulators launching inquiries and pursing actions.
“We also predict that these investigations will become more and more aggressive,” she said.
Coughlin said that any business engaging in offering or providing a consumer financial product or service is subject not only to the CFPB, but to other state and federal laws regulating data privacy and security.
She agreed that the Dwolla scenario offered a roadmap for companies regarding protection of consumer data.
Several best practices to follow include ensuring accuracy of external and internal privacy policies, and an organization’s compliance with these representations; maintaining appropriate cyber and other insurance coverage, because a cyber event can spawn E&O and D&O claims, in addition to regulator inquiry and fines and litigation; and closely reviewing all contracts with vendors to ensure appropriate notification and indemnification language is contained those contracts.
“Companies need to understand what is legally required of them and ensure they practice what they preach,” she said. “Preparedness is key.”
Securing the Small Business Supply Chain
By its nature, supply chain risk is complex. But it also appears to be misunderstood by small and mid-sized businesses.
More than half (55 percent) of U.S. SMEs [small to medium-sized enterprises] surveyed do not believe the loss of a main supplier would have a serious impact on their business, according to Zurich’s Third Annual Global SME Survey, which polled SME C-suite executives and managers.
A second study, the 7th Annual Supply Chain Resilience Report – produced by Zurich Insurance in collaboration with the Business Continuity Institute (BCI) – found that 74 percent of organizations suffered at least one supply chain disruption in the past year, and 14 percent suffered losses of well over $1 million.
The top three causes of supply chain disruption were unplanned IT and telecommunications outages (64 percent), cyber attack and data breach (54 percent), and adverse weather (50 percent).
Supply chain resilience has serious implications for businesses of all sizes, said Linda Conrad, director of strategic business risk for Zurich North America.
“Many companies seem to be so focused on managing the bottom line that they don’t look out for these operational risks within their supply chain, which is close to driving blindfolded,” Conrad said.
The data conveys that many small enterprises do not fully understand the level of exposure facing their supply chains — and that overlooking these risks can be extremely costly.
“Due to the increasing complexity of global trade and how goods must travel, it’s not a case of it, but when a supply chain disruption is going to happen,” Conrad said.
She noted that a previous study found that about 40 percent of companies that suffer significant supply chain disruptions fail.
“Dollar values are going up and people are not thinking through in advance how much will cost them.”
And for SMEs, their limited or lack of cash flow cushions and a loss of market share resulting from a disruption can serve as a rough one-two punch.
Good practices can mitigate the worst effects of supply chain disruptions. — Patrick Alcantara, senior research associate, Business Continuity Institute
“SMEs often do not have the tools, support and methodology to quantify what a supplier disruption will do to their business,” she said. “Most SMEs have an ‘all hands on deck’ scenario in trying to be profitable, but no resources to measure potential loss. Yet, the supply chain is their economic lifeblood.”
Conrad added that Zurich’s database of supply chain disruptions across the globe reflect that many of those losses are not caused by insured occurrences, such as a fire.
For example, a work slowdown at a seaport can wreak havoc with a supply chain but is not specifically covered via insurance.
“Eventually when the goods show up, SMEs are already behind in filling orders,” she said, adding that that the fastest-growing supply chain risk today is often a cyber issue, even more than goods or supplies in transit.
The surveys also found that nearly one in 10 organizations cannot name their key suppliers and seven in 10 do not have visibility over their full supply chain.
Other findings of the report include:
- Among the top 10 disruptions new to the list this year are a product quality incident (No. 8), a business ethics incident (No. 9) and lack of credit (No. 10).
- The top five consequences of disruption are loss of productivity (58 percent), customer complaints (40 percent), increased cost of working (39 percent), loss of revenue (38 percent) and impaired service outcomes (36 percent).
- One-third (33 percent) of respondents report “high” top management commitment to supply chain resilience, increasing from 29 percent last year.
- More than two-thirds of respondents (68 percent) report having business continuity arrangements in place to deal with supply chain disruptions.
Patrick Alcantara, senior research associate at the BCI and a report author, said that good practices can mitigate the worst effects of supply chain disruptions.
“With findings consistently showing top management commitment as a key enabler of supply chain resilience, we encourage business leaders to take a closer look at their supply chains and champion good practice across their organizations,” he said.
“Through our work with customers in this area, we’ve found that increasing visibility along supply chains and resilience are major sources of competitive advantage,” added Nick Wildgoose, global supply chain product leader at Zurich Insurance Group.
“Senior management leadership is the key to overcoming silo thinking about supply chains within an organization, regardless of size,” he said.