Social Media: A Double-Edged Sword
Something as simple as a hashtag can launch an event onto a national stage in a matter of hours. For companies and organizations harnessing social media as a business tool, that kind of attention can go both ways.
In Target’s massive cyber breach last year, customers unleashed their fury on Facebook and Twitter, at a pace too overwhelming for a corporate response to counter. The company has slashed its profit outlook for 2014 as it struggles to regain consumer trust.
Earlier this year, the New York Police Department started the hashtag #myNYPD, encouraging people to tweet friendly photos of themselves with officers. The marketing ploy backfired, however, when people shared photos of police brutality instead.
The pendulum can swing the other way, like the ALS Ice Bucket Challenge. The Facebook campaign prompting users to donate to the ALS Association — or record themselves dumping a bucket of ice water over their heads — raised more than $100 million and boosted awareness of the debilitating disease, according to the association.
While Facebook, Twitter and LinkedIn are the most common channels used by companies, more social media forums are emerging, and executives and risk managers must consider how to deal with the reputational and legal risks of those new channels while taking advantage of the communication breadth and speed of social media.
The top social media risks are brand reputation; disclosure of proprietary information; corporate identity theft; and legal, regulatory or compliance violations, according to a survey and report by audit and advisory firm Grant Thornton, “Social Media Risks and Rewards.”
Of the 111 executives surveyed, 38 percent said their companies use social media to raise brand awareness, while 27 percent use it for recruiting. Fifty-five percent said social media will be an important component of future corporate efforts.
However, only one-third had a defined social media policy, and only 36 percent provided social media training for employees.
“A number of companies are adopting social media policies,” said Melissa Krasnow, certified information privacy professional and corporate partner with Dorsey & Whitney LLP.
But the language within those policies must comply with state and national regulations. For example, states have different laws governing whether employers can demand log-in information for employees’ private accounts.
In addition, the National Labor Relations Board has been aggressive in scrutinizing employer social media policies that appear too restrictive of employees’ speech and the “right to come together to discuss work-related issues for the purpose of collective bargaining or other mutual aid or protection.”
Fear of Loss
Like dialogue from a bad movie, the stories wrapped around the Ebola virus in recent times leave one looking for the exit. But here, unfortunately, there is no exit, and an Ebola script will continue to be written.
The questions are what to do about it and what role property and casualty insurance can play.
As is the norm in insurance coverage issues, the answer must be: It depends. And counterintuitively, some exclusions in liability and property insurance policies, which don’t specifically exclude viruses, may leave the door open for policyholders to collect on Ebola-related losses from such policies.
We have been here before, although not with quite as fearful a contagion.
In 2003, severe acute respiratory syndrome (SARS) killed more than 900 people, shut down airports, roiled governments and dominated the news. Now, contagion is back, in the form of a virus that relegates SARS to minor league status.
The World Health Organization estimates there will be 10,000 estimated new cases a week before the outbreak subsides.
More than 5,000 people have died to date, the mortality rate is estimated at 50 percent and the World Health Organization estimates there will be 10,000 estimated new cases a week before the outbreak subsides.
Besides death and debilitation, there is a huge economic impact, even outside West Africa. Businesses are taking note of aircraft taken out of service, cruise ships barred from entry, apartments quarantined and stigmatized, and bridal shops closed and inventory destroyed. The reason: infection or alleged or threatened contamination by the Ebola virus, or fear of such infection or contamination.
A Wake-Up Call
As a starting point, SARS was a wake-up call for the insurance industry (if the rapid rise of mold litigation had not already raised the alarm).
Concerns over the insurance of infection came to the fore. Although the Mandarin Oriental Hotel collected millions of dollars on its business interruption claim after a significant SARS-related loss, in the current circumstances such recoveries are at best, less certain, and at worst, potentially barred.
The primary reason is strong exclusionary language, but even with that, all may not be lost. Here is a standard (ISO) Exclusion of Loss Due to Virus or Bacteria endorsement, which may be found in first-party property policies: “We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.”
Video: A bridal shop shuts down to due customers’ fears of possible infection, but losses aren’t covered.
That language is broad, although it arguably does not encompass alleged or threatened outbreaks.
On the liability-insurance side, we have seen an Absolute Mold Exclusion that excludes loss “related or attributed to, arising out of, resulting from, or in any way caused by any bacteria, virus, mycotoxin, ‘fungus(i),’ ‘spore(s), scent or byproducts.’ ”
That language is also broad, but it arguably does not encompass alleged or threatened outbreaks either.
Further, while those exclusions are broad, they are not used universally.
For example, an exclusion we reviewed recently provided that it excluded loss “which would not have occurred, in whole or in part, but for the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of, any ‘fungi’ or bacteria on or within a building or structure, including its contents.…”
It does not take a rocket scientist to note that viruses are not listed in the terms of the exclusion.
It does not take a rocket scientist to note that viruses are not listed in the terms of the exclusion, leaving open the possibility that a policyholder might find coverage for loss traced to Ebola. Further, its use of “alleged or threatened … exposure” could be used as evidence that the two other exclusions mentioned above do not reach loss caused by alleged or threatened exposure.
Another path to potential coverage is evaluation of the actual harm that has occurred.
In some cases, the Ebola virus is actually present (the first victim’s fiancé’s apartment in Dallas, where he was staying). In other cases, it is only fear of the virus that has caused the damage (the stigma attaching to bridal gowns in an Akron, Ohio, store visited by someone not yet diagnosed with Ebola). In that case it might be difficult to say that Ebola caused the loss when there is no Ebola to be found on the dresses.
But that raises a serious issue. Property policies usually, if not always, require physical damage as a precondition for coverage for a loss. So what is physical damage? Does it require actual physical change to the property at issue? Or is it enough that the property cannot be used?
If fear of being in a bridal shop visited by an undiagnosed customer requires the shop to shut down, burn merchandise, and lose sales, that “loss of use” of the property might lead to an insured claim.
The physical damage issue is eliminated in some policies with extensions of coverage for “orders of civil authority.” Under such provisions, if access to property is forbidden under government order, coverage may be available, notwithstanding the lack of physical property damage.
Rather than contesting the local health board’s quarantine order based on suspicion of Ebola, companies might welcome it and tender it to their insurer with their claim. Clearly, the cruise ship that was turned back by Belize should carefully review its policy in this regard.
Could specialized coverages be turned to advantage? Pollution legal liability policies would appear to be well-fitted to Ebola contamination issues. These policies extend coverage to pollution events.
Does Ebola contamination, or suspected Ebola contamination, constitute pollution? Close examination of one’s policy may make that clear.
If “pollutant” or “pollution” is defined to include microorganisms or “contaminants” then that would seem airtight. It might be a closer call if the coverage extends to “contaminating substances,” because the insurer likely will assert that a virus is not a substance.
Does Ebola contamination, or suspected Ebola contamination, constitute pollution?
But, because ambiguities in insurance policies are nearly universally construed in favor of the policyholder, there is a reasonable chance that a contaminating substance could be found to include the Ebola virus.
Policyholders, risk managers and counsel pursuing this angle should remember that much of the potentially relevant case law will address the meaning of pollution exclusions. The rules of construction in those cases are significant.
First, the carrier would have the burden of proof to prove the application of the exclusion. Second, exclusions are construed narrowly. And third, the goal in those cases would have been to show that a mold, bacteria or virus was not pollution, rather than the goal here, which is to show the opposite.
So a holding that a virus is not pollution in the pollution exclusion cases may be completely irrelevant to whether a virus is pollution in a policy written to cover pollution.
Landlords have special concerns with Ebola. Even after the Ebola-ridden tenant is cured and/or vacates, others may perceive high levels of risk and refuse to rent the apartment or even nearby ones. This may vest huge importance in tenants’ renters insurance.
Policyholders should also consider directors’ and officers’ coverage, if claims of economic loss are brought against individuals or organizations based on how they reacted to an Ebola outbreak or threat.
While those policies frequently contain pollution exclusions, the availability of Absolute Mold Exclusions or Bacteria or Virus Exclusions strongly suggests that a pollution exclusion should neither apply nor bar coverage.
Even if the case law in a jurisdiction would extend a pollution exclusion to a virus, that is not the end of the story. The loss must “arise out of” or “result from” the virus. There is substantial case law holding that such words of linkage are ambiguous where an insurer attempts to bar coverage for a claim alleging directors’ negligent disclosures relating to pollution.
The conclusion those courts tend to reach is that the loss does not arise out of pollution but rather out of the improper disclosure.
Where do EPLI policies fit in the landscape? Those policies often exclude bodily injury claims, but have an exception for mental anguish or emotional distress.
If a worker is “negligently reassigned” to a work location where there is an actual or feared Ebola outbreak, and that worker claims mental anguish or emotional distress as a result, that claim could be covered under an EPLI policy.
Policyholders, brokers, risk managers and carriers should think critically about whether coverage for Ebola specifically, or pathogens more generally, should be affirmatively offered.
As always, the market will dictate what the market will offer. If there is a true desire for such coverage and matching appetite and ability to underwrite it accurately, the future might lead to clear Ebola coverage across all lines of coverage.
As policyholders and insurance companies wend their way through some of the issues identified above, they will likely come to some landing point on the efficacy of this coverage.
From Coast to Coast
The 3,920-ton Left Coast Lifter, originally built by Fluor Construction to help build the new Bay Bridge in San Francisco, will be integral in rebuilding the Tappan Zee Bridge by 2018.
The Lifter and the Statue of Liberty
When he got the news, Scot Burford could see it as clearly as if somebody handed him an 8 by 11 color photograph.
On January 30, the Left Coast Lifter, a massive crane originally built by Fluor Construction to help build the new Bay Bridge in San Francisco, steamed past the Statue of Liberty. Excited observers, who saw the crane entering New York Harbor, dubbed it the “The Hudson River Hoister,” honoring its new role in rebuilding the Tappan Zee Bridge over the Hudson River.
Powered by two stout-hearted tug boats, the Lauren Foss and the Iver Foss, it took more than five weeks for the huge crane to complete the 6,000 mile ocean journey from San Francisco to New York via the Panama Canal.
Scot took a deep breath and reflected on all the work needed to plan every aspect of the crane’s complicated journey.
A risk engineer at Liberty International Underwriters (LIU), Burford worked with a specialized team of marine insurance and risk management professionals which included John Phillips, LIU’s Hull Product Line Leader, Sean Dollahon, an LIU Marine underwriter, and Rick Falcinelli, LIU’s Marine Risk Engineering Manager, to complete a detailed analysis of the crane’s proposed route. Based on a multitude of factors, the LIU team confirmed the safety of the route, produced clear guidelines for the tug captains that included weather restrictions, predetermined ports of refuge in the case of bad weather as well as specifying the ballast conditions and rigging of tow gear on the tugs.
Of equal importance, the deep expertise and extensive experience of the LIU team ensured that the most knowledgeable local surveyors and tugboat captains with the best safety records were selected for the project. After all, the most careful of plans will only be as effective as the people who execute them.
The tremendous size of the Left Coast Lifter presented some unique challenges in preparing for its voyage.
The original intention was to dry tow the crane by loading and securing it on a semi-submersible vessel. However, the lack of an American-flagged vessel that could accommodate the Left Coast Lifter created many logistical complexities and it was decided that the crane would be towed on its own barge.
At first, the LIU team was concerned since the barge was not intended for ocean travel and therefore lacked towing skegs and other structural components typically found on oceangoing barges.
But a detailed review of the plan with the client and contractors gave the LIU team confidence. In this instance, the sheer weight and size of the crane provided sufficient stability, and with the addition of a second tug on the barge’s stern, the LIU team, with its knowledge of barges and tugs, was confident the configuration was seaworthy and the barge would travel in a straight line. The team approved the plan and the crane began its successful voyage.
As impressive as the crane and its voyage were, it was just one piece in hundreds that needed to be underwritten and put in place for the Tappan Zee Bridge project to come off.
The rebuilding of the Tappan Zee Bridge, due to be completed in 2018, is the largest bridge construction project in the modern history of New York. The bridge is 3.1 miles long and will cost more than $3 billion to construct. The twin-span, cable-stayed bridge will be anchored to four mid-river towers.
When veteran contractors American Bridge, Fluor Corp., Granite Construction Northeast and Traylor Bros. formed a joint venture and won the contract to rebuild the Tappan Zee, one of the first things the consortium needed to do was find an insurance partner with the right coverages and technical expertise.
The Marsh broker, Ali Rizvi, Senior Vice President, working with the consortium, was well known to the LIU underwriting and engineering teams. In addition, Burford and the broker had worked on many projects in the past and had a strong relationship. These existing relationships were vital in facilitating efficient communication and data gathering, particularly given the scope and complexity of a project like the Tappan Zee.
And the scope of the project was indeed immense – more than 200 vessels, coming from all over the United States, would be moving construction equipment up the Hudson River.
An integrated team of LIU underwriters and risk engineers (including Burford, Phillips, Dollahon and Falcinelli) got to work evaluating the risk and the proper controls that the project required. Given the global scope of the project, the team’s ability to tap into their tight-knit global network of fellow LIU marine underwriters and engineers with deep industry relationships and expertise was invaluable.
In addition to the large number of vessels, the underwriting process was further complicated by many aspects of the project still being finalized.
“Because the consortium had just won this account, they were still working on contracts and contractors to finalize the deal and were unsure as to where most of the equipment and materials would be coming from,” Burford said.
Despite the massive size of the project and large number of stakeholders, LIU quickly turned around a quote involving three lines of marine coverage, Marine Liability, Project Cargo and Marine Hull & Machinery.
How could LIU produce such a complicated quote in a short period of time? It comes down to integrating risk engineers into the underwriting process, possessing deep industry experience on a global scale and having strong relationships that facilitate communication and trust.
Photo Credit: New York State Thruway Authority
When completed in 2018, the Tappan Zee will be eight lanes, with four emergency pullover lanes. Commuters sailing across it in their sedans and SUVs might appreciate the view of the Hudson, but they might never grasp the complexity of insuring three marine lines, covering the movements of hundreds of marine vessels carrying very expensive cargo.
Not to mention ferrying a 3,920-ton crane from coast to coast without a hitch.
But that’s what insurance does, in its quiet profundity.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.