Defending the Digital Frontier
Digital technology continues to transform the global publishing arena, from changes in copyright law to ways in which media and technology are insured.
Kevin P. Kalinich, Chicago-based global practice leader for cyber/network risk at Aon Risk Solutions, emphasized just how dramatic the transformation in global publishing has been in recent years.
“If you take a look at the top four or five publishers like Pearson, Reuters, Thomson, Reed Elsevier and Wolters Kluwer … in just the last five years they’ve converted from being 75 percent hard copy to being 80 percent electronic.
“It’s amazing, and here’s why it’s so important,” Kalinich added. “In the old world when hard copy ruled, the end user — the consumer — would not be liable because the publisher was liable for publishing it.”
Now, however, there are few limits to how an end user can use digitally published content. And it’s not always clear where the line is between fair use and infringement.
Kalinich and others said that publishers walk the tightrope of trying to protect the original content owner while protecting the end user from unintentional intellectual property infringement.
“End users need the appropriate legal rights to use copyrighted materials or they could potentially commit copyright or trademark infringement,” said Kalinich. “Typically, the IP rights are granted through a licensing agreement or ‘fair use exception’ to copyright violations. Fair use is a limitation and exception to the exclusive right granted by copyright law to the author of a creative work.”
The Role of Intent
In the past year, there have been two landmark copyright decisions in the online publishing realm that have media/technology experts buzzing.
One is Authors Guild Inc., et al. vs. Google Inc., a decision rendered in mid-November. The other is the Associated Press vs. Meltwater U.S. Holdings Inc., a decision reached last March.
In the Google case, book authors and several major book author associations challenged Google’s reproductions of books and “snippets” of millions of books on its website. The book authors claimed this did not constitute “fair use” and violated their copyright protection.
The decision by U.S. Circuit Court Judge Denny Chin in Manhattan — if it survives an announced appeal of the ruling — lets Google continue expanding the online library. Chin ruled that Google’s product helps readers find books they might not otherwise locate.
The institutions that have provided works for scanning of snippets include Harvard University, Oxford University, Stanford University and the New York Public Library.
A key element in Chin’s “fair use” decision was that Google does not receive any monetary gain from posting whole volumes or snippets of some 20 million books in its electronic library.
In the Meltwater case, New York District Court Judge Denise Cote ruled that online aggregator Meltwater infringed upon AP’s copyright protection by using original content that AP had “labored to create.”
Not long after Cote’s ruling, AP and Meltwater entered into an agreement for AP to produce and Meltwater to electronically distribute content in a joint venture.
“It’s encouraging to see collaborations like the one between the Associated Press and Meltwater aggregating service as they try to work together, because clearly this is what the future looks like,” said Joanne Richardson, New York-based practice leader, U.S. media and entertainment, E&O at Hiscox USA.
“Companies that find ways to bring content and distribution together are really going to be the winners at the end of the day,” Richardson added. “I think it’s the way things are going to have to go. They need each other. It’s a win/win for everybody.”
Eric Seyfried, New York-based senior vice president at Marsh & McLennan Cos.’ FINPRO group, makes a distinction between online aggregators that are in business for monetary gain, like Meltwater, and online aggregators like Google Books, which exist to serve research and other scholarly purposes.
“In Judge Chin’s decision, he talks about Google providing significant public benefit,” said Seyfried. “Are they making available information that has been buried in the bowels of libraries, for example? In the Google case you have to look at the purpose and character of the use. Are they bringing potentially long-lost volumes to light for scholarship and research?”
Seyfried believed that Chin was “growing the pie” of books available.
Aon Risk Solutions’ Kalinich noted that Chin said he believed the authors involved would get more sales because Google was cataloguing their work, and that Google wasn’t making any money off the arrangement.
In the Meltwater case, Marsh’s Seyfried said, Meltwater used its proprietary technology to “scrape” the Internet for news stories and then processed the information into some sort of news digest for their subscribers.
“Is Google trying to further some level of scholarship and research, whereas Meltwater is looking to monetize content for its own benefit through selling subscriptions?” asked Seyfried. “It’s not some sort of academic or intellectual exercise, while Google is about building the brand rather than a subscription base.”
Louis Scimecca, Kansas City, Mo.-based senior vice president for AXIS PRO, which provides media and entertainment coverage, among other solutions, noted: “With the Internet and electronic communications flourishing and expanding, in a lot of cases the law hasn’t caught up with new technology. The technology comes and then the law follows.”
Scimecca said that the issue isn’t restricted to content aggregators. Any individual can find themselves in a legal tangle for using another party’s copyrighted material or trademarked digital matter without permission. “Generally right now, if a person or an entity is taking somebody’s else’s copyright material without permission or consent, that is a problem,” he said.
As in the Google case, Scimecca said, “fair use” might be a defense if material is used for educational, scholarly or teaching purposes.
Protecting the Business
In the realm of insuring risks at media/technology companies, Chad Milton, a partner at Kansas City, Mo.-based Media Risk Consultants LLC, said that as technology at media companies with innovative strategies change, these businesses threaten somebody else’s old business model.
“And the result more often than not leads to a copyright infringement claim,” said Milton. “The history of this kind of litigation is that it’s really about business practices rather than about individual bits of content. We’re not really talking about infringements in a writer’s product or work, we’re really talking about infringements in the way media companies do business.”
It wasn’t often that anybody cared about copyright infringement when content was free, Milton added. “But now that so many online publishers are trying to find ways to monetize their content, it now conflicts with the business models of the online aggregators who want to use other people’s content without paying for it.”
This environment creates interesting risks for insurers because formerly the insurers were asked to insure individual bits of media content: individual songs, individual films, individual stories and individual broadcasts, Milton said.
“They’re now being put in the position of insuring business models, and it’s harder for insurers to be able to insure the innovators,” Milton said. “And I think they need to find a way to convince underwriters that this is a manageable risk. I know there’s some resistance on the carriers’ part about this.”
But Hiscox USA is not one of those underwriters. As long as a decade ago Hiscox was creating product to address the merger of media and technology.
“We were able to put a form together that addressed both, so there was no gap in coverage because media companies now had technology exposure and technology companies had media exposures,” said Hiscox’s Richardson. “Today, there’s a lot more combined forms of media, technology and data privacy.”
Richardson said Hiscox tends to look at things on an individual risk basis, which means they want to understand how these new technologies work and function and be able to sort out exactly what some of the hiccups for them might be along the way.
“We will need a lot more case law to develop in some of these areas before we’re able to ultimately and completely understand all the exposures,” she added.
Observed Marsh’s Seyfried: “The key to insuring a media company is to try to come up with a comprehensive professional liability program. The foundation of that program is based on media liability insurance and making sure that a robust program covers a variety of media perils.”
The next step is finding a market that has the appetite to take on the risk. The other piece of the coverage is some sort of technology offering.
“I can say I do not have one significant media client in the whole risk management space that does not buy some combination of network privacy coverage and/or technology products and services coverage,” Seyfried said.
Coping with Cancellations
Airlines typically can offset revenue losses for cancellations due to bad weather either by saving on fuel and salary costs or rerouting passengers on other flights, but this year’s revenue losses from the worst winter storm season in years might be too much for traditional measures.
At least one broker said the time may be right for airlines to consider crafting custom insurance programs to account for such devastating seasons.
For a good part of the country, including many parts of the Southeast, snow and ice storms have wreaked havoc on flight cancellations, with a mid-February storm being the worst of all. On Feb. 13, a snowstorm from Virginia to Maine caused airlines to scrub 7,561 U.S. flights, more than the 7,400 cancelled flights due to Hurricane Sandy, according to MasFlight, industry data tracker based in Bethesda, Md.
Roughly 100,000 flights have been canceled since Dec. 1, MasFlight said.
Just United, alone, the world’s second-largest airline, reported that it had cancelled 22,500 flights in January and February, 2014, according to Bloomberg. The airline’s completed regional flights was 87.1 percent, which was “an extraordinarily low level,” and almost 9 percentage points below its mainline operations, it reported.
And another potentially heavy snowfall was forecast for last weekend, from California to New England.
The sheer amount of cancellations this winter are likely straining airlines’ bottom lines, said Katie Connell, a spokeswoman for Airlines for America, a trade group for major U.S. airline companies.
“The airline industry’s fixed costs are high, therefore the majority of operating costs will still be incurred by airlines, even for canceled flights,” Connell wrote in an email. “If a flight is canceled due to weather, the only significant cost that the airline avoids is fuel; otherwise, it must still pay ownership costs for aircraft and ground equipment, maintenance costs and overhead and most crew costs. Extended storms and other sources of irregular operations are clear reminders of the industry’s operational and financial vulnerability to factors outside its control.”
Bob Mann, an independent airline analyst and consultant who is principal of R.W. Mann & Co. Inc. in Port Washington, N.Y., said that two-thirds of costs — fuel and labor — are short-term variable costs, but that fixed charges are “unfortunately incurred.” Airlines just typically absorb those costs.
“I am not aware of any airline that has considered taking out business interruption insurance for weather-related disruptions; it is simply a part of the business,” Mann said.
Chuck Cederroth, managing director at Aon Risk Solutions’ aviation practice, said carriers would probably not want to insure airlines against cancellations because airlines have control over whether a flight will be canceled, particularly if they don’t want to risk being fined up to $27,500 for each passenger by the Federal Aviation Administration when passengers are stuck on a tarmac for hours.
“How could an insurance product work when the insured is the one who controls the trigger?” Cederroth asked. “I think it would be a product that insurance companies would probably have a hard time providing.”
But Brad Meinhardt, U.S. aviation practice leader, for Arthur J. Gallagher & Co., said now may be the best time for airlines — and insurance carriers — to think about crafting a specialized insurance program to cover fluke years like this one.
“I would be stunned if this subject hasn’t made its way up into the C-suites of major and mid-sized airlines,” Meinhardt said. “When these events happen, people tend to look over their shoulder and ask if there is a solution for such events.”
Airlines often hedge losses from unknown variables such as varying fuel costs or interest rate fluctuations using derivatives, but those tools may not be enough for severe winters such as this year’s, he said. While products like business interruption insurance may not be used for airlines, they could look at weather-related insurance products that have very specific triggers.
For example, airlines could designate a period of time for such a “tough winter policy,” say from the period of November to March, in which they can manage cancellations due to 10 days of heavy snowfall, Meinhardt said. That amount could be designated their retention in such a policy, and anything in excess of the designated snowfall days could be a defined benefit that a carrier could pay if the policy is triggered. Possibly, the trigger would be inches of snowfall. “Custom solutions are the idea,” he said.
“Airlines are not likely buying any of these types of products now, but I think there’s probably some thinking along those lines right now as many might have to take losses as write-downs on their quarterly earnings and hope this doesn’t happen again,” he said. “There probably needs to be one airline making a trailblazing action on an insurance or derivative product — something that gets people talking about how to hedge against those losses in the future.”
Healthcare: The Hardest Job in Risk Management
Radically changing cost and reimbursement models.
Rapidly evolving service delivery approaches.
It is difficult to imagine an industry more complex and uncertain than healthcare. Providers are being forced to lower costs and improve efficiencies on a scale that is almost beyond imagination. At the same time, quality of care must remain high.
After all, this is more than just a business.
The pressure on risk managers, brokers and CFOs is intense. If navigating these challenges wasn’t stress inducing enough, these professionals also need to ensure continued profitability.
“Healthcare companies don’t hide the fact that they’re looking to reduce costs and improve efficiencies in practically every facet of their business. Insurance purchasing and financing are high on that list,” said Leo Carroll, who heads the healthcare professional liability underwriting unit for Berkshire Hathaway Specialty Insurance.
But it’s about a lot more than just price. The complexity of the healthcare system and unique footprint of each provider requires customized solutions that can reduce risk, minimize losses and improve efficiencies.
“Each provider is faced with a different set of challenges. Therefore, our approach is to carefully listen to the needs of each client and respond with a creative proposal that often requires great flexibility on the part of our team,” explained Carroll.
Creativity? Flexibility? Those are not terms often used to describe an insurance carrier. But BHSI Healthcare is a new type of insurer.
The Foundation: Financial Strength
Berkshire Hathaway is synonymous with financial strength. Leveraging the company’s well-capitalized balance sheet provides BHSI with unmatched capabilities to take on substantial risks in a sustainable way.
For one, BHSI is the highest rated paper available to healthcare providers. Given the severity of risks faced by the industry, this is a very important attribute.
But BHSI operationalizes its balance sheet in many ways beyond just strong financial ratings.
For example, BHSI has never relied on reinsurance. Without the need to manage those relationships, BHSI is able to eliminate a significant amount of overhead. The result is an industry leading expense ratio and the ability to pass on savings to clients.
“The impact of operationalizing our balance sheet is remarkable. We don’t impose our business needs on our clients. Our financial strength provides us the freedom to genuinely listen to our clients and propose unique, creative solutions,” Carroll said.
Keeping Things Simple
Healthcare professional liability policy language is often bloated and difficult to decipher. Insurers are attempting to tackle complex, evolving issues and account for a broad range of scenarios and contingencies. The result often confuses and contradicts.
Carroll said BHSI strives to be as simple and straightforward as possible with policy language across all lines of business. It comes down to making it easy and transparent to do business with BHSI.
“Our goal is to be as straightforward as we can and at the same time provide coverage that’s meaningful and addresses the exposures our customers need addressed,” Carroll said.
Claims: More Than an After Thought
Complex litigation is an unfortunate fact of life for large healthcare customers. Carroll, who began his insurance career in medical claims management, understands how important complex claims management is to the BHSI value proposition.
In fact, “claims management is so critical to customers, that BHSI Claims contributes to all aspects of its operations – from product development through risk analysis, servicing and claims resolution,” said Robert Romeo, head of Healthcare and Casualty Claims.
And as part of the focus on building long-term relationships, BHSI has made it a priority to introduce customers to the claims team as early as possible and before a claim is made on a policy.
“Being so closely aligned automatically delivers efficiency and simplicity in the way we work,” explained Carroll. “We have a common understanding of our forms, endorsements and coverage, so there is less opportunity for disagreement or misunderstanding between what our underwriters wrote and how our claims professionals interpret it.”
Responding To Ebola: Creativity + Flexibility
The recent Ebola outbreak provided a prime example of BHSI Healthcare’s customer-centric approach in action.
Almost immediately, many healthcare systems recognized the need to improve their infectious disease management protocols. The urgency intensified after several nurses who treated Ebola patients were themselves infected.
BHSI Healthcare was uniquely positioned to rapidly respond. Carroll and his team approached several of their clients who were widely recognized as the leading infectious disease management institutions. With the help of these institutions, BHSI was able to compile tools, checklists, libraries and other materials.
These best practices were immediately made available to all BHSI Healthcare clients who leveraged the information to improve their operations.
At the same time, healthcare providers were at risk of multiple exposures associated with the evolving Ebola situation. Carroll and his Healthcare team worked with clients from a professional liability and general liability perspective. Concurrently, other BHSI groups worked with the same clients on offerings for business interruption, disinfection and cleaning costs.
Ever vigilant, the BHSI chief underwriting officer, David Fields, created a point of central command to monitor the situation, field client requests and execute the company’s response. The results were highly customized packages designed specifically for several clients. On some programs, net limits exceeded $100 million and covered many exposures underwritten by multiple BHSI groups.
“At the height of the outbreak, there was a lot of fear and panic in the healthcare industry. Our team responded not by pulling back but by leaning in. We demonstrated that we are risk seekers and as an organization we can deploy our substantial resources in times of crisis. The results were creative solutions and very substantial coverage options for our clients,” said Carroll.
It turns out that creativity and flexibly requires both significant financial resources and passionate professionals. That is why no other insurer can match Berkshire Hathaway Specialty Insurance.
To learn more about BHSI Healthcare, please visit www.bhspecialty.com.
Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial property, casualty, healthcare professional liability, executive and professional lines, surety, travel, programs, and homeowners insurance. It underwrites on the paper of Berkshire Hathaway’s National Indemnity group of insurance companies, which hold financial strength ratings of A++ from AM Best and AA+ from Standard & Poor’s. Based in Boston, Berkshire Hathaway Specialty Insurance has regional underwriting offices in Atlanta, Boston, Chicago, Los Angeles, New York, San Francisco, Toronto, Hong Kong, Singapore and New Zealand. For more information, contact email@example.com.
The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service. Any description set forth herein does not include all policy terms, conditions and exclusions. Please refer to the actual policy for complete details of coverage and exclusions.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Berkshire Hathaway Specialty Insurance. The editorial staff of Risk & Insurance had no role in its preparation.