Exclusion J. Damage to Property:  “Property Damage” to (4) Personal Property in the care, custody or control of the insured.

For example, your client drops off their laptop to you for repairs.  You take the laptop with you as you head to another client’s location.  While you are there, someone breaks into your car and steals numerous items, including your client’s laptop.  Your General Liability policy would not respond; however, if you purchase a Property policy or are able to add Property coverage to your existing General Liability policy, there is a coverage that can be included called “Personal Property of Others”.  You are able to choose the desired limit of coverage and it must be combined with coverage for your own business personal property or building.

The 2001 ISO version of the General Liability form includes a new exclusion that eliminates coverage for “injury arising out of the infringement of copyright, patent, trademark, trade secret, or other intellectual property rights.” However, the new exclusion excepts “ infringement in your ‘advertisement’ of copyright, trade dress, or slogan.” Therefore, coverage is now specifically excluded for all trademark and trade secret claims. In addition, coverage for the three remaining types of intellectual property claims (copyright, trade dress, or slogan) is dependent upon such offenses arising out of an ‘advertisement’.

As regards the definition of ‘advertisement’, only infringements that occur in the advertisement itself are covered. The new 2001 edition includes the following new restrictions on Internet activity:

 *  Advertisement with respect to a website means only “that part” of the website that is about “your products, goods or services for the purposes of attracting customers or supporters.”

 *  Coverage is eliminated for claims “rising out of an electronic chat room or bulletin board that the (insured) hosts, owns, or over which the (insured) exercises control.” It is likely that the use of blogs, Facebook, Twitter, and other social media fall under this exclusion.

 *  Coverage is also eliminated for “unauthorized use of another’s name or product in the (insured’s) e-mail address, domain name or meta-tag, or any other similar tactics to mislead another’s potential customers.” One area of concern that has not yet been clarified by the courts is use of trademarked terms in meta-tags.

To follow are some common situations where the above mentioned restrictions can eliminate coverage for non-media companies:

 *  Claims for copyright infringement arising out of text, photographs or other content that are not part of an online advertisement. The use generic photos on company on company websites in areas that are not actually part of a specific product advertisement is a common source of litigation. Providers of stock photos are using watermarking technology to search the internet for instances of the unauthorized use of their photographs and many law firms are specializing in providing representation in this area.

 *  Trade dress claims arising out the look and feel of a website, blog, social media, etc. that is not part of an online advertisement. These involve navigation (ex: buttons, bars), color schemes, hyper links, menus, etc.

 *  Online comparative advertising where your product is represented as being bigger, better, faster, etc. as compared to the competition. These representations may result in claims for false or misleading advertising and unfair competition under the Lanham Act or various state statutes. However, if these representations are directed at a specific competitor, they may be covered under advertising injury.

 *  Product packaging that too closely resembles a competitor may result in liability for trade dress infringement. These claims may be excluded because the courts may not consider the product packaging to be part of an advertisement.

If any of these instances of potential uncovered claims are a concern, a business should strongly consider adding Media Liability (offline) or Cyber Liability policies (online).

Source: Elizabeth C. Kock and Jay Ward Brown, Levine Sullivan Koch & Shultz, LLP; Risk & Insurance; December 2011.

 In this case, a class action lawsuit was filed against Nextel (or its agent) for sending unsolicited fax blasts in violation of the TCPA. The TCPA is a federal law making it unlawful to use a fax, computer, or other device to send an unsolicited advertisement to a fax machine. Each fax sent in violation can result in the greater of actual damages or $500.

 Transportation Insurance Company argued that the “advertising injury” coverage under its General Liability must be for “oral or written publication of material that violates a person’s right of privacy”. And, in the present case, no private content was communicated in the advertisement.

 However, the court opined that the “right of seclusion” is a right of privacy that is provided for under the TCPA. Therefore, the “advertising injury” coverage under the General Liability form does provide coverage for sending unsolicited fax advertisements in violation of the TCPA.

 In the Penzer case, the fax blast violation occurred in 2003. Since that time, the insurance industry has adopted form CG 00 67 03 05 entitled “Exclusion-Violation Of Statutes That Govern E-Mails, Fax, Phone Calls Or Other Methods Of Sending Material Or Information”. This policy endorsement should preclude coverage in the majority of these cases.

Source: John Sadler

“Many employees disable the encryption solutions on their laptops, putting their employers at risk for data breaches, according to a study by Absolute Software Corp. and The Ponemon Institute.”

The study specifies “Corporate America” is being affected by the behavior of employees who destabilize data protection.  This behavior is resulting in encryption not being enough to protect laptops and other mobile devices that have sensitive information stored on them.  The number one source of data loss is from lost or stolen laptops.  When a laptop has been stolen, 3 out of 4 companies will incur a data breach.  

Necessary safety measures are not being taken by business owners to secure their laptops.  Some business managers even deactivate their laptops’ encryption making themselves and their clients more vulnerable to identity theft.  Additional layers of security can be utilized to identify data that has been accessed, even delete sensitive information remotely, and find a lost or stolen laptop.  Employers can not afford to rely on the behavior of their employees nor encryption technology to provide the data protection they need according to this study.  

Source: Absolute/Ponemon

http://www.insurancejournal.com/news/national/2009/04/27/99982.htm

Many General Liability policy forms have an exclusion which takes away coverage for a laundry list of professional services including legal, accounting, architectural, engineering, medical, health care and computer consulting, design, or programming services including web site design. 

Obviously, this presents a problem for tech compaines or IT professionals seeking General Liability coverage. But, the problem can be solved by an insurance professional who specializes in insuring tech and IT risks.

Carriers like The Hartford can add eliminate this harmful Professional Services exclusion by endorsing the policy to add back coverage for tech professional services. Hartford has a special endorsement entitled “Technology Services Coverage” for this purpose.

Tech Professionals with General Liability Carriers that don’t address the Professional Services Exclusion with a buyback endorsement may find needed coverage under a Professional Liability policy that offers a Contingent Bodily Injury / Property Damage endorsement.

Be sure to avoid these types of problems by dealing with a tech insurance specialist.

Most service or contracting businesses could cause property damage that results in loss of or damage to a third party’s electonic data that is housed on their computer system. This exposure is not limited to IT firms.

Standard General Liability forms provide coverage for liability arising out of “property damage”. “Property Damage” is defined as a) physical injury to tangible property including loss of use thereof and b) loss of use of tangible property that is not injured…. As used in this definition, “electronic data” is not tangible property.

“Electronic data” is defined as information, facts, or programs: a) stored as or on, b) created or used on: or c) transmitted to or from: computer software…..hard or floppy discs, CD-ROMS, tapes, drives, cells, data processing devices, or any other media which are used with electronically controlled equipment.

This problem can be solved by the addition of various endorsements to add back coverage for property damage to electronic data. The cost is usually minimal.

However, some General Liability carriers that cater to IT firms will not add back this coverage. As a result, IT firms may need to verify that their Professional Liability (Errors & Omissions Liability) policy picks up this exposure. The key is to locate the definition of “tangible property” and find out if electronic data is included.

1. Bodily Injury And Property Damage Liability (General Liability)

2. Personal Injury And Advertising Injury Liability (General Liability or Errors & Omissions Liability)

3. Negligent Acts, Errors, Omissions In Performance Of Professional Services Resulting In Economic Damages (Errors & Omissions Liability)

4. Intellectual Property Infringements such as copyright, trademark, etc. (Media Liability)

5. Breach Of Security (Unauthorized Access, Computer Virus, Denial Of Service)