In this Issue

	Does the Internet Pose a Financial Risk for Your Company?
	Clinical Trials Liability Considerations

Quick Facts

The 2005 FBI computer crime survey found that nearly 9 out of 10 public and private organizations in the United States have been victims of some kind of computer security incident.

In a domestic General Liability policy the worldwide coverage applies only if the lawsuit is brought in the United States, but experience shows that consumers are most likely to file lawsuits in the countries where they live, not where the manufacturer of the product is based. (Chubb Group of Insurance Companies)

Although the number of Securities Class Action lawsuits continued a 3-year drop through 2006, both the average and median settlement size increased to $34M and $7.3M respectively, not including defense costs.  (Carpenter Moore Insurance Services)

Because they face a broad array of unfamiliar exposures, employees are more likely to be injured at work when they are outside the United States than when they are on home turf.  A 1997 study of the health insurance records of 10,800 employees of World Bank found employees who routinely traveled on business accounted for 80 percent more medical claims than employees who did not travel.  (Chubb Insurance Group)

Does the Internet Pose a Financial Risk for Your Company?

Morning news shows broadcast the breach of a major corporation’s database: credit card and other personal information for hundreds of thousands of consumers has been compromised. Cisco announces that Apple has infringed on its trademark “iPhone”. An employee misplaces a laptop or, even worse, a hacker breaks into highly-protected corporate databases.

In the Internet age, the ability to bring hundreds of millions of people together for a multitude of purposes does not come without a price. Information falling into the wrong hands can be devastating to its victims and the failure of a product can have serious financial repercussions for customers and shareholders.

Has your corporate insurance buyer or risk manager assessed the extent of your corporation’s Internet exposures? If you have coverage in place, does it address your corporate needs as well as offer broad terms and conditions?

What exposures are not currently covered in your standard property, general liability and errors and omissions policies? Have you determined what exposures do not have a feasible insurance solution and the appropriate risk management solution to address that exposure?

Does your company need internet liability insurance?

What businesses need Internet liability? With the merging of technologies, where products such as phones and pocket PCs enable users to take pictures, listen to music, and cruise the Internet, where does Internet liability begin and end? Do hardware and software companies also have an internet exposure as suppliers of components for these products? Do companies not deriving revenue from any Internet-related products but maintaining a website and perhaps taking orders over the Internet have the same or different Internet liability exposures?

These are just a few of many exposures that pose a financial risk to companies:

• Liability to others for failing to properly protect confidential information from hackers or other third parties.
• Alleged copyright or trademark violation, or plagiarism on your website or in your product.
• Unintentional transmission of a virus, worm or Trojan horse; use of tracking cookies; gray ware; spoofing; phishing, or spam.
• Terminated employee wreaking havoc with customer projects, data or their websites resulting in a consequential financial loss.
• Incorrect advice, or failure to advise, a client on the types of software products (e.g. security software) that should or should not be used in conjunction with their corporate intranet or the Internet.
  

What is your coverage if a customer files a claim?
Internet liability policies vary from insurer to insurer; are you aware of key provisions in your policy?

• Are unauthorized access and introduction of a virus to your product or to others from your web site covered causes of loss? If so, is there a dollar sub-limit or a coverage restriction stipulating that it must be the result of an act by an outside 3rd party?
• Is there coverage for consequential loss to your customer and others as a result of such a loss?
• Is there a description of products or services on the policy declarations page? If so, is it a broad description encompassing all of your corporate products and services since a more restrictive description may limit your coverage? Better yet, do you have even potentially broader coverage that does not require a description?
• What is the definition of damages, e.g. if a disgruntled customer demands that your company repay the full value of the contract to him, would this be covered? Does your policy include “cost of contract” in the definition of damages for a covered claim to repay the cost of the contract to your customer if part of a claims settlement?

Because of the wide variations among coverage forms and responses to Internet-related losses, it is critical that insurance buyers, risk managers, and others involved in identifying risks of financial loss through the Internet consult their insurance professionals to determine exposures, gaps in coverage, and the insurance products that are best suited to meet the needs of their businesses. It is also critical that these same individuals be reminded that no insurance policy exists to cover all risks of financial loss. There will be times when other risk management techniques might be necessary or appropriate.

Clinical Trials Liability Considerations

Unlike many forms of insurance, biotech clinical trials products liability is not standardized. Be prepared to buy wisely with these tips:

1. Start Early. If you are trying to get a new drug or device to trial you will need to produce informed consent and protocol documents. If more than one country is involved, you should allow a minimum of six weeks to get your insurance in place. Investigative Review Boards may have issues with policy language and it can be a very time-consuming process.
2. Sell your company as a loss averse company. Believe it or not, companies perceived as taking a cavalier approach to losses do not receive the best deal or the best policy terms. No one wins in a loss, particularly not you. If the insurance company recommends taking action in any area (contract management, certificates, packaging, labeling, etc.) make an effort and do your best to comply.
3. Choose the right limit. Your broker may be able to help you by providing limits benchmarking or historical claims data. Look at what limits your contracts require and have your broker review these sections. Finally, it may come down to how much can you afford and how well you will sleep at night with a given coverage. Ask your insurance company for deductible and limit options and you can make a good choice.
4. Don’t forget to have your policy DICED! All policies have five areas to review. Declarations: Who is being insured? What locations? What product? What limits, dates, and forms? Insuring agreement: What has the insurer agreed to insure you for? Against what causes of loss? Conditions: What must you do following a loss? What are the reporting requirements? Exclusions: What is not covered? This is a very important section as it may lay out very specific technical exclusions. They can be negotiated in some circumstances but you have to ask. Definitions: The same word can mean different things; make sure that you understand how your policy defines important terms.