Insurance Products That Respond To Intellectual Property Risk
I. INSURANCE TYPE COVERING FORMS OF INTELLECTUAL PROPERTY LIABILITY
General Insurance Policies That Might Offer Limited Protection
Commercial General Liability (CGL) policies
Property insurance with business interruption and extra expense policies
Errors & omissions (E&O/Professional Liability) policies
Umbrella and excess insurance policies
Directors & Officers (D&O) policies
Internet-Specific Policies
Cyberspace/multimedia policies (third party – libel, slander and defamation claims, and IP right infringement coverage)
Internet security policies (unauthorized entry, viruses or employee error; theft of credit data; first- and third-party virus cleanup; and some IP claims)
Intellectual Property Policies
IP coverage (offensive and defensive)
II. SOURCES FOR INSURANCE POLICIES
IP Defensive Policies
XL – General Managing Agent IPISC (www.ipisc.com).
IPISC, for patent infringement coverage, will write only single products for up to $2 million in limits (with some exceptions).
Patent defense policies exclude prior knowledge of loss.
Swiss Re (www.swissre.com) and AIG (www.accessaig.com) (catastrophic patent infringement coverage above a $25M retention; Swiss Re requires other lines of insurance).
Ambridge Partners (www.ambridgepartners. com) and The Hartford Specialty (www.thehartford.com) – deal-specific patent infringement coverage and excess patent enforcement coverage. AIG and The Hartford Specialty offer patent litigation buyout coverage.
IP Offensive Policies
Homestead Insurance Company – general managing agent IPISC (www.ipisc.com).
For patent enforcement coverage, IPISC will write only known enforcement policies for up to $2 million (with some exceptions).
AIG – AIG netAdvantage Complete policies (www.aignationalunion.com)
The Hartford – FailSafe Technology Liability Policies (www.hfpinsurance.com/tech/tech.htm)
Media/Professional Insurance Agency – Cyberliability Plus Policy (www.mediaprof.com)
ACE USA – Integrates Cyber & E&O coverages (www.aceprofessionalrisk.com)
INSUREtrust.COM – Multimedia/Cyberspace/Ebusiness insurance policies (www.insuretrust.com)
Marsh – “CyberLiability Plus insurance policy” (www.marsh.com)
Steadfast Insurance Brokerage – information technology, professional liability (www.steadfast.com.au)
St. Paul – Internet Liability/E-Commerce (www.stpaultravelers.com/business_insurance/specialty/products/internet_liability/)
ZC Specialty Insurance – E-risk (www.zurichna.com/SaFE/erisk.nsf)
Internet Security Insurance Policies
AIG – American International Specialty Lines Insurance (Internet security liability policy (ISL)) (www.accessaig.com)
Chubb Insurance – Safety Net Internet liability policy (www.chubb.com)
Significant exclusions: Cybernet/ multimedia policies exclude patent infringement and antitrust violations, as well as various forms of unfair competition.
Asset Policies
Kiln (www.kilnplc.com) – first-party patent coverage to insure the value of the patent asset and/or licensing income stream; some first-party coverage also available from Swiss Re.
III. FEATURES OF E-BUSINESS/CYBER-LIABILITY POLICIES
AIG netAdvantage Complete - Provides Seven Distinct Coverages:
Internet Media Liability – provides coverage for third-party liability arising out of content on the insured’s website, including copyright and trademark infringement and invasion of privacy.
Internet Professional Liability – comprehensive claims-made errors and omission coverage for Internet and managed security professional liability.
Network Security Liability – provides third-party liability coverage for claims out of failure of the insured’s network security caused by a computer attack.
Information Asset Coverage – Provides coverage for the restoration or recreation of electronic data, computer systems resources and information assets that are damaged as a result of a failure of network security caused by a computer attack.
Network Business Interruption – Provides protection for business interruption losses arising from the interruption or suspension of an insured’s computer network, due to a failure of security.
Cyber Extortion – Provides coverage for both investigation and settlement of extortion threats against the insured related to intentional computer attacks.
Cyber Terrorism – Provides a broad form coverage for computer attacks that are acts of terrorism. The Hartford - FailSafe Technology Liability Policies:
FailSafe MEGA – ideal for small technology companies with less than $5 million in revenues and provides E&O coverage in case someone claims:
– You were negligent in fulfilling your duties because of something you allegedly did wrong or failed to do.
– Your technology services did not perform as intended.
FailSafe GIGA – is a monoline E&O policy including breach of warranty coverage.
FailSafe TERA – technology liability policy that includes specified E&O as well as:
– Specified content - covers copyright, trademark infringement and plagiarism.
– Specified security - encompasses failure to prevent unauthorized access, and denial of service.
– Specific personal injury - protects you against claims of libel, slander and invasion of privacy.
Media/Professional Insurance – CyberLiability Plus Policy
– designed for entities whose primary business focus is the dissemination of information and/or the performance of services utilizing on-line technology. ACE USA – Integrates Cyber and E&O Coverages. Including Provision for:
Technology E&O Liability; Internet Media;
Network Operations Security; Cyber Extortion;
Miscellaneous Professional Liability.
IV. CAVEATS TO CONSIDER:
Insurance products responsive to intellectual property risks are in flux; they change frequently. Five caveats to consider:
First, a number of carriers who previously offered such a policy can be approached. With the right due diligence and risk management review, they may re-enter the market.
Second, all forms of this kind of coverage, which is not widely written, are negotiable. The more comprehensive the company’s approach to minimizing intellectual property risks, the better chance the company stands of procuring a reasonable quote for such insurance.
Third, insurers are particularly concerned that clients who insist upon prompt delivery of an intellectual property defense policy know they are likely to be sued. The least lead time imaginable for these products will be 90 days. Some may take as much as six months. This time can be lessened for companies who deal with carriers that presently insure their other business operations. Unlike CGL insurance, these products are not sold with minimal underwriting. A serious commitment by an insured to working with underwriters to procure such policies is essential.
Fourth, there is presently an absence of a middle market, $5 million to $25 million in limits, for blanket patent infringement coverage. However, a number of prior providers may be approached once appropriate due diligence and a risk management IP survey are conducted.
Fifth, it is critical that policyholders approach brokers knowledgeable about procuring intellectual property insurance. Many have little or no experience with this process. Relationships with wholesale brokers who regularly negotiate with underwriters who provide this coverage are also key.
