All posts by Brian Friel

Insurance Coverage for Phishing Cons: Policyholders Twice Scammed

We have received numerous requests from businesses seeking to understand insurance coverage for phishing scams. Many of these businesses have become the victim of phishing attacks and are pursuing claims for coverage.

Scam I: Phishing

Computer email scams are increasing on an alarming rate.  The FBI reports that companies have been swindled out of billions of dollars due to email scams over the past few years.  To counteract this, the FBI recently issued public service warnings to businesses about criminals using bogus email accounts to pose as CEOs to trick financial controllers into wiring funds to the fraudsters’ bank accounts.  See FBI’s Public Service Announcements, www.fbi.gov.  Last year, Equifax, one of the three major credit reporting agencies in the US, announced a data breach affecting 143 million customers, based on hackers accessing Social Security numbers, birthdates, addresses, and driver’s license numbers.

Most companies have experienced these types of scams first-hand. The reason for this is that phishing scams have become more and more sophisticated over time.   We all know to look out for that email from a Nigerian prince asking us to hold $10 million dollars of money for them. We also know not to respond to a bank asking us to “click here” to verify user names and passcodes.  With organizations, the scams have become much more sophisticated. Cyber criminals hack into an organization’s internal computer system so that they can send what look bona fide emails from a CEO or CFO requesting the payment of invoices to a “new” bank, which coincidentally is located in China.   Employees who get one of these emails from their management, naturally respond asking for confirmation. Those emails are then intercepted by the cyber-criminal, and the cyber-criminal responds saying that all is ok.

Scam II: Insurance Company Response

Insurance companies are responding to these scams by offering specialized policies, for additional premiums of course, specifically addressing these risks or adding coverage to their standard Fidelity/Crime or Cyber Liability policies, typically under the moniker of “Deception Fraud” or “Social Engineering” insuring agreements.   As with most things in the world of insurance, the devil is in the details, but some of the insurance coverage bought to specifically to cover phishing scams is worthless.

Here’s how many insurance companies are deceiving their corporate policyholders.  “Deception Fraud” and “Social Engineering Fraud” are so broadly defined in the policies that they cover nearly every possible computer scam.  For example, in the currently available Private Choice Premier Policy, Crime Coverage Part offered by The Hartford Insurance Company, “Deception Fraud” is defined as “the intentional misleading of a person to induce the Insured to part with Money or Securities by someone, other than an identified Employee, pretending to be an Employee, owner of the Insured, . . . a Vendor, a Customer, a Custodian, or a Messenger.”   Incredibly broad, which is exactly what companies want to protect them against risks, right?  Not so fast.  This coverage may come with a very small sub-limit of $50,000-$100,000, whereas other coverages under these same policies may have limits of between $1-$5 million.

What’s even worse (and here comes the true deception) is the fact that insurers often take the position that losses falling under “Deception Fraud” or “Social Engineering Fraud” cannot also be covered under other higher limits insuring agreements, such as “Computer Fraud” or “Funds Transfer Fraud” (which are typical coverages in Fidelity/Crime policies). Insurers argue that, despite higher limits under other coverage grants, that the loss nonetheless must be recognized as a “Deception Fraud” or “Social Engineering Loss” only, subject to a small limit of insurance.  In other words, heads insurers win, tails policyholders lose.  Given this widely adopted position of insurers, Policyholders were better off rejecting these new highly promoted enhancements to coverage and relying upon coverage they previously had.

Insurance Coverage for Phishing

Insurance coverage for There’s nothing more disappointing and frustrating than to spends thousands, if not hundreds of thousands, of dollars buying insuring policies to protect against the risk of fraud, only to have an insurance accompany argue that it sold a nearly worthless policy.  Corporate policyholders should review their current and prospective policies to spot this and other clever limitations, and demand appropriate changes. If a company has already become a victim to phishing, however, it is not too late to challenge an insurance company regarding this kind of position which creates an unnecessary and unwarranted gap in coverage and retain coverage counsel to assess all options.

Media Liability Insurance Claim Success Story


In this post, Miller Friel attorney Brian Friel discusses media liability insurance claims and how insurance carriers improperly deny media liability insurance claims.  In the example presented here, a prominent TV and radio host was sued for defamation.   The media liability insurer denied the claim based on an improper reading of an exclusion.  Turning this improper media liability insurance claim denial around involved comparing the facts of the company’s on-air statements across multiple media outlets, and the language of the policy, which indicated that the insurance company’s initial denial improper.

Please watch the video to learn more, or Contact us if you have any questions.

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Insurance Defense Firms: The Fox May Be Guarding the Hen House

When corporate policyholders consent to defense counsel in litigation, they assume that the law firm defending them is loyal to their interests.  Law firms are presumed to be independent, which goes part and parcel with a the ethical obligation of a litigator to “zealously” litigate on behalf of their clients.  Yet, over the years, insurance carriers have instituted higher and higher levels of control over defense counsel.  Chubb appears to be at the forefront of this growing trend, and Chubb’s control of defense counsel through direct ownership of “House Counsel” law firms illustrates just how problematic this issue has become.

1. The Fox

Recently, Chubb issued a press release announcing that it has promoted Liz Daly to Senior Vice President, and something called “House Manager” for its North American Claims Organization.  Chubb states that “House Counsel attorneys provide litigation, trial and appellate legal services to Chubb’s commercial and personal policyholders.”  There are 11 different law firms in 18 cities in the U.S. that currently fall within Chubb’s House Counsel program.   These firms provide legal services just like other law firms, such as defending companies in “commercial litigation including contract disputes . . . . state and federal courts and agencies alleging discrimination, retaliation and harassment involving the following federal statutes and claims and their equivalents:  Fair Housing Act, Americans With Disabilities Act (ADA).”

2. The Fox is Well Hidden    

A casual observer would never know Chubb owns these law firms.  The name Chubb is not found anywhere in those law firm firms’ names.  Rather, the firms sound and look like your garden variety independent law firms, with names such as Kuluva, Armijo & Garcia in California, McGuinness & Cicero in Florida, and Daly, Lamastra, Cunningham, Kirmser & Skinner in New Jersey.   In fact, the Daily in  Daly, Lamastra, Cunningham, Kirmser & Skinner appears to be the very Liz Daly who also serves as a Senior Vice President for Chubb.

3.  The Fox is in the Hen House

Leaving aside the issue of whether the lawyers at these firms are providing the highest quality legal services, the most important question is why would any company trust its insurer’s in-house claims lawyers to defend and protect their interests?  Often times, the ultimate determination of whether an insurer will provide full coverage, or even perhaps the determination of whether it will file an action against its insured to recoup the attorneys’ fees it has paid on its insured’s behalf, results from facts discovered during the course of litigation .  A Chubb lawyer, who also may wear the hat of company claims executive, consciously or subconsciously, may steer a case in a way that is not in the best interests of an insured in terms of coverage.  Or an in house insurance company lawyer may share confidential information with its employer, Chubb, about the insured.

There is an inherent conflict of interests, both real and potential with this kind of relationship.  It’s in an insurance company’s interests to pay as little as possible for a claim.   An insurance company employee can not serve its employer’s interests and zealously represent a client in litigation that has interests adverse to the insurer.  What’s more, it’s unclear how many other insurers are providing this sort of in-house legal service to their insureds.

When an insurance carrier has agreed to defend, corporation should insist on independent legal counsel.  If you’re uncertain as to your rights, contact a coverage lawyer.

Tips and Traps in Corporate Liability Coverage

The Corporate Board, one of the leading journals of corporate governance, recently published one of our articles, entitled “Tips and Traps in Corporate Liability Coverage.”  In this article, we address some of the most important insurance issues faced by directors and officers.  These include notice, securing defense coverage, coverage for governmental investigations, coverage for criminal investigations, and many more.  We welcome your comments and questions.

Click here to read the entire article.

Retroactive Date Exclusions: Commonly Alleged, But Seldom Applicable

 

In today’s post, Brian Friel addresses one of the most common reasons for denial raised by insurance carriers today: retroactive date exclusions.  These retro-date exclusions have become a favorite reason for denial by insurance carriers, but they are seldom applicable.  In this video, Brian addresses a typical scenario.  A client came to us with a denial letter from its insurance carrier that relied primarily on a retro date exclusion. 

After carefully reviewing the policy, we determined that the retroactive date exclusion did not apply. We took our argument to the insurance company, explained our reasoning, and the insurance company retracted its denial, resulting in a multimillion dollar settlement for our client. 

This arc from denial letter, to coverage analysis, to positive outcome is highly repeatable.  We use this kind of approach for each and every one of our corporate policyholder insurance clients.  A denial letter from an insurance carrier is not the end of the road for an insurance claim; it is an invitation to re-examine the claim and negotiate.  Corporate policyholders have the opportunity to overturn a denial of coverage,  but this typically cannot be done without skilled legal assistance. 

Watch the video to learn more about how corporate policyholders can overturn insurance claim denials based on retroactive date exclusions, and please feel free to contact us if you have any questions. 

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Multiple Insurance Policies Covering a Single Claim

 

In this post, Brian Friel wraps up his series The Ten Biggest Mistakes Made By Corporate Insurance Policyholders, discussing how multiple types of insurance policies can cover a single claim.

When a claim comes in, it is important for corporate policyholders to look at all potentially applicable insurance policies, which include not just the most obvious kinds of coverage.  Multiple insurance policies typically cover a single claim.  The reason for this is that lawsuits often allege more than one thing.  Within a single claim, certain allegations may trigger D&O (Director and Officer) coverage, others may fall under E&O (Errors and Omissions) coverage, while others may trigger EPLI (Employment Practices) coverage. More often than not, a claim will extend into multiple lines of coverage, effectively multiplying the potential coverage.  Insurance policies are complex, and the law controlling coverage even more so.  What corporate policyholders do early in the claims process is critical. 

Watch the video to learn more.

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Insurance Recovery Law Conflicts of Interest

 

This video addresses the ninth biggest mistake made by corporate policyholders: not understanding potential conflicts of interest when pursuing insurance claims.  To call this a mistake made by corporate policyholders, however, is misleading.  The reason why corporate policyholders misunderstand conflicts in insurance cases is because they are seldom provided with sufficient information to identify insurance recovery law conflicts of interests. 

Panel Counsel Relationships with Insurance Carriers

The larger United States law firms offer a wide range of legal services to clients, and “one stop shopping,” for high quality lawyers at a selected firm often makes sense.  It is not uncommon for a company to utilize one law firm for a variety of legal disciplines.  And, if litigation ensues, it is a benefit to the company if the chosen law firm is also panel counsel for their insurance carrier.  That way, the matter can be defended using a law firm the corporation trusts. 

Potential Insurance Conflicts of Interest

This model, however, does not work with insurance recovery claims.  Most large multi-practice law firms have conflicts when it comes to providing advice on insurance claims.  Some directly represent insurance companies in transactional and litigation matters, and seek waivers to represent corporate policyholders whenever an opportunity to help a corporate policyholder arises.  Most large law firms also serve as panel counsel.  Law firms that rely on litigation typically want to be listed as panel counsel, as that permits them to represent policyholders in litigation, and get paid, at least in part, by insurance carriers. 

In either the waiver or the panel counsel situation, insurance carriers ask for something from the law firms representing them.  If defense counsel is asked to handle an insurance claim, policyholders should be aware of their limitations.  For example, in exchange for being listed as panel counsel, law firms must agree to many things, which typically include, not filing bad faith lawsuits, not deposing executives at the insurance company, and providing the insurance company with a “heads up” before litigation is filed.  The overriding view is that insurance companies will not tolerate law firms that turn against them.  This which makes it difficult or impossible for any law firm with insurance company relationships to zealously represent the interests of a corporate policyholder client.

If your are in-house counsel tasked with handling an insurance claim, watch this video to better understand what kinds of questions should be asked to avoid insurance recovery law conflicts of interest.

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#8 Why Corporate Policyholders Need Insurance Law Experts

In today’s video, Miller Friel Managing Partner Brian Friel continues his series The Ten Biggest Mistakes Made By Corporate Insurance Policyholders with his eighth entry, which address using the wrong lawyers.  Although corporations recognize that insurance law experts are warranted for any significant claim, the process of getting there is not always straightforward.  Not so long ago, the concept of “one stop shopping” for lawyers was quite the thing.  A corporation with an unsettling piece of litigation might first look to litigators defending the claim to give an opinion on whether or not the claim is covered by insurance.  General litigators or even corporate attorneys are often brought in to give a cursory opinion on coverage.  The ease and simplicity of this approach is easy to understand.  Companies often want to use the same law firm to both defend the underling case and to prosecute its insurance claim.  However, insurance recovery law is too complex and too important to have non-expert lawyers leading a claim.  

We talked before about the inherent complexity of insurance recovery law in past posts. See How To Choose An Insurance Recovery Law Firm.  Insurance law is a specialized practice area.  It involves not only complex insurance policy language, but also rapidly evolving case law that can vary significantly from jurisdiction to jurisdiction.   Insurance companies do not retain general litigators to evaluate claims for them, and neither should corporations.  In fact, insurance companies are known for hiring some of the most sophisticated law firms in the country, including law firms having hundreds of insurance law specialists on call to represent their interests when it comes to claims. See Where Have All of the Insurance Lawyers Gone?   

Watch the video to learn more.

For a transcript of the video please see below.

Insurance law experts

Insurance law experts are warranted for any significant claim, the process of getting there is not always straightforward.

Another common mistake made by corporate policyholders is relying too heavily on their outside general litigators who are handling the underlying defense matter to assist on the insurance claim. We understand why this happens. Everybody likes the idea of one-stop shopping. You go to a large firm. You’ve been sued in a intellectual property case or practical liability case, some complex commercial transaction, and you have some great general commercial litigators or a great IP litigator or patent litigator or copyright litigator. Maybe that person or maybe a person down the hall from them at their firm also has some background in doing an insurance claim maybe a couple years ago or five years ago and has some general idea of how insurance policies are structured and a general idea of how the claims process works.

There is going to be a natural pull for a company to want to keep that all within one shop, and that’s very natural. We understand that. The problem is insurance law is a very specialized area of law. You’re talking about not just an insurance contract, it’s a specialized insurance contract that could be hundreds of pages long with detailed provisions, definition sections, insurance grants, exclusions, endorsements, different policy provisions for different states, depending on where corporate facilities are located. You have 50 state laws that control for insurance law, plus the federal courts in those 50 states that sometimes come up with their own laws and interpretations of insurance policies, and all of those laws are evolving over time and the insurance products are evolving over time.

Insurance policies today, whether they’re general liability, directors and officers, fidelity, employment, they’re different than they were three years ago, much different than they were ten years ago, and almost incomparable to what they were twenty years ago. You need someone who understands this specialized contract and the specialized law that goes along with it. Companies also have to realize that when you have a claim, particularly a significant claim with real dollars at stake, and you get a coverage letter from an insurance company, whether it’s directly from the company or from its own outside counsel, be rest assured the insurance company who has retained their own outside counsel to assess your claim, evaluate your claim, probably either issue a denial or strongly worded reservation of rights, but not making any payments and raising all sorts of reasons why they think they may deny the claim, be rest assured, the insurance companies are not using general practitioners or general litigators to evaluate your policy and your claim.

For that reason alone, you shouldn’t be using general practitioners or general litigators to evaluate your policies or your claims.

Are Conversations With Insurance Brokers Privileged?

 

 

Today Brian Friel talks more about the role of brokers in the corporate insurance process, asking this critical question: are conversations with insurance brokers privileged? Corporate policyholders deservedly believe that conversations with insurance brokers are privileged, just like conversations with lawyers.  But, certain courts have held that insurance brokers break the chain of privilege between lawyers and clients, which can jeopardize the payment of legitimate claims.  If you have sensitive conversations with your broker and they are deposed, corporate policyholders open themselves up to unnecessary problems. Brokers are essential to corporate policyholders in many ways, but acting as a viable alternative to focused legal representation is not one of them.

Watch the video to learn more about insurance brokers and privilege.

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Don’t Rely Solely On Insurance Brokers During Claims Denials

Managing partner Brian Friel continues his series The Ten Biggest Mistakes Made By Corporate Insurance Policyholders is the common mistake of relying too much on the advice of insurance brokers during claims denials. 

We have a great deal of respect for insurance brokers.  But, they should not be put in the difficult position of offering legal advice on claims.  Although Insurance broker expertise is extremely valuable to policyholders when settling claims.  To maximize the value of claims, is important to understand two things about insurance brokers. First insurance brokers are not lawyers.  Insurance brokers know how insurance professionals treat claims, but they cannot offer the most important thing that policyholders need to know about claims, namely, how courts interpret insurance policies.   Second, the important  relationships insurance brokers have with insurance carriers can often be leveraged. An integrated approach, involving legal claims analysis and broker knowledge of insurance claims professionals affords the best results.  Watch the video to learn more about how these important points can be used by corporate policyholders to maximize the value of insurance claims.

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