All posts by Miles Karson

Maximizing Bad Faith Recoveries

In today’s video blog post, Miller Friel attorney Miles Karson continues his discussion of Bad Faith claims.  Bad Faith claims against an insurance carrier can be the “great equalizer,”  leveling an otherwise unequal playing field between insurer and policyholder.  However, it is not always enough to know that the law of most states recognize that an implied covenant of good faith and fair dealing in every insurance contract.

Maximizing Bad Faith Recoveries

Maximizing bad faith recoveries requires in an depth knowledge of the complexities and differences of each state’s bad faith laws.  Different states recognize different types of bad faith claims, impose different conditions on bringing bad faith claims, and afford different bad faith damages.  In order to maximize the strength of a potential bad faith claim, it is critical for coverage counsel to identify all potentially applicable states’ laws, know the types of bad faith claims recognized under those states’ laws, and evaluate the entirety of the insurer’s conduct.

Because of the intricacies of bad faith law, and the complexities involved in choice of law analysis, it is important to hire coverage counsel who not only understands bad faith law, but who also has experience and success at litigating bad faith claims.  Having analyzed and litigated bad faith claims in numerous jurisdictions, Miller Friel has the experience to integrate bad faith into an overall recovery strategy, and use bad faith as a tool to maximize recovery.  See Miller Friel Case Resolution.

To learn more about how we have used integrated bad faith strategies to drive insurance recovery settlements, please give us a call at 202-760-3160.

Maximizing Bad Faith Recoveries

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Bad Faith Claims Against Insurance Carriers: The Great Equalizer

When an insurance claim has been denied, a critical first step for businesses is to consider whether or not the insurance carrier acted in bad faith.  As Miles Karson discusses in today’s video, bad faith claims against insurance carriers are the “great equalizer,” leveling an otherwise unequal playing field between insurer and policyholder.  Policyholders rely on their insurance carriers to promptly and fairly evaluate their claims for insurance.  Unfortunately, insurers don’t always live up to their end of the bargain.  When properly used, bad faith claims create leverage, leveling the playing field, and open the door to full recovery.  A successful bad faith claim brings with it the potential to recover policyholder coverage counsel fees, as well as tort-based and punitive damages.

Many Insurance Claim Denials Are Made in Bad Faith

An important thing for policyholders to remember is the vast majority of high-end insurance recovery practices cannot pursue bad faith claims against insurers.  A dirty little insurance industry secret is that most law firms – whether AmLaw 100 or smaller – cannot pursue bad faith claims against insurers.  Sometimes, this is because of actual conflicts of interest.  Other times, insurers require utmost loyalty from their stable of defense panel law firms.  For example, many larger law firms have agreements with insurance companies whereby, in exchange for being added as panel counsel to insurance policies, those firms agree not to assert bad faith claims against insurers.  Given the steady diet of insurer-referred work these panel counsel relationships provide, giving up bad faith claims against an insurer may be viewed, by these law firms, as a minor concession.   Finally, many larger law firms have policies prohibiting lawyers from pursuing bad faith lawsuits.  The result is that, by drastically limiting the number of high end large law firm lawyers who can pursue bad faith claims against them, the  insurance industry has effectively insulated themselves from bad faith liability.  This ensures that the playing field remains tilted in their favor, that is, unless you retain a law firm that is capable and adept at handling corporate bad faith insurance claims. 

How Does Our Focus On Insurance Recovery Law Relate To Bad Faith Claims?

Miller Friel, with our singular focus on insurance recovery law, is not bound by any of the standard insurance industry prohibitions against pursuing bad faith claims.  Our absolute freedom from insurance carrier restrictions gives us flexibility, not only in litigation, but also in settlement.  When warranted, we can aggressively pursue insurance recovery claims, including bad faith, to obtain the maximum recoveries possible for our policyholder clients.  We can also utilize bad faith as part of an overall recovery strategy that affords policyholders the opportunity to recover the full amount of their losses, or more. 

 To learn more about how we have used integrated bad faith strategies to drive insurance recovery settlements, please give us a call.

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The Importance of Bad Faith in Corporate Insurance Claims

One of the most important areas of corporate insurance recovery law is insurance carrier bad faith.  Bad faith laws have developed for good reason.  The relationship between insurance carriers and policyholders is unbalanced.  Insurance carriers draft the policies, unilaterally decide whether claims are covered, exert financial control over defense panel counsel attorneys, and financially benefit when defense costs are minimized and claims are denied.  This imbalance in the insurer-policyholder relationship applies equally to personal and corporate insurance claims, as no amount of policyholder sophistication can overcome the unique power and control possessed by insurers.  The bottom line is that insurers are financially motivated to improperly deny claims, and bad faith is often the only detriment against improper insurer conduct.     

Bad Faith in Corporate Insurance Claims

Bad faith claims can also be incredibly helpful to corporate policyholders.  A successful bad faith claim may entitle a corporate policyholder to recover its coverage counsel’s fees as well as consequential and punitive damages.  Yet, corporate bad faith claims are far less common than one might expect.  One reason for this is that the vast majority of large law firms are prohibited from bringing bad faith claims against insurers because of potential conflicts, internal law firm procedures, and various panel counsel restrictions.  See  Where Have All of the Insurance Lawyers Gone?  For financial reasons, law firms want to be listed as panel counsel because they are guaranteed a steady stream of litigation defense work by insurance companies.  See AIG Panel Counsel List.   Major conflicts arise when a policyholder approaches panel counsel to pursue an insurance claim.  The quid pro quo for being listed as panel counsel is the law firm’s agreement that it will not engage in bad faith litigation against the insurer.   By imposing these restrictions on how law firms can pursue insurance claims, insurers have, in essence, insulated themselves from corporate bad faith claims.   

In today’s video, Miles Karson discusses the first steps a corporate policyholder should take when facing an insurance claim.  Because bad faith is often the only way that policyholders can be made whole, a critical first consideration when a claim has been denied is to determine whether or not the insurance carrier has acted in bad faith.  In the corporate context, very few law firms can pursue bad faith insurance claims.   Our specialty at Miller Friel is the pursuit of corporate insurance claims, and our clients, some of the largest and most well-known corporations in the world, have entrusted us to evaluate and pursue their claims in the most professional manner possible.  Our absolute freedom from insurance carrier restrictions permits us to pursue bad faith, when appropriate, and to obtain incredible results for our policyholder clients.  See Colorado Interstate v. National Union

If counsel has informed you that they cannot pursue a bad faith claim against an insurer, or if you are in need of a second opinion regarding coverage, please give us a call. 

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Settling With Underlying Insurers For Less Than Policy Limits — The Good, the Decent and the Ugly

When a policyholder resolves or settles an insurance claim that implicates multiple layers of insurance, and not every layer is settled at once, trouble is bound to ensue.  When a policyholder resolves or settles an insurance claim that implicates multiple layers of insurance, and not every layer is settled at once, trouble is bound to ensue.  Unfortunately, for many policyholders, this issue is first considered on the eve of settling a large claim implicating multiple coverage layers.  As a result, policyholder after policyholder has unwittingly forfeited their right to excess insurance coverage, because they failed to understand what the law required of them, and failed to see how to use the law to their advantage in settling with their underlying insurers.

The Problem

This primary-excess settlement issue is almost ubiquitous.  It lurks behind settlement of most any claim that triggers more than one layer of coverage.   The situation typically arises when a lower-level insurer will settle a claim, but still wants some “credit” – however small – for all of those coverage defenses that its lawyers have raised.  That “credit” commonly comes in the form of settling for an amount less than policy limits. All the while, the excess insurers sit, confidently asserting the same defenses as the primary insurer, hoping that the policyholder makes a mistake in settlement that arms them with an additional coverage defense.  Excess insurers have the luxury of sitting on their doubtful defenses, with little-to-no incentive to engage in good faith settlement discussions, because they stand a chance that the policyholder will make a critical mistake and relieve them from liability. Thus, a question arises – can the policyholder settle with the underlying insurer for less than policy limits, then itself “fill the gap” between the settlement amount and the policy’s limits of liability?  Perhaps not surprisingly, the answer to that question comes from the excess policies themselves.

The Good, The Decent, and The Ugly

Exhaustion language in excess policies varies but generally falls into one of three categories: (1) the good, (2) the decent, and (3) the ugly.

1.  The Good

First, the “good” exhaustion language.  A well-negotiated excess policy will clearly and unambiguously state that the policy is triggered after exhaustion of the underlying limits through payments by the underlying insurer, the insured or others on behalf of the insured.  For instance, a good example of this exhaustion language reads:

This Policy shall provide insurance excess of the Underlying Insurance.  Liability shall attach to the Insurer only after (i) the insurers of the Underlying Insurance, the Insureds or others on behalf of the Insureds shall have paid in legal currency amounts covered under the respective Underlying Insurance equal to the full amount of the Underlying Limit . . . .

See Axis Excess D&O Policy, Form XS 0001 12 10.  A different, but also good example of favorable exhaustion language is found (in relevant part) in this AIG excess D&O policy:

The Insurer’s coverage obligations under this policy attach to the Insurer only after the Total Underlying Limits have been exhausted through payments by, on behalf of or in the place of the Underlying Insurers of amounts covered under the Underlying Policies.  This policy shall recognize erosion of an Underlying Limit of an Underlying Policy through payments by others of covered amounts under that Underlying Policy.

See AIG Excess Edge Policy, Form 103224 (02/10). A policyholder with excess insurance policies containing these or substantially similar exhaustion provisions should feel confident that it will have access to its excess policy limits should it settle with its underlying insurers for less than underlying policy limits.

2.  The Decent

Second is the “decent” exhaustion language.  In contrast to the above unambiguous exhaustion language that unquestionably allows a policyholder to “fill the gap” left between a settlement for less-than-policy-limits and the underlying limits of liability, there is exhaustion language that arguably leaves things open to interpretation – at least in the minds of insurers.  For example, some excess policies provide that:

[I]t is agreed that in the event and only in the event of a reduction or exhaustion of the Underlying Limits of Liability, solely as the result of actual payment of a Covered Claim pursuant to the terms and conditions of the Underlying Insurance thereunder, this policy shall . . . .

See RSUI Excess D&O Liability Policy, Form RSG 230003 0204. An important pro-policyholder case interpreting and applying similar exhaustion language comes out of the Eastern District of Virginia.  See Maximus, Inc. v. Twin City Fire Ins. Co., 856 F. Supp. 2d 797 (E.D. Va. Mar. 12, 2012).  In Maximus, Maximus sought coverage from its primary and excess professional liability insurers for a settlement reached in an underlying lawsuit.  Maximus settled with its primary insurer as well as its first and second level excess insurers for amounts less than the limits of coverage under those policies.  In each settlement, Maximus “absorbed the difference between what the carrier agreed to pay and the policy limit.”  Id. at 799.  Axis, Maximus’ third-level excess insurer, however, refused to indemnify Maximus, arguing that its policy was not triggered because Maximus did not exhaust the underlying policies.  Specifically, the Axis policy provided that it “shall apply only after all applicable Underlying Insurance with respect to an Insurance Product has been exhausted by actual payment under such Underlying Insurance . . . .”  Id.  Axis argued that the term “actual payment” clearly created a condition precedent to coverage, requiring payment by the underlying insurers of the full amount of their respective policy limits before the excess policy coverage attached.  Id. The court in Maximus concluded that the exhaustion language in the Axis policy was ambiguous in that it neither stated that “actual payment” required payment of the full limit by the underlying insurer, nor did it expressly preclude the policyholder from filling the gap to exhaust the underlying policy.  Id. at 801-02.  Thus, the court found that Maximus’ settlements with its underlying insurers for less than the full limits of their respective policies, and agreeing to fill the gap so that the policy limits had been reached, satisfied the Axis policy’s exhaustion requirement.  Id. at 804. In contrast to the Maximus decision, however, insurers have argued, with some success, that similar exhaustion language is not ambiguous and that it requires exhaustion of underlying limits through actual payments by the underlying insurers.  See, e.g., Great Am. Ins. Co. v. Bally Total Fitness Holding Corp., No. 06-C-4554, 2010 WL 2542191 (N.D. Ill. June 22, 2010); JP Morgan Chase & Co. v. Indian Harbor Ins. Co., 2012 WL 2105915 (N.Y. App. Div. June 12, 2012) (applying Illinois law); Forest Labs., Inc. v. Arch Ins. Co., 953 N.Y.S.2d 460 (N.Y. Sup. Ct. 2012). While the Maximus decision is an important (and correct) one for policyholders, policyholders must be aware that should their excess policies contain exhaustion language that does not expressly address who must make payments to exhaust underlying limits, excess insurers will undoubtedly argue that their policies are only exhausted through full payment of the underlying limits by the underlying insurers.  This uncertainty highlights both the importance of negotiating the most favorable exhaustion language when placing insurance and also in being aware of the applicable exhaustion language and controlling case law when settling a claim with underlying insurers.

3.  The Ugly

Finally, there is the “ugly” exhaustion language.  In contrast to the examples above, there is exhaustion language that requires exhaustion of underlying limits through full payment by the underlying insurers.  For example, some excess policies provide:

The coverage hereunder will attach only after all of the Underlying Insurance has been exhausted by the actual payment of loss by the applicable insurers thereunder and in no event will the coverage under this Policy be broader than the coverage under any Underlying Insurance.

See XL Insurance Excess Coverage Form EX 71 01 09 99.  Courts interpreting similar exhaustion language have held that only payments made by the underlying insurers exhaust the underlying policy limits, leaving the policyholders unable to trigger excess policies when settling underlying policies for less than policy limits and then “filling the gap.”  See, e.g., Citigroup v. Federal Ins. Co., 649 F.3d 367 (5th Cir. 2011) (applying Texas law); Comerica Inc. v. Zurich Am. Ins. Co., 498 F. Supp. 2d 1019 (E.D. Mich. 2007); Qualcomm, Inc. v. Certain Underwriters at Lloyd’s, London, 73 Cal. Rptr. 3d 770 (Cal. Ct. App. 2008).

Conclusions

There are a number of ways to deal with this situation, but policyholders must first recognize the problem.  Then, they need strategies to solve that problem. While some excess policy forms contain unfavorable exhaustion language, that language should be negotiated out of the policies on renewal.  New language should unambiguously allow for exhaustion through payments by either the underlying insurer or the policyholder.  We have successfully negotiated such policy changes on behalf of multiple clients numerous times. If faced with “decent” or “ugly” exhaustion language and a desire to settle, extreme care must be taken.  Policyholders must be cognizant of the risk they run in settling with underlying insurers for less than policy limits.  By doing so, when faced with this kind of exhaustion language, the policyholder runs a real risk of forfeiting excess coverage.  Under such circumstances, it is best to directly raise this issue with the excess insurers, and bring them to the settlement table along with the underlying insurers.  Most excess insurers don’t want to litigate a claim against a policyholder on their own.  Once they know that you are aware of the issue, and are not going to grant them a get-out-of-jail free pass, they may soften to the idea of agreeing to settlement. In sum, the variety in types of exhaustion language found in excess insurance policies underscores the importance of policyholders getting out in front of this issue when negotiating and placing their insurance programs.  All too often, excess policies are an afterthought in the placement process only to become an issue when it’s time to settle a significant claim.  By being proactive during the placement and negotiation stage, a policyholder can ensure that it has the insurance it expects when faced with resolving a large claim.  What is more, being aware of the type of exhaustion language in your policy and the manner in which courts have applied that language is critical when settling a claim with underlying insurers so as not to unknowingly forfeit otherwise accessible excess coverage. Miller Friel, PLLC is a specialized insurance coverage law firm whose sole purpose is to help corporate clients maximize their insurance coverage.  Our Focus of exclusively representing policyholders, combined with our extensive Experience in the area of insurance law, leads to greater efficiency, lower costs and better Results.  Further discussion and analysis of insurance coverage issues impacting policyholders can be found in our Miller Friel Insurance Coverage Blog and our 7 Tips for Maximizing Coverage series. For additional information about this post, please email or call Miles Karson (KarsonM@MillerFriel.com, 202-760-3165).ins

Death, Taxes and Pre-Tender Defense Costs

Had Union troops not defended themselves against General Lee's invasion, the outcome of the battle at Gettysburg would have been different.

Had Union Troops Not Been Permitted To Defend Union Territory Against General Lee’s Invasion, The Outcome Of The Battle At Gettysburg Would Have Been Different.

There are three certainties in life, as the saying goes: death, taxes and that your insurance carrier will deny coverage for pre-tender defense costs.  The practice of denying coverage for pre-tender defense costs is now standard operating procedure for insurers, despite the fact that it is often contrary to policy language and case law.  The response to such a denial is often that the insurance policy does provide coverage for pre-tender defense costs, but it is unlikely that an insurance carrier will reverse itself on this kind of wrongful denial without the presentation of proper legal analysis refuting their wrong.

When a policyholder is sued, insurance carriers insist that they are tendered a copy of that lawsuit.  While it is advantageous to have a system in place so that a copy of the claim is provided to the insurance carrier as soon as possible, that does not always happen in practice for a number of legitimate reasons.  Among other things, the broker may advise against providing notice; the policyholder may not be aware that the claim is potentially covered; and, the policy may be unclear as to what exactly constitutes a claim for which notice should be provided.  Regardless of the reasons, pre-tender defense costs can be financially significant, even if the “pre-tender” period is relatively brief.

The root of the problem is that insurance carriers have been successful at convincing many – brokers, some courts and even a few policyholders – that pre-tender defense costs are not covered. Their argument is typically that pre-tender defense costs are not covered, because the insurer’s duty to defend is not triggered until the insurer receives notice of the potentially covered claim. See, e.g., Dreaded, Inc. v. St. Paul Guardian Ins. Co., 904 N.E.2d 1267 (Ind. 2009) (applying Indiana law).

More-and-more courts, however, recognize that an insurer’s duty to defend is triggered when a claim is brought against the policyholder with allegations that are potentially within the scope of coverage.  Thus, an insurer’s duty to defend pre-exists any obligation by the policyholder.  These courts hold that the insurer must establish prejudice resulting from the timing of any purported “late” notice to deny coverage for pre-tender costs.  See, e.g., Episcopal Church in S.C. v. Church Ins. Co. of Vt., No. 2:13-cv-02475-PMD, 2014 WL 5302955, at *9-10 (D.S.C. Sept. 22, 2014) (South Carolina law); CH Props., Inc. v. First Am. Title Ins. Co., No. 13-1354(FAB), 2014 WL 4417772, at *9-10 (D.P.R. Sept. 9, 2014) (Puerto Rican law); Baker’s Express, LLC v. Arrowpoint Capital Corp., No. ELH-10-2508, 2012 WL 43702565, at *8 (D. Md. Sept. 20, 2012) (Maryland law); Smith & Nephew, Inc. v. Federal Ins. Co., No. 02-2455B, 2005 WL 3434819, at *2 (W.D. Tenn. Dec. 12, 2005) (Tennessee law); Liberty Mut. Ins. Co. v. Black & Decker Corp., 383 F. Supp. 2d 200, 204-05 (D. Mass. 2004) (requiring prejudice for insurer to disclaim coverage for pre-tender defense costs is “simply more analytically coherent” in state where late notice is only a defense to coverage if insurer prejudiced); Nat’l Sur. Corp. v. Immunex Corp., 297 P.3d 688, 695-96 (Wash. 2013) (Washington law); Nationwide Mut. Fire Ins. Co. v. Beville, 825 So. 2d 999, 1004 (Fla. 4th DCA. 2002).  It is critical to identify the potentially applicable states’ law, determine whether any of those states’ laws have taken a pro-policyholder position and then conduct a choice-of-law analysis to determine whether a pro-policyholder state’s law might apply.

A finding of coverage for pre-tender defense costs should be even more universal with so-called “duty-to-advance” policies.  While general liability policies and other business-related policies commonly contain a duty to defend, many employment-practices liability, professional (E&O) liability, fiduciary liability and D&O liability policies contain a duty-to-advance (or duty-to-pay) defense costs obligation.  In contrast to duty-to-defend policies, under duty-to-advance policies, it is the policyholder (not the insurer) that has the contractual obligation to defend an underlying claim, and that duty begins on day one.

Insurance carriers justify their denials of coverage for pre-tender defense costs under duty-to-advance policies, because, they contend, their policyholders did not “obtain consent” to incur the pre-tender defense costs.  Put another way, insurers contend that the policyholder must obtain consent from them to defend an underlying lawsuit.  While there is scant case law analyzing coverage for pre-tender defense costs under duty-to-advance policies, the insurers’ argument is logically flawed and should be rejected for a number of reasons.

First, under a duty-to-advance policy, the policyholder is contractually obligated to defend the underlying action from day one.  Indeed, the policy will state so in unequivocal terms:  “The Insurer does not assume any duty to defend.  The Insureds shall defend and contest any Claim made against them.”  See, e.g., AIG Employment Practices Liability policy form 67547 (4/97).  Thus, both the insurer and the policyholder understand that the policyholder is contractually required to defend any claim against it from day one.  Accordingly, the policyholder is under no requirement to obtain consent to defend the underlying claim.  For this very reason, courts have reasoned that insurers should not be able to deny coverage for pre-tender defense costs under duty-to-advance policies absent prejudice.  See Pacific Ins. Co., Ltd. v. Eaton Vance Mgmt., 260 F. Supp. 2d 334, 344 (D. Mass. 2003) rev’d on other grounds, 369 F.3d 584 (1st Cir. 2004).  In Eaton, the court reasoned that, while some states have held that “it is unfair to force the insurer, who might have made different choices, to pay for the defense prior to notification of a claim” where the insurer had a duty to defend, that “concern . . . is not present where the policy specifically absolves the insurer of any duty to defend.”  Thus, “[t]here is nothing unfair about requiring [the insurer] to pay for the Pre-Tender Costs where [the insurer] would have consented had it been asked.”  This reasoning is reinforced by the common policy requirement that the insurer’s consent “shall not be unreasonably withheld.”

Second, many duty-to-advance policies provide that, for certain types of claims (e.g., class actions, discrimination claims, securities claims, etc.), the policyholder must retain pre-authorized defense counsel, i.e., panel counsel, to defend the claim.  Panel-counsel firms are law firms that the insurer has pre-authorized.  Incredibly, insurers even deny coverage for pre-tender defense costs when a policyholder selects pre-authorized panel counsel to defend the underlying action.  A policyholder’s selection of a law firm that has been pre-authorized by the insurer is the very essence of consent.  There should be no need to obtain additional consent from the insurer.

Third, an insurer’s denial of pre-tender defense costs based on a purported “lack of consent” is a logical fallacy.  Here’s how notice of a standard claim usually occurs in practice:

  • policyholder provides notice of the claim along with the identity of defense counsel, if known;
  • the insurance carrier quickly acknowledges receipt of notice, but does not provide a substantive response at this time;
  • the insurance carrier often sends the claim on to outside coverage counsel, months pass – sometimes 3 or 4 or more;
  • the insurance carrier eventually provides the policyholder with a substantive coverage letter, often drafted by counsel, either acknowledging or denying coverage for defense costs; and
  • if the identity of the defense counsel is known (and coverage is being acknowledged), the insurer will acknowledge the policyholder’s retention of that defense counsel and identify panel counsel rates (which are already known to panel counsel) if applicable.

Based on the insurers’ “lack of consent” argument, coverage for defense costs should not begin until that written acknowledgment is provided – after all, the policy states that the policyholder “shall not incur any Defense Costs without the prior written consent of the Insurer.”  Taken literally, the insurer’s position means that the policyholder cannot defend itself for months after it has been sued, because it has not received written consent from its insurer to incur those defense costs.

The only way to reconcile this logical fallacy in the insurers’ argument is to address late notice under applicable late notice standards.  While insurers assert that coverage for pre-tender defense costs is an issue of consent (or lack thereof), in reality, the issue is one of timely notice.  Under a proper logical analysis of this issue it is the insurance carriers’ burden to demonstrate prejudice resulting from any purported late notice.  Without that prejudice, which rarely if ever exists in this context, an insurance carrier may not deny coverage for pre-tender defense costs under a duty-to-advance policy.

Despite the fact that a growing number of states are finding coverage for pre-tender defense costs, and that the insurance carrier arguments do not support the denial of pre-tender defense costs, insurance carriers continue to push a narrative that pre-tender defense costs are categorically uncovered.  Policyholders should be aware that pre-tender defense costs are recoverable and should not accept at face value any message to the contrary.

Miller Friel, PLLC is a specialized insurance coverage law firm whose sole purpose is to help corporate clients maximize their insurance coverage.  Our Focus of exclusively representing policyholders, combined with our extensive Experience in the area of insurance law, leads to greater efficiency, lower costs and better Results.  Further discussion and analysis of insurance coverage issues impacting policyholders can be found in our Miller Friel Insurance Coverage Blog and our 7 Tips for Maximizing Coverage series.  For additional information about this post, please email or call Miles Karson (KarsonM@MillerFriel.com, 202-760-3165).

Strategies for Addressing Cloud Computing Insurance Risks

 

Cyber-Insurance and Cloud Computing Don't Quite Yet Mix

Cyber-Insurance and Cloud Computing Don’t Quite Yet Mix

More and more companies – both big and small – are migrating and storing their data in the cloud.  While cloud computing offers benefits over traditional storage methods, such as flexibility, accessibility and capacity, cloud computing comes with its own set of data-security risks.  The most high profile of these risks is the good old-fashioned data breach, which, in 2014 alone, struck such trusted household names as Target, Home Depot, Google, Neiman Marcus and JP Morgan Chase.  See  Bank Info Security, Infographic: 2014’s Top Breaches So Far. These breaches can also result in hundreds of millions of dollars in losses and send a publicly-traded company’s share price tumbling.  See  Forbes.Com, Target Shares Tumble as Retailer Reveals Cost of Data Breach.  But, data breaches are just the tip of the iceberg when it comes to cloud-security threats.  Other risks can be far less nefarious, such as a data loss, which can be the result of simple human error or negligence.  For example, over one weekend in 2011, many Amazon Web Service customers lost data as AWS’s EC2 cloud suffered a “mirroring storm” due to human operator error.  See InformationWeek, 9 Worst Cloud Security Threats.

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