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Protecting Your Business

Protecting Your Business. Kristina Phillips, CIC, CRM Area Vice President Unit Manager – PestSure Cyber 101 – Cyber Liability Employment Practices Liability Umbrella Liability. Cyber Liability. Cyber 101. What is Cyber?.

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Protecting Your Business

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  1. Protecting Your Business Kristina Phillips, CIC, CRM Area Vice President Unit Manager – PestSure • Cyber 101 – Cyber Liability • Employment Practices Liability • Umbrella Liability

  2. Cyber Liability Cyber 101

  3. What is Cyber? Cyber liability’s primary goal is to cover data breach events (stolen information). This includes: Personally Identifiable Information (PII), Protected Health Information (PHI), trade secrets, and other data. This can include electronic or paper records.

  4. What is PII? • PII or Personally Identifiable Information is defined as information that if lost, compromised, or disclosed could result in substantial harm, embarrassment, inconvenience, or unfairness to an individual. • This includes: • SSN, DOB, Bank Account information, Home Address, Login Information, etc. in digital or paper form

  5. “But, we use a payment processor” • It is a common defense to say that a payment processor is responsible for a data breach if they collect all payments, however this is not completely true. • If your customer data is breached and you handled it in anyway then you can be found liable in a lawsuit. It is your duty to your customers.

  6. What else does it cover? Other coverages that can be covered by cyber include: • Social Engineering • Cyber Extortion (Ransomware) • Business Interruption and Dependent Business Interruption • Defense! One of the most important coverages is defense if you’re accused.

  7. How is a breach handled? • Depending on your carrier, a typical response is as follows: • If you suspect your network has been compromised, notify your carrier so they are aware. Many times they can help you decide if you’ve really had a breach.

  8. How is a breach handled? 2. If the carrier suspects a breach, an investigation is started and forensics are typically called in. This serves the purpose of identifying: • How the hacker got in and how to keep them out • How long they’ve been in the system • What was or could have been taken or lost

  9. How is a breach handled? 3. Notifications are sent out to all effected or potentially effected individuals. Typically credit monitoring for 2 years is also included depending on statutory laws. • Every state has different laws regarding how and how quickly to notify • If you don’t follow the laws, you can be fined by each state • Your carrier knows these laws and how to keep you compliant

  10. How is a breach handled? 4. If Payment Card Information (PCI) was also compromised, you and your carrier will work with the respective payment card companies to ensure you’re also compliant with your PCI contracts.

  11. What is Social Engineering? Social Engineering is the voluntaryrelease of funds to a fraudulent party • Example: A person acting as the CEO calls or emails the CFO requesting they send money to a fraudulent account number to pay a vendor. Since the money was sent by the CFO voluntarily, it’s not considered theft and won’t be covered by a crime policy.

  12. What does is NOT cover? • Reputational harm • Loss of future revenue • Costs to improve internal technology systems • Lost value of your own intellectual property

  13. Claim Example Home Depot • 56 million credit cards and debit cards stolen • 7,500 Point of Sale terminals infected • Like Target, the hackers got in through a third-party vendor • Total cost of breach is estimated at close to $200 million and is still climbing

  14. Employment Practices Liability

  15. Employment Practices Liability Insurance that covers wrongful acts arising out of the EMPLOYMENT PROCESS What does that mean? Provides coverage for a wide range of employment-related claims.

  16. Employment Practices Liability • Do you have employees? • Do you have people apply for employment? • Do you have exposure to the public? Then you NEED this coverage! It’s always EXCLUDED on your GL Policy

  17. Employment Practices Liability EPL protects the entity, including Directors, Officers and Employees for wrongful acts such as: • Hiring/firing practices-including failure to employ/promote, wrongful demotion, etc. • Harassment • Discrimination • Employment-related libel, slander, defamation

  18. Employment Practices Liability Who can bring a claim against you for EPL? • Employees • Current • Former • Applicants • Customers/Clients

  19. EEOC Statistics According to the Equal Employment Opportunity Commission’s (EEOC) published statistics, for YE 2016, there were: • 91,503 charges filed • 97,443 charges resolved • $482M in enforcement recovery • 86 lawsuits filed, 165 on docket

  20. TOP FIVE EEOC can be a gauge for frequency, we use Advisen as an Industry resource for severity. TOP FIVE settlements or awards in 2016: (excluding Wage and Hour claims) Las Vegas Sands Corp – Wrongful Termination: Casino Executive allegedly terminated over failure to carry out orders allegedly in violation of FCPA Settled for: $75,000,000

  21. TOP FIVE BNP Paribas NA, Inc – Hostile Work Environment: Former Employee allegedly fired after complaining about training film depicting Hitler and other Nazi imagery. Settled for: $40,000,000 Wal-Mart Stores, Inc. – Wrongful Termination: Plaintiff pharmacist alleged a technician accessed her private health information, disclosed the information to others and was subsequently fired. Awarded: $31,200,000 incl $15,000,000 punitive

  22. TOP FIVE American Family Insurance – Age Discrimination: Plaintiff was removed from her manager position in corporate restructuring, arguing the intent was to higher younger managers. Awarded: $20,450,000 incl $20,000,000 punitive Fox News Network – Sexual Harassment: A Fox News Correspondent alleged hostile work environment, sexual harassment and retaliation. Settled for: $20,000,000

  23. Exclusions What’s not covered? • Contractual Liability • Bodily Injury • Non-monetary loss, such as cost to make your office ADA compliant • THE BIG ONE – Wage and Hour Claims

  24. Wage and Hour Claims • Wage and Hour definition – an assertion by an employee that employer failed to pay wages owed • Wage and Hour is generally excluded although a few insurers do provide a small sublimit for defense. • These claims dominate employment claims. • Over 60% of claims over $10M settled or awarded in 2016 were Wage and Hour claims!

  25. Wage and Hour examples • Unpaid or Underpaid Overtime • Minimum Wage Violation • Unpaid Meals or Rest Breaks • Work Travel • Comp Time • Turning a Blind Eye (clocking out and still working) • Unpaid Prelim or Post Completion Activities • Incorrect Classification – Exempt v. Non-Exempt

  26. Additional Services in EPL policy Most policies include additional services • Legal consulting with employment attorneys on a pre-loss basis • Training on employment issues • Website registration to provide webinars, articles • Sample Handbook language • Other employment law material • Information can be found in your policy – see me

  27. Favorite Question • How much is the premium? • Very affordable! • Most premiums between $5,000 - $10,000 • Based on employee count and location • Can be packaged with D & O and other policies • The cost of premium is less than the cost of defense in the event of accusation – only has to be alleged, not guilty, and you have to defend!

  28. Umbrella Liability

  29. Umbrella Liability • Umbrella Liability – designed to cover against catastrophic losses. • Includes Claims from: • Auto Liability • General Liability • Employers Liability (part of WC policy) – different from Employment Practices Liability

  30. Liability claims The cost of claims continues to rise and we are seeing more Liability claims exceed $750k • 2010: 0 2014: 2 • 2011: 3 2015: 1 • 2012: 4 2016: 1 • 2013: 3 2017: 2* *Exceed $1M each **Newer years do not include development, but types of claims we are seeing are more expensive

  31. PestSure History Captive was formed in 1980. In 36+ years we have had 2 Umbrella claims. • 1995 - Motorcycle accident: paid $2M • 2006 – Struck a child: $3M • Both single claimant accidents • Neither claimant died

  32. PestSure History In 2017 we have 2 claims expected to hit the Umbrella layer. • Auto accident involving 8 claimants – including multiple doctors, their spouses and staff • Struck Bicyclist – Engineering student who spent approx. 30 days in ICU; Traumatic Brain Injury Plus 2015 claim that could also hit: • Employers Liability claim where Employee was electrocuted and died.

  33. Auto Claims Are Scary! Auto claims are your biggest exposure in both Frequency and Severity. • Approx. 10 x more AL claims reported than GL • Negligent Entrustment is always a risk • Hiring Practices come into play; must make good choices – more than an MVR

  34. General Liability Majority of claims are Auto, but General Liability is not exempt. The cost of these claims are also increasing: • Termite Claims – houses and their repairs are more expensive • Bigger Contracts = bigger exposure • Bodily injury is rare, but costly! • Very expensive to defend

  35. Umbrella Facts Important things to remember about your Umbrella policy: • Follows Form to underlying policies – if covered in underlying, covered in Umbrella; unless coverage is sublimited (mold). • Includes Manuscript Endsts- Treatment, E&O, Inspections • Per Occurrence and Aggregate limit are the same. • Defense is outside the limit. • Punitive damages are silent. • Attach at $2M limit

  36. Umbrella Liability Why is this coverage so important to protect your business? • Cost of claims are increasing; medical, Traumatic Brain Injuries – multimillion dollar settlements • Majority of claims the demand is automatically policy limits • Example: Injured worked hit by “underinsured driver” and requested UM, which Insured rejects on policy. Attorney bypasses Sedgwick and sends demand directly to Umbrella for policy limits. Our reserve on claim? $5,000 for med paywhich settled the claim.

  37. Umbrella Liability Better to be overinsured than underinsured • More I have, more they’ll take mentality • Company assets at risk Worse-case Scenario? We always thought perhaps a school bus of children… until we had the SUV of doctors!

  38. Favorite Question How much is the premium? Several factors impact cost: • Auto Count • Geographical area – can impact premium 30% • Losses • Size But still surprisingly affordable! Price per million decreases the more you buy

  39. Kristina Phillips • 800-326-6203 • Kristina_Phillips@ajg.com Questions?

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