IRMI Update—Issue #112
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
May 3, 2005
In This Issue
Colleague,
Certificates of insurance are a big source of frustration to risk and insurance
professionals. While they are required to evidence compliance with contractual
obligations to procure certain types of insurance, much to the consternation
of certificate holders, the standard forms used in the United States contain
several "escape clauses" designed to make them nonbinding on the issuing insurer.
As a result, the lowly certificate has little credibility, and much time and
effort is expended by people trying to compensate for that fact.
While the "escape clauses" (the purpose of which is to avoid having the certificate
override the policy's coverage terms) are justifiable, I don't understand why
insurers can't promise to send certificate holders notice of cancellation. The
"endeavor to give notice of cancellation" provision was included in standard
certs back in the days when it took entire buildings to hold computer systems.
Today's technology should allow insurers to promise certificate holders a notice
if the policy is canceled or not renewed and to easily make good on that promise.
In fact, this is the easiest change to negotiate on certificates of insurance.
Many insurers allow their field underwriters to agree to do so. In my book,
it is long past time for insurers to commit to certificate holders that they
will provide such notice. What do you think? Am I missing something here, or
should the industry make this little concession in the standard certificate
forms? [See reader comments].
On another note, I would like to ask you for a favor. The subscriber list
for IRMI Update has hovered around 29,000 for over a year now, and I'd really
like to see it grow to 30,000. Would you please recommend it to a few colleagues
or clients who would benefit from the articles and commentary? I would sure
appreciate your help. They can sign up here.
Have a great day.
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
Insuring Potential Liability for Fax/E-Mail—A
number of plaintiffs are pursuing class action suits for violation of the Telephone
Consumer Protection Act (TCPA) for improperly sending faxes to recipients who
did not solicit them. These communications, known as "blast faxes," can create
significant liability. Hooters recently settled such a claim for nearly $9,000,000.00,
following entry of a judgment against it for $11,889,000. See Hooters of Augusta Inc. v American Global Ins.,
272 F Supp 2d 1365, 1379 (SD Ga 2003). Hooters procured coverage under the "advertising
injury" offense for "oral or written publication material that invades the privacy
of another" which is presently on appeal to the 11th Circuit. With one recent
exception (an opinion from the 7th Circuit applying Illinois law which an Illinois
state court judge subsequently refused to follow), courts have uniformly found
coverage for such claims.
A new ISO exclusion, CG 00 67 03–05–Exclusion—"Violation of Statutes that
Govern E-Mails, Fax, Phone Calls, or Other Methods of Sending Material or Information,"
was introduced in March of 2005. Similarly, while multimedia policies typically
include coverage for "invasion of privacy" where the alleged wrongful conduct
emanates from internet related activity, most of these policies contain exclusions
for liability "for or arising out of the transmission of unsolicited commercial
e-mail messages and faxes." Both exclusions appear to impact claims under the
Can-SPAM ACT of 2003, effective in 2004 which prohibits transmission of unsolicited
e-mails.
Risk managers would be wise to either seek to remove these exclusionary endorsements
by negotiation or procure a form of CGL/umbrella or multimedia/cyberspace policy
that does not yet contain these exclusions. The latter course is easier but
requires careful review of pertinent policy forms. It is therefore critical
in this renewal cycle to see the full policy form with all endorsements before
acquiring CGL/umbrella coverage.
By: David Gauntlett
Gauntlett & Associates
Irvine, CA
dag@gauntlettlaw.com
www.gauntlettlaw.com
Suggest a Risk Tip. Send us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages. Submit your tips. We'll
acknowledge your contribution as we did for David.
There are now 659 risk management and insurance articles on IRMI.com. Below
you'll find summaries of some recent additions with links to the articles.
-
Commercial Property/Casualty
Premium Rates Continue to Soften—The Council of Insurance Agents
& Brokers survey shows a continuing significant decline in premiums, with
most large and medium accounts showing a 7–10 percent drop in premium.
-
School Violence—The
potential for school violence has led many school systems to either implement
a school violence prevention program or augment the one already in place.
Dr. James Madero explains.
-
Unexpected Hazardous
Materials—What Do You Do When the Owner Says "Keep Going"?—As
Mike Loulakis relates the lesson learned from a recent case, contractors
cannot simply sit back and raise unsubstantiated fears about a contamination
problem when faced with an undoable deadline.
-
Silica—The Next Environmental
Issue—Silica exposure can be deadly. Jeff Slivka discusses the
mineral, how it kills, the workplace hazard, and the insurance and risk
management implications.
-
Why the COSO Frameworks
Need Improvement—Matthew Leitch looks at the recent "Enterprise
Risk Management—Integrated Framework," pointing out weaknesses that need
to be rectified before it becomes an internal control standard.
-
Sales and Use Tax
Bonds—Sureties must act quickly upon receipt of a notice of claim
from taxing authorities to avoid liability for interest and attorney fees.
Marilyn Klinger explains.
We have recently updated IRMI Online to include the latest issues of our
newsletters, The Risk Report, Captive Insurance Company Reports, and Strategic RM, as well as supplements to
a number of the reference manuals. See a summary of all the new stuff with direct links into the publications.
RIMS 2005: Spitzer's Legacy—Jack
Gibson chronicles the debate over broker compensation and contingency commissions
that took place at the annual RIMS conference, provides links to other source
material on the web, and offers his own thoughts as to the changes that will
occur.
Is a captive the right choice for your company or clients? Learn the key
differences between the various alternative captive approaches and how they
compare to other "ART" programs. Avoid costly mistakes when formulating your
captive business plan.
Spend only 2 days out of the office in this intensive program led by Kate
Westover. Seating is limited—register today for Dallas or Orlando! Get pricing,
see testimonials, and view the agenda.
Plus, obtain insurance CE credit for most states. Satisfaction guaranteed!
This one-of-a-kind reference manual is the industry's most thorough explanation
of how to allocate risks in all types of contracts. You'll save hours of drafting
time with "boilerplate" insurance clauses. Use the state-by-state analyses of
how the courts interpret hold harmless and indemnity clauses to bulletproof
your clauses. Explains when and how to require additional insured status. Plus,
many more strategies to protect your company!
New information recently added on these topics:
- Surety bond requirements
- The 2004 additional insured endorsements
- Permissible scope of indemnification in a given jurisdiction
- CGL insurance requirements in construction contracts
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