Insurers are fast introducing special insurance policies to cover e-commerce exposures. As I watch this occur I keep asking myself, "Are e-commerce exposures really so different as to require entirely separate insurance programs to cover them? Does a bank, magazine publisher, retailer, or manufacturer really need two sets of direct and indirect property coverage and two sets of liability coverage to insure its cyber and 'brick and mortar' exposures?"

Business in cyberspace is definitely increasing certain loss exposures, changing other loss exposures, and introducing some new ones. Of course, insurers recognize this and realize they need to tread carefully. That's why, for example, you'll see changes made in the standard commercial general liability (CGL) form this year to address Internet issues.

But are cyberspace exposures really so different as to require insurance programs that are separate and distinct from the insurance already purchased for a given businesses' traditional exposures? Frankly, I don't think they are.

Business is indeed journeying where none has been before, and specialized coverage approaches coupled with careful underwriting are needed to properly insure the resulting exposures. Developing special stand-alone insurance programs that are underwritten by special units of insurers facilitates this process and makes much sense at this early stage of e-evolution. It might be compared to the development of specialized approaches to writing boiler insurance so many years ago. Well, of course, the trend today is to write boiler coverage simply by deleting an exclusion from the property insurance policy.

Will this happen with e-commerce insurance policies? Will insurers one day write policies tailored to cover both the e-commerce and traditional property and liability exposures of businesses on either a monoline or package basis? I think the answer to these questions is "Yes," and I think this will occur sooner than we might imagine if the e-commerce revolution continues at its current speed. So get ready for some new educational challenges!

What do you think? [To see what readers had to say, check out IRMI Update #12.]

Have a great day!

Jack

Jack P. Gibson
President
IRMI

Risk Tip

Modify the Debris Removal Provision. Property policies often contain provisions that add coverage for the cost "of the removal of all debris of the property insured hereunder...." Some perils, however, such as windstorm and flood, may deposit debris on the premises that is not insured property, but rather materials from elsewhere. Regardless of whether this debris is insured property, it must be removed, often at considerable cost.

Modifying the debris removal provision by deleting the phrase "of the property insured hereunder ..." would preserve coverage for what might otherwise be an uninsured loss.

By: Evan Simmons Sr.
Executive Vice President
Palmer & Cay of Texas, Inc.
www.palmercay.com

Suggest a Risk Tip. Future issues of IRMI Update will include more risk tips from our readers. Send us a practical tip (less than 300 words) for identifying and managing risks, buying insurance, managing claims, or filling gaps in insurance coverages. We'll acknowledge your contribution as we did for Evan.

New Expert Commentary

We add new Expert Commentary to IRMI.com every week. There are now 111 articles on IRMI.com, and many more are in production. Below you'll find summaries of some recent additions with links to the articles.

Spoliation of Evidence: The Next Frontier for Insurance Coverage Battles—Over the past several years, courts have fashioned a new cause of action deriving from products liability cases when evidence is destroyed, lost, or altered: spoliation of evidence. Does the post-1986 ISO, CGL policy cover this loss? See why this author thinks so.
Risk Quantification in Rapidly Changing Business Environments—Rapid changes in business have made planning more difficult and risk management more important. Whereas business planning is based on forecasts of expected outcomes, risk management is focused on deviations from expected outcomes. Learn how GARCH models provide a significant advancement in the ability to forecast potential deviations by characterizing volatility as an evolving process.
Insurance Archeology for Mergers and Acquisitions—One often-crucial factor affecting both the advisability and success of a merger is the prospective partner's insurance portfolio. Any corporation moving to merge or purchase a corporation in the United States must recognize the litigious climate and defend itself by making sure that both its own and its prospective partner's insurance coverage is adequate. Learn more in this insightful article.
The New OSHA Ergonomics Program Standard—OSHA has issued its long-awaited final rule for an Ergonomics Program Standard, 29 CFR Part 1910.900. This new standard contains stringent requirements for most nonconstruction employers to identify and abate musculoskeletal disorders. This article examines the new standard and the possible costs to implement the ergonomics requirements.
Linking Financial Services—A Good Idea?—Is it a good idea for the insurance industry to provide one-stop shopping for financial services? While not a new idea, it does seem to be the wave of the future. This article explains that the key, however, is not selling the services, but providing good customer service.

New IRMI Insights

How Well Does That Blanket Cover You? Blanket additional insured endorsements are useful tools for preventing administrative oversights and reducing paperwork, but they also carry risks for both the named and additional insureds. Discover methods contractors and subcontractors can use to minimize the risks of breaching their contracts when using blanket AI endorsements.

IRMI Construction Risk Conference

Reserve the Dates in Your Calendar. October 29 through November 1—for the 21st IRMI Construction Risk Conference. Join 1,000 project owners and contractors—as well as the risk, insurance, and legal professionals who advise them—in New Orleans. You'll experience a superior educational program, unparalleled networking opportunity, and the city's unique culture and cuisine. Check out last year's speaker handouts for examples of the types of topics covered.

IRMI Products & Services

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IRMI Update—Issue #11

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