The Techno-Neutrality Solution to Navigating Insurance Coverage for Cyber Losses

Insurers currently constrict coverage for losses involving electronic information in traditional insurance product lines. As a result, insurance customers are driven to the brave new world of non-standardized varieties of cyber-risk insurance policies. That world abounds with coverage gaps as the market for cyber insurance sorts itself out. Until that synchronization of coverage for cyber losses occurs, litigation is bound to occur as the boundaries of coverage remain patchwork and uncertain. This article examines the degree to which cyber losses differ from other insured losses. The cyber-loss insurance coverage jurisprudence reveals a mishmash of principles and coverage terms that are largely focused on the technology of the loss and not on the nature of the loss insured. Unpredictable and unhelpful analogies have ensued, prompting a highly inefficient coverage marketplace and resulting litigation experience. This article also draws parallels with the market experience of a number of now-commonplace insurance coverage products, like commercial general liability policies, that also went through an initial period of uncertainty. Lessons from those prior insurance experiences are instructive as the wild world of cyber insurance stabilizes. This article proposes that, to reduce the prevalence of insurance coverage disputes about cyber losses, courts should jettison the cyber loss differentiation altogether and instead focus on the nature of the inherent risk insured against, as opposed to the risk\u27s cyber quality. Taking a technologically neutral stance-applying techno-neutrality to insurance policy language-can act as a market stabilizer. This approach is preferable to introducing new, untested insurance products or, alternatively, risking arbitrary coverage gaps under traditional product lines. The long-term, more commercially sensible solution is for insurers to simply fold cyber-loss coverage into traditional coverage products and not differentiate losses based on particular or peculiar property characteristics

Protecting Auto Accident Victims from the UM/UIM Insurer Identity Crisis

Automobile liability insurance is mandatory for drivers in all states, so as to provide for an available source of compensation for auto accident victims. Yet more than 20% of drivers in some states drive without valid, collectible automobile liability insurance. Another vast proportion of drivers have woefully inadequate financial limits of liability insurance that could not pay for even a modest percentage of a typical accident victim\u27s compensatory needs. An auto accident victim cannot choose which tortfeasor driver injures her in a collision. Without the at-fault tortfeasor driver\u27s liability insurance to act as a source of full compensation for her injuries, an injured accident victim risks having her compensation fall drastically short. In response to prodding, the insurance industry invented two types of insurance coverages to fill in the gaps created when an accident victim wants a higher level of potential accident compensation if injured by an uninsured or underinsured at-fault tortfeasor driver: uninsured motorist and underinsured motorist coverage (collectively UM/UIM ). These two coverages allow prudent auto insurance policyholders to purchase insurance that takes over if the policyholder is injured by a tortfeasor driver who has no or insufficient insurance to cover the victim\u27s injury costs. UM/UIM coverage pays the policyholder, the first party, but acts in the context of third-party liability insurance because UM/UIM coverage is triggered only when the policyholder is in an accident and the at-fault tortfeasor driver has inadequate liability insurance to respond to the loss. UM/UIM coverage can be thought of as both first-party (purchased by the policyholder as part of a bilateral contract with the insurer, who is the second party) and third-party insurance in that it is designed to replace the liability insurance that in theory should have been purchased by the tortfeasor causing injury to the conscientious policyholder who purchased UM/UIM insurance. But courts and commentators have not definitively addressed the proper function of UM/UIM insurers in responding to policyholders\u27 claims. Despite its role as additional liability insurance for the inadequately insured tortfeasor, UM/UIM insurers routinely take the position that their standard of care is less demanding than that imposed on an ordinary third-party liability insurer and that UM/UIM carriers are not required to make the reasonable settlement decisions required of an ordinary liability insurer. UMIUIM insurers take the position that they may instead deny policyholder claims so long as there is any colorable basis for disputing the extent of injury, the volume of treatment, or medical billings. Insurers then routinely argue that they have a \u27fairly debatable basis for valuing the amount of injury at a lower amount than that sought by the policyholder just as a true first-party insurer such as a property insurer might assess the worth of lost property at a lower amount than does a policyholder. The insurer does all this with a considerably reduced chance of incurring significant liability for even a recklessly wrong decision. This self-serving perspective of many UM/UIM insurers is wrong in light of the history, purpose and operation of UM/UIM coverage. It undermines the basic contractual and public policy goals of the UMIUIM policy feature which are to put the policyholder in a position equivalent to that it would have if suing an adequately insured tortfeasor. Under the first party UM/UIM perspective, the insurer\u27s own policyholder - the customer who prudently paid for protection - is treated worse than the third party the policyholder would sue. This occurs because the first-party construct preferred by insurers imposes weaker incentives on an insurer than the more stringent obligation of liability insurers to make reasonable settlement decisions in light of the range of results possible at trial and the duty to protect a policyholder from the risk of a judgment in excess of policy limits. As a result of the misunderstanding that many UM/UIM insurers hold about their duties to their policyholders, UM/UIM policyholders tend to receive harsher treatment than they would if suing a stranger tortfeasor and his liability insurer who, unlike the UM/UIM insurer, has never received a dime of premium from the claimant. In addition to harsher treatment of policyholders, who are injured victims, lowball offers, and reduced compensation, this situation causes unnecessary waste of social, economic, and judicial resources due to the reduced incentives UMIUIM insurers have for settlement. A proper understanding of the history, purpose, and function of UM/UIM coverage requires that the insurers fully assume their proper role: acting as if they were an additional form of a tortfeasor\u27s liability insurance. The liability insurer orientation more fairly, transparently and efficiently fits the contours of UM/UIM claims. It also makes a meaningful improvement to the public policy buttressing the automobile collision compensation system

Technologically Improving Textualism

The textualist approach to construing statutes, regulations, contracts, and other documents remains dominant but has drawbacks, most significantly its tendency to disregard probative evidence of textual meaning in favor of isolated judicial impressions and dictionary definitions. Although a broader, contextual, “integrative” approach to interpretation is preferable, the hegemony of textualism, even extreme textualism, is unlikely to recede soon. Textualism can be substantially improved, however, through effective use of a form of big data—the corpus linguistics approach to discerning word meaning. By enlarging the universe of sources about how words are actually used, corpus linguistics represents a significant improvement over imperial judicial pronouncements about word meaning along with episodic and inconsistent use of dictionary definitions for deciding cases. If deployed as tool of textualism rather than formulaic use of a bigger dictionary, corpus linguistics analysis can, at a minimum, serve as a useful supplement to traditional textualist tools

Infected Judgment: Problematic Rush to Conventional Wisdom and Insurance Coverage Denial in a Pandemic

The COVID-19 pandemic created not only a public health crisis but also an insurance coverage imbroglio, prompting near-immediate business interruption claims by policyholders impacted by government restrictions ordered in response to the pandemic. Insurers and their representatives presponded to the looming coverage claims by quickly moving to denigrate arguments for coverage, engaging in a pre-emptive strike that has largely worked to date, inducing too many courts to rush to judgment by declaring-as a matter of law-that policy terms such as direct physical loss or damage do not even arguably encompass the business shutdowns resulting from COVID-19. Our closer examination of the term and of other key coverage questions suggests that policyholders have a much stronger case than suggested by the initial-and often superficial and conclusory-conventional wisdom flowing from the first wave of judicial decisions. Only a few courts have analyzed the COVID coverage debate with the type of reflective care, judicial humility, and respect for the trial process one would hope to see. The early returns in these coverage wars have been analytically disappointing, creating risk of an unfortunate path dependency or cascade of cases excessively narrowing the meaning of key terms such as loss and damage, and diminishing the quality of future coverage decisions

Assessing the Multiple Impacts of Extreme Hurricanes in Southern New England, USA

The southern New England coast of the United States is particularly vulnerable to land-falling hurricanes because of its east-west orientation. The impact of two major hurricanes on the city of Providence (Rhode Island, USA) during the middle decades of the 20th century spurred the construction of the Fox Point Hurricane Barrier (FPHB) to protect the city from storm surge flooding. Although the Rhode Island/Narragansett Bay area has not experienced a major hurricane for several decades, increased coastal development along with potentially increased hurricane activity associated with climate change motivates an assessment of the impacts of a major hurricane on the region. The ocean/estuary response to an extreme hurricane is simulated using a high-resolution implementation of the ADvanced CIRCulation (ADCIRC) model coupled to the Precipitation-Runoff Modeling System (PRMS). The storm surge response in ADCIRC is first verified with a simulation of a historical hurricane that made landfall in southern New England. The storm surge and the hydrological models are then forced with winds and rainfall from a hypothetical hurricane dubbed “Rhody”, which has many of the characteristics of historical storms that have impacted the region. Rhody makes landfall just west of Narragansett Bay, and after passing north of the Bay, executes a loop to the east and the south before making a second landfall. Results are presented for three versions of Rhody, varying in the maximum wind speed at landfall. The storm surge resulting from the strongest Rhody version (weak Saffir–Simpson category five) during the first landfall exceeds 7 m in height in Providence at the north end of the Bay. This exceeds the height of the FPHB, resulting in flooding in Providence. A simulation including river inflow computed from the runoff model indicates that if the Barrier remains closed and its pumps fail (for example, because of a power outage or equipment failure), severe flooding occurs north of the FPHB due to impoundment of the river inflow. These results show that northern Narragansett Bay could be particularly vulnerable to both storm surge and rainfall-driven flooding, especially if the FPHB suffers a power outage. They also demonstrate that, for wind-driven storm surge alone under present sea level conditions, the FPHB will protect Providence for hurricanes less intense than category five