Personal Lines Interest Group

This past July, my wife and I noticed that our house in Dallas felt more humid than it normally does during a blistering Texas summer. And we could not figure out why. We eventually contacted our air conditioning contractor, and he went into the crawl space of our pier-and-beam home. While crawling around in there, he discovered a large leak in the water heater pipe, which was transforming our dark, damp, spidery, creepy, and crawly crawl space into a veritable sauna (not the type of sauna you would want to visit, by the way). The next step was to contact a plumber, who repaired the leak, earning every last cent for this unpleasant and difficult task. (For some reason, my wife

Chair’s Corner—My Personal Lines Claim Sagaby Robin K. Olson, CPCU, CRIS, ARM, AAM, ARP

did not want to go in the crawl space to find the leak.)

Step Three involved hiring a water damage restoration company as quickly as possible. The three companies from which we received bids gave us wildly varying information and estimates. The one that we decided on convinced us that we had major water damage to our floors and our lower kitchen cabinets. If it had been a cold water pipe leak, the damage would have been minimal. But the combination of the water heater pipe leak, the fact that our house was built in the early 1960s so has older subflooring/plywood, and a disintegrating vapor

What’s in This IssueChair’s Corner—My Personal Lines Claim Saga . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Note From the Editor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Personal Lines Gets Social! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Best Practices for Insurance Data Migrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

So Social...So Liable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

CPCU Seminar on Catastrophes Is a Winner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Visit us online.www.cpcusociety.org

Continued on page 2

Personally Speaking

Robin K. Olson, CPCU, CRIS, ARM, AAM, ARP, is director of training and education for the International Risk Management Institute (IRMI) and editor of IRMI’s Personal Lines Pilot. He contributes articles on personal risk management and auto risk management to the Expert Commentary section of IRMI.com. Olson also serves as an adjunct professor at the University of North Texas, where he teaches risk management classes. Before joining IRMI in 1998, he was an underwriting manager for two national insurance companies, where his experience encompassed both personal and commercial lines.

“This experience gives me an opportunity to tout our industry, which often gets a bad rap in the media and in other public forums.”

barrier created the perfect storm, as the saying goes.

Step Four consisted of calling our insurer and filing a claim. We were reluctant to do this because we have a one percent deductible and could not imagine that the loss would exceed $4,290. Boy, were we wrong! Our insurer immediately came out and instructed us that the loss was covered and that we needed to vacate the premises within forty-eight hours. It paid to pack us out and has paid to pack us back in. The company has been great to work with, paying the significant cost of water damage restoration as well as the additional living expenses from staying at the nearby Residence Inn.

Unfortunately, there were foundation problems—which are not covered under a standard homeowners policy—but the majority of the loss was covered. Although it may be another month or so before we can move back in, this experience has not been as horrible as it would have been without a good homeowners insurance company standing behind us.

Lastly, Step Five was to hire a qualified general contractor that was experienced not only in repairing this type of damage, but also in working with insurance companies and their estimating software. We eventually decided on a qualified contractor, and the work is proceeding slowly but properly, one step at a time.

This experience gives me an opportunity to tout our industry, which often gets a bad rap in the media and in other public forums. Here is a reminder of the good things our industry does:

Help people recover from major disasters and accidents, with the goal of returning them to their pre-loss financial condition (subject to certain limits and deductibles)

Promote safety and loss control efforts, often through the efforts of such insurance industry-affiliated organizations as the National Insurance Crime Bureau and the Insurance Institute for Business & Home Safety

Facilitate credit transactions, as creditors are more likely to lend funds to individuals and businesses if the collateral is protected by insurance

Serve as an anti-monopoly operation; without insurance, only the largest businesses and wealthiest people could sustain major losses and recover financially

Function as a financial intermediary, reinvesting insurance premiums in the economy

On another note, your Personal Lines Interest Group Committee is working diligently for you, our members. We are planning another great seminar for the Annual Meeting in New Orleans, to be held October 26 to 29, 2013. Mark it on your calendar as a can’t-miss event! The seminar will pertain to the future of personal lines underwriting and the dramatic changes we anticipate in the next ten or twenty years. We are also planning to continue our tradition of hosting a personal lines breakfast, with the likely topic being social media as it affects the insurance industry. PLIG leader Don Roinestad will head up the session initiative, and Dan Blodgett, PLIG newsletter editor, will take the lead on the breakfast event (with new recruits Stephanie Wells and Rob Galbraith). Thanks to both Don and Dan for their valuable efforts.

Best wishes to all during the holiday season!

CPCU Society Personally Speaking December 20122

Chair’s Corner—My Personal Lines Claim SagaContinued from page 1

Did 2012 really just pass us by? At the time I’m writing this, 2012 isn’t over yet; however, it seems as if we just started the year. So what contributes to a fast-paced year? How about a summer with a nationwide record heat wave? How about record-breaking storms this fall on the East Coast? Let us hope to fill the last portion of the year with calmer weather and holiday season traditions with family. Here’s to kicking off 2013 right! Please enjoy the latest edition of Personally Speaking.

PLIG chairman Robin K. Olson, CPCU, CRIS, ARM, AAM, ARP shares his experience this past summer with a personal lines water claim. (It will help you with warm-weather thoughts as the temps cool off.)

Project work?? Data migration affects any successful project, and Prakash Kurukunda, MSBA, CPCU, PMP, helps to clarify the mystery behind this complex topic and helps you make the right choices for your business.

CPCU Society Personally Speaking December 2012 3

Note From the Editorby Daniel L. Blodgett, CPCU, AIM, AIS, PMP

Daniel L. Blodgett, CPCU, AIM, AIS, PMP, is a project manager in the Systems Department of State Farm’s home o!ce in Bloomington, Ill. He started with State Farm in 1990, holding positions such as auto underwriter and supervisor in the State Farm Payment Plan. Blodgett is on the Board of Directors of the CPCU Society Central Illinois Chapter, and he is past president of the Southwestern Michigan Chapter and past chair of the Personal Lines Interest Group.

Let’s get social! The PLIG wants to spread the word via social media, and Roger G. French, CPCU, ARM, AU, AIS, CIC, IPT, is helping to lead the charge.

Speaking of social media, check out the article reprinted with permission from Rough Notes by Bruce D. Hicks, CPCU, CLU, which examines the liability of our social media exposures.

The 2012 Annual Meeting in Washington, D.C., was successful for the PLIG! Robin K. Olson, CPCU, ARM, AAM, ARP, CRIS, rounds out this issue with a summary of the PLIG catastrophes seminar, which was published in Personal Lines Pilot, an IRMI e-mail newsletter for personal lines insurance professionals.

Until next time...

“If everybody does it, it must be OK.”

Even though it’s not quite the same as jumping off a bridge, using social media in business conjures up wisdom similar to that conveyed by Mom and Dad to help us learn to make good decisions.

It is true…almost everyone and most businesses use some type of social media. In our private lives we use it to stay connected: to let others know where we are and what we are doing and to find similar information about our friends and connections. Other than requiring us to set privacy settings, social media use in this capacity can be pretty casual.

But how is social media being used in business? How are businesses using this fantastic new tool as an adjunct to the business of making profit and providing service? The tools—Facebook, LinkedIn, Google Plus, Twitter, and so many others—are extremely easy to access and use. In fact, anybody with a minimum amount of Internet savvy actually CAN do it, connect to others through the Internet. Further, the costs are minimal, and businesses ARE making money using social media. So, go grab a Twitter account and start improving your ability to work with personal lines insurance!

Not so fast. Like anything else, successful business use of social media should include a healthy dose of planning and strategizing. After all, it is another part of the business plan—or should be. A recent study, however, highlights an

important anomaly. The study, published in the September 2012 CPCU eJournal, “A Study Exploring the Perception of Technology Readiness and Use of Social Media by Independent Insurance Agents in Illinois,” identifies that although the surveyed insurance people had adequate technological abilities and were using social media in their businesses, many had yet to develop and incorporate winning formulas for its use as a business application.

Real success in use of social media is going to require the same diligent work as any other marketing process: for starters, identify the ultimate objective, whether sharing news or opinions, managing risk, or simply maintaining a public persona; identify who should be reached and by whom; and identify what the content will be. The list, of course, goes on. It is simple business basics.

Social media is too integral in society to ignore, but don’t let its ease of use delude you. Effective use takes planning and work.

TIP: An easy way to check your security settings on sites like Facebook is to view your site the way someone who is not yet your friend would see it. Create a site review e-mail address (using Gmail, for instance, you might create [email protected]). Use that account to surf to your site. What you see will be exactly what any stranger would see. Use the site’s privacy settings to fine-tune public access.

Roger G. French, CPCU, CIC, ARM, AU, AIS, ITP, leads the Countrywide Insurance Operations Training Department for MAPFre USA in its Commerce Insurance corporate headquarters in Webster, Mass. French has worked in the insurance industry for more than twenty-"ve years in sales, sales management, brokerage and agency management. He is a past president of the CPCU Society’s Western Massachusetts Chapter and current webmaster of the Central Massachusetts Chapter. French serves as a member of the Personal Lines Interest Group, a member of the Champions Advisory Board, and a member of the Board of Trustees of the CPCU-Loman Education Foundation.


Personal Lines Gets Social!by Roger G. French, CPCU, CIC, ARM, AU, AIS, ITP

Editor’s note: Caution—This is a technical topic with project methodology to sort it all out! As a project manager, I can appreciate the article more than most. For any company, decisions must be made in terms of pros versus cons and costs versus bene"ts. This article helps shed light on ways to formalize decisions by using processes that you can be stand behind with con"dence.

From replacing a policy administration system to acquiring another company, many insurers in today’s ever-changing personal lines marketplace are involved in some sort of data migration. There are multiple options for migration of insurance policies from one system to another system. However, if data migrations are not planned carefully, data quality will haunt insurers for years—resulting in loss of premium profits, reduced customer retention, and even legal issues.

There are two methods of doing the data migration:

Manual migration

Automation migration

Manual MigrationDepending on an insurer’s book, some systems may have fewer than 500 policies, and it is costly to write programs to migrate a small book of business. If a relatively small number of policies need to be migrated from an insurer’s legacy system to a new system, hiring temporary workers to do the data entry on the new system will be an economical solution.

Even though it seems simple, manual conversion has its own complexities. The date required for the new system has to be identified and the needed data have to be mapped from the old system to the new system. The data entry team needs to be trained on the new system so that they enter the data correctly.

Audits should be conducted to make certain that entered data is accurate so that policies will be correctly rated and various transactions will adhere to business rules on the new system. In addition, reports on the new system should be run to verify that premium variations between the legacy system and the new system are within the acceptable range.

Automated MigrationPolices can be converted using one of three automated conversion approaches:

1 . “Big Bang” Approach a) Data migration via extract,

transform, and load (ETL )

Migrate all the policies in one go by moving the data from the legacy system to the new system. Data will be extracted from the legacy system, transformed to fit the new system, and loaded into the new system.

Data cleansing is very important. The policies will not be rated in the new system because data-related issues will be known only during endorsements or renewals.

This approach involves lower maintenance costs because the migration effort is done as a one-time activity, unlike renewal conversion, which requires staff to support the conversion for one year.

Some businesses require mass renewals—this mass approach is the only option for migration as the policies are renewed throughout the year.

Even though it is less expensive, the initial investment is high because more testing is needed before migration to make


Best Practices for Insurance Data Migrationsby Prakash Kurukunda , CPCU, MSBA, PMP

Prakash Kurukunda, CPCU, MSBA, PMP, is currently working as senior portfolio manager for Aon. Prior to working for Aon, he worked for LexisNexis, Harleysville Insurance, and General Accident. Kurukunda has over twelve years of experience in the property-casualty and life insurance industries. He has a master’s degree in business administration from Fox School of Business and Management in Philadelphia. He is a member of the CPCU Society’s Personal Lines Interest Group.

Continued on page 6


certain that the migrated data complies with business rules on the new system.

Based on the volume, the production migration may take more time; therefore, thorough deployment planning is needed. If the target system allows, it is better to plan for a nondisruptive data migration option as certain business critical applications cannot have longer downtimes.

There is a possibility of missing test scenarios because the migrated data may not have been sent through the policy life cycle, that is, various policy transactions.

All the policies should be tested for renewal and with other policy transactions. If a very large number of policies need to be migrated, then the right sample needs to be selected to cover the various test cases.

There is no need to maintain two systems after the migration is completed. Users can start working in the new system immediately and do not need to work on both systems until all the policies are renewed.

b) Data migration via screen scraping technology

This approach is used when data migration cannot be done by loading the data into the database using the ETL process or when there is no API or web services interface available for data migration. The best approach is to load the data into the system by entering the data through the front end, using automation techniques.

This is similar to the manual approach; however, automated scripts are needed to load the data into the system. There are multiple automated tools available in the marketplace that can read the data from excel spreadsheets (or another source) and load the data from the front end.

This is a very time consuming process; however, the migrated data will pass the screen edits and business rules before being stored in the target system.

Skilled developers are needed to write the automated scripting.

Dedicated machines need to be used to load the data through scripting.

Reports from the target system are needed to compare the premium and other details.

2. Renewal Conversion Approach With this approach, policies are

converted and migrated to the target system on a daily basis when the policies come in for renewal; the renewal is executed on the new system. This approach is appropriate when there are a large number of policies that need to be migrated and policy renewals are spread out throughout the year. Renewal conversion is less risky because fewer policies are converted at a time. Most of the policy-related data will be executed during renewals; hence, there is no fear of missing data during the migration. In addition, renewal changes will be easily incorporated in the migration because the new system will run the renewals. However, with this approach, the legacy system must be maintained until all the policies are converted and rolled over to the new system.

3. Hybrid approach This approach involves converting

the policies via renewal conversion and then employing a “big bang” conversion for historical data. This approach eliminates the risks involved in the big bang conversion. It also allows the current book to migrate through the renewal conversion, and then after renewal conversion is completed, historical policy data and claims data migrate in one go. The amount of historical data that need to be migrated will depend on rating and statutory requirements, as well as on company policy and procedures.

Other ConsiderationsWhichever approach an insurer takes for migration, there are certain best practices that should be followed to achieve better results. These include project management and software development life cycle (SDLC).

Project ManagementFor the successful migration of a huge amount of data, project management should ensure a proper hardware/software infrastructure is planned and procured. Migration planning should include which data to migrate first, how long the migration will affect critical business applications, identification of all systems and subsystems that need to be involved in the conversion, and buy in from all stakeholders. (At the beginning of the data migration project, it is important to identify all stakeholders—from project start to finish—to ensure buy in. For example, identify the various reports that need to be prepared for balancing and for premium comparison.)

It is important to procure subject matter experts (SMEs) involved with both the legacy system and the new system and involve them in the mapping exercise. Also, they will be able to support the teams if there are any questions related to business rules. Data migration acceptance criteria must be set up, and the testing

Best Practices for Insurance Data MigrationsContinued from page 5


Continued on page 8

team must have all the scenarios to test on the new system with the migrated data.

Software Development Life CycleSDLC is basically a series of phases that provide a standard, or model, for the development and life cycle management of software applications. The phases include these:

Requirements Phase Start with solid business analysis by forming a team with legacy system as well as new system SMEs.

Involve the SMEs in the data mapping between the source system and the target system, with all the business rules and valid values of the data entities.

Determine what kind of data need to be migrated, what is required from a rating and transactions perspective, what is

required from a compliance perspective, and what is required from an underwriting perspective. There is a need to analyze these questions and plan for the data that is to be migrated.

Proper data profiling needs to be done on the data to identify quality issues, incomplete data, duplication, validation problems, and so forth. It is important to find the gaps in data between the source and target systems and involve SMEs to resolve any data and business rule incompatibilities between the systems.

Identify the data-related issues on the legacy data and plan data cleansing activities in advance; this needs to happen before the actual migration project starts. Some examples of data cleansing are name and address cleaning; validating territory

ratings; validating data in the coverages, limits, and premiums; and removing duplicate customer records.

Make sure that all the policy-dependent data are identified during this phase. For example, identify the claims associated with a policy and scheduled personal property that is stored in a separate database.

Determine how much historical data need to be converted to the new platform and how many policies need to be converted.

Decide the tolerance for differences in premium between the source and target systems and the acceptable level of conversion errors.

Review the mapping for thoroughness and get signoffs from business stakeholders


before handing it over to developers and the quality assurance team.

Make certain to plan for all the reporting needs upfront. Work with various stakeholders to get their input on these reports:

Reconciliation reports (to capture the totals between source and target and balancing)

Premium comparison reports

Conversion eligibility reports that list policies that are eligible and not eligible for conversion

Report of nonrenewal policies

Daily policy-issue report

Daily conversion error report

Daily conversion error aging report

Insurance Services Office, Inc. (ISO) loss premium reporting

Design PhaseUnderstand the complexity of the migration and invest in the right tool for extracting and transforming data from the source system and loading the data onto the target system.

Develop a framework for data migration. This will help in the long run because the conversion packages can be reused, which will result in a reduction in cost and time of migration.

Decide what hardware and software is required for the migration architecture and deployment strategy. The deployment strategy should include the rollback strategy to allow rollback of the migration changes to bring the application back to its original state.

Choose the right scripting technology if the nonautomated conversion method is chosen.

Consider all possible performance issues upfront and design possible solutions. Finding a migration-related performance issue in production will be detrimental to the business because it may affect the

live system, which will result in loss of revenue.

Balance the various processes, for example, eligibility file creation on the legacy system pre-ETL and post-ETL and on the new system.

Development There are lots of ETL packages on the market. After careful evaluation, the correct package needs to be chosen for a given enterprise. Two popular ETL packages are Microsoft SQL Server integration services and Informatica.

If complex conversion/transformation is needed, then special conversion routines need to be developed. These can be developed using the ETL native SDK.

Another effective approach to migration is using the web services of the new platform to push the data into the new system, which allows all the business rules to be validated during this process. However, it may not be suitable for migrating the data for millions of policies.

Develop screen scripting to allow automatic data entry into the screens and make sure that the data entered by the automated programs is accepted by the target system.

Use the policy management system’s auto rating and automated renewals features for testing the migrated data on the new system. All policy administration systems on the market have these features, which make the migration easy and accurate.

Validate data against various policy transactions.

Conduct peer reviews to improve the quality of the work done by the development team. Involve SQL experts to do the SQL query tuning and database tuning during this phase.

Quality Assurance (QA) TestingPlan for at least three test cycles of data migration for all policies, transaction

endorsements, cancellations, and reinstatements.

Plan to handle the performance issues in this phase by addressing the issues before the start of the user acceptance testing. It is imperative to measure how long it takes to migrate the data from the source system to the target system and balancing. This migration time needs to be validated with all stakeholders.

Make sure that all the data from different applications are migrated to the new platform by running queries on the new and legacy platforms and comparing the results.

As a quality check, make certain that only policies that are eligible for migration are migrated and policies that need to be nonrenewed are not migrated.

Policies that fail migration need to be reported to the development team so the data in the legacy system can be fixed and the corrected policy data resubmitted.

User Acceptance Testing (UAT) Work with business users to complete the user acceptance testing. Provide adequate support to the testing team and have the SMEs available from the source and target systems to resolve any business-related questions.

Pay attention to the business rules and other valid values that are being reported by business users. If there is any change in the business rules, make sure that mapping documents are updated and inform QA and development teams of any update needs.

Plan for at least two UAT cycles to make sure that users test all the transactions, including renewals, endorsements, cancellations, and reinstatements.

Set up a production-like staging environment to test the performance of the system during the migration. This will help to identify the performance issues well before production migration.

Best Practices for Insurance Data MigrationsContinued from page 7


A premium comparison report needs to be provided for old and new systems so that business users can compare the premiums and investigate any discrepancies.

Test all the downstream feeds to make sure that all the data are sent to those systems correctly. If downstream systems reject any data, investigate the cause and fix the issue in the legacy system.

Production Go-LivePrepare the deployment plan in advance to identify all the activities related to migration. Improper planning may result in extended production downtime and application performance issues.

Make sure that performance issues are addressed well before the production migration.

Production DBAs need to verify the ETL scripts to ensure there are no issues.

Capture the premigration state of the target system to make certain that the migration did not corrupt the existing data.

Once the migration is complete, test some policies to confirm the system is operational.

Post Go-LiveMonitor the production and address any issues that are reported.

Monitor the conversion reports and recycle the policies that error out during the conversion.

Based on the business need, remember that the legacy system should be available for months after the new system goes live.

Final ThoughtsData migration is successful only when the new system can process the converted data without failure. Migration projects need to involve stakeholders at every stage of the migration project to make it successful. Effective project management, solid technology platforms, and business subject matter expertise are the cornerstones of a successful data migration project. Organizations that plan their data migration carefully will reap the benefits of legacy system migration, which will reduce the cost of legacy system maintenance and increase business profits because of the new system’s agility.


Bruce D. Hicks, CPCU, CLU, is senior editor for Technical and Educational Products at The Rough Notes Company. He has more than thirty years of property/casualty insurance experience including personal and small-business underwriting as well as compliance duties for several national and regional insurers. Active in the Chartered Property and Casualty Underwriters (CPCU) Society, Bruce served as Governor from 2007 through 2010.

So Social…So LiableA conversation with an attorney on the rami!cations of social media exposuresby Bruce D. Hicks, CPCU, CLU

Editor’s note: This article originally appeared in the June 2012 Rough Notes magazine. It appears here with permission of The Rough Notes Co., Inc.

If you make your living in nearly any aspect of property/casualty insurance, you may be increasingly affected by the Internet and, particularly, social media. Social media’s rising prominence is accompanied by significant loss exposures. What is your level of awareness regarding social media liability loss exposures? How do you minimize or avoid them? Have you spent enough time to learn where you might seek protection against such losses?

We spoke with Daniel Maldonado, an attorney at Kunz Plitt Hyland & Demlong, P.C., who is also an associate author of the nationally renowned coverage reference Couch on Insurance, 3d. He has created a presentation that is designed to raise awareness of exposures related to social networking.

RN: What is Social Media Liability?

Maldonado: I would define Social Media Liability as liability exposure to claims for libel, slander, harassment, invasions of privacy, violations of intellectual property right and even improper employment practices resulting from the use of social media sites, including Facebook, Myspace, Twitter, YouTube, blogs, etc.

RN: What led to your interest in social networking loss exposures?

Maldonado: I use social networking for both personal and business reasons. As an avid daily user, I noticed that individuals were posting things on the Internet that if done in a traditional publication would constitute defamation, invasion of privacy, or other claims. Because my legal practice handles complex insurance coverage and litigation involving, among

other things, personal injury coverage for traditional defamation and invasion of privacy claims, it was a natural fit to extend that practice to social networking losses.

RN: What coverage options exist in standard commercial and personal lines products to deal with social media liability exposures? Do you know of any products in development?

Maldonado: Most commercial insurance policies include personal and advertising injury coverage that provides protection in general for libel, slander, and derogatory remarks as well as invasion of privacy. Some homeowners policies also provide personal and advertising injury. My experience with renters policies is that some carriers may provide coverage for personal and advertising injury while others do not. The 2001 ISO Form, Form CG 00 01 10 01 (Commercial General Liability Form), added the language “material placed on the Internet or on similar electronic means of communications” to the definition of advertisement.

The 2001 commercial lines ISO form also defined the enumerated offenses, which include “oral or written publication, in any manner that slanders or libels a person’s or organization’s goods, products or services;” and “oral or written publication, in any manner, of material that violates a person’s right of privacy.” The addition of the phrase “in any manner” takes into consideration electronic communications via the Internet or other similar medium.

The 2001 ISO form also added Exclusion K – Electronic Chatrooms or Bulletin Board and excludes personal and advertising injury arising out of an electronic chatrooms or bulletin boards hosted, owned or controlled by the insured. Because chatrooms are not as

prevalent as they were in the early 2000s, this exclusion will likely not apply to social networking sites like Facebook, Twitter, Myspace, LinkedIn, etc.

RN: What prominent examples can you share that demonstrate some of the issues that insurance professionals should be concerned about?

Maldonado: Agents should be concerned about individuals who post blogs or maintain watchdog Web sites of products because these individuals may be susceptible to claims of defamation or invasion of privacy. Even casual users of social network sites may inadvertently post comments about a current or former lover that are defamatory, especially after a divorce or breakup because of a sordid affair. The agent/broker may want to ensure that any personal lines policies

procured include coverage for personal and advertising injury if such coverage is optional or can be obtained via endorsement.

RN: Is there a significant difference between business and personal networking-related exposures?

Maldonado: Business and personal exposures may overlap in general. However, there are some differences. Businesses networking related exposures are typically related to business activities. Businesses may, for example, misattribute the ownership of a Web site to a lower level employee so as to avoid connection to the business. The lower level employee may sue for false light invasion of privacy, especially if the Web site contains sordid or proprietary material. Business managers may also announce termination of their

employees or disclose personal information about their employees that may result in exposure. Employees posting information or videos about their employers may be protected by state or federal statutes if their conduct constitutes protected activity, e.g., opposing unlawful discrimination or other employment practices.

Personal networking-related exposures run the gamut of claims that can be asserted in the traditional arena, including accusing individuals of crimes, infidelity, failure to pay child support, disclosure of personal or financial information, posting of pictures or videos in compromising positions, etc.

RN: What are the typical costs of claims/lawsuits involving libel, slander, etc., particularly those involving social networking? And are defense costs, potentially, a higher concern for insurers?


Continued on page 12


Maldonado: Because such claims may involve historical postings, defense costs may include electronic discovery, which is not typically required in the traditional claim. Because this electronic discovery may include subpoenaing information from the social networking site itself, the costs may increase if the social networking site fights discovery or the claimant seeks overbroad discovery (e.g., the defamatory statement is made on Facebook, but the claimant wants discovery of all postings made by the insured on any social networking site). In addition, venue may be an issue with these cases more so than with traditional cases given the national and international reach of social networking sites. Depending on the nature of the claim, the insured may be faced with multiple lawsuits in multiple jurisdictions including outside the United States. Defense costs may reflect extensive jurisdictional and venue disputes that must be addressed first even before the merits of the claim.

RN: Following up on the question regarding costs associated with social

media claims—Is it likely that such claims may more readily involve reservation of rights and bad faith disputes?

Maldonado: Insurers will likely issue reservations of rights in cases involving social media claims primarily because of two exclusions—the Knowing Violation of Rights exclusion and the Knowledge of the Falsity exclusion. These exclusions are similar to an intentional act exclusion. Given the nature of the specific social media claim, the insurer will likely assert that the insured knew that it was posting material on the Internet that was defamatory or that invaded the privacy of an individual. Because this is generally a fact issue, it is in the best interest of the insurer to reserve its rights rather than decline defense of the case or deny coverage.

Because defamation and invasion of privacy are, by their nature, intentional acts that are specifically covered by the policy, insureds have argued that the carrier is acting in bad faith by relying upon the Knowing Violation of Rights exclusion and the Knowledge of the

Falsity exclusion. There is a split in the jurisdictions as to this issue.

RN: Is there a danger that insurance customers may confuse social media liability with cyber liability or similar terms? Is social media liability a standardized term or would it make more sense to refer to traditional language?

Maldonado: The terms can be confusing. Social media liability is essentially personal injury covered by policies that result from the same personal defamatory acts and invasions of privacy but in the context of the Internet. Cyber liability is essentially advertising injury covered by policies that result from a commercial business’s advertisement of its products or services that can result in defamation of another organization’s products or services or copyright infringement, but in the context of advertising on the Internet.

To my knowledge social media liability is not a term that has been adopted by the insurance industry yet. I would presume that as it becomes more common in the vernacular of popular culture,

So Social...So Liable Continued from page 11

SOCIAL MEDIA LIABILITY ON THE NET

A quick Internet search will result in many links to information concerning liability associated with social media, particularly libel, defamation and invasion of privacy. The following sites were found at the time the main article was written. The links were, at that time, active.

Important: The appearance of these links is NOT an endorsement or warranty of the information’s validity or accuracy. We are merely illustrating the variety of information that results from a search on the topic. We suggest that persons interested in more information consider conducting their own search and vetting that information.

www.motherlylaw.com/motherly-law/2011/03/social-media-faux-pas-defamation-lawsuits.html

www.marketingpilgrim.com/2010/01/social-media-lawsuits-another-2010-trend.html

www.inc.com/guides/201102/how-to-avoid-a-social-media-lawsuit.html

www.shearsocialmedia.com/

www.tuscaloosanews.com/article/20110317/news/110319677

www.law.ed.ac.uk/it&law/c10_main.html

www.ecommercetimes.com/story/35512.html


the insurance industry might adopt the term. At this point, insurance policies are simply referring to the traditional terms of “personal and advertising injury” and extending this traditional coverage to social media and the Internet, as explained in a prior response, by including in the 2001 ISO form the phrase “in any manner” as it relates to oral or written publication. It ultimately makes more sense to refer to social media liability specifically so that the insurer can evaluate whether it will want to provide coverage for such risks since exposures are great and so insureds will clearly understand whether social media losses are in fact covered by the policy.

RN: Does social media present any new wrinkles with regard to libel, slander or invasion of privacy exposures?

Maldonado: Most individuals do not have the means to communicate broadly to each other in the traditional realm, other than making comments to the news media. Social media makes it easier to libel, slander or invade a person’s privacy because off-the-cuff comments are now published nationwide or internationally, as compared to a comment made at the water cooler or in the privacy of one’s home. As a result, the damages sustained by a claim can be more substantial because there are more people aware of the comments as compared to the traditional situation.

RN: What advice, customer education should or could carriers and producers provide to increase customer awareness?

Maldonado: Carriers/producers should make customers aware of the legal potential if their customers utilize social media and the proclivity of such claims that can result if defamatory comments are made about family members, friends, exes, etc., and that they are not immune from suit simply because they make such comment on Facebook or Tweet such comments. If

a customer does utilize social media, then offering optional personal injury coverage as part of a homeowners or rental policy is recommended. It can also be a selling point as an additional reason for e-commerce customers to obtain CGL coverage because personal injury coverage is traditionally included.

RN: What insurance or risk management strategies should commercial and personal insurance customers take to minimize their social media liability exposures? For instance, should individuals consider umbrella coverage or activities that might be avoided, such as blogging?

Maldonado: Given the potential large exposures, especially for commercial customers, umbrella coverage is definitely recommended. Umbrella coverage is also recommended for prolific social media users and bloggers. Although encouraging people to avoid high-risk behavior is laudable, given the popularity of social media, it is unlikely that individuals will avoid social media or blogging altogether and may inadvertently engage in behavior that results in social media liability, especially given the personal/emotional aspect of such claims. Individuals should evaluate the risk potential and realize that coverage for social media liability may become a necessary part of everyday life, similar to auto insurance or home insurance. Carriers/producers should market and package such coverage to customers so that they come to embrace the need for such coverage.

RN: Recently there have been media stories concerning companies, schools and other entities which have required job applicants, students and other individuals to share Facebook account passwords. How might policies held by such entities address exposures created by password accessibility requirements?

Maldonado: The first thought that comes to mind is whether there is, in fact, an

invasion of privacy. The employees or students will be hard pressed to assert an invasion of their privacy when they, in fact, consent to the employer or school having access to their Facebook pages. Even if they could assert an invasion of privacy claim, the claim would likely be covered under Coverage B – Personal and Advertising Injury. It meets an enumerated offense—invasion of privacy.

However, Coverage B generally contains a knowing violation of rights exclusion that precludes coverage when the insured commits an injury that was caused by or at the direction of the insured with the knowledge that the action would violate the rights of another and inflict personal injury. Not all policies do. Obviously, if the policy does contain a knowing violation of rights exclusion, then the analysis is done. The claim is excluded. If the policy contains a knowing violation of rights exclusion, then if the employer or school reasonably believed that they had consent of the employee or student to view the Facebook page, the exclusion will likely not apply because the employer/school did not knowingly violate the rights of the employee/student. Consequently, if the employee/student can establish an invasion of privacy (which is doubtful), then Coverage B will ultimately provide coverage.

However, Coverage A (bodily injury or property damage coverage) is likely not triggered. Coverage A requires an occurrence; i.e., accident. However, the act of monitoring the FB account is not accidental but an intentional act. In addition, it will likely be excluded by the intentional act exclusion contained in the policy.


CPCU Seminar on Catastrophes Is a Winner by Robin K. Olson, CPCU, CRIS, ARM, AAM, ARP

Editor’s note: This article originally published in Personal Lines Pilot, a newsletter of the International Risk Management Institute, Inc., October 12, 2012. © 2010 International Risk Management Institute, Inc. All rights reserved.

One of the more interesting sessions at the Chartered Property Casualty Underwriter (CPCU) Society’s annual meeting in Washington, D.C., last month was “The Impact of the CAT,” developed by the CPCU Personal Lines Interest Group. Considering the fact that insured catastrophe losses in the United States for 2011 totaled nearly $36 billion (far above the annual average of $24 billion), this seminar was indeed a timely one. Three skilled presenters approached the issue from different perspectives.

Ron Stouffer, senior vice president of homeowners line management for Allstate, led off the session. He discussed the worldwide impact of growing CAT losses. So far, the most devastating U.S. CAT remains Hurricane Katrina in 2005, with an inflation-adjusted $46.6 billion in insured losses. Mr. Stouffer believes that although the United States has not yet experienced a $100 billion CAT event (such as a Category 3 hurricane striking Long Island), something of that magnitude is bound to occur in the future. The regulatory system, according to Mr. Stouffer, has to allow insurers to re-capitalize after major surplus-destroying CAT losses. This is not always easy, as it is difficult to explain long-term combined loss ratios to regulators.

Another panelist, Ed Collins, is the national director of ProtectingAmerica.

org, a not-for-profit coalition of first responders, emergency management professionals, building code experts, and business leaders. Mr. Collins argued that the current system for indemnifying CAT losses is not working. He pointed out that the overall level of protection for CAT losses is down in the private market, with more reliance on state plans. Mr. Collins believes that the United States needs to strengthen its public/private partnership by:1. Developing stronger financial

protection

2. Improving loss control techniques

3. Fortifying first responders

4. Educating consumers

5. Strengthening oversight and continuous improvement initiatives

The concluding speaker was Ed Connor, deputy associate administrator with the Federal Emergency Management Agency (FEMA). Mr. Connor maintained that the most significant event impacting FEMA was Congress’s recent reauthorization of the National Flood Insurance Program (NFIP) after many years of temporary extensions of the program. He believes that this single event will give people confidence that the program will survive. Mr. Connor addressed several improvements that were made to the NFIP, including the following.

Reduction in subsidies for repetitive loss properties with increases in premium of 25 percent per year until the premium reaches its actuarially correct rate

Development of a reserve fund for CAT losses, similar to the approach the private sector takes


Enactment of an installment plan for consumers

Update and digitization of the flood maps

Encouragement of the private sector to provide flood insurance of its own; decreased federal subsidies may help this cause.

The consensus from the panel was that CAT losses must be addressed multilaterally and that the time to take concerted action to mitigate the challenges CATs pose to the industry is now.

Volume 14

The Personal Lines Interest Group newsletter is published by the CPCU Society Personal Lines Interest Group.

Personal Lines Interest Grouphttp://personallines.cpcusociety.org

ChairRobin “Rob” K. Olson, CPCU, CRIS, ARM, AAM, ARPInternational Risk Management Institute, Inc.Email: [email protected]

EditorDaniel L. Blodgett, CPCU, AIM, AIS, PMP State FarmEmail: [email protected]

CPCU Society720 Providence RoadMalvern, PA 19355(800) 932-CPCU (2728) www.cpcusociety.org

Statements of fact and opinion are the responsibility of the authors alone and do not imply an opinion on the part of o!cers, individual members, or sta# of the CPCU Society.

© 2012 Society of Chartered Property and Casualty Underwriters

CPCU is a registered trademark of The Institutes.

Personally SpeakingCPCU Society 720 Providence RoadMalvern, PA 19355www.cpcusociety.org

We’re always looking for quality article content for the Personal Lines Interest Group newsletter. If you or someone you know has knowledge in a given insurance area that could be shared with other insurance professionals, we’re interested in talking with you.

Don’t worry about not being a journalism major. We have folks who can arrange and edit the content to publication-ready status. Here are some bene"ts of being a contributing writer to Personally Speaking:

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To jump on this opportunity, please email either Robin K. Olson, CPCU, CRIS, ARM, AAM, ARP, at [email protected] or Daniel L. Blodgett, CPCU, AIM, AIS, PMP, at [email protected].

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