Slide 2 This is the dimension of the imagination Rod Serling
called The Twilight Zone A dimension we call The Intersection of
Risk. In this session we explore another dimension beyond what is
known to the common broker. It is a dimension as vast as your
customer contract and as timeless as an uncovered claim. It is the
middle ground between products and services, between intellectual
property and warranties, and it lies between the pit of the risk
manager's worst fears and the summit of an underwriter's combined
ratio. Slide 3 Jose Heftye, Flextronics Jenny Novoa, Gap Sarah
Stephens, Aon Your Moderator: Alex Tokar, Aon Slide 4 Scene 1: The
Suppliers Big Headache Scene 2: The Brands Big Risk Scene 3: A New
Dimension of Possibilities Slide 5 Scene 1: The Suppliers Big
Headache Slide 6 Contract Demands: 50,000,000 Errors &
Omissions 50,000,000 Intellectual Property Liability Deductible no
greater than Conflicts & Resolution: Third party Intellectual
Property Liability does not exist Possible utilization of a captive
to address future situations The Guest Star of this scene: Redesign
of a smart meter Slide 7 Contract Demands: 40,000,000 Product
Liability 40,000,000 Product Recall 40,000,000 Product Warranty
40,000,000 Errors & Omissions Conflicts & Resolution:
Client wanted dedicated limits per the contract Utilized existing
program with side agreement to reinstate limits if capacity was
eroded Self-insured product warranty and able to get client to
accept lower recall limits The Guest Star of this scene: Bluetooth
automotive manufacturing Slide 8 Contract Demands: $20,000,000
Products Liability $20,000,000 Product Recall $20,000,000
Consequential Damages $20,000,000 Brand Reputation Conflicts &
Resolution: Thus far Impossible to comply with clients demand for
brand reputation. Product Liability & Recall partly evidenced
with existing programs. Consequential damages agreed, but
self-insured. The Guest Star of this scene: Electronic Retail
Products Slide 9 Scene 2: The Brands Big Risk Slide 10 Contract
Requirement: Software companies must have E&O and Privacy
insurance. Software companies must have E&O and Privacy
insurance. Access to our customer data and/or systems could expose
large losses. Access to our customer data and/or systems could
expose large losses. Complaint & Resolution: Vendors claims
E&O/privacy are too expensive or limits too high. Evaluate the
risk to the company. In certain case we accept the risk and waive
E&O. The Guest Star of this scene: Software Vendors Slide 11
The Guest Star of this scene: Co-development deals Contract
Requirement: No one wants to accept any risk! No one wants to
accept any risk! Who owns the IP? Who owns the IP? Who caused the
problem? Who caused the problem? Complaint & Resolution: Make
sure the business has a defined scope of work. Make sure the
business has a defined scope of work. We may back off of high limit
requests based on the business partner. We may back off of high
limit requests based on the business partner. Slide 12 Contract
Requirement: Big exposures for the company data, technology,
infrastructure Big exposures for the company data, technology,
infrastructure We want substantial E&O, GL, property, and
privacy limits. We want substantial E&O, GL, property, and
privacy limits. Complaint & Resolution: Significant pushback
during contract negotiation Risks too big to ignore. Held our
ground for higher limits. The Guest Star of this scene: Outsourced
IT & Data Centers Slide 13 Contract Requirements: Products for
infants and children create unique risks Products for infants and
children create unique risks Require higher product liability
limits and recall insurance Require higher product liability limits
and recall insurance Complaint & Resolution : Overseas vendors
often claim insurance is unavailable or they dont wish to purchase
We take a tough stance on this one The Guest Star of this scene:
High Risk Products Slide 14 Scene 3: A New Dimension of
Possibilities Slide 15 The E&O UFO Professional Indemnity Media
Liability Healthcare Risks Internet Media Intellectual Property
Infringement Content Liability Data Breach Expense Identity Theft
Insurance Medical Malpractice Architects & Engineers Crisis
Management Identity Theft Liability Network Risk Cyber Liability
Data Breach Insurance InfoSec Security/PrivacyLiability Technology
Professional Professional Liability Third Party Recall Slide 16
Client Quandary: Your client requests to be added as an additional
named insured or an additional insured on your E&O policy
Policy Solution: Additional insured status: Makes no sense &/or
not available Alternatives may better meet their goals The Guest
Star of this scene: E&O Requirement on Services Contract Slide
17 Client Quandary: Handset manufacturer requires that you accept
$50MM in liability for failures of your chip as well as any
resultant recall costs they incur Handset manufacturer requires
that you accept $50MM in liability for failures of your chip as
well as any resultant recall costs they incur You dont purchase any
type of recall policy You dont purchase any type of recall policy
Policy Solution: E&O coverage for your technology services and
products, with an additional coverage grant for third party recall
costs The Guest Star of this scene: Handset Manufacturers Conundrum
Slide 18 Client Quandary: A public entity requires evidence of
Cyber Insurance in a contract where you will implement a new online
system for residents to pay taxes, citations, and licensing fees
Policy Solution: You carry E&O insurance, but Cyber is not an
industry standard term. Be aware of indemnification obligations for
data breach expenses - will your policy pay? The Guest Star of this
scene: The Cyber Requirement Slide 19 Client Quandary: You (the
retailer) are hiring a vendor to implement a data- intensive new
loyalty program You (the retailer) are hiring a vendor to implement
a data- intensive new loyalty program The program will integrate
the existing CRM system with mobile devices and a new social media
campaign The program will integrate the existing CRM system with
mobile devices and a new social media campaign At least 4 vendors
will be involved directly or as subcontractors At least 4 vendors
will be involved directly or as subcontractors What new risks do we
face? What new risks do we face? And Now The Tables Have Turned !
Vendor risk assessment (financial, technical, legal, security,
privacy, quality control, compliance) Contractual risk transfer
Vendor insurance Your insurance Slide 20 The End or Is It...? Jose
Heftye Senior Director, Risk Management Flextronics, Inc. 847
Gibraltar Dr Bldg 5 Milpitas, CA 95035 [email protected]
(408) 576-3726 Sarah Stephens Vice President Aon Risk Solutions
Professional Risk Solutions 199 Fremont, Suite 1500 San Francisco,
CA 94158 [email protected] (415)486-7438 Jenny Novoa Senior
Director of Risk Management & Safety Gap Inc. Two Folsom Street
San Francisco, CA 94105 [email protected] [email protected]
(415) 427-3306 Alex Tokar Managing Director Aon Risk Solutions 199
Fremont Street San Francisco, CA 94105 [email protected]
[email protected] (415)486-7377