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.
Jose Heftye, FlextronicsJenny Novoa , Gap Sarah Stephens,
AonYour Moderator: Alex Tokar, Aon
Scene 1: The Suppliers Big HeadacheScene 2: The Brands Big
RiskScene 3: A New Dimension of Possibilities
Scene 1: The Suppliers Big Headache
Contract Demands:50,000,000 Errors & Omissions50,000,000
Intellectual Property Liability Deductible no greater than
Conflicts & Resolution:Third party Intellectual Property
Liability does not existPossible utilization of a captive to
address future situations
The Guest Star of this scene: Redesign of a smart meter
Contract Demands:40,000,000 Product Liability40,000,000 Product
Recall40,000,000 Product Warranty40,000,000 Errors &
Omissions
Conflicts & Resolution:Client wanted dedicated limits per
the contractUtilized existing program with side agreement to
reinstate limits if capacity was erodedSelf-insured product
warranty and able to get client to accept lower recall limits
The Guest Star of this scene: Bluetooth automotive
manufacturing
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
Scene 2: The Brands Big Risk
Contract Requirement:Software companies must have E&O and
Privacy insurance. 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
The Guest Star of this scene: Co-development deals
Contract Requirement:No one wants to accept any risk!Who owns
the IP?Who caused the problem?
Complaint & Resolution:Make sure the business has a defined
scope of work. We may back off of high limit requests based on the
business partner.
Contract Requirement:Big exposures for the company data,
technology, infrastructureWe want substantial E&O, GL,
property, and privacy limits. Complaint &
Resolution:Significant pushback during contract negotiationRisks
too big to ignore. Held our ground for higher limits.
The Guest Star of this scene: Outsourced IT & Data
Centers
Contract Requirements:Products for infants and children create
unique risksRequire higher product liability limits and recall
insuranceComplaint & Resolution:Overseas vendors often claim
insurance is unavailable or they dont wish to purchaseWe take a
tough stance on this one
The Guest Star of this scene: High Risk Products
Scene 3: A New Dimension of Possibilities
The E&O UFOProfessional IndemnityMedia LiabilityHealthcare
RisksInternet MediaIntellectual Property InfringementContent
LiabilityData Breach ExpenseIdentity Theft InsuranceMedical
MalpracticeArchitects & EngineersCrisis ManagementIdentity
Theft LiabilityNetwork RiskCyber LiabilityData Breach
InsuranceInfoSecSecurity/Privacy LiabilityTechnology Professional
Professional LiabilityThird Party RecallClient Quandary:Your client
requests to be added as an additional named insured or an
additional insured on your E&O policyPolicy Solution:Additional
insured status:Makes no sense &/or not availableAlternatives
may better meet their goals
The Guest Star of this scene: E&O Requirement on Services
Contract
Client Quandary:Handset manufacturer requires that you accept
$50MM in liability for failures of your chip as well as any
resultant recall costs they incurYou dont purchase any type of
recall policyPolicy 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
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
feesPolicy 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
Client Quandary:You (the retailer) are hiring a vendor to
implement a data-intensive new loyalty programThe program will
integrate the existing CRM system with mobile devices and a new
social media campaignAt least 4 vendors will be involved directly
or as subcontractorsWhat new risks do we face?
And Now The Tables Have Turned ! Vendor risk assessment
(financial, technical, legal, security, privacy, quality control,
compliance)Contractual risk transferVendor insuranceYour
insurance
The End or Is It...?
Jose HeftyeSenior Director, Risk ManagementFlextronics, Inc.847
Gibraltar Dr Bldg 5Milpitas, CA
[email protected](408) 576-3726
Sarah StephensVice PresidentAon Risk Solutions Professional Risk
Solutions199 Fremont, Suite 1500San Francisco, CA
[email protected](415)486-7438 Jenny NovoaSenior Director
of Risk Management & SafetyGap Inc.Two Folsom StreetSan
Francisco, CA [email protected] (415) 427-3306
Alex TokarManaging DirectorAon Risk Solutions199 Fremont
StreetSan Francisco, CA [email protected](415)486-7377