Jay M. Feinman

James Davey

Abstract

Insurance fraud is not one thing but many. For political reasons, this simple truth is often hidden, as cumulative figures describing the sum total of insurance fraud are deployed to bring about legal and administrative measures that favour the insurance industry. Rule design must recognise those apparently conflicting truths that insurance fraud is socially harmful and that the insurance industry’s approach to counter-fraud is often selfserving. This paper draws on recent developments in the United Kingdom to show how incremental advances in the fight against fraud can be delivered without creating excessive opportunities for the insurance industry to limit the recovery of honest claims

Christopher C. French

Abstract

The financial consequences of the government-ordered shutdowns of businesses across America to mitigate the COVID-19 health crisis are enormous. Estimates indicate that small businesses have lost $255 to $431 billion per month and more than 44 million workers have been laid off. When businesses have requested reimbursement of their business interruption losses from their insurers under business interruption policies, their insurers have denied the claims. The insurance industry also has announced that business interruption policies do not cover pandemic losses, so they intend to fight COVID-19 claims “tooth and nail.” More than 450 lawsuits throughout the country already have been brought against insurers, including dozens of class actions. Legislators in several states have proposed legislation that would require insurers to pay business interruption claims regardless of whether the claims are covered by the wording of the policies. In the absence of a government bailout, the losers of this epic insurance battle-either insurers or their insureds’ businesses-will likely face bankruptcy. Thus, the financial consequences of this battle, and its implications for America’s economy, cannot be overstated. This is the first scholarly Essay to discuss the arguments for and against business interruption policies covering COVID-19 business interruption losses. In doing so, it sets forth the strongest arguments on each side of the fight regarding the meaning of the applicable policy language in the context of the existing caselaw and the purpose of business interruption insurance. It also addresses the insurance industry’s claim that pandemic losses are not covered by business interruption policies because such losses are simply uninsurable. Finally, it discusses the competing public policies that support each side.

Mallory Stone

Jay P. Kesan & Linfeng Zhang

Abstract

Numerous cyber incidents have shown that there are substantial legal risks associated with these events. However, empirical analysis of the legal aspects of cyber risk is largely missing in the existing literature. Based on a dataset of historical cyber incidents and cyber-related litigation cases, we provide one of the earliest quantitative studies on the likelihood of cyber incidents being litigated and the cost of settling a cyber-related case. Using regression models, we showed that some company and incident characteristics play an important role in determining the litigation probability and settlement costs for which our models propose a useful explanation. Our findings show that the lack of Article III standing is commonplace in cyber-related cases, and that solely relying on the common law system makes it difficult for victims of malicious data breaches to sue and receive legal remedies. In addition, we demonstrate that our findings have valuable implications for enterprise risk management in terms of how the legal risk associated with different types of cyber risk should be properly addressed.

Ken Goldstein

Abstract

Blockchain technology is experiencing breakout growth globally. Companies from diverse industry sectors, including insurance, are tapping into its decentralized distributed ledger capability in order to efficiently and transparently transact business, track anything of value, and operate in a more secure environment. While blockchain is being creatively implemented, however, there are also important legal (including legislative) and cybersecurity considerations to account for as a part of the decision-making process. This paper will start by providing an overview of blockchain technology, including the ability to use it as a decentralized distributed ledger. It will then pivot to a variety of blockchain applications either disrupting or supporting the insurance industry. Thereafter, it will explore blockchain-related legal issues along with Connecticut-based legislative developments in the insurance capital of the world. Lastly, the paper will reflect upon cybersecurity strengths, weaknesses, and best practices associated with blockchain.

Kelly B. Castriotta

Abstract

Insurers first developed property and casualty insurance policies prior to the internet, widespread computerization, the digital interconnectivity of electronic and mechanical devices, and the prolific use and transmission of electronic data. Many such insurance contracts did not expressly address cyber exposures at the time of their creation, leaving insurers and their customers to battle over contract interpretations for attritional cyber losses. In 2015, the Prudential Regulatory Authority (PRA) formally introduced a theoretical problem of “silent cyber” to the insurance industry, contemplating catastrophic cyber scenarios with not only a potentially powerful impact upon dedicated Cyber insurance portfolios, but also upon traditional insurance portfolios. The issue soon became a reality in the wake of the expansive insurance losses associated with the NotPetya attacks of 2017, as most insurable losses stemming from those attacks were ultimately recoverable under traditional insurance policies, as opposed to dedicated cyber insurance policies. In response to the requests made by the PRA to insurers to put into action a plan to manage silent cyber, Lloyd’s of London introduced a mandate to eliminate “silent cyber” on all Lloyds policies, charting a course for the transformation of insurers’ contractual wording to more appropriately address cyber risk. This article discusses the general concerns around “silent cyber” as presented by the PRA, the challenges of defining cyber risk across the insurance industry, and steps taken to rectify the silent cyber issue. The article then explores the idea that the silent cyber problem is at its core a semantic one rather than one of risk perception. The article concludes by offering solutions as to a semantic framework under which to analyze and address “silent cyber.”

Kenneth S. Abraham & Daniel Schwarcz

Chaim Saiman

Abstract

Even before its publication, the Restatement of the Law, Liability Insurance had been subjected to withering wholesale criticism that it creates aspirational and pro-policyholder insurance law. This view continues to be forcefully promoted by insurers and their advocates in the legal literature and by governors and state legislatures in the political areas. This Article finds these wholesale criticisms unwarranted. Liability insurance law is not a field where law is simply found and restated. In fact, settlement law offers the most vivid examples of why the Restatement of the Law, Liability Insurance is possible, useful, and justified. It is possible because there is sufficient agreement on core doctrines to be organized into a common framework. It is useful because, though courts have been handling these cases for more than a century, the basic analytical foundations of the rules associated with this specialized insurance law remain poorly understood and often unarticulated. It is justified, because the project locates insurance settlement law within the broader framework of modern contract, tort, and fiduciary law. Notwithstanding localized quibbles, because Restatements are charged with determining the legal rules that best fit within the broader body of law, the Restatement of the Law, Liability Insurance stands as a considerable achievement.

Timothy Fisher & Leah Smith