The CHART Exchange November 2017 by The CHART Exchange

TABLE OF CONTENTS

Glenn W. Clark, CPCU, Publisher CHART Exchange Founder & Earliest Adopter

3rd Annual CHART Conference Best Yet Report by Glenn Clark

Jeff Lewis Joins NetRate Systems as Director of Client Services

The Alternative Risk Value Proposition - by Peter Foley

ValueMomentum Announces BizDynamics 1.3 To Enable Rapid Roll Out

Cover Image Credit: CC 2.0

OX Zion: The Future of Insurance Technology by Mike Fieseler

Cyber Insurance Underwriters: A Call To Action by Jennifer Rothstein

Consider A Captive: 2 Interesting Case Studies by Dana Marino

Stopping Bad Actors: Defending Intellectual Property Right Before The USITC by Lamis G. Eli

The Impact of The Smart Home Revolution on Product Liability and Fire Cause Determinations by Michael Oâ&#x20AC;&#x2122;Brien

The Elephant In The Room: Spreadsheet Raters In Insurance by Abhijeet Jhaveri

The Surprisingly Simple Things That Create a Quality Loss Control Experience by Randy Thornton

ValueMomentum Offers Support To Puerto Rican Communities Severely Impacted By Hurricanes

CHART EXCHANGE 37

Convelo Insurance Group Selects ValueMomentum’s Ifoundry Rating Engine

NOVEMBER 2017 VOLUME 2 - ISSUE 10

NetRate Systems Expands Leadership Team With Addition of Insurance Industry Rating Systems Veteran as President

Publisher: CHART Exchange Glenn W. Clark, CPCU Membership Services Kate Boyle

SPECIAL REPORT:

PG 23

The Impact of The Smart Home Revolution on Product Liability and Fire Cause Determinations by Michael O’Brien of the law firm of Wilson Elser

Advertising: Kate Boyle Managing Editor: Kate Boyle Contributing Editor: Frank Huver Layout, Design & Circulation: Ron Manera AdMax Corp., Inc.

CHART Exchange

info@chart-exchange.com 3001 Philadelphia Pike Claymont, Delaware 19703 www.chart-exchange.com 302-765-6001 Last Issue:

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ADVERTISING IN THE CHART EXCHANGE MAKES SENSE: 302 765-6056 TABLE OF CONTENTS

NOVEMBER 2017

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MESSAGE FROM THE EARLIEST ADOPTER

CHART 3RD ANNUAL CONFERENCE “BEST ONE YET!” “Now We Turn To Attendees” To Learn How To Make The 4th Annual Conference Even More Productive Glenn W. Clark, CPCU Publisher & Earliest Adopter

he Third Annual CHART Exchange Event - held in Baltimore MD – has only recently been adjourned. After a day or two to catch our breath, the team initiated the task of conducting a “forensic analysis” of the three day meeting. Are we getting better at establishing a forum conducive to identifying new business opportunities? Are there any holes in our game that need to be addressed? Did CHART provide adequate value for the attendees?

The Elegant Four Seasons Hotel on Baltimore’s Famous Inner Harbor Was the Perfect Venue for the Event

NOVEMBER 2017

As with the previous CHART events, we will be turning to our attendees to help answer these

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important questions. A hardcopy survey was included with the registration package we handed out. A web-based version of the questionnaire was also distributed to the attendees via e-mail. Our team has received completed responses from approximately one-fourth of attendees so far; we will continue following up on the outstanding survey forms to improve that participation rate. We will compile everyone’s input and publish the results in the next edition of The CHART Magazine. Based on our informal conversations with the attendees during the Event, we can confidently say now that the participants were very satisfied with this year’s venue. The elegant Four Seasons Hotel provided us with an excellent setting for the workshops, the General Session,

www.chart-exchange.com

CHART EXCHANGE

and networking forums. Special thanks go out to our planner – Karla Giannetta (Promotions Kartel) – for the outstanding job she did in facilitating the meeting. Some of our attendees provided us with their thoughts about the meeting almost immediately after its conclusion. Here’s a sampling of their input: “We did enjoy the conference - you and your colleagues did a fantastic job. We had time to renew a few old acquaintances, start some new relationships and put faces to names of folks with whom we have corresponded in the past. Few things beat a face-to-face meeting with potential clients and markets. I anticipate we’ll attend in the future…” - James Warters, Preferred Reinsurance Intermediaries “Congratulations on another Chart Exchange! This was the best one yet. As each year passes, I think we mature. We are defining ourselves and our role in the Industry. You have assembled a great group of leaders and have solicited involvement of aggressive and creative players”. - Kevin O’Connor, McGowan Programs “Glenn, I regret that I held out so long before agreeing to attend and now realize that it was a blessing to do so. This was a professional event in every sense of the word and … a class act”. - Michael Hanuschak, American Eagle “I very much enjoyed CHART Exchange and I hope the contacts and initial conversations I had there will bear fruit. You and your team did an exceptional job organizing everything and making everyone feel welcome - which certainly facilitated the business discussions”. - Neno Djordjevic, Northshore Insurance Managers

hanks again to everyone who attended our Third Annual Event in Baltimore. We have a number of projects in the pipeline designed to improve the ease of doing business with our member partners. Stay tuned, as several of these initiatives will be launched early next year. If you were unable to attend our recent meeting but are still curious about doing commerce with London Markets, please contact us at info@chart-exchange.com.

Glenn W. Clark , CPCU CHART’S Earliest Adopter

www.chart-exchange.com

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NOVEMBER 2017

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“Not only do they understand insurance terminology, but they also understand the flow of business.” Jeremiah O’Donovan President, O’Donovan & Associates

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877-738-2411TABLE OF CONTENTS www.netrate.com www.chart-exchange.com

NOVEMBER 2017

NEWS

JEFF LEWIS JOINS NETRATE SYSTEMS AS DIRECTOR OF CLIENT SERVICES AS PART OF COMPANY’S EXPANSION AND GROWTH

Image Credit: Wikimedia Commons

kemos, MI, October 30, management for solution additions 2017 – NetRate Systems, and changes for existing clients, a provider of high- and processing general support performance software solutions for requests. the insurance industry, “As we continue is pleased to announce I’m very to expand the addition of Jeff excited to our business Lewis as Director of work with NetRate and bring on Client Services. An asset for our organization’s and the great group a d d i t i o n a l we growing customer of people that make clients, to base and expanded up this organization.” wanted ensure that we product line, Jeff continue to came to NetRate with more than 15 years of extensive deliver on outstanding customer experience, which includes service. We want both our new and heading multiple software support existing clients to receive the quality, groups. He has also served as head responsive and professional service of application development at an that they deserve and expect,” international carrier for multiple said David Jordan, CEO of NetRate different domestic business units in Systems. “With the addition of Jeff its commercial insurance operation. at the helm of our Client Services division, we are strengthening the Jeff is responsible for NetRate’s depth and breath of our experience Client Services team, which is to address and respond to the tasked with delivering on NetRate’s demands and challenges of our commitment to outstanding clientele. We are very pleased to customer service. Jeff will oversee have Jeff as an integral part of the the day-to-day operations of this NetRate team.” team, which includes efficient onboarding of new clients, project “I’m very excited to work with

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NetRate and the great group of people that make up this organization,” said Jeff. “Over the years, I managed multiple vendors when working on the carrier side, including NetRate, so when the opportunity to work with them presented itself, I was excited to contribute my experience and to be a part of NetRate and the solutions they provide to clients.”

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NOVEMBER 2017

ANALYSIS - PRO GROUP

THE ALTERNATIVE RISK VALUE PROPOSITION By Peter H. Foley

he alternative market continues to experience strong growth even with the competitive market conditions. Whether or not you create a captive, having the basic knowledge is invaluable to your set of tools when talking to an existing or prospective client. Captives are not for everyone nor are they the instant panacea but with understanding and discipline are a valuable asset. Business Point: In parallel with developing a new program or going through an annual update with an existing program consider reviewing the feasibility of incorporating a captive, whether now or some future date. It is worthwhile to take a moment to look at the evolution of the alternative risk market. A recent article in one of the insurance industry journals celebrating their

50th anniversary highlighted from the District of Columbia to various people who have influenced Hawaii. In addition to Vermont, the insurance such domiciles as Regardless industry. Fred Reiss VT, SC, AZ, DC, DE, in the late 1950’s of captive with MT, UT, TN, NC is recognized as and others showing structure, since one of the core strong growth. credible data is the founders of the The regulations key to the kingdom, captive movement follow some basic with some make sure that you tenets but there are attributing the variations in each are set up to create “captive” name to state. that database. This him. Whether or not he did come will benefit you as Business Point: up with the captive well as your clients When choosing label, his influence your domicile, enormously of in those early years which could be knowing the real was significant. your home state, cost of insurance.” do your due What we have diligence including seen is the evolution from the a detail specific meeting with the off-shore domiciles of Bermuda, respective captive division. Look Cayman and other island havens at their history, growth include to the transition to on-shore with type of captives, staffing depth, Vermont being the largest on- expectations and reporting shore captive domicile. Today there are thirty-eight jurisdictions See Alternative Risk Value Proposition Page 34 with captive regulations stretching

About the Author: Peter H. Foley has over thirty-five years of financial services experience with a major focus on the Property & Casualty Insurance, Specialty A&H, Reinsurance and Alternative Risk sector of the industry. Over eleven years were spent living in London, England with the responsibility for the international operations of two different financial groups with operations in N. America, Europe, Middle East and Far East. Prior experience has includes starting and running three companies in the program management and underwriting disciplines. Past experience includes working on two significant business turnarounds; a number of successful Merger & Acquisition projects; and direct involvement in raising capital in both the private and public sectors. www.chart-exchange.com

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NOVEMBER 2017

NEWS Merger & Acquisition Services

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NEWS

VALUEMOMENTUM ANNOUNCES BIZDYNAMICS RELEASE 1.3 TO ENABLE RAPID ROLL OUT The first Digital Engagement Platform built specifically for Property/Casualty Insurers rolls out new capabilities to rapidly configure new digital experiences

companies need flexible and robust platforms that not only offer out-of-the-box experiences, but also those that enable them to modify such experiences based on evolving needs – such as connecting applications to new sources of data • and customizing digital experiences for partners.” “With BizDynamics, insurers benefit from exceptional speed-to-market in providing digital experiences and are able to easily differentiate through their own unique imagination of such digital experiences. With BizDynamics, insurers get a modern set of capabilities to execute like the insurtechs,” says Jim Carlucci, Senior Vice President – Insurance at ValueMomentum.

ctober 30, 2017 - Piscataway, NJ - ValueMomentum Inc., a provider of software and services to the insurance, healthcare and financial services industries, announced today the availability of Version 1.3 of its BizDynamics Digital Engagement Platform. The new release enhances BizDynamics’ powerful studios that equip insurers to design and deploy digital apps for agents, customers and employees THIS RELEASE DELIVERS INSURERS THE FOLLOWING BENEFITS: with unprecedented ease. “BizDynamics was built to enable insurance companies to harness the opportunities presented by Digital and build delightful digital experiences for agents, customers and employees involved in buying and servicing insurance,” said Anant Iyer, Chief Product Executive of ValueMomentum. “The current insurance environment is rife with constant change. Insurance www.chart-exchange.com

•

forms and corresponding schedules to speed up the quoting process; categorization of forms into mandatory, conditional, optional and conditionally optional Endorsement capabilities to enable changes to the existing coverage before policy expiry date Ability to enable agents to personalize and access notifications from the insurer – email, call, SMS based on time of day or day of week

Enhancements to BizDynamics Studios to enable rapid roll out of digital experiences: • Richer drag and drop capability in the experience builder module to tailor apps easily and rapidly, without need to develop code • Ability to have multiple teams work in parallel to configure Enhancements to Out-of-the-box digital experiences digital experiences: • New account search and • A quick navigation pane to provide access to resources clearance capabilities including library additional parameters for • Video player widget to present duplicate account check relevant information via a video • Intuitive transaction history to a user at an appropriate point pane to access all prior policy so as to educate, guide and transaction promote the insurer’s products • Form chooser module to enable and coverages search and present price-bearing TABLE OF CONTENTS

NOVEMBER 2017

ANALYSIS - VANTAGE AGORA

OX ZION: THE FUTURE OF INSURANCE TECHNOLOGY

by Mike Fieseler

o matter the industry, technology has changed the way businesses operate. The insurance sector in particular has experienced tremendous growth as big data has provided greater insight into the customer journey, enabling companies to maximize efficiencies, increase revenue and enhance customer satisfaction. A few organizations that specialize in insurance technology solutions have risen to the top as pioneers. Each year, CIO Applications – an industry-leading magazine focused on technology and innovation – recognizes the top organizations which are making huge technological impacts in the insurance industry as the Top 25 Insurance Technology Solutions Providers. In 2017, Vantage Agora made the list for its revolutionary Business Operating System (BOS), OX Zion. OX Zion, an integrated software solution, is the only BOS that fully

NOVEMBER 2017

supports the insurance industry by enabling insurance market players to run their business without technological constraints. With one easy-to-use, fullyintegrated system, Vantage Agora is changing the way insurance companies operate by providing them with the necessary tools to increase their organizational efficiencies. OX Zion gives company leaders the control they’ve been lacking for years, all in one place. The platform mitigates ambiguity by offering complete control, real-time visibility and Operational Intelligence to empower company leadership to drive strategy, innovation, growth and success. For those specifically in the insurance industry, OX Zion offers the following benefits: •

•

The ability to track and measure key business drivers that are critical to achieving success. Complete transparency and

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About the Author: Mike Fieseler is the VP of Business Development for Vantage Agora. With over 20 years of experience in insurance and technology, Mike joined the VA Sales team in 2010. Mr. Fieseler majored in Marketing and Management Science at the University of Iowa and has over 2,000 hours of continuing education including a Six Sigma Green Belt, Operational Excellence Level I, CPC, and ITIL training.

www.chart-exchange.com

ANALYSIS - VANTAGE AGORA

visibility into key functions including operations, sales, distribution and customer service. • The capability to extract data from numerous and disparate sources (applications, systems, spreadsheets, etc), integrating and collating it into business-oriented, KPI-focused dashboards. • The ability to make data-driven decisions and streamline processes and workflows. Additionally, OX Zion offers the seven steps to Operational Excellence by employing Operational Intelligence using Insurance-in-a-box. These comprehensive dashboards track key metrics across seven different areas of an insurance operations: •

•

Insight into the productivity of an organization’s distribution network. For organizations in need of underwriting management solutions, Operational Intelligence provides important metrics on production and producers. Insight into historical data to

• •

•

adjust a company’s pricing or staffing. Real-time view of a company’s total premium production. Greater visibility into the impact of insurance claims to alleviate factors that contribute to high occurrence and claim severity. Insight into the effectiveness of an organization’s customer service and improvement opportunities. The ability to relate marketing efforts and expenses to sales, more effectively onboard employees, suppliers, distribution partners and contractors, and the capability to track any potential costly errors.

OX Zion is the only tool insurance companies need to stimulate growth and elevate their organization to the next level. Read the full feature in CIO Applications Magazine’s November 2017 issue to learn how Vantage Agora’s groundbreaking technology is transforming the insurance industry. Contact us to gain enterprise-wide visibility with OX Zion.

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NOVEMBER 2017

ANALYSIS - KROLL

CYBER INSURANCE UNDERWRITERS: A CALL TO ACTION By Jennifer Rothstein

Our society operates with a focus on the response to attacks already ctive risk management underway, but that is shifting processes are the most toward a more offensive model. effective. Traditional risk One sector positioned to contribute analysis is based on a formula: to this shift is the cyber insurance Probability x Loss. The variables industry. Underwriters can lead in the formula require an input this charge. of data which historical lines of business, such as environmental or Current risk assessments management liability, have been provide organizations with an able to gather for decades. understanding of a modicum of

has only been released in the last decade.

Risk assessments are designed to prevent or mitigate attacks before they happen. If underwriters incorporate risk assessments into their underwriting process, the convergence of underwriting applications and risk assessments could result in the building of a tactical team. The team will be tasked probable cyber threats they may with actionable items to make the To date, the cyber industry has been encounter. However, the loss data organization into a better risk and constrained in the development of is still not robust enough to be more secure business. Members a robust database to fill in these reliable or sufficiently predictable. of the team should include the IT variables. Cyber security practices The modeling for cyber risk is Department, General Counsel, Risk have been defensive in nature, complex and still in development Managers, HR, Marketing, CFO, which is understandable given the stages as much of the data required Insurance Underwriters, Brokers, rapid advent of new technologies is not publicly available. While Cyber Experts and Outside Counsel. and the increasing capabilities of cyber attacks have been taking bad actors to learn sophisticated place for decades, the awareness methods of attacks. of the attacks in the public domain See Cyber Insurance Call to Action Pg 31

About the Author: Jennifer Rothstein is a Senior Director with Krollâ&#x20AC;&#x2122;s Cyber Security practice. She develops and broadens the strategic partnerships established with insurance companies, brokers and law firms that specialize in cyber liability insurance. She leads cross-functional activity to facilitate new business opportunities and targeted innovative product development as it relates to cyber liability and cyber resiliency both in the private and public sector. She joined Kroll after a distinguished career in professional liability program management, e-discovery product development and intellectual property ownership rights management.

NOVEMBER 2017

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www.chart-exchange.com

Be Cyber Resilient From cyber risk assessments and penetration testing to incident response and investigations, Kroll's global cyber experts are ready to help you and your insureds along the path to cyber resilience.

kroll.com/cyber

4215 E. McDowell Road, Suite 115 | Mesa, Arizona 85215 Phone 602.904.7687 | Fax 602.734.5759 | eriskstrategies.com

Consultation Services •

Performs a coverage audit

•

Provides risk management consultation

•

Assists in determining if a captive is the right solution for you (traditional or small)

If a captive is the right solution for you,

WE DO NOT REPLACE RELATIONSHIPS We will work with you and your advisors to find the right solution for you.

•

ERS provides insurance coverage policy design

•

ERS provides full underwriting services; including policy issuance, premium invoicing and collection (premium financing is available)

•

ERS aids in domicile selection

•

ERS provides captive formation and captive management services.

WE ARE HERE TO HELP YOU We are experienced, creative, responsive, and responsible. Providing customized solutions rather than off the shelf products.

And, that solution might not require one of our products.

Turn-key captive management includes • Regulatory compliance and oversight • Corporate compliance and oversight • Bookkeeping and recordkeeping services • Coordination with tax professionals for timely filing of all tax returns and tax payments

The staff of Enterprise Risk Strategies (ERS) has over 100 years of insurance and risk management experience. Our staff includes accountants, CPAs (certified public accountants), CAs (chartered accountants), attorneys, business and insurance professionals.

Keeping you on the right path. Solving today’s problems with an eye towards tomorrow’s challenges.

ANALYSIS - ENTERPRISE RISK

CONSIDER A CAPTIVE: 2 CASE STUDIES

#1 Construction Industry Case Study

Insuring your business. Ensuring your future.

Client Concern/Issue: A concrete construction contractor owns and operates several batch plants in the region. The concrete is manufactured to customer specifications at the batch plants and must be delivered within a specified time frame. The insured approached his insurance broker to obtain quotes for a boiler and machinery policy to provide coverage in the event of a mechanical breakdown of their manufacturing equipment. The coverage provided by the traditional insurance market was restrictive and expensive. ERS Solution: ERS worked with the contractor to form a captive and provide coverage for Mechanical Breakdown, and also their exposure to Governmental Action ,Loss of a Key Supplier and Loss of a Key Customer. Results/Benefits: The two owners of the concrete construction company each own 50% of the shares of the captive. ERS Insurance, a Utah based insurance company, issues the three policies that are filed in the state of Utah and the insuredâ&#x20AC;&#x2122;s captive reinsures ERSI. The captive is in its third year of operation and is generating an underwriting profit. The insured has used a risk financing strategy to turn a necessary business expense into a potential profit center.

Continued...

Disclosures

About the Author: Dana Marino brings more than 20 years of reinsurance underwriting and marketing expertise to Enterprise Risk Strategies (ERS). She is the East Coast business development representative for ERS. Dana has worked in various segments of the alternative risk and reinsurance industry. Most recently she has worked as a captive consultant in both underwriting and business development. Previously, Dana has held underwriting and marketing positions within the reinsurance and alternative risk marketplace and was responsible for producing casualty insurance business, predominately from privately held corporations. Dana has a bachelorâ&#x20AC;&#x2122;s degree in economics from Bucknell University and is currently pursuing an Associate in Captive Insurance (ACI) designation through ICCIE.both the private and public sectors. dmarino@eriskstrategies.com | 610Robert Nizzi, President 353-4820 (office) 5700 W. 112th Street

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of www.chart-exchange.com TABLE OF CONTENTS (a) avoiding penalties under the U.S. Internal Revenue Code or (b) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Overland Park, KS 66211 tel: 913-220-0442 NOVEMBER 2017 rnizzi@eriskstrategies.com

ANALYSIS - ENTERPRISE RISK Continued From Page 19

Real Estate Developer Case Study

CONSIDER A CAPTIVE: 2 CASE STUDIES CONTINUED...

Insuring your business. Ensuring your future.

Client Concern/Issue:

A midsized, privately held real estate developer, is required to carry both an environmental liability policy and a condemnation policy in order to enter into certain contractual agreements with local governmental bodies and general contractors. Each policy contains a $250,000 deductible. The insured is concerned about the potential negative impact of a $250,000 expenditure to their operating income should they incur a loss under either policy.

ERS Solution: Real Estate Developer Case Study

Insuring your business. Ensuring your future.

ERS created a captive insurance company exclusively owned by the partners of the developer to issue a deductible reimbursement policy for expected losses. The captive provides a mechanism to prefund for potential deductible obligations for any insurance policies which contain deductibles. Client Concern/Issue: A midsized, privately held real estate developer, is required to carry both an environmental liability policy and a condemnation Results/Benefits: policy in order to enter into certain contractual agreements with local governmental bodies and general contractors. Each policy The partners now own a captive insurance company and any underwriting profit generated in their insurance program. contains a $250,000 deductible. The insured is concerned about the potential negative impact of a $250,000 expenditure to Even though the captive is in its first year of operation, the developer has successfully transferred the risk from their their operating income should they incur a loss under either policy. balance sheet to a captive. ERS Solution: ERS created a captive insurance company exclusively owned by the partners of the developer to issue a deductible reimbursement policy for expected losses. The captive provides a mechanism to prefund for potential deductible obligations for any insurance policies which contain deductibles. Results/Benefits: The partners now own a captive insurance company and any underwriting profit generated in their insurance program. Even though the captive is in its first year of operation, the developer has successfully transferred the risk from their balance sheet to a captive.

Disclosures IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (a) avoiding penalties under the U.S. Internal Revenue Code or (b) promoting, marketing or recommending to another party any transaction or matter addressed herein. The views and statements expressed in this presentation are for general information only. ERS, LLC is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation provides general information about certain legal and accounting issues and should not be regarded as rendering legal or accounting advice to any person or entity. As such, the information is not privileged and does not create a client relationship with the companies, or any of its employees. This presentation does not constitute an offer to represent you, and you should not act, or refrain from acting, based upon any information so provided. In addition, the Disclosures information contained in this presentation is not specific to any particular case or situation and may not reflect the most developments. IRS Circular 230current disclosure: To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of Enterprise Risk Strategies avoiding penalties under the U.S. Internal Revenue Code or (b) promoting, marketing or ERS does not provide legal2017 or tax advice 20(a) NOVEMBER TABLE OF CONTENTS recommending to another party any transaction or matter addressed herein.

Robert Nizzi, President 5700 W. 112th Street Overland Park, KS 66211 tel: 913-220-0442 rnizzi@eriskstrategies.com Dana Marino East Coast Business Development tel: 610-353-4820 dmarino@eriskstrategies.com visit www.eriskstrategies.com Robert Nizzi, President 5700 W. 112th Street Overland Park, KS 66211 tel: 913-220-0442 www.eriskstrategies.com rnizzi@eriskstrategies.com

Dana Marino

www.chart-exchange.com FOR INTERNAL USE ONLY

ANALYSIS - WILSON ELSER

STOPPING BAD ACTORS: DEFENDING INTELLECTUAL PROPERTY RIGHTS BEFORE THE USITC By Lamis G. Eli

Understanding the commission’s function, procedure, timelines, and remedies can save clients time and expense.

Lamis Eli is a registered patent attorney in the Chicago office of Wilson Elser Moskowitz Edelman & Dicker LLP, whose practice focuses on intellectual property prosecution and litigation, with a particular concentration on trademark, utility patents, and copyright matters. Ms. Eli also serves as outside general counsel for start-ups, small businesses, and marketing agencies. She works directly with clients to learn their business goals and provide creative, cost-effective solutions, counseling them through every step to provide suitable intellectual property strategies to protect their businesses. www.chart-exchange.com

he United States International Trade Commission (USITC) investigates claims brought by complainants asserting intellectual property rights, including allegations of patent infringement and trademark infringement, against imported goods. See 19 U.S.C. § 1337. The USITC investigates unfair practices in import trade under to the statute, which is referred to as “section 337.” While legal courses in intellectual property litigation focuses on the civil procedure in the district courts, the growing accessibility to technology around the globe makes understanding the nuanced manner in which claims are brought and resolved before the USITC key for litigators who represent both foreign and domestic intellectual property TABLE OF CONTENTS

clients. Counseling clients effectively on issues of licensing and foreign manufacturing requires an understanding of the commission’s function, procedure, timelines, and remedies. In 2015, over 90 percent of unfair acts alleged and actively investigated by the USITC involved patents. See Section 337 Statistics, www.usitc. gov. This article will set out to make the case that understanding USITC procedure enables attorneys to provide crucial additional services to patent clients. The background and procedures for filing and appearing before the commission are described below. Next, the section 337 remedies to keep trade fair and protect intellectual property rights are explained. These remedies are harsh, and as discussed below, they are not available to all who file. Of particular importance is the standing required to bring a complaint before the USITC as a non-practicing entity, or

See Intellectual Property Rights Pg 41 NOVEMBER 2017

Bringing U.S. Entrepreneurship to the London Market The CHART/Wilson Elser strategic partnership combines the innovative underwriting philosophy of the worldâ&#x20AC;&#x2122;s oldest insurance brand with the entrepreneurial mindset of U.S. agencies. For close to 40 years, Wilson Elser has helped organizations to better navigate challenging markets and realize improved combined ratios. We provide London- and Europe-based insurers with ready access to more than 60 discrete legal services delivered by nearly 800 attorneys in 34 strategic locations throughout the United States. Guided by a proprietary, systematic legal project management program, we help clients define strategies and achieve outcomes that align with agreed business requirements. We also implement dedicated Program Claim/Litigation Management services, creating value and driving efficiencies with respect to legal spend and indemnity. Wilson Elser is especially proud of its strategic partnership with CHART Exchange and our shared commitment to strengthening relationships between cover holders and risk takers on either side of the Atlantic.

SPECIAL REPORT: WILSON ELSER

THE IMPACT OF THE SMART HOME REVOLUTION ON PRODUCT LIABILITY AND FIRE CAUSE DETERMINATIONS

he concept of the Internet of Things (IoT) has existed for more than 15 years. Technology pioneer Kevin Ashton is widely credited with coining the term in 1999 to describe the connection of physical objects to the internet via sensors. The IoT has become a reality with 6.4 billion devices connected to the internet and on average more than 5 million new devices connecting each day. Forecasts indicate that by the end of the decade more than 25 billion devices will be connected to the internet.

spheres. What makes the IoT dynamic is the ability to control products, machines and systems over the internet.

Within the broad expanse of industry sectors where internet adaptability is advancing, the connected or “smart home” is at the forefront. It embraces all manner of previously dumb household products, building systems and appliances that now can be connected to the internet to perform new functions and communicate with data centers or other smart devices. Among the appliances, consumer electronics The exponential growth of the IoT and home systems that can connect has been described as the Fourth with and be controlled over the Industrial Revolution, characterized internet are home security systems, by a fusion of technologies that garage doors, heating and air is blurring the lines between the conditioning systems, refrigerators, physical, digital and biological ovens, ranges, washers and dryers,

televisions, home entertainment, lighting, outlets and switches. Gartner, Inc. has predicted smart home growth to go from 339 million applications in 2016 to more than a billion by 2018. Business Insider Intelligence has estimated that by 2019 companies will ship 1.9 billion connected home devices with estimated revenue of $490 billion. The driving forces behind this growth include the reduction in the cost of sensors, expanding internet connectivity, the desire for improved efficiencies and energy cost savings. Also, there is the drive to monetize big data generated from the use of these products where information on consumer use patterns and other See Smart Homes & Product Liability Page 30

Michael O’Brien is a co-chair of the firm’s Product Liability, Prevention & Government Compliance practice and leads the Internet of Things (IoT) aspects of Information Governance. He is also a member of the Information Governance Leadership Committee. With more than 30 years of experience in product liability defense, Michael focuses on representing U.S.- and Asia-based manufacturers and distributors as national counsel in litigation, pre-suit investigations and class actions. He also advises clients on reporting obligations to the U.S. Consumer Product Safety Commission (CPSC) and counsels them on voluntary recall issues. From 1989 through 1992, Michael lived in Japan, managing the firm’s Tokyo office and providing counsel to Japanese, Korean and Chinese clients. While in Asia, he saw first-hand the vast differences between the U.S. and Asian legal systems and recognized the importance of educating foreign clients on the complexities and requirements of U.S. civil practice and procedures. Prior to joining Wilson Elser in 1983, he spent three years as a staff counsel with the New York City office of The Hartford.

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NOVEMBER 2017

ANALYSIS - VALUE MOMENTUM

THE ELEPHANT IN THE ROOM: SPREADSHEET RATERS IN INSURANCE

preadsheets are undoubtedly indispensable in the property/ casualty insurance office! With its ubiquity and reliability, Microsoft Excel has become the favored workhorse for developing models, simulating business scenarios and even computing premium, amongst other uses!

BOUT THE AUTHOR: Abhijeet Jhaveri is Chief Marketing Officer at ValueMomentum and leads ValueMomentum’s softwareas-a-service business targeted at the MGA, Program Administrator and Coverholder markets. Abhijeet and his team works with MGAs, Program Administrators and Coverholders to deploy ValueMomentum’s iFoundry rating software with support for ISO, NCCI, AAIS and proprietary rate plans and extend these to agents, customers and employees with ValueMomentum’s BizDynamics Digital Experience Solution and App2Data ACORD forms processing Solution.

NOVEMBER 2017

Spreadsheets are a compliance nightmare.

From time to time, when there are changes in the underwriting guidelines or in the rates, new versions of spreadsheets are put in place. Manually managing these versions can pose a risk over time, even with the most scrupulous Spreadsheets also enable speed individual and the most robust and ease of use to quickly launch process. new insurance products to test in the market place. This probably is YOU RISK LOSING YOUR the biggest advantage realized by INTELLECTUAL PROPERTY the entrepreneurial underwriters at MGAs, Program Administrators MGAs offer tailored products and Coverholders. You collaborate to specialized market needs, with the carriers and build a new i.e. intellectual property. If an product in spreadsheets and start underwriter leaves your firm, he quoting! You capture all attributes or she may also be walking out relating to the risk, holistically with your intellectual property view the risk, compute and adjust the spreadsheet with all your base premiums. rates, modifiers and underwriting IN THIS ARTICLE I WILL SHARE:

• •

•

The disadvantages of spreadsheets The current insurance trends that should drive you to swiftly move away from them The 3 approaches you can take today to overcome the challenges

THE DISADVANTAGES OF SPREADSHEETS TABLE OF CONTENTS

guidelines. They impede operational efficiency MGAs are often the most efficient working units in the insurance space. Some of the most efficient MGAs track aggregate data to calculate time spent per quote, premiums written per employee and other such hard numbers. See Elephant in Room Page 26 www.chart-exchange.com

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ANALYSIS - VALUE MOMENTUM Continued From Page 24

ELEPHANT IN THE ROOM Not being able to track these metrics impedes operational efficiency. Also, underwriters’ time best utilized in assessing mid-market and large deals, while most risks that fit within a “box” could be processed straight-through. Today, it is easy to achieve such automation such that the underwriter only handles cases that don’t fit in the “box”.

ahead? The answer to this requires that we examine some key trends shaping the property/casualty industry today.

other, there is the time element based insurance for those driving for Uber on the side or renting out their home on Airbnb (Slice). These trends, while seemingly targeted Distribution channels are rapidly at personal lines, are expected evolving with digital agencies to impact commercial lines too and digital MGAs cropping – especially small commercial up every week threatening to insurance. disrupt traditional MGAs with Powerful Digital forces are impacting virtually As digitization takes root every industry. Mobility, Internet of things (IoT), in virtually all aspects demographic shifts, Analytics of our personal and digital and Social - all need to be lives, it is imperative that harnessed by MGAs, Program MGAs, Program Administrators Administrators and Cover Holders.

and Cover Holders embrace technology and automation to become indispensable to their agents/brokers and customers and prepare for a future with new sources of competition.”

They are the exact opposite of “ease of doing business” Then there is the issue of agent/broker ease of business. It is well understood that agents or processing staff often know where they are going to place the business. And one key criteria is how quickly they can get a quote. This is unlikely in the case of spreadsheet rating. Also, agents often want to take control of their destiny, and if they see value, will be willing to self-serve themselves so as to quickly turnaround a quote to their customers.

technology and data as their core competencies. Fintech giant Two Sigma tied up with Hamilton and AIG to create Attune which is chartered with harnessing data to accurately turnaround quotes by having an applicant answer just a few questions.

Given the industry dynamics and the Digital forces, when thinking about replacing your spreadsheet rating, you must think further out and consider some of these important factors:

ANYTIME, ANYWHERE, ANY DEVICE ACCESS.

While most business gets done on a personal computer, there are many use cases for agents/brokers to gain access using other devices. They may want to leverage an eSignature capability while at the customer’s location or they may start capturing data while away New business models are evolving from the office but finish up later in which also have disruptive potential. the office. HARNESS THE DIGITAL We are moving rapidly to a sharing FORCES TO SUCCEED economy and a gig economy. Pay Rich Engaging Experiences If spreadsheet rating is not the way per mile auto insurance is here on The online rate-quote-bind forward, what is the optimal path one hand (Metromile) and on the capabilities also need to 26

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ANALYSIS - VALUE MOMENTUM contemplate rich engaging experiences. For instance, in our personal lives we are now accustomed to our favorite apps guiding us, informing us what others like us have done or prompting us to ensure that we’re making the right selections. Such capabilities can be as simple as “help-text” describing a coverage, to more advanced capabilities that educate the agent/ broker on your unique coverages and options, with rich content such as infographics and videos that are served contextually during the transaction. The online rate-quote-bind technology should allow for ease of business above all else in enabling the agent/broker to perform transactions rapidly. For instance, the technology can help minimize keystrokes by prefilling data related to the risk from third party data sources. Or you can provide them with the ability to upload schedules via spreadsheets to avoid having to enter each location or class or vehicle one after another. Further, in anticipation of new distribution channels emerging, the rate-quote-bind capabilities must be available to new distribution channels and it is important to ensure that your technology uses a rich set of APIs or application programming interfaces – that allow your products to be rated and quoted using the distribution channels’ technology. 3 Options to replace spreadsheet raters: www.chart-exchange.com

DO IT YOURSELF

should inquire if your vendor offers This option is more conducive to the solution in a software-as-athose who have a dedicated IT service (SaaS) model – essentially department, a deep bench of web providing a package including development skills with a governing functionality, production support architecture that prevails regardless with service levels and hosting of the individual developer. Most in the cloud. Also, you should companies struggle with this and evaluate how easy/costly the as a result there is a high risk with solution supports changes to rates, this develop in-house approach as rules, addition of new plans and so business is reliant on individuals on. who could leave. In summary, as digitization takes root in virtually all aspects of our WEB DEVELOPMENT VENDOR personal and digital lives, it is Web development vendors can imperative that MGAs, Program quickly develop online rateAdministrators and Cover quote-bind capabilities for simple Holders embrace technology products. With a small investment, and automation to become you can get up and running fairly indispensable to their agents/ quickly. However, you should brokers and customers and prepare conduct due diligence on how for a future with new sources of they would manage change – for competition. instance, how easy/costly would it be to change the rates or some of the underwriting rules. Or how easy/costly would it be to add rates from a new carrier and present a side-by-side comparison? And most importantly, you must understand whether you are relying on an individual or a company with well instituted processes such that if someone leaves, you are not left holding the bag.

NEVER MISS AN ISSUE

VENDED SOLUTIONS

There are a limited number of vended solutions in the market today to enable online rate-quotebind. Such vended solutions can address simple products to far more complex ones, such as those that use ISO, NCCI, AAIS for the underlying lines of business. You TABLE OF CONTENTS

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THE CHART EXCHANGE! NOVEMBER 2017

NEWS

Partners who understand your needs. York Risk Services Group, Inc. is honored to be a Preferred Vendor Partner of the CHART Exchange. We are a premier provider of TPA Services, Specialized Loss Adjusting, Customized Claim Solutions, & Risk Control Services for Lloydâ&#x20AC;&#x2122;s of London & the London company market. We offer: Dedicated Binding Authority Adjusting Team Dedicated E&S/Specialty Lines Open Market Adjusters Back office team for banking, bordereau production, MI reporting Customized Physical Risk Assessments (Risk Control) Virtual Risk Evaluation Services

To learn more, contact Aubrey Fountain, at 850.650.2380 or Aubrey.Fountain@yorkrsg.com. C L A I M S M A NAG E M E N T | M A N AG E D CA R E | R I S K MA N AG E ME N T | LOSS CO N T R O L www. YORKRSG .co m

ANALYSIS - YORK RISK SERVICES GROUP

THE SURPRISINGLY SIMPLE THINGS THAT CREATE A QUALITY LOSS CONTROL EXPERIENCE Every company that provides loss control services strives to provide a quality product to their customers. But in the loss control space, where service providers abound and the product offerings are virtually a commodity, how do you differentiate one vendor from another in terms of quality? The answers are surprisingly simple. By Randy Thornton

virtually a commodity, how do you differentiate one vendor from very company that provides another in terms of quality? What loss control services strives to are the ‘X factors’ that make one provide a quality product to company stand heads above the their customers, working hard to rest of the pack? And what must an offer the services, product features, organization do to truly be able to technology and expertise that busy call themselves a ‘quality provider’ risk managers and underwriting of risk control services? teams depend on to make sound decisions. These are important questions to answer. Our customers bear the But in the loss control space, incredible responsibility of writing where service providers abound and binding profitable business for and the product offerings are their companies, and depend on

us to be their risk assessment ‘eyes and ears’. Doing whatever it takes to deliver them the highest quality product is not negotiable, in my mind. WHAT MAKES A LOSS CONTROL PROVIDER STAND APART

Quality is most definitely a complicated and multi-faceted subject, but after gathering insight from both valued customers, who graciously shared their time and See Loss Control Experience Page 50

Randy Thornton is President of York Risk Control, with responsibility for the strategic direction and overall operating performance of the division and is a member of York’s Senior Leadership Team. He has over fifteen years of experience in the insurance industry, holding leadership positions in the areas of underwriting operations, loss control and policy administration for a leading MGA and other insurance services providers. Throughout his career, Randy has been instrumental in the development and implementation of automated systems, improved operational performance and customer satisfaction, key organizational strategies and increased sales.

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NOVEMBER 2017

SPECIAL REPORT: WILSON ELSER Continued From Page 23

home technologies to promote the use of smart devices and products in the home. Among the benefits touted are energy management, fire and water alerts, and home security. On a more granular level, these benefits include regulating home temperature; automating interior and exterior lights; using motion sensors to turn off lights when no one is present in a room; remotely turning off TVs and small appliances that were accidentally left on; valuable insights can be gleaned remotely accessing temperature and used by businesses to generate sensors; sending alerts when market share and revenueand stave water is detected; locking or off the threat of new competitors. unlocking doors remotely; receiving

SMART HOMES AND PRODUCT LIABILITY

THE INSURANCE INDUSTRY AND THE IOT

With all the apparent benefits of smart home technology come potential risks. Dumb products made smart by connecting to the internet present a new layer of complexity when a failure occurs. The Nest thermostat, which can be controlled by a smart phone or tablet, experienced a software malfunction in January 2016 that caused the devices to lose power and drain their batteries, which could not be recharged by the software programming. Inoperable thermostats led to complaints of homes being left cold and the potential for water pipes to burst. Other reported smart home product failures include With all the apparent internet phone service and benefits of smart home internet security system technology come potential risks. failures.

Insurance companies are embracing the IoT to drive customer service, provide Dumb products made smart It is a given that anything user-based coverage options, by connecting to the internet connected to the internet is track driving and user present a new layer of complexity vulnerable to a cyber-attack. behaviors, and crack down on Until recently, the threat fraud. The insurance industry when a failure occurs.â&#x20AC;&#x153; of cyber-attacks has been also is embracing the IoT limited largely to the theft and because of the threat posed by technology giants that already notifications from your smart misappropriation of data. However, have a significant advantage over device; and detecting glass and with smart home applications, a insurers because of their daily window breakage. However, each cyber-attack on an IoT-connected interactions with consumers over of these features adds complexity to product or system has the risk of the internet. Such interactions the functionality of the product or causing property damage, bodily allow the technology companies system and, like any product, can fail injury or death. In an August 2016 to monetize data they collect in in ways not intended or anticipated. interview, Elliot Kaye, Chairman of ways that could not be imagined a A device that can turn off a smart the U.S. Consumer Product Safety product also can turn it on. A device Commission, reported that the CPSC decade ago. that can regulate temperatures was assessing the risks to consumers In the smart home arena, a number can cause temperatures to reach posed by emerging technologies, including the IoT, and identified of property insurers have partnered dangerous levels. with companies such as providers of home security services and smart LIABILITY AND SECURITY RISKS See Smart Homes & Product Liability Page 42

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ANALYSIS - KROLL Continued From Page 16

CYBER INSURANCE CALL TO ACTION

the underwriting community in gathering data in a proactive way at the time of underwriting can facilitate multi-faceted security.

Cyber insurance is evolving rapidly and plays a critical role in defining the formula of risk. If the insurance companies and insureds work collaboratively and ask actionable questions, the output will be more meaningful from both a security and risk management perspective. If a cyber insurance company were The insurance underwriting to require a risk assessment prior process will not remain a stagnant to binding a policy, risk assessment process with yes/no questions but results could be delivered into rather, an in-depth inquiry into the usable formats for underwriters cyber security posture with answers and should be reliable data points. and possible scores that will direct the organization to implement The more the insurance companies real time improvements. gain knowledge of the cyber Risk assessments are conducted in several ways depending on the scope of the assessment. They can range from questionnaires to table top exercises. If any of these

methodologies are used by an underwriter, the results can be factored into crafting an appropriate coverage program in addition to understanding the types of risks that are being added to any book of business. Risk management is a driver of many facets of the security of our nation, corporations and private individuals. The assistance of www.chart-exchange.com

security realm of their insureds, the more likely those policies will expand and be further customized to sectors and organizations. Leveraging all the benefits provided by a cyber insurance policy would give them not only a better secure system, but also premiums that reflect their true potential risks. As companies are assessed before cyber insurance policies are written, the process may identify potential risks or vulnerabilities of which they may have been unaware. The opportunity to remediate is identified in advance of an attack and the emergent cyber security posture is strengthened. TABLE OF CONTENTS

WOULD YOU LIKE TO HAVE YOUR MESSAGE DELIVERED TO 100,000+ FOCUSED INSURANCE INDUSTRY EMAIL ADDRESSES EVERY MONTH?

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NOVEMBER 2017

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VALUEMOMENTUM OFFERS SUPPORT TO PUERTO RICAN COMMUNITIES SEVERELY IMPACTED BY HURRICANES A $50,000 contribution will be made to the American Red Cross to support their disaster relief efforts

alueMomentum Inc., a provider of software and services to the insurance, financial services and healthcare industries, has contributed $50,000 towards relief efforts to help the residents of Puerto Rico to recover from the catastrophic effects of Hurricane Irma and Maria. ValueMomentum will contribute $50,000 to the American Red Cross to support disaster relief efforts.

CHART EXCHANGE

pain people are experiencing,” said Raj Samanthapudi, Chief Executive Officer of ValueMomentum. ABOUT VALUEMOMENTUM

ValueMomentum provides software and services to Insurance, Healthcare & Financial Services firms. Customers choose ValueMomentum due to the company’s track record of delivering value and driving the momentum of customers’ business initiatives. ValueMomentum accomplishes this by applying a time-tested formula of combining strong technology expertise with deep industry experience. For more information, visit https:// www.valuemomentum.com.

“Hurricanes Maria and Irma left a trail of devastation in Puerto Rico. We are deeply saddened by the devastation caused and we hope our contribution will help alleviate some of the www.chart-exchange.com

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ANALYSIS - PRO GROUP Continued From Page11

adequately from Irma.

ALTERNATIVE RISK VALUE PROPOSITION

There is no mystique about what is a captive (“an insurance company that is wholly owned and controlled by its insureds with the primary purpose to insure the risks of its owners”), with the additional clarification there are basically four types:

requirements, what services if any contracted out. Have your captive manager familiarize you with the key aspects of the jurisdiction’s regulations. Prior to the recent spate of natural catastrophes various market segments were going through profound changes. One only need to look at the transportation sector and the other industries with the proliferation of technology advancements. Captives can be an excellent resource to weave your way through these changes.

a) Group/Association Captive; b) Sponsored or Protected Cell Captives;

a captive: a) stabilize insurance costs; b) potential to improve cash flow; and c) direct benefit of greater control over the risk(s). The captive cannot be looked upon as the owners’ “piggy-bank” and the use of the assets should be done with transparency and follow the prudent person rule. There is no guarantee of profits and there needs to be an understanding of the potential for losses.

When looking at the various captive structures, one form which would appear to be of great d) Pure (Micro) Captive. benefit for the members of CHART is the Association Captive. In When looking at this instance the Association the various captive Captive would operate as a reinsurer of the program and structures, one form which would appear to be of great ideally the issuing carrier is not just a pure front and actually benefit for the members of taking risk. c) Single Parent Captives; and

CHART is the Association Captive. In this instance the Association Captive would operate as a reinsurer of the program and ideally the issuing carrier is not just a pure front and actually taking risk.”

Business Point: Regardless of captive structure, since credible data is the key to the kingdom, make sure that you are set up to create that database. This Business Point: A good will benefit you as well as your discipline and test is if your clients enormously of knowing business was impacted and/ the real cost of insurance. or “what if” my business had With this data you can create been hurt by “HIM” (hurricanes In addition to these structures the effective loss control-risk “Harvey, Irma, Maria”) would a you have Risk Retention Groups management program. Working captive structure been of benefit. (RRG) and Self-Insurance Groups with your actuarial firm in creating Our group has a number of auto (“SIG’s”). RRG’s will be covered in a credible information is not that dealers who set up a captive to subsequent article while SIG’s will difficult with today’s technology. protect them from excess flood be touched on at the end of this losses which were not available in article. We at Pro Group work within the the open market. The result was they protected themselves very In looking at the benefit(s) of having See Alternative Risk Value Proposition Page 52 34

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NEWS

CONVELO INSURANCE GROUP SELECTS VALUEMOMENTUM’S IFOUNDRY RATING ENGINE ValueMomentum’s iFoundry with ISO Electronic Rating Content to support rating for commercial lines in all states

alueMomentum Inc., a provider of software and services to the insurance, healthcare and financial services industries, announced today that Convelo Insurance Group (Convelo) has selected ValueMomentum’s iFoundry Rating Engine along with BizDynamics for enabling rating & quoting for commercial lines. Convelo’s E&S rating requirements based from ISO lines, which will leverage ISO Electronic Rating ContentTM (ERC). Convelo is a new and exciting Managing General Agent (MGA) start-up, which began operations mid2017. Convelo is starting with Contractors General Liability for their initial Commercial Lines release. From there, they will quickly roll-out Transportation/Inland Marine, Property, Commercial Package; Personal Lines Home Owners, Auto, Personal Package, Flood, and other specialized programs that meets the needs of their customers, brokers, and agents. Product and Program innovation which aligns to the objectives of their carriers, coupled with the capabilities of the technical platform, will enable Convelo to swiftly be recognized as a serious differentiator. “We are to provide a zero to low touch speed to market digital customer experience”, explains Salvatore V. Abano, EVP & CIO of Convelo. “We are rapidly executing against our plan to establish systems, distribution and establish partnerships with more carriers. Our entire business model is about the way we connect electronically to our various methods of conventional and non-conventional www.chart-exchange.com

distribution channels. We found ValueMomentum’s solution as a good fit to rapidly roll out new products and support our digital technology strategy by leveraging their rating software along with ISO Electronic Rating ContentTM.” “Convelo recognizes the importance of digital technology as a lever to achieve its business goals”, said Abhijeet Jhaveri, Chief Marketing Officer of ValueMomentum. “We are excited to partner with Convelo in their journey”.

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OUR TEAM IS THERE FROM THE START TO THE FINISH NSM Insurance Group Comprehensive Insurance Coverage for: Social Services I Addiction Treatment I Professional Liability Staffing Firms I Workers' Compensation I Collectible Vehicles Coastal Condo Associations I Breweries and Wineries Sports and Wellness I Specialty Aviation

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NEWS

NETRATE SYSTEMS EXPANDS LEADERSHIP TEAM WITH ADDITION OF INSURANCE INDUSTRY RATING SYSTEMS VETERAN AS PRESIDENT Insurance Industry Rating Systems Executive Paul Areida Joins Leading Commercial Insurance Solutions Provider as President

Paul has over 35 years of experience in the insurance industry and over 25 years working in leadership roles at other insurance solution providers. His leadership experience includes president and CEO of FSC., a personal and commercial comparative rating company, Sr. Vice President and National Sales Manager at Applied kemos, MI, October 19, Systems, and President of American 2017 - NetRate Systems, a Driving Records. provider of software and service solutions to the commercial “I am very excited to join the property and casualty insurance team at NetRate Systems”, stated marketplace, announced today Areida. “NetRate’s cloud based that Paul Areida has Submit, Rate, Quote, joined the company to Bind, Issue, Report enhance the leadership solution coupled team and help lead with a deep expertise the company into its in commercial next generation of insurance rating growth. In his new role create a unique as president, Paul will offering for Program oversee all aspects of Administrators, the operation with an MGAs, Carriers, emphasis on building and Coverholders upon the nearly 20 looking to grow years of successfully their commercial Paul Areida delivering powerful business.” solutions that simplify insurance rating and the associated David Jordan, CEO of NetRate submission, quoting, issuing and Systems, said “We are pleased reporting processes. Paul is joining NetRate Systems.

He has an excellent track record of strategically growing businesses. Paul’s experience coupled with recent advances in our product portfolio positions us well for significant growth.”

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ABOUT NETRATE SYSTEMS

NetRate Systems, Inc. supplies commercial lines submission, underwriting, rating, policy issuance, and data reporting and analysis solutions to the property and casualty insurance marketplace, with a focus on managing general agents (MGAs), program administrators, Lloyd’s coverholders, and insurance carriers. Its solutions are designed to streamline the process of selling insurance by eliminating manual references, reducing manual data entry, automating rating through See Areida Joins NetRate Pg 41 NOVEMBER 2017

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NEWS Continued From Page 39

Continued From Page 21

PAUL AREIDA JOINS NETRATE

DEFENDING INTELLECTUAL PROPERTY RIGHTS

the full policy life cycle, simplifying reporting requirements, and delivering business intelligence. NetRate Systems products include nationwide rating of ISO®based General Liability, Property, Commercial Auto, BOP, Crime, and Inland Marine, as well as NCCI Workers Comp. NetRate also offers custom development of all lines of business. NetRate’s solutions are offered via cloud-based web portals, or via web services that power point-of-sale submission, rate, quote, and issue applications. Integrations with third-party data sources and web services support efficient and thorough underwriting and quoting, and streamlined reporting processes. Strong partnerships and integrations with third-party policy administration solutions provide seamless workflows and processes for front and back office operations. For more information, please visit www.netrate.com.

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those entities that have the right to sue for patent infringement but do not make, use, or sell anything that embodies the patent. The USITC’s treatment of non-practicing entities is complex, necessitating the understanding of the commission in an era of licensing. Finally, the unique legal process afforded by the USITC is discussed. The procedural structure of the USITC resolves cases faster than the other forums in which intellectual property disputes may simultaneously be pending. As discussed below, cases before the USITC go to trial faster than cases in the district courts. This shortened litigation schedule demands that attorneys work more quickly to understand the technical aspects involved in their cases and identify the facts and the evidence pertinent to their cases.

forums and avoiding re-litigation of the same issues. Mastering the proceedings before the USITC can help save time and money for clients, giving them faster results that help short circuit long judicial proceedings in federal court. HISTORY OF THE USITC HANDLING INTELLECTUAL PROPERTY CLAIMS

Established by section 337 of the Tariff Act of 1930, the United States International Trade Commission (USITC) conducts investigations of claims brought by complainants, asserting intellectual property rights, including allegations of patent infringement and trademark infringement, against imported goods. Section 337 makes it unlawful to import any article into the United States that infringes a valid and enforceable U.S. intellectual property right. See 19 U.S.C. § 1337 (a)(1)(B).

These investigations under section 337 are set up to prohibit unfair acts and unfair methods of competition involving imports and provide that the importation of infringing goods into the United States is unlawful. Under the Omnibus Trade and Competitiveness Act of 1988, section 337 was amended, making it easier and less expensive to prove a section 337 violation by showing that imported articles have The USITC’s adjudication of a infringed on U.S. patents and other dispute before any resolution is federally registered intellectual available in any other another property rights such as trademarks forum gives the decision weight in pushing resolution in the other See Intellectual Property Rights Pg 54 TABLE OF CONTENTS

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SPECIAL REPORT: WILSON ELSER cyber-attacks have caused property damage dating back to the Stuxnet attack on the Iranian nuclear energy facility by the United States andIsrael in 2010. In 2014, a German steel mill was attacked and a blast furnace was destroyed. In 2015, Fiat Chrysler recalled 1.4 million Jeep Grand Cherokees because it was demonstrated by white hat (ethical) hacktivists that the infotainment system of the vehicle was vulnerable toa remote concerns with the potential safety of cyber-attack that could cede devices that can be hacked or where control of critical operator and a software update to fix a problem is safety controls to remote hackers. not installed. In December 2015, the power grid in western Ukraine was attacked The Federal Bureau of Investigation and shut down for several hours, and other federalagencies, reportedly by a Russian stateincluding the Federal Trade sponsored cyber-attack. Commission andDepartment of Homeland Security, also have INVESTIGATING FIRES identified IoT connected devices INVOLVING IOT SMART DEVICES as being vulnerable to cyberattacksthat can lead to property When fires occur in insured structures, the property insurer will damage, bodily injury or death. investigate to adjust the first-party loss suffered by the policyholder IMAGINED VERSUS REAL THREATS and then look to address the One of the first demonstrations potential for arecovery of monetary of a successful cyber attack was damages by subrogation against the Aurora Vulnerability test a responsible third party, such conducted in 2007 at the Idaho as a product manufacturer, if National Laboratory. A computer the product is thought to have was programmed to cause a diesel played a role is causing the fire. generator’s circuit breakers to open This undertaking requires that a and close out of sync, eventually qualified fire investigator − often leading to an explosion. A video of a Certified Fire Investigator (CFI) this demonstration provided by the orCertified Fire and Explosion Department of Homeland Security Investigator (CFEI) − and forensic was released by CNNin 2007 and engineer conduct an investigation can be viewed on YouTube. in an effort to establish the area of origin of the fire and the A number of other documented possiblecause of the fire. Continued From Page 30

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NFPA 921

One of the primary reference guides used to aid withthe investigation of fires is the National Fire Protection Association’s NFPA 921 Guide for Fire and Explosion Investigations. However, neither the current edition (2014) nor the 2017 edition scheduled to be published shortly addresses “smart” products and the IoT where software malfunctions with previously dumb products have the potential to cause a fire. Another edition will not be published until 2020. Chapter 3: Basic Methodology of NFPA 921 requires use of the “scientific method” to conduct an origin and cause determination by first recognizing the need and then defining the problem. However, when a technological revolution is taking place that is not yet recognized or understood by those charged with the investigation, it raises a question as to the underlying thoroughness and reliability of the investigation process if potential causes are overlooked or misunderstood. Another question arises as to whether current fire investigators and forensic engineers are equipped by education, training and experience to handle the complexity of fire investigations where internetconnected products with advanced software and sensors are deployed. In addition to software or sensor www.chart-exchange.com

SPECIAL REPORT: WILSON ELSER

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failures, NFPA 921 will eventually have to address cyber-based attacks on internet-connected products as a potential cause of fires. An arson or incendiary fire is addressed in Chapter 24 of NFPA 921, where an incendiary fire is defined as “a fire deliberately set with the intent to cause the fire to occur in an area the fire should not be.” Despite recognition by federal agencies that IoT devices can be hacked and cause physical damage, there is no discussion in NFPA 921 about internet-connected devices having the capacity to be used to deliberately start fires. It is worth noting that while Chapter 24 identifies a number of motives behind incendiary fires − including vandalism, willful and malicious mischief, excitement, thrill seeking, attention seeking, recognition, extremism and terrorism − these same motives can be said to apply to individuals who commit cyberattacks.

The Internet of Things: New Vulnerabilities

For instance, Chapter 18: Origin Determinations makes reference in various sections to specific appliances and systems that might contain retrievable data.

18.3.3.11 Fire Protection Systems. … If the system was monitored, records should be obtained from the monitoring service. In some While internet-connected instances, information can be products, appliances and systems downloaded from the central panel are not directly addressed in NFPA to indicate alarm and trouble 921, there is some recognition signal locations and times. … A of the importance of data and qualified technician should be information that these devices employed for downloading the and systems hold that might be data as substantial permanent relevant to a fire investigation. loss of data can occur if this However, these sections are is done incorrectly…. limited to collecting data that is stored on hard drives, not in the 18.3.3.8 HVAC Systems. …Some are equipped with cloud or on servers or other devices systems such as smart phones, tablets manual or automatic dampers designed to control fire spread, and routers. smoke movement, or airflow. www.chart-exchange.com

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Where these devices are present, their specific location and condition should be noted and any activation records should be obtained. The location and setting of any thermostats, switches, or controls for the HVAC system should be identified and documented. 18.3.3.13 Security Cameras. Security cameras that monitor buildings … may be very useful, particularly for “hard” times. Events before or during the fire including, in some cases, the actual ignition and development of the fire may have been recorded. The video recorder may be found in a secure area or a remote location. It should be recovered and reviewed even if damaged.

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SMART HOMES AND PRODUCT LIABILITY 18.3.3.14 Intrusion Alarm Systems. An intrusion system may activate during a fire due to heat, smoke movement, the destruction of wiring, or loss of power. A monitored intrusion system may send a trouble signal to the monitoring station if a transmission line is compromised or power is lost. As with fire alarm systems, attempts should be made to recover the alarm panel history before the alarm system is reset. This frequently requires special expertise. Some alarm systems may record the identity of persons entering or leaving the building. However, none of the subsections referenced recognize that these products and systems if connected to the internet can potentially be the cause of a fire due to software or sensor failure or that they may be vulnerable to cyber-attacks by hackers who could gain control of the products and systems in order to cause damage. In fact, a search engine called Shodan 44

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has servers located around the world that crawl the internet 24/7 to provide the latest internet intelligence. Shodan is used to find IoT-connected devices around the world, including “cars, fetal heart monitors, water treatment facilities, power plant controls, traffic lights and glucose meters.” (See, “The Terrifying Search Engine That Finds InternetConnected Cameras, Traffic Lights, Medical Devices, Baby Monitors and Power Plants,” Forbes, September 23, 2013) Shodan recently launched a new section that lets users browse webcams that are vulnerable because they use the Real Time Streaming Protocol to share video but have no password authentication in place. The image feed is available to paid Shodan members who can search using the site’s filter port.

expertise of the individual doing the analysis. If the investigator lacks the knowledge to properly attribute meaning to a piece of data, then assistance should be sought from someone with the necessary knowledge. Understanding the meaning of the data will enable the investigator to form hypotheses based on the evidence, rather than on speculation or subjective belief. Chapter 19: Fire Cause Determination has language that is very similar to the language in the section above addressing the analysis of the data.

Section 19.4, like 18.4, provides: Analysis of the data is based on knowledge, training, experience, and expertise of the individual doing the analysis. If the investigator lacks the knowledge to properly attribute a meaning to a piece of data, then On a more positive note, NFPA assistance should be sought from 921 does recognize the need someone with the necessary to call in new expertise when the knowledge. Understanding investigator finds that the data to the meaning of the data be analyzed is beyond his expertise. will enable the investigator to form hypotheses based on 18.4 Analyze the Data. The scientific the evidence, rather than on method requires that all data speculation or subjective belief. collected that bears upon the origin be analyzed. This is an essential In the context of the smart step that must take place before home, other chapters that will the formation of any hypotheses. eventually need to address the IoT The identification, gathering, and are Chapter 26: Appliances and cataloging of data does not equate Chapter 26.4.2: The Use and Design to data analysis. Analysis of of the Appliance. the data is based on knowledge, training, experience, and LACK OF STANDARDS TABLE OF CONTENTS

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SPECIAL REPORT: WILSON ELSER Another area that will complicate the investigation process for the immediate and near future is the lack of safety standards. Most common household products that are powered by electricity, batteries or carbon fuels have the potential to fail in various modes of operation, which can lead to fires. This recognition has led to the development of standards through safety organizations such as Underwriters Laboratories (UL) working with industry, government and consumer safety groups. These efforts are used in part to address potential product failures through the development of consensus safety standards that incorporate designs to mitigate against failures. But when a dumb product is connected to the internet and is given smart applications, the smart features may have the potential to cause the failure of the product. How then does the governing product safety standard address this new technology?

Program (CAP) with the introduction of UL 2900. UL 2900 is not a standard; rather, it is an outline for the eventual development of a standard. There are three outlines in all. The first is UL 29001 Outline of Investigation for Software Cybersecurity for Network Connectable Products, Part 1: General Requirements. The other two apply to the health care industry and industrial control systems.

and breaches on connected cars and electric goods have been demonstrated … and … can be life threatening.”

UL’s initial efforts seemed directed toward software vendors, startups, manufacturers deploying IoT products and buyers of these products “looking for trusted support in assessing security risks while they continue to focus on product innovation to help build safer, more secure products, as According to Underwriters well as for purchasers of products Laboratories, UL 2900-1 “provides who want to mitigate risks by a minimum set of requirements sourcing products validated by that developers of network- a trusted third party.” connectable products can pursue to establish a baseline of The scope of the outline “applies to protection against vulnerabilities network-connectable products and software weaknesses, that shall be evaluated and tested along with a minimum set of for vulnerabilities, software security risks controls and weaknesses and malware.” documentation to consider relative to their existing overall product The outline sets out areas to be risk assessments.” addressed, but does not provide any guidance on how this is to UL touts 2900 as “part of a series be accomplished. Areas to be of standards to offer testable addressed include: cybersecurity criteria for networkconnectable products and a. Requirements regarding the At present, none of the existing UL systems to assess software vendor’s risk management standards for home appliances, vulnerabilities and weaknesses process for its product consumer electronics or home- and minimize exploitation, b. Methods by which a product building systems have any address malware, review shall be evaluated and safety requirements to address security controls and increase tested for the presence of software applications and security awareness.” vulnerabilities, software connectivity to the internet. weaknesses and malware UL 2900-1 UL acknowledges that “… c. Requirements regarding security the presence of security risk UL, however, has taken the first interoperability, step to begin to examine this and data privacy become critical risk. In April 2016, it launched when connecting devices via its Cybersecurity Assurance public networks. … security attacks See Smart Homes & Product Liability Page 46 www.chart-exchange.com

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SPECIAL REPORT: WILSON ELSER Continued From Page 45

a product.”

Going forward, the investigation of a fire that may involve an IoT product will need to take into account the vulnerability of the device to hacking. Lack of encryption and use of default passwords from the manufacturer provide easy pathways for hackers to gain access to smart devices. In 2016, a research team at the University of Michigan published a study addressing vulnerabilities with Samsung’s SmartThings platform. The researchers were able to (1) exploit the SmartApp to program backdoor pincodes to a connected locked door and (2) eavesdrop on a smart lock when it was being programmed, disabling the vacation mode and causing a fake fire alarm.

Thus far, UL’s effort is largely conceptual as there is no standard for products that are governed by a UL standard that addresses their software, sensor and internet connectivity applications. The actual criteria of practices and procedures contained in the outline is generalized and more of a “what to do” rather than a “how to” set of requirements. Moreover, there are no existing safety standards controls in the architecture and for anything that is considered an IoT product. While various safety design of a product. organizations and stakeholders on developing Notably the “outline does not are working contain requirements regarding standards that will address issues, functional testing of a product” including security and safety, for the and therefore “contains no foreseeable future technology requirements to verify that is again outpacing the regulatory the product functions as efforts to keep up with the new In February 2016, the Federal designed.” Nor does the outline technological advancements. Trade Commission announced “contain requirements regarding SECURITY VULNERABILITIES a settlement with ASUS, a the hardware contained in

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SPECIAL REPORT: WILSON ELSER

In the smart home arena the issue of interoperability of various platforms of IoT devices is an obstacle to harmonization and a potential area of vulnerability.

Ta i w a n e s e m u l t i n a t i o n a l computer hardware and electronics company, where it agreed that its routers used in consumer home networks were vulnerable to security breaches, placing consumers’ networks at risk for cyber breaches. While the emphasis was on privacy and data vulnerabilities, the insecurity of the router could lead to products connected to the router falling under the control of a hacker. In August 2016, researchers at the DEF CON 24 security conference demonstrated the vulnerabilities of smart lock padlocks and door locks. Others demonstrated how the www.chart-exchange.com

vulnerabilities of smart thermostats to hacking can lead to denial of service. INTEROPERABILITY AND INTERCONNECTIVITY ISSUES

Interconnectivity and interoperability are terms often misunderstood and occasionally used interchangeably. Interconnectivity addresses the ability to connect a device to the internet and to operate and communicate with it, often as part of a stand-alone ecosystem. Interoperability deals with the ability to connect a series of distinct connected devices or TABLE OF CONTENTS

ecosystems so that they can communicate and operate with each other. One useful definition posited in an article by Stephanie Lynn Sharron and Nikita A. Tuckett is “the ability of objects or devices, whether they be sensors, computers or other everyday things, to connect with each other and communicate data in a form and format that can be understood and processed by other persons or entities and is agnostic as to the hardware or software on which the data is to be further processed and stored.”

See Smart Homes & Product Liability Page 48

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SPECIAL REPORT: WILSON ELSER which in turn will be managed what theories of liability can be by a smart phone or tablet from employed to make a legal claim Continued From Page 47 yet another company with its against a smart device. own software. Thus, a washer and dryer made by one company In addition, the design of the will be in a home where there application, or app, that runs is a smart thermostat made the programs for the smart by a second company and a things requires two different smart security system made by a sets of software. First, there is third. In turn, all of these devices the communicationtransmission may be managed by a smart phone software that exists with the smart or tablet made by yet another product, and then there is the company. The smart phone/tablet communication-receiving software may have its own propriety that resides on the smart phone software controlling the smart or tablet. The software may be Interoperability is one of the devises or it may use software proprietary to a manufacturer of foundational challenges facing the supplied by an outside vendor. the smart product or it may be growth of the IoT as each competitor is looking to create its own The potential for an internet-connected operating system to manage and product to experience a software or sensor control its products.

SMART HOMES AND PRODUCT LIABILITY

In the smart home arena the issue of interoperability of various platforms of IoT devices is an obstacle to harmonization and a potential area of vulnerability. All major players have made investments in their own proprietary platforms. Samsung has SmartThings, Google has Thread, Apple has Home Kit and Amazon has Echo. Different software platforms will each have different security issues in addition to the expected software glitches that have already been demonstrated in recent years.

malfunction that can cause a fire is something that will have to be addressed by manufacturers, insurers and other stakeholders in the IoT marketplace.”

Thus, the lack of interoperability among various IoT platforms will likely add more complexity to fire investigations.

sourced from a software vendor. Likewise, the software on the cell phone or tablet may be propriety or sourced.

The complexity of the supply chain of smart home technology will likely make it harder to establish liability when a failure due to either a software malfunction or a cyberattack causes a fire. The legal definition of what is a “product” As new players make their push also is likely to complicate the into the smart home ecosystem, effort to establish fault and assign it is a given that smart appliances liability to a responsible third party. will be in homes, each potentially Software is usually viewed by operating independently on the courts as a service rather their own proprietary software, than a product, which may curtail

Poor security protections in the form of easily guessed default passwords or those that can be breached via “brute force” attacks present an avenue of security risk. Encryption is advocated as an additional measure of security to reduce the likelihood of a cyber-attack that succeeds in gaining access to and control of a smart product or ecosystem.

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E-DISCOVERY AND PRIVACY ISSUES www.chart-exchange.com

SPECIAL REPORT: WILSON ELSER The complexity of smart devices in the home is further compounded by the wide range of different programming systems being deployed by IoT manufacturers. There are, for instance, issues with interoperability − the ability of a system or a product to work with other systems or products without special effort on the part of the customer. As noted, the design of a smart app involves two sets of software: the software that enables communication by the IoT product and the receiving software in the cell phone or tablet from which the consumer controls the product. Multiple parties can be involved with the development of the software for both the IoT product and the control. This further complicates the identification of potentially responsible third parties and the determination of fault. How does an injured party establish that software malfunctioned and caused the product to fail? What kind of information obtained through lab examinations or in pretrial discovery will need to be examined to make this work? IoT devices already have been examined in the context of personal injury lawsuits. A Canadian lawyer has used the data from his client’s Fitbit band in an effort to establish her preand post-accident levels of physical activity. The NFL undertook steps to obtain data during the investigation of Deflategate and attempted to obtain New England www.chart-exchange.com

Patriot quarterback Tom Brady’s cell The potential for an internetphone to examine his emails and connected product to experience text messages. a software or sensor malfunction that can cause a fire is something The question of privacy versus the that will have to be addressed by reasonable needs of litigants is manufacturers, insurers and likely to be a major issue in civil other stakeholders in the IoT litigation when IoT products are marketplace. In addition, because IoT the subject of a lawsuit. The issue of products are vulnerable to cyberdata ownership also is likely to add attacks, manufacturers, insurers complexity to litigation in which a and other stakeholders will have smart product is at the center of a to address the deliberate actions claim. Is the data owned by the of hackers that can induce a failure manufacturer, the wireless service leading to damage. Hence, when provider or the consumer? the failure of a smart product leads to a fire, the challenge of how the It may be ironic that the proliferation smart home application should of smart home devices is being be evaluated and examined as a driven by the very same property potential cause becomes a more insurers who will seek recovery complex undertaking than the for fire losses against an IoT failure of a similar but dumb product. device when it is identified as a viable subrogation target. Lawyers who defend manufacturers In the context of privacy and in product liability fire losses ownership of data, this may create will likely be the first to challenge a conflict issue. One insurer as part expert findings from a fire scene of its promotion of smart products investigation and laboratory has privacy policies that state analysis of evidence and the insurer may use customer artifacts collected post-fire if IoTinformation to process claims, among connected products found at the other things. But if an insurance scene are not addressed in a way company has promoted the use of that takes into account the new smart technology for its insureds and complexities and vulnerabilities. has collected information to create In particular, the ability to ”rule efficiencies and improvements out” an IoT product rather or to monetize the information, than point to it as a cause may should the insurer then have access be more problematic if the to discoverable information that investigator and experts retained may be relevant to a subrogation to conduct the cause and origin claim it may make against a investigation fundamentally do potentially responsible third not understand the complexity party? of the smart products − or until the standards catch up with the CLOSING THOUGHTS technology. TABLE OF CONTENTS

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ANALYSIS - YORK RISK SERVICES Continued From Page 29

CREATING A QUALITY LOSS CONTROL EXPERIENCE thoughts, as well as months of discussions with members of my own team, who have decades of industry experience, I’ve come to believe that two of the major factors that define a quality loss control experience are, surprisingly, rather simple. A loss control provider that consistently turns out a quality product. 1. Spends whatever care and time is necessary in the critical, early stages of the process to really HEAR and UNDERSTAND what the client wants. Many of the downstream quality issues that occur can be traced back to a communication ‘disconnect’ early in the process. We need to pay attention to what our customers are saying and give this part of the process the time it deserves to get it right.

that expectations are in sync before the work begins. It’s our job as professionals to articulate, probe when needed and not let go until we are sure there’s alignment with our client’s goals. Not always easy to accomplish, for sure. In other words, a plain, old-fashioned dose of transparent communication between vendor and client, and a loss control team that ‘owns’ the responsibility for making this happen.

The quality of the loss control reports you receive, and the confidence you have in relying on the information they contain to make critical business decisions is dependent on much more than simply product features and pricing. It’s the loss control team - their experience, professionalism and the care with which they tend to your partnership – that makes all the difference.”

parameters for the survey and reports. In addition to more standard items like turnaround time and attempts to contact insured, going deeper to understand specific expectations can prevent quality issues down the road. For example: •

With multi-unit property owners, should an inspection be performed on every LRO tenant, only a percentage, or only those with a special hazard (like cooking exposures)? • Should all appurtenant structures be included in the survey? • Concerning restaurant programs, is a full cooking supplement required or is a narrative comment sufficient? • And if roofing inspections are required, be sure to clarify what actions inspectors are expected to take (i.e. is performing a visual inspection from the ground acceptable on pitched roofs, or with a flat roof, can it be accessed internally or is ladder access preferable).

A loss control survey is a loss control survey in theory, but each client’s underwriting culture and underwriting guidelines are unique, so beginning the A QUALITY PRODUCT BEGINS HERE The initial stewardship meeting, new relationship aligned on when the Loss Control or expectations and crystal clear on Underwriting Manager meets with their requirements is critical to senior members of the loss control producing a quality product in the vendor team, is the time to discuss end. Whatever the situation, it’s the and set expectations, spell out job of your risk control professional client requirements, and detail any to make sure needs are articulated 2. Takes responsibility for ensuring and heard before execution 50

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ANALYSIS - YORK RISK SERVICES commences. If this process needs to be slow-played a bit to ensure all questions are answered, and all expectations aired, so be it. This is where a quality product begins.

Superior Technology - Good, cutting-edge loss control systems can make life much easier for busy risk managers, more efficiently providing things like:

organization.

ADDITIONAL QUALITY FACTORS TO LOOK FOR

• A greater degree of customization to your underwriting guideline • Program alerts when things get off schedule • Through the use of dashboards, make it easy to • ‘see at a glance’ the status of an assignment • Overall, delivering the information you need quicker, and with much less chance for error

In the end, the quality of the loss control reports you receive, and the confidence you have in relying on the information they contain to make critical business decisions is dependent on much more than simply product features and pricing. It’s the loss control team - their experience, professionalism and the care with which they tend to your partnership – that makes all the difference

The following are also critical aspects of a quality loss control product in my mind, and have the added benefit of being more easily vetted when deciding which loss control provider to engage: Experienced inspectors - The highest quality inspection starts with having the highest quality inspector to do the job. Without exception, a loss control provider that has a team of experienced inspectors is going to produce a higher quality product.

But technology serves a far more important function in the risk assessment process. By automating many of the timeconsuming and labor intensive I believe this so strongly that at tasks that would normally fall York Risk Control, we’ve set the bar to the underwriting team (like high for not only those inspectors email notification and follow-up we hire, but also the recruiters communications), they are freed within our organization that do up for more productive (and the hiring. Our recruiting team profitable) tasks. is held accountable and trained to search for, recognize and vet That’s pivotal for busy risk loss control specialists according management professionals, who to a strict set of criteria which function daily in a pressured, include years of industry and deadline-driven world, yet must lines of coverage experience as always possess the clarity of mind well as previous carrier training/ to make the sound underwriting decisions that drive company experience. profitability. Underwriters need Unquestionably, engaging a loss to be able to spend their energies control provider that hires well- on the critical tasks of properly qualified inspectors stacks the assessing risk, building critical odds in your favor of receiving agency relationships and writing profitable business for their quality surveys and reports. www.chart-exchange.com

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State-of-the-art loss control technology provides the means to accomplish this.

ABOUT YORK RISK SERVICES GROUP

York Risk Services Group, Inc., is a premier provider of risk management, claims handling, specialized loss adjusting, managed care, pool administration, loss control and other insurance services nationwide. York provides risk management and managed care solutions to a variety of strategic partners, including insurance carriers, self insureds, brokers, wholesalers, MGAs, programs, risk pools and public entities. The third largest TPA in the U.S., York delivers customize claims solutions for all lines of business, including property, liability, products liability, ocean and inland marine, environmental, transportation and logistics, construction and workers’ compensation. Based in Parsippany, New Jersey, York and has over 90 offices in the US and a strong international presence. Visit us on the web at www.yorkrsg.com. NOVEMBER 2017

ANALYSIS - PRO GROUP Continued From Page 34

ALTERNATIVE RISK VALUE PROPOSITION following procedures upon an expression of interest to consider creating a captive structure. Phase 1: Preliminary Analysis at no cost Determine basic program requirements Phase II: Creation of the feasibility study with the specific steps to execution Costs are clearly spelled out Business Plan with financial proforma with detailed assumptions Phase III: Approval and post approval requirements Quarterly reporting and review of results vs. plan The timing for the phases is dependent upon the availability of the information. This can range from as quick as six to eight weeks to as long as three to four months. Having gone through this a number of times we work from a wellplanned series of program steps to manage everyone’s time and expectations. All parties need to be responsive throughout the process. 52

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five years. Within the financial area you need to have clearly stated assumptions to include the Demotech, respective costs Inc. (acquisition of (Demotech.com) the business, with its thirty-year administration, history, in addition and marketing). costs to its actuarial and Reinsurance and structure will consulting resources be incorporated has from personal into the feasibility experience proven study performed by the actuary. time and time The level of risk again to be a very in relation to the credible and valuable captive’s capital partner in gaining will be looked at very closely.

The specific information checklist follows a due diligence format. The basic information centers around who is the program manager; the company’s principals and expertise in the targeted class(es); lines of business; systems/processing capabilities; and carrier and reinsurer relationships. When considering the program structure, again there are some general guidelines which includes but is not limited to:

acceptability working with their ratings.”

Your actuarial firm will be a key business partner in the success of the program. If you have your preference a. Targeted classes for a firm we will work closely with b. Size of market you in vetting their work. If you c. Competitors prefer we will recommend several d. Underwriting firms. Whatever firm chosen has to characteristics: limits and coverage be on the domicile’s approved list. requirements As you reflect on this on a first review it seems like a lot of work, which is a e. Admitted vs. non-admitted valid assumption. The result is with f. Regional/territorial factors g. Historical results and the right captive manager this work reliability and availability of the can be managed very efficiently without unduly distracting you from data h. Market demographics: your core business requirements. growing, flat or decreasing Prior to closing we will spend a little When getting into the financial time on Self-Insurance Groups (SIG’s). considerations with the business plan you create the proforma SIG’s at times suffer from unwarranted financials for a period normally criticism due to the mismanagement of several groups which due to their TABLE OF CONTENTS

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ANALYSIS - PRO GROUP manager’s questionable practices led to dissolution creating unexpected liabilities to the Group’s members.

to the members along with being reinvested in the company.

acceptability working with their ratings.

A disciplined admittance process along with aggressive claims management and quarterly actuarial reviews has eliminated reserve and/ or pricing surprises.

In closing, have attempted to touch on some of the key considerations which should go into the necessary considerations when considering the captive route.

Even with these results the basics have to be remembered. SIG’s as required under the regulations operate with Joint and Several Liability. This is all the more reason and a large incentive that membership be limited to those companies committed to strong risk management. The other part of our formula for success is reserves are reviewed quarterly with all The majority of all Self-Insured Groups accounts visited at least twice a year across the nation have developed by qualified loss control staff. The SIG sophisticated insurance operations members need to understand that with refined underwriting, claims, there will be no distributions in the safety and loss control models first three to five years to allow for the that are specifically tailored to the build-up of credible results. unique needs of their members. At Pro Group, we have SIG’s which From a risk basis the SIG normally have been operating profitably for retains the first $500,000 with 12 to 23 years in such industries as reinsurance placed for the excess to construction, transportation, retail meet statutory requirements. services, agriculture and others. The formula for success is built from Prior to closing whether setting some very sound business principles. up a captive, an RRG or a SIG, you may be confronted with a rating The fundamental basis is the Trustees, agency requirement. Being a new who are made up of members of company or due to size S&P, Moody’s the SIG work closely with the Pro or AM Best may not be receptive to Group management ensuring the providing a rating. Demotech, Inc. operations, investments, claims (Demotech.com) with its thirty-year and the service providers to the history, in addition to its actuarial SIG are providing the best service and consulting resources has from and value to the SIG’s members. personal experience proven time Generating underwriting profits and time again to be a very credible and sound investment income has and valuable partner in gaining generated consistent distributions

For more information you can contact: PeterFoley@pgmnv.com Office: 646-568-1865

In the most general sense SIG’s are pools whose members comprise homogeneous industry sectors. A key but at times little known fact is that thirty-six (36) states have SIG legislation in place. This offers a very significant opportunity especially since most SIGs have been set up to write workers compensation, a class of business which we know can be very challenging at times without having to resort to the state workers compensation funds.

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ANALYSIS - WILSON ELSER Continued From Page 41

DEFENDING INTELLECTUAL PROPERTY RIGHTS and copyrights. See Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418, 102 Stat. 1107 (1988). Hoping to incentivize U.S. companies to invest in research and development, Congress amended section 377 to eliminate the need to prove certain injuries to U.S. industries and damages. See H.R. Rep. No. 40, pt. 1, 100th Cong., 1st Sess. 2-7 (1997). Specifically, the amendment abolished the need to show injury in cases in which the alleged unfair act is the infringement of a valid and enforceable United States utility patent, United States process patent, federally registered trademark, semiconductor chip registration, or federally registered copyright. Id. at 154, 156. The scope of intellectual property rights that the USITC will investigate is wide. Both utility and design patents, as well as registered and common law trademarks, infringements may be asserted in these investigations. See 19 U.S.C. § 1337(a)(1)(C). The commission will also investigate claims of other 54

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forms of unfair competition, such as misappropriation of trade secrets, trade dress infringement, passing off, false advertising, and violations of the antitrust laws, which may be asserted. Id. at (a)(1)(E). Section 337 violations can be asserted by U.S. companies with domestic or foreign operations. Foreign owners of U.S. intellectual property rights can take advantage of section 337 if they can demonstrate the requisite amount of domestic activity related to the intellectual property right. Specifically, as long as the owner asserts, for example, a right in a patent, registered trademark, or copyright, and there has been significant or substantial activity with respect to the exploitation of that right, section 337 may be used to protect against infringement. 19 U.S.C. § 1337(a)(3)(A)–(C). Patent litigators need to be prepared to represent a foreign client who needs legal services in the United States to bring a claim before the commission. USITC PROCEDURES

Section 337 investigations are initiated by the USITC after the receipt of a properly filed complaint. The USITC has strict rules for the requirements for the form and content of section 337 complaints, set forth in 19 C.F.R. §§ 210.4, 210.8, and 210.12. See also 73 Fed. Reg. 38316 (Aug. 6, 2008). A commission notice announcing the commencement TABLE OF CONTENTS

of an investigation is published in the Federal Register whenever the USITC votes to institute a section 337 investigation. See 19 U.S.C. § 1337(b)(1). To prove a violation of section 337, the complainant must establish (1) unfair competition, or an unfair act; (2) importation, sale for importation, or sale after importation into the United States of the accused products; and (3) the existence of a domestic industry relating to the product or intellectual property in question. See 19 U.S.C. § 1337(a). In an investigation in which the alleged unfair act is not the infringement of a U.S. patent or other federally registered intellectual property rights, a complainant also must prove injury from the alleged unfair act. Id. at (a)(3). Section 337 investigations proceed very quickly, differing from district court cases, which can drag on for years. Congress intended that the USITC complete most cases within one year, although the statute was amended to eliminate a strict oneyear time limit. Regardless, section 337 investigations are statutorily required to be completed as early as practicable. 19 U.S.C. § 1337(b) (1). As indicated, the majority of the complaints to the USITC involve patents. See Section 337 Statistics, www.usitc.gov. Of the accusations in new filings in 2015, nearly half involved high-tech products, including computers and telecommunications products, and www.chart-exchange.com

ANALYSIS - WILSON ELSER they involved entities that created and manufactured the actual products whose patents were in dispute. Id. The aggressive pace at which cases proceed before the commission is even more significant in the patent realm because attorneys need to have command over the complex scientific and technical knowledge in addition to the litigation skills to proceed at such a speed.

final determination was made on average within 15.8 months after filing. See Section 337 Statistics, www.usitc.gov. All investigations in 2016 were completed on average within 10.8 months after filing. Id.

the long-term disruption to your client’s business that might result from a matter being litigated over several years before the Patent and Trademark Appeal Board or in a district court.

While it likely that cases involving the same intellectual property will be litigated simultaneously

REMEDIES

If the USITC finds that a violation of section 337 has occurred, it is authorized to issue two Understanding the types of remedial orders: procedures and effectively exclusion orders and ceaseand-desist orders. See 19 litigating a matter before the USITC can help leverage expedited U.S.C. §§ 1337(f )–(g). Both types of orders may be resolutions in other forums and issued in the same case. ultimately decrease the long-term Id. Unlike proceedings disruption to your client’s business in the district courts, damages are not that might result from a matter being money an available remedy for a litigated over several years before the violation of section 337.

At the outset of its investigations, the USITC is required to set target dates for completing each case, with a triallike evidentiary hearing being held within nine months to a year after filing. The target date for completion must Patent and Trademark Appeal Board be within 16 months However, prevailing or in a district court.” from the date that the complainants can investigation begins; successfully preclude other otherwise, approval is required. before the USITC, in a district parties from importing, distributing, See 19 C.F.R. § 210.51(a). While court, and even before the Patent and profiting from the sale of parties have 30 days to respond and Trademark Appeal Board, the infringing goods in the United to discovery and motions in the investigation averages for claims States. These remedies are valuable districts courts, the commission before the commission indicate for considering whether to pursue typically only gives respondents 10 that they will most likely be resolved enforcement of patent rights before days. first. The commission’s adjudication the USITC. Patent cases litigated in of a dispute before any resolution district court require application Written discovery and fact is available in any other another of a four-factor test to determine depositions are completed three forum gives the decision weight whether injunctive relief for patent to four months after the USITC in pushing resolution in the other infringement is appropriate. See initiates an investigation. Expert forums and avoiding re-litigation eBay Inc. v. MercExchange, LLC, 547 reports and depositions can be of the same issues. U.S. 388 (2006). The USITC, on the expected four to six months after other hand, does not need to apply initiation of an investigation. The Understanding the procedures this test to issue exclusion orders or trial typically occurs within two and effectively litigating a matter cease-and-desist orders. months of the close of discovery. before the USITC can help leverage In 2016, 16 total investigations expedited resolutions in other See Intellectual Property Rights Pg 56 were completed on merits; a forums and ultimately decrease www.chart-exchange.com

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Set forth in 19 C.F.R. § 12.39, the commission’s exclusion orders and seizure orders are implemented by U.S. Customs and Border Protection. An exclusion order directs the U.S. Customs and Border Protection to exclude articles from entry into the United States. There are two types of exclusion orders: general exclusion orders and limited exclusion orders. See 19 U.S.C. § 1337(g). A general exclusion order excludes all infringing articles, without regard to source. In contrast, a limited exclusion order excludes infringing articles that originate from a specified firm that was a respondent in the USITC investigation. If an entity has previously attempted to import an excluded article into the United States, and the article was previously denied entry by the U.S. Customs and Border Protection, the USITC may order the seizure and forfeiture of subsequent shipments of the article. See 19 U.S.C. § 1337(i). A cease-and-desist order directs respondents in a commission investigation to cease their unfair 56

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acts, including selling infringing imported articles out of U.S. inventory. Unlike exclusion orders, cease-and-desist orders are enforced by the USITC, not by U.S. Customs and Border Protection. See 19 U.S.C. § 1337(f )(2) (providing civil penalties for violation of ceaseand-desist orders).

provided that the respondent posts a bond with the commission.

Upon the conclusion of the 60-day review period, if the president does not disapprove such a remedial order, infringing imports may no longer be imported, and the complainant may seek to have previously posted bonds forfeited Preliminary relief is also available to it. See 19 U.S.C. § 1337(j)(4). to a complainant. A complainant Appeals of USITC orders entered may request, at the time of filing a in section 337 investigations are complaint, that the USITC conduct heard by the U.S. Court of Appeals expedited temporary relief for the Federal Circuit. See 19 U.S.C. proceedings and issue a temporary § 1337(c). exclusion order or a temporary cease-and-desist order, or both, PATENT LICENSING ISSUES effective during the course of the For a license holder of an investigation. See 19 C.F.R. subpart intellectual property right, the ease H. However, there are substantial by which a non-practicing entity additional pleading and proof to bring a claim before the USITC requirements when expedited has evolved. The Omnibus Trade temporary relief is requested, and and Competitiveness Act of 1988 such relief is seldom granted, due did not clarify the significant and to the high standard of proof that substantial activity requirement is required. under 19 U.S.C. § 1337(a)(3)(A)–(C) Upon issuance, USITC remedial orders are sent to the president. Though rare, the president may, within 60 days, disapprove a remedial order for policy reasons. See 19 U.S.C. § 1337(j). During this 60-day “presidential review period,” infringing articles may enter the United States provided that the importer posts a bond with U.S. Customs and Border Protection in an amount determined by the USITC. Similarly, activities prohibited by an USITC cease-anddesist order may continue during the presidential review period, TABLE OF CONTENTS

as it pertained to license holders in the United States. As a result, the USITC and Congress have repeatedly tried to reconcile what constitutes significant activity when a license holder is in the United States but manufactures products elsewhere. As manufacturing moves out of the United States, be it driven by cheaper labor or parts, license holders in the United States have sought to establish that they have a domestic industry based on the Omnibus Trade and Competitiveness Act of 1988’s amendment that www.chart-exchange.com

ANALYSIS - WILSON ELSER If your client is either a licenser or licensee, it is imperative to consult with them about what would be required of them in the event of litigation before the commission. Whether your client is a licensee Patent owners and prospective or a licensor, keeping abreast of licensees should have these issues sorted out long It is crucial for attorneys before a license is issued. to have command of the Cooperation should be specified in the licensing procedures and expectations for agreement to preclude practicing before the USITC because drawn-out legal procedures the outcome can help leverage and court involvement to ensure that evidence of and expedite resolutions in other in the United forums. This knowledge ultimately production States is made available.

extends domestic industry to “substantial investment in (the asserted patents) exploitation, including engineering, research and development, or licensing.” 19 U.S.C. § 1337(a)(3)(A)–(C).

bolsters a non-practicing entity’s ability to base its domestic industry requirement argument on its own licensing.

With respect to nonpracticing entities in the United States that hold licenses to patents manufactured outside the United States, on January 9, 2014, for the first time, the commission held that for licensing activities to satisfy the commission’s can decrease long-term disruption requirements of being a to your client’s business that might Limitations on nondomestic industry, nonentities’ practicing entities must result from a matter being litigated practicing access to the USITC have prove that these are over several years before Patent and been advocated even products that practice Trademark Appeal Board or in the in Congress. In a 2012 the patents. Certain congressional hearing, Computers and Computer district courts.” companies argued that Peripheral Devises, and non-practicing entities Components Thereof, and Products Containing the Same the evolving requirements when should not be able to use licensing (Inv. No. 337-TA-841, decided Jan 9, a matter commences before the to meet the domestic industry USITC is crucial to permit your client requirement because this permits 2014). to continue going about its normal non-practicing entities to threaten This seemingly limits a non- business without disruption. Even an import ban as a means to leverage practicing entity from bringing as a licensor, a patent holder could excessive settlements through early matters before the USITC. However, become enmeshed in litigation resolution. this can be contrasted with the before the USITC by a licensee February 2017 USITC ruling that that needs the patent holder’s A lobbying coalition of private found that a non-practicing entity’s cooperation to provide evidence companies called the “ITC Working licensing activities were sufficient of U.S. production of the patent for Group”joined the debate to advocate to bring a complaint before the purposes of establishing standing. for higher standards against noncommission. In re Certain Silicon- In the first quarter of 2017, six of the practicing entities to preclude them on-Insulator Wafers (Inv. No. 337- 13 investigations brought before from using the commission to obtain TA-1025, issued Feb. 8, 2017). The the USITC involved non-practicing excessive licensing fees improperly ruling reaffirmed that a licensee’s entities. See Section 337 Statistics, activities can be used to satisfy the www.usitc.gov. See Intellectual Property Rights Pg 58 domestic industry requirement and www.chart-exchange.com

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the USITC. The bill could make the domestic industry standard more difficult to meet. As of March 2016, the bill was referred to the House Ways and Means Subcommittee on Trade. Active efforts to limit the access of the USITC’s remedies to practicing U.S. patent holders are evident. THE EFFECTS OF OUTCOMES AND DECISIONS

from accused infringers. The efforts to preclude non-practicing entities, especially those entities whose business models focus on purchasing and asserting patents without making any product, and who garner the incendiary nickname “patent trolls,” even sparked the May 2014 introduction of the Trade Protection Not Troll Protection Act bill by U.S. Representatives Blake Farentheld (R-Tex.) and Tony Cardenas (D-Cal.). The bill had bipartisan support and took aim to preclude non-practicing entities from having standing before the USITC to promote the protection of American manufacturers from excessive and expensive litigation. This bill was reintroduced in 2016 after the original did not make it out of the House Committee on Ways and Means. Private companies that support these efforts include Google, Apple, Ford Motor Co., and HP, Inc. The bill, H.R. 4829, is said to ensure that complainants asserting patent rights have a vested interest in a patent, particularly development of the product described, to bring a case before 58

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In such actions, the United States district courts may issue mandatory injunctions incorporating the relief sought by the USITC as they deem appropriate in the enforcement of such final orders of the USITC. The robust remedies available to complainants are powerful tools that U.S. intellectual property rights holders can use to curtain unfair foreign competition.

In conclusion, the remedies available to complainants of intellectual property rights infringement through the U.S. International Trade Commission are significant and swift. Section 337 makes it unlawful to import any article into the United States that infringes a valid and enforceable U.S. intellectual property right.

Perhaps most important is the swift nature in which the USITC makes decisions. The aggressive timeline from the initiation of an investigation through discovery and trial leaves little room for hesitation. The commission’s tendency to adjudicate a dispute before other forums resolve simultaneous actions, whether The consequences of violations of in the district courts or before commission orders are not to be the Patent and Trademark Appeal approached lightly by infringers. Board, gives the commission’s Successful complaints can be decision weight in pushing awarded an exclusion order to resolution in the other forums block the importation of infringing and avoiding re-litigation of the goods physically. As of December same issues. 31, 2016, there were 101 active exclusion orders. See Section 337 It is crucial for attorneys to have Statistics, www.usitc.gov. Further, command of the procedures and in 2015, the administrative law expectations for practicing before judges issued 15 cease-and-desist the USITC because the outcome orders, the effects of which are can help leverage and expedite pronounced and harsh. Id. Under resolutions in other forums. 19 U.S.C. § 1337(f )(2), violation of This knowledge ultimately can a cease-and-desist order results in decrease long-term disruption a civil penalty of up to $100,000 to your client’s business that per day and may be recovered for might result from a matter being the United States in a civil action litigated over several years before brought by the USITC in the district Patent and Trademark Appeal Board or in the district courts. court. TABLE OF CONTENTS

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