Dont rest on your laurels as liability trends continuously evolve

26 March 2015Jonathan Faurie

If you were trend spotting in the fashion industry, you would most likely pick up
on the latest trends before anyone else does. This is a function the insurance
industry would desperately like to do as we move towards a more risk based
society.
This is a particular area of concern for niche liability insurers as their industry is
more affected by the changing environment than your conventional insurers.
Some of the growing trends in the market were highlighted at the SHA (Stalker
Hutchinson Admiral) Broker Training Day, which was held in early March.
Gargantuan growth
Since 2000, the rate at which technology has had an increasing influence on the
world has been amazing. There is no industry in the world that is not influenced
by technology, and the insurance industry seems to be one of the industries
where this growth is the most pertinent.
In the past, you could mostly anticipate an attack because you could see the
signs that built up to an attack, but how do you prepare yourself against an
attack you do not see coming? Danny Myburgh, Chairman of the Cyber Forensic
Forum South Africa, points out that the number of people who have internet
access at home has increased from 1.4 billion in 2009 to 16 billion. Currently, this
means that anyone with a computer and a well thought out plan can be a
criminal.
On average, technology users around the world send 108,7 billion e-mails a
year. There is also an average of 2.8 billion google searches a year and 144
million tweets sent a year. If we look at this from a criminals perspective, they
can gain access to private information through spyware, spoofed websites and
illegal access to data, as was the case in the Sony hack earlier in the year. If
criminals get hold of your laptop or mobile phone, your life is over, says
Myburgh.
Go green or go to jail
Apart from cybercrime, environmental liability is the fastest growing form of
liability in the world. Lucinda van Rensburg, MD at legal compliance firm Implex,
says the quickest way for a company to find itself on the wrong side of the law is
to contravene the National Environmental Management Act (NEMA).
The ambit for prosecution under NEMA is quite broad, so there needs to be
proper compliance and defined communication channels within companies.
Every person who causes, has caused or may cause significant pollution or
degradation has a duty of care to minimise the effects of their actions and to
rectify their impact in the form of rehabilitation, says Van Rensburg.
What is interesting is that if found guilty of an offense, NEMA carries the second
biggest maximum penalty in the South African legal system besides the
Consumer Protection Act. Maximum penalties as defined by the NEMA Act
include a fine of R10 million, imprisonment of ten years, or a
combination of both punitive measures.Then there is also the rehabilitation
costs and the suspension of activities that need to be taken into account.
How well are clients covered?
There are a few aspects which needs to be looked at when it comes to
environmental cover. Obviously there is a duty of Directors and Officers (D&O) to
ensure that the business processes are environmentally compliant. Never the
less, D&O cover needs to be taken out by companies who want to avoid
punishment.
Anton Meyer, Executive Head at SHA, shows that the ambit of NEMA is even
more far reaching as previously thought as it also stipulated that fault lies with a
Director for any time they represented the company, past or present, so this type
of liability does not just ride off into the sunset.
Typically, Directors and Officers will be held liable for fines in their personal
capacity. This is not something that a conventional D&O policy would cover.
There is also no coverage for guilty findings or claims following an environmental
impairment.
An interesting aspect to look at here is the cover for reputational damage
following a violation of NEMA. If we consider the information provided above
regarding the amount of data that is being transmitted in the world, particularly
over social media, the current suspension of duties is the least of the companys
worries.
Editors Thoughts:
They say that insurance is not a game for sissies, and the liability industry is
proof of this. What we need to be aware of is that claims in this industry is
increasing at a rapid rate as companies come to terms with regulatory changes
or the general workmanship of their employees. It should be an easy sell for
brokers, but you need to make sure that your clients are sufficiently covered if
we bear in mind the punitive measures they could possibly face. Please comment
below, interact with us on Twitter at @fanews_online or email me your
thoughts jonathan@fanews.co.za.