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The Law

Legal Spotlight

A look at the latest decisions impacting the industry.
By: | October 3, 2017 • 4 min read

Invasion of Privacy Exclusion Holds Firm

In November 2012, David Emanuel brought a class action lawsuit against the Los Angeles Lakers basketball team.

Emanuel, who had attended a Lakers game the month before, felt duped after responding to an overhead message displayed on the scoreboard. The message invited game attendees to send a text to a specific phone number with the hopes of seeing their message on the screen.

Emanuel sent a text and received an automated message in return. In the subsequent lawsuit, he alleged that the Lakers sent the response message using an automatic dialing system, which, he said, violated the Telephone Consumer Protection Act and cost him and others in text and data charge fees. They sued for $1,500 and damages.

In 2013, a California district judge dismissed the case, stating that by sending the initial text, Emanuel implicitly consented to receiving a confirmation message. The team settled with Emanuel in 2014 during his appeal.

The Lakers were insured under a ForFront Portfolio insurance policy held by Federal Insurance Co. Federal denied coverage of the suit, because the insurer claimed the TCPA fell under a policy exclusion for invasion of privacy.

The Lakers sued Federal for bad faith refusal to defend or indemnify them. A district judge ruled to dismiss the allegation, agreeing with the insurer that the policy’s invasion of privacy exclusion included the TCPA. The Lakers appealed. A divided panel affirmed the judge’s ruling.

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“The panel held that because a Telephone Consumer Protection Act claim is inherently an invasion of privacy claim, Federal Insurance Company correctly concluded that the underlying Telephone Consumer Protection Act claims fell under the Policy’s broad exclusionary clause,” read the court’s decision.

Scorecard: The Los Angeles Lakers are not entitled to coverage for class allegations that the team sent unwanted text messages to fans.

Takeaway: Insurance policies that exclude privacy-related claims should clarify whether TCPA claims fall within the exclusion.

Cyberattack Costs Insurer Millions

Nationwide Mutual Insurance Co. and its unit Allied Property & Casualty suffered a massive data breach on Oct. 3, 2012. Sensitive information of more than 1 million people was stolen from its databases.

The breach affected both existing and potential customers in 32 states and the District of Columbia. Social Security numbers, driver’s license numbers and Nationwide-assigned creditworthiness scores were made available by the hackers.

Shortly after the breach, the insurer notified the customers that their information was compromised. Nationwide offered free credit monitoring and a $1 million identity theft insurance coverage with no deductible to those affected.

In the August 2017 hearing, state attorneys general from each state alleged that the breach stemmed from a security lapse. Nationwide conceded that there was a “criminal data breach,” yet denied any liability for the exposed information. The company said it took the proper and immediate steps to contain the attack.

The two parties reached a settlement of $5.5 million, to be divided amongst the states and the District of Columbia. The settlement relieves Nationwide from most legal and civil liabilities but not from criminal, antitrust, securities or tax liabilities. A spokesperson for Nationwide said that the company’s security remains compliant with data security laws.

In the end, the settlement did not include allegations of data security law violations. “Protecting consumer data is something that we take seriously,” Nationwide said. The company said it will continue to strengthen cyber-security.

Scorecard: The data breach cost Nationwide $5.5 million, which will be given to those whose information was exposed.

Takeaway: Cybersecurity programs should regularly be updated and reviewed for any potential security risks, even when a program follows security laws.

WC Death Benefits Granted to Widower

A grocery store worker was in her office when she suffered cardiac arrest. A store manager heard her fall and rushed to her aid, but it was too late. Her husband filed for workers’ compensation death benefits, claiming his wife’s death was due in part to the stress of her job.

Probable cause of death was ruled to be cardiac arrhythmia, stemming from arteriosclerotic heart disease, likely worsened by obesity.

The emergency responders’ report stated that coworkers heard the deceased saying “her job was stressing her out,” and that she complained of chest pain shortly before collapsing.

The Workers’ Compensation Board granted the husband workers’ comp death benefits on Oct. 15, 2015. The employer and its carrier appealed.

In the 2017 court hearing, the employer alleged that the cardiac event was due to underlying heart disease. There was no way to prove that job stress caused her heart to stop.

New York workers’ comp law states that barring substantial evidence to the contrary, “an unwitnessed or unexplained death [that] occurs during the course of a decedent’s employment, Workers’ Compensation Law provides a presumption … that the death arose out of the decedent’s employment.”

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Because there was no formal autopsy performed on the deceased, the husband used the medical report as proof his wife’s cardiac arrest was related to the stress of her job. The court ruled the deceased’s work-related stress was a “significant contributing factor,” and her husband should receive death benefits.

Scorecard: The workers’ compensation carrier will pay death benefits to the deceased employee’s husband.

Takeaway: When injury or illness occurs on the job, employers must be diligent in reporting the incident and recording each step taken.

Autumn Heisler is the digital producer and a staff writer at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]