Recently a federal court ruled that Chubb did not have to pay $138 million relative to Target's 2013 data breach. I am not an attorney so I am not suggesting anything that follows is a legal interpretation as such. I am simply focused on the importance and dwindling importance of insurance.
From what I read, much of that case depended upon whether the payment cards were damaged versus the decrease in property value. The breach clearly compromised the payment cards, but it was argued the cards did not completely lose their ability to be used. The cards lost value, but the lost value was not insured. Only loss of use damages were insured. The judge wrote, "Here, the record is devoid of any allegation or evidence as to what the value of the use of the payment cards is, either to Target's customers or to the payment card companies, ..." Now, maybe if in the judge's opinion Target had provided evidence relative to the value and loss of value, the judge would have decided differently.
Target evidently had used case law relative to property damage in the form of real estate property damage. According to the article I read in the Insurance Journal, "the court told Target that the Concrete Units case did not apply because Target did not present any facts regarding the value of the plastic payment cards and thus the question of a diminution of the value of the cards was not at issue."
Again, if this case was decided per the coverage terms, I don't really have a concern specific to this case. However, the forms that are being sold are making insurance follow the path of the dinosaurs to extinction. This world now consists of virtual currency. Aon did a study that showed 80%+ of the S&P member companies' value was in the form of intangible assets. Intellectual property is far more valuable to a company today than real estate. This is the data age. This is the knowledge age. This is not the concrete and plastic age.
So much of the COVID claim legal arguments involve the definition of property damage. I have zero dispute with the interpretations that I have seen denying coverage. Again, that is not my point. My point is that businesses need virus coverage far more than they need fire coverage. Businesses need quality cyber coverage more than theft coverage. Businesses need quality business income coverage far more than they need contents protection.
To focus so hard on real property when it is not as important when compared to what is important (i.e., intellectual property) to businesses today means that businesses will turn to other solutions. They must find better solutions than what the insurance industry is currently offering.
It is time for the people running insurance carriers to accept that the U.S. economy is no longer based on the same variables that existed when they graduated college. Today’s assets are not the same as the collection of assets that ran our economy in the 1970's. Assets now are largely intangible. Intangible assets are property just as much as tangible assets -- they run the economy now and need to be insured.
Someone told me the other day that the reason this change of focus has not happened is because it is difficult. So? It is really not that difficult if we quit thinking about insurance within the format of a 1970's property form and the opportunities are fantastic.
Let me know if you wish to remain in the past or move forward at the broker or carrier level.
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