Tag Archives: general liability policy

Space, Aviation Risks and Higher Education

What do you do when a group of precocious students decide to build a satellite and launch it into space? Or, when they decide to build an unmanned aviation vehicle (UAV)—more commonly known as a drone—and fly it over a busy urban market? Or, when they design and launch a few rockets October Sky-style from a training field on campus before heading to a NASA competition for a chance at $50,000 in prize money?

As a risk manager, considering the answer to these questions may cause a heart palpitation or two as you think about the potential effects of these educational opportunities on the educational institution. Not only does the institution face increased liability and property damage risks, but there is also the potential for increased risk to reputation and even regulatory compliance considerations.

Insurance was likely the last thing the students at St. Thomas More Catholic School in Arlington, VA, were thinking about when they began construction on a shoebox-sized satellite called Cubesat. According to a Washington Post article, the purpose of Cubesat, which was released from the International Space Station on Feb. 15, 2016, is to beam photos from 200 miles above the Earth back to computers in their school library. You can view pictures from the satellite here.

See Also: Should We Take This Risk?

Insurance was also, probably, the last thing students from the University of Wisconsin-Whitewater were thinking about in October 2015 when they launched their drone to capture aerial images of the new Whitewater City Market. According to the University of Wisconsin News, the purpose of the project was to respond to the market organizer’s request to geographically depict the organic growth of the Whitewater City Market. A video of the aerial images has been posted to YouTube and can be viewed here.

To the 54 college teams selected by NASA for 2015-2016 NASA Launch Challenge, insurance was likely pretty low on the list of considerations as the teams worked to design, construct, test, launch and successfully recover a high-powered reusable rocket and its payloads. The purpose of the challenge is to encourage participation in STEM fields and to examine innovative solutions to potential issues that may arise during space travel. There is also $50,000 in prize money for the top three teams that complete the challenge. For 2015-16, the competing rockets will be launched on April 16, 2016.

So, what are the risks associated with these types of activities, and how can insurance assist the college in transferring some of these risks?

According to a white paper recently published by Allianz, a large commercial insurer, these types of aviation/space risks can be bifurcated into two areas: (1) ground or pre-launch risks and (2) in-orbit or post launch risks.

Ground risks include:

  • Hazard or catastrophic risk to facilities because of fire. This type of risk can be significantly increased if someone is using flammable chemicals, such as nitrogen or any of the components present in rocket fuel. Keeping these materials on campus can create additional risk for the institution, which may not be contemplated in current insurance programs.
  • Transportation risk increases the risk of property and liability losses. Moving rocket components, including flammable materials, increases the potential for losses to (1) the components themselves and (2) a third party that may be injured as a result of an incident on the road.
  • Liability loss because of launch failure may result in damage to property near the launch site or even injury to a third party, faculty member or student. Failure to take adequate safety precautions during design/construction—working with chemicals, power tools and other materials—may result in increased potential for injury to students and faculty participating in the project.

Post-launch risks:

  • Loss of the object because of malfunction, damage or equipment failure, items that represent a significant investment of time, resources, and materials. Such a loss may result in the inability to participate in a competition, a loss of grant money or additional time spent rebuilding or reworking the project.
  • Liability loss due to in-air collision, falling objects or interference with another aerial object (such as a satellite signal or an airplane’s operating equipment)—these types of incidents may result in significant bodily injury or property damage of a third-party property.

Typical insurance policies maintained by most institutions may not provide adequate coverage for space/aviation risks:

Property policy—Provides coverage for loss or damage to property, equipment and materials of the university. Coverage is generally broad but may exclude: (1) hazardous materials, (2) property in transit or off premise, (3) property not owned by the university and (4) pollution because of the release of a hazardous substance or chemical.

General liability policy—Provides coverage for the injury or property damage of a third party because of the negligence of the institution or those operating on behalf of the institution. Coverage responds to a wide range of standard risks, but there may be exclusions for: (1) aviation risks, (2) loss caused by the acts of a third party, such as a student or contractor, (3) third-party liability related to a discharge of pollutants/chemicals, (4) loss of institutional reputation or cost of a crisis management team, (5) coverage for regulatory fines and penalties for failure to obtain proper permits, etc. and (6) the liability to a third party because of the failure of a vessel to perform as expected or because of a design flaw.

Automobile liability policy—Provides coverage for liability and property damage associated with the operation of a motor vehicle. Coverage responds to a wide range of standard risks, but there may be exclusions for: (1) pollution because of the discharge of a chemical substance transported on or in the vehicle, (2) liability for use of third-party transportation, such as a rental vehicle or bus charter or the use of a personal vehicle by a faculty member or student and (3) property damage to institutional property being transported on or in the vehicle.

There are additional types of coverage that may be needed, including:

Pollution coverage—Including premises pollution (to provide coverage for the institution’s own facilities) and pollution liability coverage (to provide coverage for third-party exposure to pollutants)

Aviation/space coverage—Specialized policies can provide coverage for losses to an aerial vessel or its equipment and, also, for the most common types of liability loss (collision, crash or interference). Note: Special endorsements may be required for drones.

Inland marine rider/policy—Provides coverage for scheduled equipment and property that may not otherwise be covered by the institution’s standard property coverage. This can include coverage for property that is being transported in a vehicle

Crisis management coverage—Provides coverage for loss or damage to the institution’s reputation; this may include coverage for the costs to engage a crisis mitigation team and public relations experts or the cost to take other steps to preserve and restore the reputation of the institution.

See Also: What Is the Future for Drones?

Professional liability—Provides coverage to professionals because of the failure of the design/construction or for the failure of the devise to perform as intended. This coverage may include coverage for damages not related to injury or to property damage— including the financial loss and the costs for rework and redesign.

Not all insurance policies are created equal—individual coverage and policies may respond differently. Please consult with an expert if you if you have questions about coverage for these types of institutional activities.

Should You Insure Your Intellectual Property?

While industrial companies always insure their physical plants, they rarely insure their intellectual property even though it is often the most valuable thing the company owns.

Core IP, which defines and individualizes the company, is most often the company’s inventions — patented machinery, devices and technology. But it could be something as seemingly simple as the copyrighted graphics and designs on a wildly popular designer handbag or a top-selling toy. Trademarks can be invaluable IP — for instance, Coca-Cola’s trademark is recognized worldwide.

Because IP is intangible, it can be easily stolen — though the proper term, “infringement,” sounds more polite, theft is often what it is. An engineer can walk out the door with knowledge about your patented technology and trade secrets. A counterfeiter can copy your designs and trademarks as fast as a computer or photocopier works. The Web, of course, is paradise for infringers.

On the other hand, your company can stand accused of infringing someone else’s intellectual property. Let’s say it’s a series of patents on complex machinery. You’re convinced the suit is groundless, but you still have to hire an expensive law firm and bring in expert witnesses. In the end, you win. Congratulations. You’re still out a few million dollars in legal fees.

Your general liability policy gives you very limited coverage for your liability for your alleged infringements against others. (It’s generally restricted to infringing copyrighted advertising materials.) And it gives you no coverage to sue infringers. If you want significant coverage, you have to get a special policy. 

Given the amount of litigation — for example, 2,830 patent cases in 2006 — IP insurance is well worth considering.

Because there are two potential money pits — someone ripping off your IP and someone accusing you of ripping off theirs — there are two distinct types of IP insurance.

Defensive IP policies take effect when someone sues you for infringing their intellectual property. Even if your company is scrupulous, inadvertent infringement can happen. These policies are also sometimes called “IP infringement defense insurance” or “IP liability insurance.” They cover both your legal costs and the cost of the judgment if you lose. Judgments can run into the millions, and, besides paying out damages, you’ll be forced to stop making the infringing product.

A defensive policy kicks in when another party demands either money from your company or non-monetary relief, such as an injunction. Only a handful of insurers offer these policies. Depending on the carriers, you can buy coverage limits of anywhere from $5 million to $15 million. Minimum deductibles vary, and some insurers also insist on coinsurance, meaning you would pay larger out-of-pocket expenses.

Offensive IP policies are effective when someone else infringes your intellectual property. That is, the policy will provide money so your company can hire a law firm to sue the company that infringed your patent, trademark or copyright or stole your trade secrets. You will have to get permission from the insurer to hire a law firm and start litigation.

Why would you need an offensive policy? Unlike personal liability lawyers, who get paid by taking a percentage of the settlement if they win, IP law firms generally demand cash on the barrelhead for their services. If your company is a startup or a small organization without a lot of money in the bank, you might not be able to afford to hire a topnotch IP litigator to go after the bad guys. If you have a trademark or copyright case, the legal fees might be manageable, but going after a patent infringer takes millions. Your IP could be stolen by a bigger company, and there’d be little you could do about it. If the infringed patents are your competitive advantage, your company might even be forced out of business eventually. There’s only one known insurer that underwrites offensive IP insurance.

Do you need IP insurance and, if so, how much of what kind? There are no cut-and-dried answers. If your company manufactures generic goods like plywood, you may not need it, unless your manufacturing process is a trade secret. But if your company’s inventions, designs and trademarks are crucial to your company’s success, you may. Start by assessing how important your company’s IP is, and how vulnerable it is to being infringed by someone else or having someone claim that you’re the infringer. Once you have a clearer idea of the risks and potential consequences, you can start to investigate IP insurance systematically and determine if it’s worth it.

Ultimately, you may decide you don’t need IP insurance. But the time to investigate is now. Once you have been sued or your IP has been infringed, it will be too late. 

Leap Year: Season 2, Episode 8 – Behind the Hologram


Leap Year Season 2: Episode 8 by Mashable
Maybe Olivia actually learned something about marketing from her paramour, the Livefy CEO, after all. Turns out she was secretly filming the C3D team and posting their startup adventures as a new online series — Behind the Hologram. A startup web series as a plot point in Leap Year, a web series about a startup — it doesn’t get much more meta than that. And in both cases viewers are watching these series to see if C3D can actually get their product launched on time.

Now Bryn’s threatened Andy Corvel’s life and kidnapped June Pepper. Nothing like raising the stakes just when things were starting to feel a little more like a regular old boring startup just trying to make the next billion dollar product. It’s hard to tell exactly what’s going through Bryn’s mind right now, but her witty repartee with Remy the Detective was straight out of Law & Order or some old detective novel. But, for all her quick, acid responses, she might have actually exposed C3D to some real potential issues through the videos she posted on Behind the Hologram.

It’s not so much that Bryn threatened to kill Andy Corvel, that’s serious, but something for the police to address. However, the incendiary remarks she made about both Corvel and Livefye could potentially open C3D up to charges of slander or libel from their competitors, or their benefactor. Most startups don’t threaten anyone with physical harm, but quite a few have gone a little overboard in promoting their product and putting down the competition. Of course, there’s small business insurance to cover this. C3D would be protected from potential claims of advertising injury through their general liability policy. What’s not covered? Kidnapping and death threats. That’s something the team will need to deal with on their own.

So, if the Livefye office is fake and Andy Corvel paid off Derek’s lawyer fees, what exactly has been going on this whole season? And who actually stole their prototypes?