Emerging Issues

ISO regularly monitors technological, social, and business issues — as well as legislative, regulatory, and legal developments — that may affect our insurance programs. We modify our programs to reflect changes in all those areas.

ISO’s staff also actively pursues emerging issues and long-term trends that may affect the insurance industry. We discuss those issues with our insurer panels, and we have a special Emerging Issues Panel that helps us identify important future concerns. You may review the agenda of our last Emerging Issues Panel in circular AM-AL-2011-009.

We also consider the effects of emerging issues on enterprise risk management (ERM). ISO’s enterprise risk management web portal — Enterprise Risk Management for Insurers on ISOnetSM — contains articles and presentations designed to keep you informed on recent trends and developments in the field.

Here’s a selective list of some of the issues we’re watching now:

Alternative Energy Production

  • Gas drilling: Reports have surfaced regarding concerns about the drilling process used to extract gas from shale rock. A process known as hydraulic fracturing, or “fracking,” uses pressurized water, chemicals, and sand to break apart the shale and release the gas. Concerns have arisen regarding the potential for the release of toxic chemicals into the environment during the process.
  • Wind turbines: Reports indicate that lawsuits and complaints about noise, vibrations, and resulting decreases in property values have surfaced in several states.

ISO Activity: Effective September 1, 2011, ISO implemented changes to the General Liability Classification Table to introduce several new classes that address solar energy, wind energy, and biofuels.

Climate Change

ISO Activity: We’ve been tracking several lawsuits alleging that greenhouse gas emissions create a nuisance. They include Connecticut v. American Electric Power Co. and Comer v. Murphy Oil USA, Inc. We’ve also been tracking other cases regarding climate change and global warming, including Native Village of Kivalina v. ExxonMobil Corp. and Steadfast Insurance Company v. The AES Corporation.

On June 21, 2011, the U.S. Supreme Court ruled in Connecticut v. American Electric Power Co. that the plaintiffs (including Connecticut and several other states bringing suit against American Electric Power and other utilities) generally cannot maintain federal common law public nuisance claims to seek court-imposed limits on greenhouse gas emissions, because the Federal Clean Air Act — and EPA actions the act authorizes — displace such claims. On September 16, 2011, in Steadfast Insurance Company v. The AES Corporation, the Virginia Supreme Court ruled generally that, under the commercial general liability (CGL) policies at issue, Steadfast does not have a duty to defend AES for global-warming-related claims asserted against the utility.

We’re also tracking information focusing on how directors and officers liability (D&O) policies could potentially become involved in associated claims and lawsuits.

Electromagnetic Energy

Some scientists reportedly expect a new active period of solar storms (Solar Cycle 24) to peak in May 2013. In today’s technology-dependent world, there are increasing concerns about the vulnerability of electric distribution and communications systems to solar storm activity.

ISO Activity: We are following the issue of artificially generated electromagnetic energy with regard to potential damage to electronic equipment and property. For commercial lines, we’ve updated various exclusions to make them more specifically reflect the current technological understanding of how electromagnetic energy (including electromagnetic pulse or waves) and microwaves affect power sources and associated systems. We are considering changes to personal lines policy language to address the same issues for GPS systems and other consumer electronics.

Food-Related Exposures

ISO is following such issues as food-related illnesses (including the severe E. coli outbreak reported in Europe), childhood obesity, and the use of bisphenol A (BPA) and other chemicals in food packaging. Many substances reportedly leach out of the packaging and into food.

Green Movement

We are tracking reported concerns about potential increased products liability risk associated with green building materials. A lack of qualified and experienced contractors installing such products — many of which are new and untested — could lead to increased risk.

ISO Activity: ISO filed a commercial property coverage option — and related rating information — for green upgrades. The filing became effective March 1, 2010, in most jurisdictions. For personal property, ISO is researching and developing a green buildings coverage option for residential properties.

Hazardous Products and Recalls

  • Recently, many consumer products manufactured outside the United States (for example, in China) have been subject to recall because of defects and contamination. Consumers have become increasingly aware of the safety of consumer products, such as toys, food, and medicine manufactured outside the country.
  • We are tracking a reported increase in the amount of counterfeit construction components and materials — ranging from circuit breakers to structural steel — produced and sold. Such items may not meet the quality or safety standards of the genuine products. The proliferation of counterfeit products could lead to supply chain and distribution issues, especially as the use of the Internet for commerce and equipment sourcing makes the sale of such items appear legitimate. Another reported type of counterfeiting involves forged labels, such as fake Underwriters Laboratories stamps on untested products.

Internet Exposures

Employers have raised concerns about their employees’ use of social networking websites during the workday. The U.S. Supreme Court, in Ontario v. Quon, addressed the issue of privacy of workplace texting and found that a city audit of an employee’s text messages on a city-owned pager was a reasonable search under the Fourth Amendment.

ISO Activity: In a homeowners multistate revision effective May 1, 2011, ISO has filed an optional endorsement that provides personal injury coverage within an aggregate limit. The slander, libel, and invasion of privacy exposures typical under personal injury coverage may potentially include some Internet and electronic publications. The endorsement addresses concerns that, because of the widespread use of personal blogs and social networking, some insurers may not wish to provide coverage for such exposures under the “per offense” limit of liability in the existing program.

ISO commercial lines staff is studying the potential effect of increased blogging, cyber bullying, and electronic social networking on certain coverages under our commercial policies, specifically with respect to personal and advertising injury coverage and employment-related practices liability coverage.

Nanotechnology

  • There is a growing body of science founded on the concept of building products, processes, and machines at the molecular level. There is also a good deal of concern about this technology and unexpected consequences. The National Nanotechnology Initiative (NNI) coordinates federal efforts in nanoscale science, engineering, and technology. Additional information for the group and its participating agencies is available on the NNI website.
  • A report caused concerns about health risks to workers who may be inhaling carbon nanotubes during the manufacture of certain products. The carbon nanotubes resemble asbestos fibers in appearance, raising fears that they may cause illness similar to that linked to asbestos. Several publications have reported that a team of scientists has used an enzyme found in white blood cells to break down carbon nanotubes into harmless components.

ISO Activity: ISO filed changes to the General Liability Classification Table introducing several new classes that address nanotechnology. The classes include nanotechnology distributors and manufacturers. We have proposed an effective date of September 1, 2011.

Hazardous Substances, Materials, and Devices

We are tracking the following topics for future developments: coal combustion residues, mercury, atrazine, phthalates, bisphenol A (BPA), cadmium, indium tin oxide, and various recycling options for compact fluorescent light bulbs.

Genetically Modified Organisms

  • The FDA has proposed regulations that would allow the commercial use of genetically engineered animals. It appears that the regulation does not require labeling of meat and other food from genetically engineered animals. The FDA is actively considering the use of genetically modified animals for medical experiments and as a food source. The FDA is also considering whether to approve a genetically engineered version of Atlantic salmon. If approved, it would be the first time the government allows sale of genetically modified animals for consumption.
  • Synthetic biology is a new technology in which scientists design and fabricate organisms or biological systems not found in nature. Potential dangers of such experiments include accidental release of unintentionally harmful organisms or systems and malicious design and release of intentionally harmful organisms or systems — for example, as weapons of war or terrorism. More information is available at the Synthetic Biology website.

ISO Activity: ISO is considering the merits of introducing a liability exclusion for injury or damage from genetically modified farm personal property.

For more information . . .
. . . on any of these topics, please call Jeffrey De Turris at 201-469-2697, or send e-mail to jdeturris@iso.com.

Or suggest an emerging issue for consideration by ISO’s Emerging Issues Panel.