COVERAGE ACROSS BORDERS: INTERNATIONAL INSURANCE CLAIMS Kelly B. Castriotta, Arch Insurance Group Heather W. Habes, Kilpatrick Townsend & Stockton LLP Christine Hiler, Hanson Bridgett LLP Kirsten C. Jackson, Kasowitz, Benson, Torres & Friedman LLP Evie Lee, International Medical Corps October 20, 2016

Today’s Roadmap Increase of cross-border operations Types of insurance coverage that might be relevant to cross-border risks Unique international insurance coverage issues Key considerations for structuring an international insurance program

It’s A Small World Companies increasingly seek to build an international platform Challenges of cross-border operations Employees and property abroad Non-English speaking countries Different laws and regulations Presents unique insurance coverage issues

Multinational Operations Interaction between local offices and multinational company Protecting employees sent abroad and those that are hired abroad Key challenges and considerations for in- house counsel

Potential Cross-Border Liabilities Third-Party Claims Claims by customers or other third parties for bodily injury, property damage, etc. Loss incurred as a result of investigations, enforcement actions, employee claims, etc. First-Party Exposures Theft by employees or vendors Business interruption or extra expense

Potential Cross-Border Liabilities Companies based in the United States that have foreign operations abroad, including subsidiaries or joint ventures Companies with employees who travel or are stationed abroad Companies that produce, sell, distribute, or export products that may be used or cause injury or property damage abroad

Relevant Third-Party Coverages Commercial General Liability Directors and Officers Liability Pollution Legal Liability Errors and Omissions Employment Practices Liability Other possible coverages

Examples Implicating Third-Party Coverages No. 1 – A class action is filed against a multinational corporation in the U.S. alleging design and/or manufacturing defects sold to customers in France. No. 2 – A U.S. oil company drilling in Ecuador is sued for damage to surrounding homes and injuries to persons living near drill sites.

Relevant First Party Coverages Property, Business Interruption, Extra Expense Crime/Fraud Other possible coverages

Examples Implicating First-Party Coverages No. 1 – A U.S.-based company learns that a vendor in its Chile office has been improperly stealing merchandise. No. 2 – Heavy winds cause tree to fall onto a warehouse located in Spain.

International Coverage Issues Coverage Territory Terrorism/war exclusions and coverage Political/Civil Unrest coverage Choice of law and venue considerations Foreign Policy language

Coverage Territory Damages caused by an “occurrence” in the “coverage territory” Location of the “suit” and not the occurrence Beware of “gaps”

Terrorism And War Exclusions Following 9/11, new endorsements became available that excluded war, military action and terrorism The clause excludes coverage for loss or damage caused directly or indirectly by:: War, including declared or undeclared war; Warlike action by a military force; Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority Consider effect of terrorism coverage

International Terrorism Coverage Government-Backed Insurance Schemes September 11, 2001 United States Terrorism Risk Insurance Act of 2002 United Kingdom (Pool Re) Declarations by the government of event

International Terrorism Coverage Standalone Terrorism Coverage No required government declaration Property Damage and Business Interruption Multiple attacks as a single event

Political/Civil Unrest Coverage Different from terrorism coverage Triggers for coverage Additional considerations

Business Interruption Coverage Loss to covered property Loss caused by covered cause Local policy coverage

Compare And Contrast Government declaration might be needed TERRORISM COVERAGE POLITICAL/CIVIL UNREST Government declaration might be needed Coverage to consider for all countries, and might be mandate to obtain Business interruption may be covered by standalone No declaration from the government needed to trigger More important in countries with general unrest/less secure/higher crime rates Business interruption likely covered Compare And Contrast

Choice of Law and Venue Loss abroad What court will adjudicate the case? International insurer? Choice of law clause – given effect unless enforcement contrary to public policy Venue considerations

Policy Issued In Foreign Language Interpretation of terms? Translate the policy. Ambiguity based on differing translations. Seek counsel conversational in both languages to advise.

Constructing An International Insurance Program Underwriters being asked to write on a global basis “Worldwide coverage” provision might not suffice Specific locations needed Kelly to present. Possible question – how can the insured work with the insurer to ensure that all of the

Admitted Insurance Purchase domestic insurers and brokerages for local access Liabilities backed by state’s guaranty fund Contrast with non- admitted Taxes Insolvency Kelly to present

Admitted And Non-Admitted International insurance program could include both admitted and non- admitted Potential issues Delayed payment/fines Specific prohibition Fractured result Kelly to present.

Controlled Master Program Stand-alone coverage Issued to parent company and applies to international operations Still need to confirm compliance with local requirements Kelly to present – possible questions: Does the master policy act like umbrella or excess coverage? How do Sirs usually work for master policies? If the company has paid the SIR under the local policy, and the master policy is excess when the local policy is exhausted is there typically another SIR that the company will need to pay before the master policy is on the risk?

Key Steps to Evaluating Your Cross-Border Insurance Program Involve relevant stakeholders to identify business goals and limitations, cross-border risks and liabilities, conduct risk assessment and develop risk profile Review existing coverages – look for gaps Involve your broker Involve international and local counsel Interpretation of policy terms Claim presentation, negotiation, and mediation Coverage litigation and arbitration Evie – Discuss that this is an important part of the work that you do with IMC each year.

Questions?