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 meeting in Circular AM-AL-2012-004.

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 ISOnet® — contains articles and presentations designed to keep you informed about recent trends and developments in the field.

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

Follow the links or scroll down for details.

Alternative Energy Production

  • Gas drilling: A process known as hydraulic fracturing, or “fracking,” uses pressurized water, chemicals, and sand to break apart shale rock and release natural gas. Concerns have arisen regarding the potential for the release of toxic chemicals into the environment during the process. Researchers report that the use of injection wells to dispose of wastewater left over from hydraulic fracturing — and not the drilling itself — could be inducing earthquakes. While fracking has gained momentum in the United States, the industry is reportedly just starting to develop in Europe. Various gas and oil companies have reportedly begun developing plans to appraise, explore, and develop gas and oil reserves in rock throughout several European countries. Fracturing with propane is reportedly a developing technology proposed as an alternative to high-volume hydraulic fracturing.
  • Wind turbines: Reports indicate that lawsuits and complaints about noise, vibrations, and resulting decreases in property values have surfaced in several states. The development of offshore wind energy in Europe is reportedly farther along than in the United States. European regulations, standards, and guidelines, however, reportedly have potential deficiencies, particularly if applied to offshore wind turbine projects planned along the hurricane-prone coastlines of the United States.
  • Solar: The Solar American Board for Codes and Standards (Solar ABCs) published a white paper discussing a potential safety issue concerning photovoltaic solar arrays (solar arrays that convert sunlight to electricity). The issue — undetected faults in grounded photovoltaic arrays — reportedly came to light during a review of the investigations of fires involving such arrays. The Solar ABCs paper provides possible mitigation strategies for owners of new and existing systems. The paper is available online at http://www.solarabcs.org/about/publications/reports/blindspot/index.html.

ISO Activity: Recent General Liability Classification Table changes, which became effective September 1, 2011, introduced several new classes addressing solar energy, wind energy, and biofuels. A commercial property general multistate revision, filed in late 2011 for a planned effective date of April 1, 2013, includes new classes that uniquely identify wind towers, solar panel arrays, and electric-vehicle charging stations.

Climate Change

ISO Activity: We’ve been tracking several lawsuits regarding climate change and global warming. The cases include Comer v. Murphy Oil USA, Inc., Native Village of Kivalina v. ExxonMobil Corp., and Steadfast Insurance Company v. The AES Corporation.

On September 16, 2011, in Steadfast Insurance Company v. The AES Corporation, the Supreme Court of Virginia 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. The court subsequently granted a rehearing of Steadfast Insurance Company v. The AES Corporation. On April 20, 2012, the Supreme Court of Virgina affirmed the decision of the lower court and found that there was no allegation that the property damage was the result of a fortuitous event or accident. As a result, the court found that such loss is not covered under the relevant CGL policies.

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

Solar Cycle 24/Space Debris

  • 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.
  • Space debris orbiting the earth reportedly represents a growing threat to spacecraft, astronauts, and satellites.

ISO Activity: ISO’s sister company Atmospheric and Environmental Research (AER) is involved in a research initiative regarding Solar Cycle 24 and space weather. The goals of the initiative are to establish baseline probability of space weather events capable of producing severe disruption to the power grid and to quantify the consequences of power grid interruptions caused by space weather.

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’re 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 planning to file a green buildings coverage option for residential properties in the third quarter of 2012.

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.
  • We’re 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.

Internet Exposures

Employers have raised concerns about their employees’ use of social networking websites during the workday. The National Labor Relations Board (NLRB) issued a report discussing the decision making involved in 14 complaints reportedly stemming from employer social media policies that, according to the NLRB’s acting general counsel, present emerging issues in the context of social media. The NLRB indicates the report is intended to provide guidance as this area of the law develops.

ISO Activity: In a homeowners multistate revision effective May 1, 2011, ISO 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’s 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. The World Health Organization (WHO) is developing guidelines on protecting workers from potential risks of manufactured nanoparticles.

ISO Activity: ISO filed changes to the General Liability Classification Table to introduce several new classes addressing nanotechnology. The classes include nanotechnology distributors and manufacturers. The changes became effective September 1, 2011.

Hazardous Substances, Materials, and Devices

We’re tracking the following topics for future developments: coal combustion residues, atrazine, phthalates, bisphenol A (BPA), cadmium, and perchlorate.

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.
  • A large manufacturer has reportedly agreed to a $750 million settlement of litigation brought by more than 10,000 rice farmers who alleged that a strain of genetically modified rice produced by the manufacturer contaminated the farmers’ rice crops. The farmers claimed that contamination prevented them from exporting the rice to Europe, which banned imports of genetically modified organisms. Also, the Arkansas Supreme Court affirmed a nearly $50 million verdict (including $42 million in punitive damages) for farmers who claimed they lost money because genetically altered rice seeds contaminated the food supply and drove down crop prices. The state supreme court agreed with a lower court’s ruling that applying a cap on punitive damages in this case would be unconstitutional.
  • Synthetic biology is a new technology in which scientists design and fabricate organisms or biological systems not found in nature. The Advisory Committee on Biotechnology and 21st Century Agriculture is charged with examining the long-term effects of biotechnology on the U.S. food and agriculture system and the U.S. Department of Agriculture (USDA). The committee also provides guidance to the USDA on pressing individual issues related to biotechnology. Information about the committee is available online at http://www.usda.gov/wps/portal/usda/usdahome?contentid=AC21Main.xml&contentidonly=true.

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

Supply Chain Vulnerability

Most businesses — manufacturers, retailers, and service providers alike — rely to some extent on other entities to supply materials, products, or services needed to ensure the continuity of their own operations. The interdependence of the many sectors of the business community has become an issue of global concern, especially following recent extreme-weather, earthquake, and tsunami events. Such events have turned the spotlight on the importance of planning to mitigate the risk of supply chain disruption. A World Economic Forum report highlights the need to review risk management practices to keep pace with rapidly changing contingencies facing the supply chain and the related transport, aviation, and travel sectors. The report is available online at http://www.weforum.org/reports/new-models-addressing-supply-chain-and-transport-risk.

ISO Activity: As part of a general multistate revision, ISO has filed revised dependent property endorsements that will enable commercial enterprises to address supply chain loss exposures more fully. The proposed effective date is April 2013. The endorsements appear in Circular LI-CF-2012-001.

For more information . . .
. . . on any of these topics, please call Jeffrey De Turris at 201-469-2697, or send e-mail to This email address is being protected from spambots. You need JavaScript enabled to view it..