WORLD LATETS NEWS BY Barry Glover: March 2012

A unique liability insurance policy put together by experts in the dietary supplement and herbal industries was recently rolled out at the Nutrition Business Journal Summit Conference in Dana Point, CA. Although initially focusing on the dietary supplement/herbal product industries, the coverage can apply to any business. Of particular significance is coverage for Proposition 65 lawsuits, which have proliferated in California. Companies are experiencing the hurt of “bounty hunter” lawsuits including civil actions by various state or local authorities.

False Advertising Insurance

Before this policy was announced, there was no coverage to be had for "false advertising.” Sadly most people figure they have such insurance under the “Personal and Advertising Injury” division of their commercial general liability policy. The truth, typically discovered following a lawsuit for false advertising comes in the door, is that a standard commercial liability policy contains absolutely no insurance for allegations of false advertising. With the announcement of this recent policy, insurance is now obtainable. The new policy particularly defines what constitutes “false advertising” which will trigger the coverage.

Proposition 65 Coverage

Again, heretofore there has not been any insurance coverage around for the financial consequences of enforcement of the provisions of California's Proposition 65. As a practical matter, allegations of high levels of lead have been the largest single cause of litigation, which could be initiated by public enforcers such as state or local district attorneys or private plaintiffs suing “in the public interest.” Experts have said that there are perhaps thousands of merchandise sold in California with lead levels exceeding the legal threshold, and without the proper warning labeling mandatory on the packaging of such products. Companies selling these products without appropriate analytical testing or the warning are “at risk” according to Frank Jaksch, President of ChromaDex, an Irvine, CA-based testing laboratory (www.chromadex.com ).

Typical Proposition 65 settlement expenses, which some have labeled as “legalized extortion,” include defense costs, plaintiff's attorney costs, civil penalties, and payments in lieu of civil penalties. According to statistics gathered by a leading trade association the average Prop 65 settlement cost, including attorney fees, exceeds $100,000.

Availability of Coverage and Limitations

The Prop 65/false advertising insurance is an expansion of coverage under one of the policy modules called Content Liability for Media Companies and Advertisers. This module provides extensive coverage for perils arising through creating and distributing content for all forms of communications together with print, digital and audio media. Companies that heavily make use of diverse media to advertise might by now have this form of coverage. The Prop 65/false advertising insurance is an extension of insurance beneath this module and can not be purchased on a standalone basis.

The insurer is at the start limiting two elements of Prop 65 settlements, civil penalties and/or payments in lieu of civil penalties, to a $100,000 maximum sub-limit of insurance, which could be negotiable and amplified under specific conditions.

The new policy also contains a module for insuring first-party and third-party costs arising out of a breach of data security, as well as notification costs, data restoration, crisis management, credit monitoring, cyber investigation, cyber extortion, and civil fines and penalties.

SOURCE: http://www.articlecity.com/articles/business_and_finance/article_16027.shtml

WORLD LATETS NEWS BY Barry Glover

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