This week in risk management, we talk about the “Wild West” market, companies leaving each other at the altar, and robot-driven taxis. If you’re ready for some twists and turns, you’re in the right place. Let’s go.
Amazon Can’t Dodge Product Liability in Wild West Market
Amazon is the largest online marketplace, but it’s routinely dodged lawsuits alleging one of its products caused bodily injury or damage. Instead, the behemoth blames third-party retailers who technically sell the items. But the recent US Consumer Product Safety Commission lawsuit against Amazon could change all of that.
Interestingly, many massive merchants don’t hold typical responsibility as other online distributors. Naming these merchants as distributors will peg product liability on them, which will help tame this “Wild West” market. We also wonder what impact this decision will have on product recall, as well. If online distributors are responsible for product liability claims, they could also be responsible for the costs to recall harmful products they have sold to customers.
It goes to show that not even top-tier players are beyond the foundational coverage of product liability insurance. We wonder what sort of ripple effect this will have on rates since the premium pool will undoubtedly expand.
New Executive Order Brings Massive D&O Changes
In addition to several items topping President Biden’s to-do list, promoting competition is high on the agenda. The new executive order addressed the abuse of market power, monopoly, and antitrust law enforcement. A total of 72 initiatives promote competition, but direct mandates are few and far between. Naturally, these initiatives could mean more D&O claims risk and exposure.
Here’s the thing, most D&O insurance doesn’t provide coverage for antitrust enforcement actions — only securities claims. So, we’re curious as to how much these new considerations will confuse company leaders. Will insurers reconfigure how D&O policies are structured? Or, are many public companies in for a massive awakening?
Robo-Taxis Launch in Major Cities
Ford, Lyft, and Argo join forces to deploy a self-driving ride-hailing service in the most extensive commercial launch to date. The rollout will start in Miami and Austin, followed by other metropolises. Because of the strategic combination, Argo’s valuation has climbed to a jaw-dropping $12.5 billion.
While many Americans think that autonomous vehicle technology isn’t ready for primetime, others will gladly ditch a human driver for a robot. Still, major concerns for passengers of driverless taxis are hackers and safety control. So, let’s talk about cybersecurity. We saw cybersecurity issues skyrocketed in 2020, but what will this new venture look like? Will this push insurers to write their cyber liability policies more strategically?
Aon & Willis Towers Watson $30B Merger — Called Off
There’s nothing quite like a bride and groom calling it off at the altar with onlooking friends and family. But the red flags start flailing when two well-established companies bolt last-minute. The reason the Aon and Willis merger was called off? According to Aon’s Chief Executive, Greg Case, “Despite regulatory momentum around the world…we reached an impasse with the US Department of Justice.”
Many are pegging this as a victory for the Biden administration in its attempt to broaden competition. One of the primary concerns is health and benefits coverage for employees. But how will the DOJ’s decision impact future M&As? Will companies think twice before pursuing a corporate combination? And how will R&A insurance fit into the equation? Will insurers see an influx of quote requests? We are bright-eyed and bushy-tailed on this one.
Securities Suit Filings Sloping Downward
Cornerstone’s midyear assessment shows a decrease in the number of securities suit filings in 2021 compared to the last half of 2020. The litigation rate has significantly declined, as well. We can attribute these trends to reducing merger objection lawsuits and securities class action filings in federal and state courts. In comparison to other years, 2021 seems to be relatively standard.
SPAC merger transitions and COVID-19-related suites impact these figures. We’ve outlined our SPAC forecast (pg. 20) already, but we expect to experience more ripples from those vehicles in the future. If 2020 taught us anything, though, it was to be ready for anything.