This and That by Dennis Wade

Of late, insurers who write crime and fidelity coverage have been “spooked” by “spoofing” scams in which bad guys use spoofed emails to trick company executives to wire transfer funds to phony accounts.

Curious about this phenomenon, I Googled “How do you spoof an email?”  It’s shockingly easy as I learned from watching You Tube how-to videos and reading scores of articles that popped from my simple query.  And the very ease of spoofing is at issue in Medidata Solutions, Inc. v. Federal Insurance Company, a matter about to be heard in the Second Circuit.

In that case, Federal wrote “Funds Transfer Fraud” and “Computer Fraud” coverage.  In 2014, Medidata sustained a loss when it wire transferred close to $5 million dollars from its account at Chase Bank to an account in a Bank in China that proved to be the account of a fraudster and not the party that Medidata thought it was paying.

In the coverage contest in the District Court, both sides agreed that spoofed emails, seemingly coming from the plaintiff’s CEO, tricked authorized employees to trigger the wire transfers. Federal argued its coverage was limited to third party hacking or otherwise a physical intrusion into the company’s computer system or bank account. But Federal contended that simple spoofing scams – – resulting in authorized transfers by the insured itself – – did not fit within the embrace of its coverage.  The District Court disagreed with Federal’s reading of the coverage grant, finding the wording wide enough to embrace a scheme in which a spoofed email prompted an employer to trigger a wire transfer.

That this issue is central to Crime and Fidelity insurers is made plain by the amicus brief submitted by The Surety & Fidelity Association of America (SFAA), an organization that drafts fidelity and crime insurer policy forms.  See, Medidata Solutions, Inc. v. Federal Insurance Company, Brief of Amicus Curiae Supporting Reversal.

In essence, SFAA argued that if the Circuit accepts the ruling below – – that a simple spoofed email scam triggers computer fraud coverage – – the availability of such coverage will likely either become too expensive or too burdensome because of cyber security requirements likely to be imposed by insurers.

The outcome of this contest, whether for against Federal, will no doubt prompt wording revisions in crime and fidelity policies – – and so it is a case well worth following.  But as I reflect on this post, I find it a bit scary that a simple Google search explained in great detail how to perpetrate a fraud.  I thought more “phishing” would be required.  Look that term up if you are curious or if you want more information on how to commit a cyber-crime.

And that’s it for This and That.”

This and That by Dennis Wade

In American parlance a “cake walk” is an absurdly or surprisingly easy task.  But this December when the United States Supreme Court hears Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission, the challenge will be anything but a “cake walk.”  In fact, to decide the case, SCOTUS may have to decide whether a “cake” qualifies as a work of art.

The legal fight started when Colorado baker Jake Phillips refused to create a specialty cake for a same sex couple’s forthcoming marriage, claiming such a task would be contrary to his deeply held religious beliefs.  This refusal led to a complaint before the Colorado Civil Rights Commission charging discrimination based on sexual orientation, a clear violation of the Colorado’s anti-discrimination law.  The Commission agreed with the aggrieved couple and so did the intermediate Appellate Court, finding that supplying a cake did not constitute a “message” in relation to the propriety of same sex marriage.  It was, well, like selling a hamburger or some other commodity.  The Colorado Supreme Court refused to hear the case but, after much discussion, SCOTUS agreed to hear the matter.

The case, which has a cake at its center, pits the 14th Amendment (equal protection under the law) against the 1st Amendment (the sanctity of religious belief and expression).  On the surface, it would seem, regardless of the high court’s spectrum, from liberal to conservative, that there is no right to refuse to sell a product in a public place premised on bias or discriminatory animus.

But here, the baker, Jake Phillips, contends that his cakes are works of art, and that he ought not be compelled to create a work of art, a specialty cake, that violates his religious beliefs.  Anything else in the bakery, already made, is up for sale to anyone, Phillips claims.  But the line Phillips wants to draw is the right to refuse to create a work of art, a cake.  Scores of amicus briefs have been submitted aimed at proving that a cake can indeed be a work of art.  One brief is filled with vivid color photos of custom cakes in various exotic shapes.

So what does the Masterpiece cake have to do with insurance issues, the usual subject of my blog?  It vividly illustrates how important decisions often turn, not on legal principles, but on vexing questions, bordering on the metaphysical (Is a loss fortuitous?  And, yes, can a cake qualify as a work of art?).  My prediction: SCOTUS will somehow “ice over” (ouch!) the cake as art issue and affirm the ruling below 5/4, with Justice Anthony Kennedy writing the majority opinion.

And that’s it for this This and That. And to the bakers of the world, amateur and professional, art aside, I like chocolate, lots of it. 

This and That by Dennis Wade

On October 31, 2017, Halloween, at about 3:15 p.m., I left our Maiden Lane office to walk to the World Financial Center where I was scheduled to meet with a client. About ten minutes into my walk, my paralegal Suzi called me, “Dennis, be careful, I saw on the news scroll something about a “mass shooting near Chambers Street.”  “Thanks, I’m fine,” and I kept walking west.  When I reached West Street (the Westside Highway to New Yorkers), I saw a white delivery van splayed across the Southbound lane with its front end crushed to the windshield.  Helicopters, sirens, EMTs, all traffic in every direction, stopped.

I crossed the highway and continued to my appointment perhaps 400 yards from where, I later learned, a terrorist had ended his murderous rampage down the Westside Esplanade, a delightful path along the Hudson for all to enjoy. But those 400 yards seemed a world away from the carnage I would later see on the evening news.

I think New Yorkers have found the best way to fight terror. It is RESILIENCE; a will to keep going in the face of adversity.  Although by 5:00 p.m. most of New York knew what had happened, life went on, undaunted.  In my neighborhood, literally blocks from where the attack took place, parents took their costumed children trick-or-treating; the fabled Halloween parade took place as scheduled; and all seemed strangely normal.

In the ancient world, the proudest boast was “civis Romanus sum” (I am a Citizen of Rome). In essence, the phrase was a declaration that the individual was entitled to the full protection of the Empire if their liberty was challenged. After the events of this Halloween, I proudly boast “I am a Citizen of New York.”

And that’s it for this This and That.

This and That by Dennis Wade

What do Amazon and Insurance have in common? The answer, I suggest, is this: Everything and Nothing.

But first I digress.  For many years, the desk staff at my Manhattan apartment building really had but one job: To be pleasant and sometimes helpful to tenants coming and going.  Now the desk staff has become servants of Amazon as each day UPS drivers dump hundreds of packages at the front desk:  Shoes, toys, diapers, clothing, furniture…everything “brick and mortar” retail once sold. And now that Amazon has moved into fresh produce and groceries with the purchase of Whole Foods, the anxiety of the desk staff has increased measurably.

With that digression in mind, recently, I attended an international insurance conference in Rome, Italy. There, one panel of insurance brokers and underwriters discussed how the marked preference of millennials for internet shopping has changed and is changing the way insurance is sold.

With the advent of online insurance applications, the brokers are worried about becoming irrelevant; and, the underwriters are worried that fraud, already a $40 billion dollar industry problem, will rise to even greater levels. But some panelists argued that Watson-like cyber brains and sophisticated algorithms would eventually solve short-term blips in online insurance applications and claim service.

Needless to say, save for the inevitability of change in the way insurance is sold and claims resolved, no clear answers emerged. The only consensus seemed to be this: Routine  risks such as auto and basic homeowners would increasingly be written and resolved over the internet; while sophisticated commercial and high net worth risks require and will always require human judgment to assess whether the risk ought to be accepted and if so at what premium. And, of course, boots on the ground and perhaps lawyers would be required for complicated matters.

The theme that ultimately emerged from the discussion is that human expertise in risk assessment and claim service still matter and add value no cyber network, however sophisticated, can match. But even with that positive realization, the clear message to insurance professionals and lawyers alike was to embrace technology to achieve greater efficiency and profitability. In sum, the promise of the mantra– “There’s an App for that”–may soon become more than Silicon Valley hype in the insurance world. And we have to be ready to meet it.

And that’s it for this This and That. If you have any thoughts (or gripes) about how the internet has changed the way insurance is produced, claims are managed, or lawyers employed in our digital world, please call or email Dennis.

This and That by Dennis Wade

In coverage and defense fights, the contest sometimes becomes personal and the warring advocates, insurers and lawyers alike, trade verbal barbs, often later regretted. Trading snarky remarks rarely advances the cause of either side and often brings down the wrath of the judiciary.  This unfortunate practice has spawned countless articles and continuing education courses, typically styled “Civility in the Practice of Law.”

Perhaps the best example of civility under stress comes from Ulysses S. Grant who, at the courthouse in Appomattox, treated Robert E. Lee with respect. In fact, before discussing the terms of surrender, Grant and Lee chatted about old times at West Point.  Not only was Grant a model of civility, his Personal Memoirs, published posthumously, is one of America’s great non-fiction literary works.  Grant’s prose, honed by the countless orders he wrote to men in the field, is simple, direct and moving.  And it is a book I recommend to all aspiring writers.  Grant’s account of meeting Lee at Appomattox touches me each time I read it:

“I was without a sword, as I usually was when on horseback in the field, and wore a soldier’s blouse for a coat, with the shoulder straps of my rank to indicate to the army who I was. When I went into the house I found General Lee. I had my staff with me, a good portion of whom were in the room during the whole of the interview…

“What General Lee’s feelings were I do not know. As he was a man of much dignity, with an impassible face, it was impossible to say whether he felt inwardly glad that the end had finally come, or felt sad over the result, and was too manly to show it… General Lee was dressed in full uniform which was entirely new, and was wearing a sword of considerable value. In my rough travelling suit, the uniform of a private, I must have contrasted very strangely with a man so handsomely dressed, six feet high and of faultless form. But this was not a matter that I thought of until afterwards.”

And that’s it for this This and That. If you have any thoughts on civility in coverage and defense litigation, please call or email Dennis.

This and That by Dennis Wade

In the darkest days of World War II, England’s very survival depended on getting vital supplies and armaments across the Atlantic to home ports. The Navy knew they could not do it alone.  They needed to enlist the cooperation of the citizenry.  So, the War Ministry papered London and other port cities with posters sounding a simple but profound warning: Loose Lips Sink Ships.

In litigation, like war, loose lips can indeed sink the best efforts of counsel. Perhaps the best example of “loose lips” is the breaking story of two high-powered Washington lawyers, who were chatting in a toney Washington steakhouse about their efforts to coordinate the White House response to Special Counsel Robert Mueller’s document demands in the “Russian Investigation.” The problem was that the lunchtime discussion took place in earshot of New York Times reporter Kenneth Vogel.

The next day, September 17, 2017, Vogel and his colleague Peter Baker published an account of what was overheard while the lawyers dined al fresco at the BLT Steakhouse which is situated near the White House (and as it happens the Washington Bureau of the Times).

I invite you to Google the story for the salacious details. But for my purpose here, the story confirmed the rumors swirling in the Blogsphere that there was internecine warfare within the White House as to the proper scope of disclosure, and an intimation that certain documents were being withheld from Mueller.

While most defense and coverage cases do not involve matters of national import, great care must be taken to keep close counsel. The temptation to reveal key strategy to co-counsel, to the Court, to Mediators, or frankly, to just discuss the contest with others is often hard to resist. But vigilance and the Cannon of Ethics require that all client confidences and strategy must be closely guarded and revealed only when the time has come to use what has been lawfully withheld to advantage.

For example, if an expert, medical or otherwise, uncovers a telling fact or a winning theory, you might be tempted to discuss it. But an untimely disclosure or inadvertent “loose lips” slip may result in the other side massaging the facts to counter the potential defense. As Edgar said in Shakespeare’s King Lear, “Ripeness is all.”  All of us, then, must guard against inadvertent disclosure and decide, after consultation, when the telling fact or theory is “ripe” for disclosure.

At WCM, our lips are sealed and we have multiple layers of security to keep our network safe from prying eyes and cyber thieves.

And that’s it for this This and That. If you have any tales to tell about “loose lips” sinking your case, please call or email Dennis.

This and That by Dennis Wade

On November 19, 1863, at the battlefield in Gettysburg, Edward Everett, former President of Harvard, a distinguished public servant, and certainly one of the most renowned orators of the day, spoke for two hours before Lincoln took the dais. Lincoln spoke for two minutes, uttering but 272 words.  Nothing is remembered of Everett’s dedication, but Lincoln’s few words beginning with “Four score and seven years ago…” became immortal.  The next day, Everett wrote to Lincoln, “I should be glad, if I could flatter myself that I came as near to the central idea of the occasion in two hours, as you did in two minutes.”

Recalling Lincoln’s two minute address is my segue to stressing the importance of the “Elevator Version” of your case in litigation. Most elevator trips in Manhattan office buildings take about two minutes.  And in those two minutes, you should be able to explain why you should win your case or achieve the outcome your client wants.

Most busy judges and harried mediators want an Elevator Version of your case. So, the best preparation for an argument or indeed any client discussion is to distill your case to two minutes – – a story and a conclusion that can be told during an elevator ride.

With the essence of your case distilled to an elevator ride, all that follows, the details, the nitty gritty, the legal precedent, will unfold nicely because you have done the hard work of making something that seems complex, quite simple.

As an aside, I do not advocate discussing cases or anything else on public elevators. But you get the idea.

And that’s it for this This and That. And if you have any thoughts on brevity in argument, please call or email Dennis.

This and That by Dennis Wade

Dazzled by the tennis, but equally dazzled by the color and design of the players’ clothing at the ongoing U.S. Open at Flushing Meadow, Queens, I wondered why the All England Club at Wimbledon strictly enforces the rule of “white” tennis apparel. Apparently, it dates back to the 1800s when the sight of sweat through clothing was deemed unseemly to the Victorian sensibility, thus bringing life to the rule of white and a tradition that has held fast over the years.

This may seem like a strange beginning to discussing a recent and notable United States Supreme Court copyright decision. At issue in Star Athletica, LLC v. Varsity Brands, Inc. was whether designs on cheerleading uniforms were subject to copyright protection when the uniforms themselves were purely functional.  Varsity obtained over 200 copyright registrations for two dimensional designs on cheerleading uniforms – – stripes, chevrons, zigzag patterns, and the like.  Star Athletica made uniforms with very similar designs, prompting Varsity to sue Star for copyright infringement.

Much confusion existed in the Circuits as to the scope of IP protection for design elements in fashion apparel. And so, the case made its way to the top court.  Writing for the majority, Judge Clarence Thomas announced:

[A] feature of the design of a useful article is eligible for copyright if, when identified and imagined apart from the useful article, it would qualify as a pictorial, graphic, or sculptural work either on its own or when fixed in some other tangible medium.

The majority found that, while the design elements were integral to a purely functional item of apparel, the designs enjoyed “pictorial graphic or sculptural qualities” which, in effect, if imagined in a medium other than clothing could qualify as works of art capable of copyright protection.

Insurers writing broad form advertising injury coverage have been plagued with claims across many industries. But now it seems that the fashion industry is a fair target for infringement and advertising injury claims. And that’s it for this This and That. But if you care to predict the Open champs or share your views on appropriate tennis apparel, please call or email Dennis.