Posts tagged ‘Insurance’

It’s a Scary Time for CUs, Cyber Attacks, and Insurance

Warren Zevon once called on his dad to bring him “lawyers, guns, and money.” Given the sharp increase in cyber-attacks, your average credit union CEO should be asking for lawyers, money, and better cyber insurance policies.

Recently, an article in The American Banker proclaimed that these are scary times for small banks and credit unions, some of which have recently been the target of ransomware attacks. Yours truly is highlighting this trend not simply because I want to scare you into action but because I believe that for many financial institutions the question is not if, but when you will find your credit union’s data being held by hackers who want money in return for allowing you to access your client’s personally identifiable information.

One of the most basic steps you can take to help protect yourself against ransomware and data theft attacks is to buy insurance. This is an issue that yours truly is also becoming increasingly obsessed about because there is a lack of clear guidelines as to precisely what a policy provides your credit union and even if your regulators are going to penalize you for using insurance proceeds to recover from ransomware payments.

My paranoia has been fueled by this recent GAO report describing an insurance industry that is scrambling to adjust to the rapidly evolving and increasingly expensive niche of cyber-attacks. For your credit unions that means that it is absolutely crucial that you get competent counsel to provide new guidance as to what is and is not covered under your policy. It also means that you should not assume that general language in your existing policy already provides you insurance protection. There are more and more cases in which this precise issue is being litigated. For example, I recently came across this case, West Bend Mutual Insurance Company v. Krishna Schaumburg Tan, Inc., in which an insurance company tried to deny coverage to a business that was sued after providing biometric data of customers to third parties.

In the medium to long term these issues will resolve themselves. Courts will scrutinize and effectively standardize basic terms. The problem is that this is little comfort to those of you confronting these issues right now. Time to call the lawyers and bring the money.

May 26, 2021 at 9:16 am Leave a comment

Resisting The DarkSide

The successful dark side ransomware attack in which hackers were able to disrupt a major pipeline providing gas to states throughout the east coast has once again brought the issue of cyber security to the forefront.  Here are some of the lessons your credit union can learn from this event:

Don’t forget the basics. These are highly sophisticated attacks that start with very basic mistakes. On Wednesday, the FBI and the CISA issued a joint memorandum. The first three steps it suggested companies take to mitigate the threat of ransomware are to require multi-factor authentication, enable strong spam filters, and implement a user training program and simulated attacks for spear phishing.

Expect insurance costs to spike. The attack comes as regulators and stakeholders debate the best way to deal with ransomware attacks and the role that the insurance should play. This past fall, FINCEN issued guidance warning financial institutions and insurance companies that they might be violating federal law if they help a company facilitate a ransomware payment. In addition, New York State’s Department of Financial Services recently reached a multi-million dollar settlement with an insurance company for violating the state’s cyber security regulations. The settlement has gotten the attention of the legal community since it included a stipulation that insurance proceeds would not be used to pay the settlement. 

The DarkSide may bring congress to its senses. Call me a cock-eyed optimist but if the ability of hackers to shut down a major energy pipeline affecting states throughout the country doesn’t jolt congress into passing comprehensive cyber security regulations then nothing will. This would seem like an issue that can overcome the great ideological divide but only time will tell. 

May 17, 2021 at 9:20 am Leave a comment

How to maximize your TNC protection

As readers of this blog know, the Legislature authorized Transportation Network Companies such as Uber and Lyft to start operating in New York State locales beyond NYC as part of the recently approved budget. Thanks in no small part to the efforts of the Association, the legislation includes some important protections for credit unions. However, there are still additional steps that I would take to maximize your credit union’s collateral protection, particularly as ridesharing is taking hold at the same time that the 72 month car loan has become common place.  Remember this is just one person’s advice and not a substitute for running this by your own counsel.

Ever since plans were laid for TNC networks to come to New York, insurance has always been a big issue. Remember that your typical car insurance policy contains a livery exception, meaning that a driver isn’t insured for accidents that happen while logged into the network to pick up passengers. The legislation addresses this issue by mandating that TNC drivers applying to join a network be informed of the need for additional insurance and mandating that the TNC’s make sure that these drivers are, in fact, properly insured.

While these are important protections, in talking to credit unions I am suggesting that there are still additional steps they should consider taking. Most importantly, I would amend your car loan language with a provision informing the borrower that the use of a vehicle being financed in a TNC without the insurance mandated under NYS Law shall constitute a breach of the lending agreement and may result in the entire amount of the loan being due immediately.

What does this accomplish that New York State’s Law cannot? For one thing it is more expansive than the protections afforded by the law since its prohibitions would apply even to members who are not currently logged in to a TNC Network but who are TNC drivers.This is important because if you have reason to believe that a member is operating as a TNC driver you can call the loan without waiting for an accident. It also provides an additional notice to your members that special TNC insurance is required. Finally, it provides you some level of protection in the event that your member somehow gets to join a network without getting adequate insurance. But under this later scenario I would consider going after the TNC Company for your losses. New York’s TNC legislation takes effect in approximately three months.

By the way, since we are on the subject of TNC’s, I had the pleasure of dropping off my two daughters at Kennedy Airport Monday morning for a flight down to North Carolina. For those of you, who haven’t had the “pleasure” of going to Kennedy, think of those chaotic scenes in third world capitals where a mass of humanity ignores all laws. The one thing noticeably absent from this scene was anything more than a handful of traditional yellow cabs. If I had taken this trip just 5 years ago they would have been everywhere. With the caveat that I have always been accused of being a skeptic when it comes to the future of the medallion industry, all you have to do is go to NYC to realize that the medallion industry as we know it is destined to become an exhibit in the Smithsonian. I am also happy to report that my two kids didn’t witness paying passengers being dragged off the plane and assaulted.

On that upbeat note enjoy your day!

 

 

April 20, 2017 at 9:21 am 1 comment

Why Ride-Sharing Impacts Your Credit Union

Ride sharing is about to have a bigger impact on your credit union than you may have thought possible.

Yesterday, the Attorney General and the Department of Financial Services reached an agreement with the Lyft Ridesharing Service that will allow it to start plying its trade in Buffalo and Rochester. Since July 2014, the AG and the DFS blocked the company from operating in Buffalo contending that it was violating the Insurance Law by not requiring people who signed up as drivers on the service to comply with basic insurance requirements. The agreement announced yesterday addresses some of the insurance concerns but could still leave credit unions holding the bag in the event one of your members gets into an accident while providing a Lyft ride.

Lyft is a ride sharing service that competes against Uber. The service matches people who need a ride with willing drivers using an App. The two parties negotiate the fare. Here’s where it gets interesting. Your typical car insurance has a livery exception, meaning that if one of your members gets into an accident providing ride-sharing services they won’t get coverage. Needless to say, this makes your collateral worthless.

The agreement reached yesterday specifies coverage for three distinct periods: the time during which the Lyft driver is waiting for pick-up requests; the period between when a driver has accepted a request and the driver is going to pick up the passenger; and the period running from when the driver begins transporting the passenger to when he drops them off. While this is a step in the right direction, drivers are still not required to obtain comprehensive collision insurance that would protect the vehicle against property damage. In other words, the agreement doesn’t go far enough to protect lenders.

The Legislature had been considering passing legislation to address the issue, but with time running out on an already past deadline Legislative session, movement in this area is unlikely. The agreement raises several questions for credit unions to consider. Most importantly, while the agreement just applies to Buffalo, it may provide a template for ride sharing services to start operating in other parts of the state. Uber is already in operation in New York City under an agreement with that city’s Taxi and Limousine Commission.

Is there a way for credit unions to protect themselves? You may be able to mandate that members get special comprehensive collision insurance if they decide to become a ride sharing driver. The problem is, that you won’t know if they have honored this requirement until they get into an accident.

June 19, 2015 at 8:49 am 1 comment

Is Uber In Your Future?

No one appreciates a good ride more than I do, but I have been gun shy about trying out ride sharing services in cities where they are already available. On the one hand, the more people who are willing to give me a ride the better; on the other hand, I have visions of being picked up by an Uncle Buck in a Jalopy or a well-meaning soccer mom who sticks me in the backseat of her minivan with a screaming, cheerio-throwing two-year-old.

These so-called Transportation Network Companies also raise a host of insurance issues that will impact your credit union if it offers car loans. The networks are in operation in NYC, but the Attorney General and the Department of Financial Services successfully blocked them from expanding outside of the Big Apple. Resolving this impasse has emerged as a headline issue not only in New York State but across the country. DFS Superintendent Lawsky recently said he hoped a bill authorizing the networks would be approved by the end of this Session.

These systems use Apps from a company such as Uber or Lyft to connect passengers and drivers. A request goes out to a network of drivers who have signed up to give people rides. The passenger is informed when someone has agreed to give him a lift and the fare is negotiated between the passenger and driver.

The system seems like a win-win until you start considering the insurance consequences. Let’s say that one of your members took out a car loan recently and decided that to make extra money she would pick-up the occasional ride. One day, while taking one of her passengers home from work, she gets into an accident. No one gets hurt, but the car is totaled. Chances are your collateral is worthless. Your typical insurance policy has a livery cab exception to its coverage. Since your member was acting as a livery driver, insurance isn’t going to cover the accident. You could include a provision in your car loans prohibiting using the car for such purposes without additional coverage but such coverage isn’t easy to get and, if a member ignores this requirement, you won’t know until it’s too late.

To resolve the insurance conundrum, both Senator Seward and Assemblyman Cahill have put in bills to regulate insurance that Ride Sharing Networks would be responsible for making sure their drivers have. In addition, the Legislature is grappling with the issue of determining when a person is acting as driver for hire and when she is just a soccer mom who got into a fender bender.

None of these issues are insurmountable. Sometime soon expect Uber or Lyft to become available near you and to add yet another wrinkle to your increasingly complicated lending procedures. Here are some of the proposed bills.

http://www.capitalnewyork.com/article/albany/2015/04/8566110/lawmakers-detail-support-measure-uber-and-lyft-upstate

http://assembly.state.ny.us/leg/?default_fld=&bn=A06090&term=2015&Summary=Y&Actions=Y&Votes=Y&Memo=Y&Text=Y

April 27, 2015 at 9:06 am Leave a comment


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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