It’s Pokémon Go Time for Insurers
But what do their sometimes comic, other times tragic tales of injury and privacy invasion mean for insurers—particularly those that might offer coverage to developers of augmented reality (AR) apps?
Responding to an inquiry from Carrier Management, technology E&O underwriters weighed the risks and opportunities of augmented reality games for insurers.
“Pokémon Go has been a worldwide phenomenon, and the E&O market should strike while the iron is hot,” said Michael Brunero, technology and media underwriter at CFC Underwriting.
Lloyd Takata, executive vice president of OneBeacon Technology Insurance, observed: “The Pokémon Go craze is huge and reflects the cutting edge of mobile technology and consumer appetite for AR experiences.” According to Takata, “The No. 1 use of smartphones and other mobile devices is not email or social media—[it’s] gaming, and this is a prime example.”
Lloyd Takata, OneBeacon Technology Insurance
Weighing in on the risks, both said many exposures for AR game developers are similar to those of other game makers. In addition to technical issues, such as technology crashes and loss of access to the games, “previous electronic games have had issues with players losing credits or tokens.” Lost Pokeballs or captured Pokémon could also become an issue here, Takata said.
“If the app doesn’t work right and sponsors’ locations fail to generate the level of expected traffic, there could be an errors or omissions situation,” he added.
Brunero notes that game developers, such as Pokémon Go’s creator, Niantic, “are heavily exposed to IP infringement claims, especially when using third-party content. They also run the risk of being the subject of a cyber attack, perhaps more so where they have an immensely high profile.
“Consequences will be severe where there are a large number of users and personal information obtained, and they operate on a global scale where laws differ. In fact, a hacking group already claimed responsibility for a DDOS [distributed denial of service] attack, which they alleged caused the servers to crash [recently], leaving the game players unable to access the game.”
“It has since been determined that it was just sheer traffic rather than a dedicated cyber attack, but it may only be a matter of time,” Brunero said.
Both Takata and Brunero referred to the daily media accounts of distracted players getting injured in situations ranging from slips and falls to traffic accidents, and others falling victim to crimes like robberies and shootings as they navigate into unsafe areas. “Users have been reported as brazenly invading private yards and overtaking public spaces in numbers,” Brunero added.
Will there be lawsuits and claims in spite of clear in-game warnings and terms of service disclaimers?
“Stay tuned,” Takata said.
“There may be room for allegations against companies that, for example,…did not act responsibly to eliminate the risks associated with the game. These exposures are new with very little precedent as to how courts, globally, will treat claims should they arise,” Brunero said.
Still, insurers need to act quickly on the opportunities to provide coverage, he said. “People are talking about this technology, so it is time for insurers to enter the discourse by showcasing their product offering and its application to a real-life topical scenario.
Michael Brunero, CFC Underwriting
“For example, the game has traversed territorial boundaries, meaning multiple jurisdictions with different exposures and different laws. Insurers with capabilities to write business worldwide have a key advantage, and as clients are essentially buying a claims experience when they purchase a policy, having experience in multiple territories is a strength that can lead to portfolio growth with these emerging technology risks.”
Brunero added: “We are likely to see more businesses enter this space as a result of the game’s popularity (and potential for revenue generation), and they will be seeking comprehensive insurance solutions. Having a policy which covers financial loss caused by civil actions such as negligence, breach of contract and IP infringement but can also cover a client’s cyber exposures and has provision for bodily injury claims caused by game play illustrates an understanding and acceptability of the set of distinctive exposures.”
Meanwhile, while insurers craft offerings for the Niantics of the world, Niantic offers a gentle reminder to game players to buy insurance in its terms of service under a section titled “Safe Play”:
“During game play, please be aware of your surroundings and play safely. You agree that your use of the App and play of the game is at your own risk, and it is your responsibility to maintain such health, liability, hazard, personal injury, medical, life and other insurance policies as you deem reasonably necessary for any injuries that you may incur while using the Services.”
Hat tip to theringer.com for pointing out Niantic’s insurance advice (blog item dated July 8, 2016, “The ‘Pokémon Go’ Injuries Are Already Piling Up: What a way to (Pokémon) go, though, right?” by Carl Brooks Jr.).
More “Pokémon and Insurance” Sightings
While game players have been hot on the trail of pocket monsters in the physical world in what Erie Insurance described as a digital scavenger hunt (in a July 11 blog item), editors here at Wells Media have been hunting down online mentions of “Pokémon and Insurance” and “Pokémon and Liability” and puzzling out scenarios where lawsuits might emerge or insurance might apply.
Our sightings were slow to emerge initially. Erie’s warning to players that they should not “Pokémon and Drive” and should not broadcast their locations on apps or social media was the first to come to our attention. But it wasn’t long before the clear tie to insurance was hatched (no walking required) by the life insurance arm of a Russian bank. Online media reports (here and here) reveal that Sberbank started offering free insurance coverage in mid-July.
But can you die from playing Pokémon Go?
A shooting in Guatemala is widely reported as the first fatality of someone who was playing the game at the time he died.
The Russian life insurer’s policy is actually an injury policy, however, promising to pay only up to $800 to anyone who signs up for coverage and proves they were hurt playing the game (by delivering a photograph of the location where the injury occurred). Like the property/casualty insurers cited above, the CEO of the life insurer reportedly sees opportunities for his company to seize the moment as well. The media reports translated from Russia’s Kommersant Daily quote him as saying, “It is also important for us that the project will improve financial literacy, as the younger generation will be able to learn about insurance instruments while playing the game.” In addition, the reports say that the bank was planning to install “special PokéStops modules” to lure Pokémon players to its offices.
But while some businesses are eager to have Pokémon players show up on their doorsteps, not everyone is keen on the idea. Consider the Canadian woman who reportedly fired four shots at a group of Pokémon players from a Toronto rooftop in late July. Or the church in Cologne, Germany that is taking legal action to have the ancient location removed from the game. (See related article: “10 Recent Pokémon Sightings: AP”)
The different viewpoints raise interesting questions for P/C insurers—among them, some about underwriting considerations posed by Christopher Boggs, vice president of education for Wells Media’s IJ Academy of Insurance. Wondering about commercial insurance and those businesses that welcome the idea of serving as PokéStops, he asks, “Do the underwriting guidelines of insurance carriers address the use of Pokémon Go, or do they simply consider it part of the marketing and advertising of the business?
“If, as a business owner, I can use this to draw people to my location, is that cool with the underwriter?”
Referencing the example of churches that have embraced their PokéStops, offering snacks and drinks to players who could eventually become church followers, he asked, “Does the church underwriter consider this a part of the normal outreach of the church?
“If I own a store of some kind, I want people to come to my place to look around and maybe purchase something. Does this increase my liability because people are coming and walking around not looking where they are going?”
Invitees or trespassers? Does the distinction matter?
“Some locations have not asked and do not want to be included in Pokémon Go,” observed Andrew Simpson, chief content officer of Wells Media, in an exchange with coverage expert Boggs. Referencing private property and some sacred places, Simpson asked, “Do these locations have a potential violation of privacy claim against the game or user?”
Alabama lawyer Keith Lee asked a host of related questions in his Associate’s Mind blog in an entry titled “Is Pokémon Go Illegal?” Among his legal questions: “Is placing an AR object on a person’s private property, without their permission, a creation of an attractive nuisance?”
At the end of the piece, Lee concludes: “If something does happen to a trespasser while trying to catch a Pokémon on private property, the property owner would likely continue to be strictly liable to a trespasser for injuries that occurred, but it also seems likely that they would have a right to seek indemnification (where one party bears the monetary costs, either directly or by reimbursement, for losses incurred by a second party) from Nintendo and Niantic.”
Boggs agrees. “If I have not made my place available—or don’t want it to be—then I, or my insurance carrier, may be able to subrogate against (recover any payment from) the developers for ‘placing’ the little monsters on my site without my permission.”
In this situation, “people are coming onto such a site as trespassers, [and] property owners owe trespassers only a slight degree of care,” Boggs said. “Basically, they can’t set a trap for them; otherwise, any injury suffered by the trespasser is not the property owner’s fault, and they should not be held legally liable for the injury.”
Maria Quintero, a San Francisco-based law partner at Hinshaw & Culbertson, shared a similar assessment with Claims Journal Editor Denise Johnson (related article, “Poking Around Legal Issues Associated With Pokémon Go”). “Depending on the jurisdiction, a person who trespasses and is injured on private property can still sue for liability if a condition of the property is deemed unreasonable or unsafe,” Quintero said. Insurance claims adjusters will need to determine the facts and circumstances of the loss in order to evaluate subrogation rights and whether there is any indication of comparative negligence, she said.
Boggs said that the CGL policy (or liability section of a business owners policy) would protect business owners from lawsuits brought by injured parties, even trespassers that bring legal action against property owners.
“There might be more that can be done from a loss control/risk management perspective—maybe like posting signs that read: ‘No Trespassing—Especially Pokémon Go Players’ or ‘There are no REAL monsters here. Enter at Your Own Risk!’”
Quintero noted the potential for property owners to allege violations of privacy, explaining that in order to play the game with a smartphone, the camera and GPS must be turned on. Recording images, even in a public place, could be considered an invasion of privacy.
Sharing a recent report about the Holocaust Museum in Washington, D.C. asking game players to shut their phones and attempting to have the site removed from the game, Quintero suggested that the game could create a tipping point where the government intervenes to regulate where and how people can congregate at government venues and monuments.
“Can a government regulate…time, place, manner of how people gather?” Quintero asked. “Is that a First Amendment violation if they do try to do it?”
Quintero also addressed situations where distracted game players cause auto accidents. Although the manufacturer has app users acknowledge a liability disclaimer, she said the disclaimer may not extend to an injured third party. Taken a step further, if the manufacturer is brought in to a suit, Quintero wondered, does it then file a cross complaint against the user?
More Legal Questions and Risks
There are still more legal and risk issues posed by AR games that will arise over time:
- Does Pokémon Go have to comply with the Americans With Disabilities Act? asked Lee in another Associate’s Mind blog entry.
- Thomas Reagan, the cyber practice leader for Marsh’s Financial and Professional Products (FINPRO) Specialty Practice, addressed risks related to employer BYOD programs in a Marsh Insights blog item. “Computer and online games become instant targets for malware, through such things as fake and cracked versions in app stores. This could allow hackers to gain control over a phone and thus a wealth of data about its user. For companies with bring your own device (BYOD) programs, enterprise email accounts and other data could be exposed,” Reagan wrote.
- Could companies like Nintendo, which invests in Niantic, ever face D&O liability exposures from shareholder disappointments? Already, financial news reports are following the rise and fall of Nintendo shares, which had soared after the release of Pokémon Go but are now falling as delays in the release of the next iteration of Pokémon Go, the Pokémon Go Plus wearable pin, come to light. Will shareholder lawsuits follow game-related earnings disappointments?
- While admittedly more far-fetched, a recent Associated Press story, “Too busy for Pokémon? These entrepreneurs will play for you,” suggests the prospects of professional liability claims against a new class of entrepreneurs. Likening themselves to dog walkers, Pokewalkers will run up your score—a benefit that some of these professional players say can help impress potential dating partners on first Pokedates.
What if their efforts fail? Is E&O exposure lurking behind these new services?
Apparently not. “The terms of service in ‘Pokémon Go” explicitly forbid the practice of transferring access to an account to a third party,” the article reports. So paying someone to boost your score is totally against the rules. (The full AP report is included in a related article, “10 Recent Pokémon Sightings: AP.”)
(Compiled by Carrier Management with information from Insurance Journal, Claims Journal and IJ Academy of Insurance)