Coverage for Emerging Technologies

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Mobile App Terms and Conditions Decision Clarifies Best Practices in App Designs to Support Enforcement of Contract ProvisionsThe Second Circuit issued a decision of interest to every company that utilizes a mobile app to interact with its customers. In Meyer v. Kalanick, the court enforced the mandatory arbitration provision in the Uber app. The court considered the app from the perspective of a “reasonably prudent smartphone user” and discussed parameters supporting enforceability of contract terms for mobile apps. The Second Circuit enforced the arbitration provision because the Uber app gave the user reasonably conspicuous notice of the Terms of Service (which included the arbitration provision), and the user gave unambiguous (albeit not express) consent to arbitration in light of the objectively reasonable notice of the terms.

Due to the ubiquity of smartphones and smartphone apps, the Second Circuit analyzed the Uber app from the standpoint of a reasonably prudent smartphone user who would understand the use of hyperlinks. Uber’s “uncluttered” payment screen contained the warning that “By creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.” The court explained that the “capitalized phrase is bright blue and underlined and contains a hyperlink to a third screen containing a button that, when clicked displays the current version of Uber’s Terms of Service and Privacy Policy. The text, including the hyperlinks to the Terms and Conditions and Privacy Policy, appears directly below the buttons for registration.” The entire screen, including the notice of the Terms of Service, was visible without scrolling. The court noted that the sentence is in small font, but “the dark print contrasts with the bright white background, and the hyperlinks are in blue and underlined.” The court appreciated the simplicity of the payment screen, which included only credit card fields, buttons to register for a user account or to connect pre-existing accounts to the Uber account, and the warning with the hyperlink.

The court explained that a reasonably prudent smartphone user would understand that text that is highlighted in blue and underlined is hyperlinked to another webpage with additional information, and found the screen design and text reasonably conspicuous, thus giving the user constructive notice of its terms. The court also described the payment screen and Terms of Service as “temporally coupled” because Uber provides the Terms of Service during enrollment. The court concluded that “a reasonably prudent smartphone user would understand that the terms were connected to the creation of a user account.”

The court distinguished the Uber screen from the Amazon screen in Nicosia v. Amazon.com, Inc., because the Nicosia screen contained much more information and several buttons, and the notice of terms and conditions was not adjacent to the consent button: “This presentation differs sharply from the screen we considered in Nicosia, which contained, among other things, summaries of the user’s purchase and delivery information, ‘between fifteen and twenty-five links,’ ‘text . . . in at least four font sizes and six colors,’ and several buttons and advertisements.  Nicosia, 834 F.3d at 236-37. Furthermore, the notice of the terms and conditions in Nicosia was ‘not directly adjacent’ to the button intended to manifest assent to the terms, unlike the text and button at issue here.  Id. at 236.”

The Uber app decision provides useful guideposts for designing user interfaces for smartphone apps that include contractual terms, such as arbitration clauses: (1) implement a simple design with minimal text and few buttons; (2) ensure the visibility of the entire screen, including the hyperlink to the contract terms, without scrolling; (3) expressly warn that by creating an account, the user is agreeing to be bound by the linked terms; and (4) require agreement to the contract terms during enrollment (ideally before completing enrollment, but not later than simultaneously with enrollment).  Although the Uber app did not do so, smartphone apps can also require the user to scroll through the governing terms and conditions before accepting them to further support enforceability of those terms and conditions.

RIMS 2017: Risk Revolution is less than two weeks away… are you going? Bradley’s Policyholder Insurance Coverage team is!

When: April 23-26, 2017

Where: Philadelphia, PA

What: Visit us at Booth 2734 (map of exhibit floor) to meet some of Bradley’s coverage attorneys and learn about key issues facing policyholders in today’s complicated insurance landscape. We look forward to seeing you at RIMS 2017.

For more information about the event visit the RIMS 2017 website.

Drones: Weighing the Pros and Cons of Three Insurance Strategies for this New TechnologyUse of unmanned aircraft ­– drones – has grown dramatically in recent years, but purchase of coverage for drones has lagged behind. If your company has not revised its insurance program to include drone coverage, your company could be without coverage for this new and increasingly important technology.

More than 2.5 million drones were sold in 2016, and the Federal aviation administration expects that number to grow to 7 million in 2020. While many drones are sold to hobbyists, commercial applications for drones constitute an increasing share of the drone market. Construction companies, agricultural operations, real estate agents, insurance claims adjusters, photographers, delivery services, and surveyors are just a few of the companies and professionals now exploring use of this new technology to improve services and increase profits. Some companies are purchasing drones while others are relying on third-party vendors to provide drone operations.

As with any new technology, however, drones pose unique insurance challenges, which, if left unaddressed, could lead to potentially uncovered insurance losses. To ensure that your company is protected for drone operations, you should:

  • Assess your company’s use of drones to determine potential exposure for property loss and third-party liabilities.
  • Review existing policies to determine whether drone liabilities are insured (they likely are not).
  • Determine whether to add drone coverage to your existing property and commercial general liability policies, to purchase a specialty drone policy, or to rely on third-party vendor coverage for liability exposures arising from that vendor’s drone operations.

Traditional Insurance Policies May Not Insure Drone Liabilities

Use of drones in business operations is likely not covered under your existing insurance policies due to the commonly included “aircraft exclusion.” While most non-aviation policies do not define “aircraft,” insurers will likely argue that drones constitute “aircraft,” leaving you with, at best, a messy fight with your insurance company to obtain coverage, and, at worst, no coverage at all. Pay careful attention to policy language to determine the availability of coverage.

Three Options for Drone Coverage

  • Unmanned aircraft endorsements to existing insurance policies – Your current insurance carrier may offer insurance for drones through endorsements to your property, inland marine, and commercial general liability policies. ISO form endorsements for these policies provide first- and third-party insurance coverage for drone use in commercial settings. While these endorsements expand coverage for drones, consider them in light of your company’s business operations to avoid leaving your company exposed for certain potential loss scenarios.
  • Specialty market aircraft coverage – If your company regularly uses drones in its business operations or maintains a fleet of drones, consider purchasing a specialty insurance policy to insure your drone use. While not every commercial application for drones requires specialty coverage, a drone-specific policy can provide a more complete coverage option for companies that regularly employ drones in their everyday business.
  • Coverage as an additional insured under vendor’s insurance policies – If your company relies on third-party vendors to operate drones on its’ behalf, require the vendor to name your company as an additional insured under its policies. This strategy is not without risks, however, as your coverage is dependent on the limits, coverage grants, and exclusions of a policy that you did not negotiate and may not even have seen prior to the loss event. Require your vendor to provide a copy of the applicable insurance policies; do not rely on a Certificate of Insurance (COI). Only the insurance policy provides coverage; COIs expressly disclaim coverage and instead state that the insurance policy alone provides coverage.