As we have discussed in prior parts of this series, the insurance industry has developed an array of policies specifically tailored to cover cryptocurrency claims, and some of these policies may also cover certain NFT claims. Separate and apart from these tailored policies, policyholders with NFT claims also may look to traditional forms of insurance. 

NFTs are collectible and one of a kind, yet digital. The most common NFT is a type of visual art image like a digital painting, a photograph or generative designs (created by artificial intelligence). However, this high-level definition doesn’t do justice to just how pervasive these have become. In addition to traditional artwork, there are:

Continue Reading Digital Asset Insurance Coverage Series, Part 7: Insurance for NFTs

Several of the largest brokers have developed a considerable bench. For example, Marsh has a Digital Asset Risk Team (DART);[1] Lockton has its Lockton Emerging Asset Protection Team (LEAP)[2] and Aon and others have their own teams.[3]

There are multiple advantages to procuring cryptocurrency insurance through brokers that have deep experience in this particular area of insurance. These may include:

Continue Reading Digital Asset Insurance Coverage Series, Part 6: Brokers And Cryptocurrency Insurance

Last week’s discussion focused on the evolution of the insurance marketplace for digital assets. This section focuses on the marketplace as it now exists, providing examples of products being bought by companies and consumers facing cryptocurrency risks. 
Continue Reading Digital Asset Insurance Coverage Series, Part 5: How Companies And Consumers With Cryptocurrency Risk Approach Insurance

In the 18th Century, underwriting desks at what came to be known as Lloyd’s of London were developed to share or transfer risks associated with shipping. Availability of risk sharing, or insurance, provided protection for maritime investors and facilitated increased levels of investment and thus increased levels of maritime activity. Risk transfer has become an essential part of the development of a marketplace for many products.
In the early years of cryptocurrency, there were no insurance products specifically designed to cover cryptocurrency-related losses. Much like the presence of insurance fosters development of a marketplace, the absence of insurance hinders it.
Continue Reading Digital Asset Insurance Coverage Series, Part 4: History Of Insurance Coverage Specifically Designed For Cryptocurrency

Hurricane Ian is rapidly approaching the west coast of Florida and is expected to make landfall as a Category 4 hurricane near the Tampa area within the coming days. While the exact track is still being determined, there is a chance the storm may also impact insureds in Georgia and South Carolina. Now is the

As reported on this blog, policyholders have long been of the view that the presence of substances like COVID-19 and its causative virus  SARS-CoV-2, which render property dangerous or unfit for normal business operations, should be sufficient to trigger coverage under commercial all-risk insurance, as has been the case for more than 60 years.

However, many courts, federal courts in particular, despite decades of pro-policyholder precedent, have embraced the view that “viruses harm people, not [property].”  Thirty-one months after the start of the pandemic, the first state high court has gone in a different direction, according greater weight to pro-policyholder precedent.

Continue Reading Vermont Supreme Court Finds COVID-19 May Damage Property

In the early years of cryptocurrency, there were no crypto-specific insurance coverages. Instead, policyholders sustaining losses were left to try to access coverage under traditional insurance policies such as:
Continue Reading Digital Asset Insurance Coverage Series, Part 3: How Traditional Insurance Products Can Help Protect Policyholders From Loss And Liability Related To Digital Assets

Who can incur losses associated with cryptocurrency or digital assets? The real question is who uses them.
Among the most obvious users would be exchanges in which cryptocurrency is traded. It has been reported that the largest insurance market in the cryptocurrency industry consists of exchanges that insure against thefts from cryptocurrency hackers. Among the more prominent exchanges are Coinbase, Crypto.com and Gemini. Similarly obvious are the third-party custodians that store cryptocurrency and other forms of digital assets on consumers behalf such as BNY Mellon Crypto Currency or Fidelity Digital Assets. They provide safekeeping of digital assets including keys and ensure accessibility.

Continue Reading Digital Asset Insurance Coverage Series, Part 2: Who Can Incur Losses Associated With Digital Assets And What Are The Potential Risks Of Loss And Liability Related To Digital Assets?

Crypto markets are experiencing the greatest crash in their history to date. The value of a Bitcoin (BTC) has plummeted 70% from its peak and Ethereum (ETH) has fallen 77%. Since last November, the value of cryptocurrency tokens has lost $2 billion in value. As noted financial publication Barron’s put it: “Crypto is having a ‘Lehman moment,’ a shattering of confidence triggered by plunging asset prices, liquidity freezing up, and billions of dollars wiped out in a few scary weeks.” Cryptocurrency companies are halting withdrawals and transfers, platforms are seizing up, and regulators are circling.
Nor has the devastation been limited to the coins themselves. Non-fungible token (NFT) sales have reduced by 90% since September 2021. The New York Times reported that Opensea.io (OpenSea), an NFT marketplace that receives 2.5% share of the proceeds for each NFT sale, has been plagued by “a surge of plagiarism, as sellers convert traditional artwork into NFTs and then list the images for sale without compensating the original creator.” For example, DeviantArt, an artist collective that scans OpenSea for copyright infringement of the work of its artists, found 290,000 instances of unauthorized NFTs copying its artists’ works. While infringing listings can be deleted in response to take down requests filed by the artist, buyers of counterfeit NFTs are rarely given a refund.

Continue Reading Hunton Insurance Group Advises Policyholders on Issues That Arise With Insurance Coverage for Digital Assets, Specifically Cryptocurrency and NFTs — A Seven-Part Series 

From IRS rulings that “virtual currency” is taxed as “property” to an SEC lawsuit claiming that digital assets are “securities” under federal law, meteoric growth of the largely unregulated crypto industry has raised numerous questions about whether crypto-related risks are covered by insurance. In the latest example of the intersection of crypto and insurance, a California federal court recently held that cryptocurrency stolen from a Coinbase account did not constitute a covered loss under a homeowner’s insurance policy. The fundamental issue was whether the stolen crypto met the policy’s requirement for “direct physical loss to property” and, more specifically, whether the losses were “physical” in nature. The court ruled against coverage, reasoning that lost control of cryptocurrency is not a direct physical loss as a matter of California law.
Continue Reading California Holds Stolen Cryptocurrency Does Not Qualify as “Physical” Loss Under Homeowners’ Policy