What I didn't anticipate was Carlos eating my entire DVD collection, destroying my laundry room twice, and eating an entire week's supply of Keurig K Cups. That was just the first month.

Carlos ate her food . . . and pretty much everything else in the house. Then, she dug up my in-ground sprinklers. Seeing Carlos pulling at a 20-foot section of sprinkler pipe was quite a surprise, but such is life.

We plan, we anticipate, but life and circumstances dictate what really happens. This is what I call the "Carlos Factor."

Now, how does the "Carlos Factor" translate to insurance, risk management, and claims? In businesses we anticipate, we plan, and we safeguard, but there are always pitfalls. There are always things for which we don't prepare.

For example, the promulgation and widespread implementation of solar power creates some of those interesting and potentially unforeseen risks associated with its design, manufacture, installation, and distribution.

Large power purchase agreements (PPAs) allow energy customers to forgo daunting upfront costs by providing power (generated cheaply via photovoltaic cells), without the need to purchase the equipment. The reliance on such power and a failure of the "grid" could lead to a catastrophic loss. As PPAs gather steam (irony intended) and companies offering this technology (like Tioga Energy) continue to gain market share, the associated risk and exposure grow exponentially.

No longer will power outages be one of those situations where one business or one entity is impacted. We must now anticipate a potential catastrophic cascade failure that could create a "super solar loss" attributable to those unpredicted "Carlos Factors." There are always "Carlos Factors."

Chinks in the Armor

As with any nascent technology, there are weak links or chinks in the armor. The obvious failure is that of the actual mechanism. Discreet losses must be carefully considered when analyzing the risks associated with this type of venture; for instance, consider tertiary loss due to exposure to volatile chemicals during manufacture, height-related installation risks, collapse due to rooftop installation, water damage due to interrupted drainage, wind damage, and various forms of intellectual property exposures.

This is just one example of how invention and adaptation of new and more progressive technologies will eventually lead to races to the courthouse and/or the patent office by creative plaintiff's attorneys or various competing companies, intent on establishing rights to a given technology. Companies realizing the large amounts of money at stake if they do not control proprietary rights to a said technology will be willing to make "bet the company" decisions and engage in full-blown slash and burn litigation.

Depending on the manner in which these suits are plead, valid coverage triggers may exist and create huge potential exposures by way of defense costs and possibly, indemnification exposure.

Such exposures must be a significant consideration in the overall assessment of a given risk. Insurers must react accordingly, and provide for such exigencies in the underwriting and claim arenas.

Anticipating the risks allows you to properly tailor insurance coverage to the situation. In the above instance a variety of coverage policies would likely be appropriate, including general liability, professional liability, directors and officers (D&O) coverage, as well as a cyber insurance policy.

How would a cyber policy come into play? An example: a significant and growing risk in the energy world is the shift toward wireless meter reading. These meters present thousands upon thousands of potential access points from which to gather information, or gain entry to a company's electronic infrastructure. While there may not be a direct network link to an internal system, the systems used to access information (the meter readings) could capture (either with intent or accidentally) personal private information via unsecured wireless networks. This could be a significant and unforeseen exposure.

You may recall several months ago the Google Street View cars inadvertently gathered personal, private information such as passwords, e-mail addresses, and so on. This information was gathered by the data collection mechanism on the Street View cars. A similar, if not identical situation could arise with the collection of water/power meter data via the drive-by collections.

In such cases, not only would the entity face direct actions by the consumers, but it could also be looking at severe regulatory actions leading to fines, sanctions, and significant defense costs.

As far as risks go, I've figured Carlos out. Even though I know her ways and what to watch for, she will always surprise me. She will always find some new ways to push the edge and expand the "Carlos factor." Knowing that, I can be diligent; I can be on guard; and I can account for a portion of the unexpected and surprising behavior.

We all must constantly account for the "Carlos Factor," and conduct a creative and thorough analysis of insureds' potential risks to ensure that the appropriate insurance, limits, and deductibles are in place. No surprises.

Special Reports /

The &quot;Carlos Factor&quot;

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The "Carlos Factor"