Beyond ESIGN – Evidence Considerations for Insurance Companies

2
Agenda
■ Opening remarks
■ Overview of laws
■ Consumer disclosures
■ 6-Point Risk Framework
■ Admissibility Rules
■ Case law update
■ e-Delivery
■ Assistance from vendors
■ More Q &A

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Supplemental Materials
Please e-mail me if you would like a copy
■ Overview of 6-Point Framework
■ Enhancing the Admissibility and Enforceability of
Electronically Signed Documents (Bloomberg Law Reports)
■ ACORD White Paper – Best Practices and Legal Requirements
■ Article on recent California AB 1131

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Preliminary Comments
■ A reasonably well designed process, supported by solid
technology, can actually reduce risk, relative to traditional
process.
■ It’s more about process and workflow than it is about
technology, but technology plays important role.
■ Consider buying the solution rather than building- the choice
of vendors continues to improve.
■ Most, not all, e-sign solution vendors will have solid
functionality to address the admissibility concerns I’ll describe
today.

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Overview of Laws
■ ESIGN – federal laws
■ UETA – state laws
■ California AB 1131
■ e-Posting Laws in various Insurance Codes
■ Insurance Codes and Rules of Evidence still govern

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Basics of e-Sign/UETA
■ Documents required to be provided in writing may be e-
delivered.
■ Consumer disclosures may be e-delivered, with an extra step.
■ Electronic signature broader than “digital” signature, may be
as simple as clicking “I agree”, typing a name, or even saying
“I agree”.

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Consumer Disclosures
■ Can be given via e-delivery, but timing remains the same
■ May require special consents
■ state law disclosures
■ federal law disclosures
■ states that have included special provision: AK, AL, CO,
CT, GA, MD, MA, NH, NV, NC, NJ, OR, SC, TN, VT,
WV, and WI
■ California AB 1131
■ e-Posting Statutes

6-Point Risk Framework

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■ Developed over time from risks identified by clients and
attendees at sessions like this
■ Framework helps distinguish the risk, to match the mitigation
strategy with the right risk
■ Helps multi-disciplinary team communicate
■ Ultimate objective: Help teams design process for enforceable
records to defend in litigation and in regulatory exams in a
way that customers will use the process
6-Point Framework

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6-Point Framework (cont’d)
1. Authentication Risk
2. Repudiation Risk
3. Admissibility Risk
4. Compliance Risk
5. Adoption Risk
6. Relative Risk

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Authentication
Risk – “That’s not my signature”
Mitigant – Use “shared secrets” or other ways to affirm identity

12
Repudiation
Risk – “That’s not what I signed”
Mitigant – Hash each document and hash the audit trail

13
Admissibility
Risk – “Objection, your honor!” or “That will never be
introduced into evidence!”
Mitigant – Determine who is able and willing to testify upfront
(Read Markel)

14
Compliance
Risk – “I never saw that” or “Our state does not allow that!” or
“Can we just give this disclosure later?”
Mitigant – Varies

15
Adoption
Risk – “Am I done yet?”
Mitigant – Test, adjust, test, repeat

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Relative
Risk – “How does each category of risk for the e-process
compare to that category of risk in the traditional process?”
Apply the relative risk to each previous point
- Authentication
- Repudiation
- Admissibility
- Compliance
- Adoption

Admissibility Rules

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Admissibility of e-Records
■ For companies developing a home grown e-sign process, be
careful not to overlook the admissibility risk.
■ Design your e-sign process, or contract with a vendor who has
designed such a process, to generate admissible records and
that will likely help those records be persuasive as well.
■ Identify the custodian who is credible and qualified.
■ If records in a process are not admissible, they will not be
enforceable.
■ Question recently asked by a carrier – to tie a few key
concepts together.

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Role of Custodian
■ Person needs to have knowledge of the process for
creating, securing, archiving and retrieving relevant
records
■ Person must be credible
■ Person should be able to explain process clearly,
simply and credibly
■ If any vendor involved, consider obtaining contractual
commitment as to form of affidavit to be signed for
“transactional documents”

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Admissibility - Key Elements
■ Goal is to create admissible/persuasive evidence. To meet
Federal Rules of Evidence Rule 901(a) authentication
requirements, the e-process should:
■ Create audit trail
■ Secure the audit trail and other documents to
render them unalterable without detection
■ Your custodian needs to be able to explain this,
credibly

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Admissibility - Key Elements (cont.)
■ To meet the FRE 901(a) authentication
requirements, you should also:
■ have a secure retrieval process of the audit trail
and final documents that your custodian can
explain, confidently
■ Identify a credible evidence custodian who can
testify to the above

Admissibility – Take Aways
■ Focus on the audit trail- be sure to have one that captures each
significant step, with time and date.
■ Secure the audit trail- the audit trail itself should be tamper
evident.
■ Each document should be rendered tamper evident
immediately after it is signed.
■ Identify who will testify about the process, with first-hand
knowledge of the audit trail and rendering documents tamper
evident.
■ Consider how you defend or enforce your documents today.
22

Case Law Update

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Summary
■ There are a few bad processes
■ The courts are not struggling to recognize electronic signatures can
be enforceable

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Summary (cont’d)
■ Take-away: Courts continue confirming e-Delivery and e-
Signatures in the employee/consumer settings, as long as it is
made clear to the person the significance of the action
accepting new terms
■ Plan for admissibility, we suspect there will be more disputes
in this area

e-Delivery of the Fulfillment Package:
Can it be Done?

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e-Delivery
■ Yes – e-Delivery is permissible
■ Requires clear consent from recipient
■ Consider obtaining consumer’s consent for
e-delivery for all permitted notices, such as:
- GLB annual notices
- FCRA opt-out notices
- Security breach notices
- Other notices that may be required

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e-Delivery (cont’d)
■ e-Delivery method can reduce risk:
- proof of delivery of complete package
- proof of when delivery occurred
■ e-Delivery can also present a quandary: what happens if consumer
does not retrieve package/notice?
■ UETA has deemed receipt and upfront consent should emphasize

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e-Delivery (cont’d)
■ Better method appears to be:
- e-mail alert that something is ready
- consumer logs into secure site to access
materials

What Assurances Should You Get From
Your e-Sign Vendor or Internal IT Shop?

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Assurances from e-Sign Vendors/IT
■ Avoid surprises – ask now who will be there to testify on critical
points:
■ System creates an Audit Trail
■ Audit Trail is securely archived
■ What is generated and available as evidence
■ Documents are rendered tamper evident

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■ One credible source reports significantly improved settlement
conferences
■ Audit Trail and each document/record presented, including each
that was signed, are unaltered without detection
■ Who will testify as to the above?
■ Requires specific opt-out mechanisms for customers
Assurances from e-Sign Vendors/IT (cont’d)

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■ In sum, ask for sample of what would be generated to
prove:
- To a judge, how the company is sure the application with the
misrepresentations is in fact what the customer signed;
- To a regulator, how you are so sure that each and every
required disclosure was in fact provided to each person; and
- Consider preparing a Form Affidavit to be signed by your
custodian, include screen shots.
Assurances from e-Sign Vendors/IT (cont’d)

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The Bottom Line?
■ e-Signatures can be legal
■ Authentication and repudiation risks are manageable,
especially in new business areas, and can reduce risk relative
to paper process
■ Focus on the audit trail and tamper evident signed documents
■ Evaluating these risks must be done in context
■ More work flow and process than technology
■ Consider how you’ll prove it
■ California AB 1131 is manageable

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For further information/materials or to be added to our e-Matters e-mail alert,
please send your request to brosen@lockelord.com
Questions? Answers!
Pat Hatfield
phatfield@lockelord.com

Beyond ESIGN – Evidence Considerations for Insurance Companies

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Beyond ESIGN – Evidence Considerations for Insurance Companies