Harari, Jack, Risk Management
The digital revolution was squashed in its infancy, ushering in a resurgence of eight-tracks and phonographs; an ice age has befallen the dot-com era; and the Internet was a hoax. Right.
Although some might enjoy this doomsday scenario, the fact remains that computer technology pervades every facet of the human experience, from how we manage personal relationships to how we conduct complex business transactions. One manifestation of this symbolic shift occurred on June 30, 2000, when former President Clinton enacted Senate Bill 761 using an encoded smart card.
The law is entitled the Electronic Signatures in Global and National Commerce Act, and is commonly referred to as E-Sign. Some predict that E-Sign will save the insurance industry upward of $1 billion annually. A survey conducted by GigaLaw.com suggests that approximately 75 percent of businesses polled use, or plan to use, electronic signatures.
But companies still cannot disregard state laws, such as the Uniform Electronic Transactions Act (UETA). UETA is a model set of laws that states are free to accept, reject or alter. To date, twenty-seven states have adopted the act in some form, while sixteen other states and the District of Columbia have introduced it into legislative session. Inherent tension exists between E-Sign and UETA because Congress, while wanting to create uniform e-signature laws, is sensitive to usurping areas traditionally governed by state law, such as contracts.
The preemption provisions of E-Sign are complex. Generally speaking, state e-signature laws may be over-ridden by E-Sign if they are inconsistent with UETA. In many states, E-Sign and UETA may coexist, making it necessary to understand both.
Four provisions of E-Sign are of particular importance to the insurance industry. First, E-Sign states that "it is the specific intent of the Congress that this title apply to the business of insurance."
Second, E-Sign states that insurance agents or brokers acting under the direction of a party that enters into a contract by means of an electronic signature "may not be held liable for any deficiency in the electronic procedures agreed to by the parties" if the agent or broker: (1) has not engaged in negligent, reckless or intentionally malicious conduct; (2) was not involved in the development or establishment of such electronic procedures; and (3) did not deviate from such procedures. …