As more tech companies release virtual reality (VR) products, the impact on insurance is a growing concern. Kevin Quinley, founder and principal of Quinley Risk Associates, said the industry can look to claims and lawsuits involving video games to get an idea of what types of VR claims might arise. Insurers will likely proceed with caution and exclusions related to VR may be added to future policies.
In his latest Claims Insights podcast, Quinley discusses the growing technology and the implications for claim professionals.
“A lot of tech companies are launching VR devices for consumers. Just a couple of examples: Google’s Alphabet unit is reportedly developing a VR headset that doesn’t depend on a game console, or a computer, or a smartphone,” Quinley said. “Facebook’s Oculus sells, I think, a headset that goes for around just under $600. Samsung started selling hundred-dollar VR viewers in the fall of 2015. Both Sony and HTC have launched VR headset devices that do require a personal computer or game console.”
According to TrendForce, merchandisers sold 14 million virtual reality devices worldwide in 2016, and it projects that VR device sales and software will snowball into a $70 billion market by 2020, he added.
There are several ways virtual reality could impact insurance claims, including long term physical side effects or psychological behaviors resulting in potential liability claims against VR technology manufacturers.
“The lure of virtual reality may become so seductive, so powerful, that individuals essentially lose themselves in imaginary worlds, becoming increasingly detached from reality. Those psychoses can manifest themselves in various ways, some of them destructive,” said Quinley.
Lawsuits relating to video games will be helpful in evaluating risks associated with VR.
“I would say video game makers, we can take a look at them, because they have parried suits from injuries allegedly caused by violent acts committed by individuals who were addicted to video games,” said Quinley. “One key point is, even frivolous claims against VR reality product manufacturers will consume substantial amounts of time and legal cost. Also, all it takes is one successful claim to trigger a lawsuit avalanche, especially since the plaintiff bar continually trolls for new areas of liability and litigation.”
Additional claims could result from the nausea and motion sickness experienced by some users of VR.
“That’s due to subtle delays in the screen’s responsiveness to user movements when they’re wearing the virtual reality equipment,” he explained.
Though the risks may seem far-fetched now, he said there is always the potential for a big plaintiff win.
“My point is, when a plaintiff can win a six-figure jury award from a McDonald’s hot coffee spill, it’s no stretch to envision product claims based on allegations of illness and harm from users of virtual technology products. This kind of underscores the law of unintended consequences that really applies to every tech innovation,” said Quinley.
He explained that a subset of virtual reality is augmented reality, popularized recently by the game Pokemon Go. Media reports highlighted instances of illicit use of the app, he said.
“In July of last year, a distracted driver playing Pokemon Go hit a police car in Baltimore. That same month two distracted men fell off a cliff in Encinitas, California. Fortunately, they survived. In New York City, a 19-year-old man was robbed while playing Pokemon Go, and another was assaulted at a bus stop while playing in Austin, Texas,” Quinley said.
Video game players have sustained all kinds of injuries, including seizures, torn ligaments and broken bones.
“Only time will tell whether Nintendo, the maker of Pokemon Go, may be held liable for injuries sustained while people are playing that game,” said Quinley. “Let me also point out that potential plaintiffs here might be not only individuals playing the game, but those who aren’t playing the game and are not bound by Nintendo’s, or anyone else’s, terms of service.”
Plaintiffs could argue that AR or VR games encouraged trespassing to fulfill game requirements, he said, resulting in manufacturer liability for nuisance, invasion of privacy or pain and suffering when homeowners’ lives are invaded by a company’s product through no fault of their own.
“There’s a whole world of lawsuits waiting for companies over these kinds of games. Even if we don’t agree with the theory of liability and think it’s far-fetched, again, there’s a time cost and a dollar cost in defending even frivolous claims, and it takes only one to succeed for the dam to burst,” said Quinley.
The possibility of class actions filed against VR equipment manufacturers alleging users suffered physical ailments or psychoses through the use of virtual reality headsets is not out of the realm of possibility, he said.
Quinley highlighted a few examples of video game lawsuits.
In Roccaforte v. Nintendo, a child’s parents sued Nintendo after their son suffered violent seizures while playing video games. There was a seven-day trial. The jury ruled in favor of Nintendo, although the appeals court ordered a new trial due to alleged discovery abuses.
In March 2007, a plaintiff sued Vivendi Games, Sierra Entertainment and Sony in New York State alleging their infant suffered an epileptic seizure from a video game.
“Product suits against video game manufacturers have alleged not only physical health harm from playing games, but psychological damage to players who harm others,” Quinley said. “In James v. Meow, a high school student shot several other students. Parents of the victims sued the video game maker, as well as the movie companies, claiming the video, game and movie content desensitized the shooter to violence and thereby caused the murders. So, the plaintiffs sued on negligence and product liability.”
He described another case, Sanders v. Acclaim Entertainment, where the plaintiff sued video game makers, alleging violent games prompted the Columbine shooters in Colorado. The court found the manufacturer couldn’t reasonably foresee the Columbine shootings and the shooter’s criminal acts were the superseding cause of the plaintiff’s damages.
In another case, Wilson v. Midway Games, the plaintiff filed a product liability suit against a video game maker alleging violent video games caused her son’s friend to stab her child.
Quinley said there’s a precedent for claims, even if many have failed thus far.
Besides the cost in defending claims or lawsuits and the legal fees associated, there’s a reputational toll.
“Even the failure of plaintiffs in court so far, largely, in holding video game manufacturers liable doesn’t negate the risks and the costs which companies have to manage, and which claim professionals may have to address in terms of the reputational cost and loss of brand equity,” said Quinley.
Other defendants could include retailers and distributors “who have commercial general liability, CTL [constructive total loss] policies with product and completed operations, so-called PCO coverage.”
Insurers, he said, should proceed with caution.
“Because of the technology’s novelty, I see insurers reluctant to write product liability coverage. The loss data with any new technology. – it’s not unique to VR … will initially be too immature to calculate reliable rates and premiums,” Quinley said. “So, by nature, insurance companies are wary of underwriting new technologies. Some may add exclusions to policies, depending on the nature of the account, the nature of the risk, precluding or carving out coverage for claims from VR technologies.”
In terms of the insurance industry, and claims, VR could be beneficial for training, he said.
“Insurance companies and claim departments could harness VR reality as adjuster training tools,” said Quinley. “I can foresee adjusters donning virtual reality headsets to simulate various on-the-job scenarios as a training tool, for example, one is that the adjuster is on top of a homeowner’s roof appraising post-hurricane shingle damage.”
He offered additional training scenarios, where an adjuster arrives at an overturned tractor-trailer to investigate a motor truck cargo loss with packages strewn all over the highway or a property adjuster uses VR reality training gear to enter a smoke-and-fire-damaged kitchen and develops a scope of loss.
“Immersive technology…creates new training avenues for insurance companies to realistically simulate situations adjusters will face without building an entire educational infrastructure,” Quinley explained. “This could compress the learning curve and accelerate training for real-life skills application. That’s hard to get from textbooks and it’s hard to get from classroom guidance, and it doesn’t require constructing elaborate mock-ups in a training department, which is a…cost barrier for many companies to invest in.”
Training, he said, could also be used for improving customer service through communication modules.
“As VR becomes increasingly sophisticated, there could be more interactive scenarios introduced as claim training vehicles – negotiating with policyholders and claimants and opposing attorneys. A second big area would be claim communication, dampening the need for in-person business travel,” said Quinley.
He correlates VR to the Chinese symbol for danger.
“It represents danger and it represents opportunity. I think that’s an apt metaphor here,” said Quinley. “VR technology encompasses both features. It will create, I think, new demand for claim services, new liability theories, but also new training and communication opportunities for the claim industry.”
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