Technology firms face a variety of complex risks in the course business today. Your firm has unique and challenging exposures. Many have asked me what the leading claims in today’s tech environment are. I have identified the following…
Data Loss: What happens if your data back-ups fail? What about software upgrades and or accounts or data files you transfer to other systems? These can fail. Over the last 12 (twelve) months, I have seen a marked increase in the number as well as severity of losses. The average loss for a small to midsized tech firm has been $100,000.
Cloud Services: This is an important area that can significantly benefit you and your clients. However much like data losses, what happens if information is lost or comprised (see below).
Network Security including losses as a result of Hacks, Viruses, Loss of Service & Unauthorized Use / Access: Who is going to be the next victim? Sony Corp. and Target are just a few of the companies that have had security breaches? However local store owners and business are also seeing losses. Credit card information in particular is a problem. Do you have the funds set aside to reimburse the banks and financial institutions for wrongful charges or even the replacement value of the cards that have been compromised? What if you have a rogue employee? Do you have any high profile clients in the financial or medical sector which should be of concern if your or their systems are breached?
HIPAA & Privacy Claims: Federal regulators have recently passed legislation which requires technology companies to be HIPAA compliant specifically as it relates to clients data. Do you have the ability to incur privacy breach costs and obligations including any statutory fines?
Copyright / Trademark Infringement: Are you in a competitive field? I have had several tech clients be sued for copyright infringement. The average cost to defend and in indemnify copyright losses exceeds $450,000. One client was sued in Australia? Our policies thankfully provided full worldwide coverage. Do you have the ability, time and or money to hire an intellectual property lawyer to handle such a claim? Another client recently failed to renew one of his client’s URL addresses. The client lost rights to their main website address. Needless to say the loss was very large.
Spamming: This has been a nuisance for many years. However over the last few months, I have had clients become the victim of Phone Spamming. If you use or offer VOIP telephonic services, make sure you have protocols and protection in place as such losses should be of concern.
Along with strong security and technology practices, insurance should be fully integrated into your overall risk management plane. The above exposures are in addition to what I call basic insurances every firm should address:
- Professional Errors and Omissions for contractual & financial losses. Broad policies such as those I specialize in affirmatively cover the above claim exposures.
- General Liability: including bodily injury, property damage, hired & non-owned auto, damages to premises rented and even employee benefits in select policies I can offer. What happens if a
client slips and falls on your premises? What if you drop their server or spill a cup of coffee on their brand new laptop.
- Property: Are your computers / servers and all other office contents insured for full replacement value both on premises and off? Are your buildings insured for adequate amounts?
- Workers Compensation – Employer’s Liability: Are you meeting state minimum requirements and are you protected if an employee is injured on the job?
- Employment Practices Liability (EPLI): Do you have a difficult employee? Are you concerned with about possible & even baseless wrongful termination or sexual harassment claims?
- Crime Insurance: Do you have employees who have access to your clients or your property, money or funds? Are you or your clients concerned with employee dishonesty theft?
- Cyber Liability Coverage: Do you or even your client’s need a stand-alone and fully dedicated policy that insures first and third party network security, cyber and privacy exposures?
- Auto (commercial and personal): Does your firm own any vehicles or a fleet of vehicles?
- Directors and Officers: Are you and your fellow partners concerned about being held personally liable for shareholder, employee or customer claims for alleged mismanagement of your company?
- Umbrella or Excess Coverage: Do you have a large client or a substantial amount of assets / revenues that warrant higher limits?
- Life, Accident, Group Health & Dental Insurance and Key Man Insurance? Do you offer or are you considering offering employee benefits such as these? What happens if you or your partner is injured or worse? Do you also have Fiduciary Insurance for mismanagement of 401-K plans or these insurance related benefits.
Why are these important? The number one reason is to protect your assets! Do you have funds set aside for such contingencies or catastrophic losses? Do you have legal representation on retainer to defend your firm for claims and other alleged negligent acts? Policies will defend and indemnify you for losses and provide you and your client’s peace of mind. Insurance helps provide long-term viability for competitive industries & problematic risks.
Clients, banks, landlords are increasingly requiring certificates of insurance to ensure that your firm has basic insurance to provide them protection. Thus insurance is offered meet your contractual obligations. I also recommend using our insurance as a marketing tool much like the local contractor in your town does.
In addition to insurance, I strongly recommend technology firms implement industry standard contracts and best practices. Make sure your services are in writing and work order or changes are signed off on. Obviously if you’re handling data, proper network security and back up measures must be in place.
Remember, strong technology plus insurance = true protection! Get covered today! Contact our VAR Office Suite business insurance partners…Ask Michael (Check off the Liability Insurance box).
By Michael Kihm