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Insurance Cover for Innovative Businesses
Because of their innovative products and services, complex partnership arrangements and global footprints, ICT, Life Sciences, Media and Telecom businesses can face unseen pitfalls when it comes to insuring against business risks, writes Zita Erdis from Keaney Insurance Brokers Ltd.
When assessing how well you and your business are protected, there are three key insurance areas to consider alongside covers that may be specific to your particular sector and the traditional covers of commercial general liability, employer’s liability, business interruption and property insurance.
1. Professional Liability
Is your policy cover what you expected? Check your policy for the following:
- Are the indemnity limits adequate?
At a minimum, do they match the requirements of contracts you have with third parties?
- Is the limit of indemnity on an “any one claim” or “aggregate” basis?
- Do you have worldwide jurisdiction and geographical limits?
Remember one of the biggest challenges is to ensure that the jurisdiction takes into account all territories from where claims may emanate, and the geographical limits should be in line with the countries where work is being undertaken.
- Are fraud and dishonesty included?
Will the policy pay damages resulting from any claim for fraud/dishonesty of an employee?
- Does your policy include breach of contract cover?
One of the greyest areas is whether contractual liability is covered. Companies are entering into contracts with third parties on a day-to-day basis. These contain warranties backed up by indemnities, which can be uncapped, and include exclusion and limitation clauses, consequential loss clauses, IP Right Indemnities and jurisdiction and dispute clauses, all of which need careful consideration in terms of how the insurance policy will respond if required to do so.
2. Cyber Liability
Every business needs protection from the consequences of data leaks and breaches.
There is a need for businesses to fully understand and discharge their contractual and regulatory duties and responsibilities, particularly those relating to information security and data privacy laws.
Policies can include:
- Breach Notification Services
Privacy Breach Notification Laws are common across most USA States and are now spreading across the world, which is one of the main reasons why Cyber Liability Cover is purchased as it typically includes breach notification services cover.
- Data Liability
Provides cover for damages and defence costs associated with a data breach.
- Reputational Damage
Provides protection for the purpose of averting or mitigating damage to your reputation or brand.
- Income Loss
Provides cover for your loss of income incurred during system down time and loss of income resulting from reputation issues i.e. loss of customers.
- Retroactive dates/date of discovery
An event that causes a data breach can lie undetected for a long time. It is very important to know the policy’s “retroactive date” i.e. how far back in time cover extends to. Alternatively, cover may apply from the “date of discovery” of a data breach, i.e. the date you first found out about the breach.
3. Directors’ and Officers’ Liability
Every entity has potential exposure to risk, so this cover should be a basic requirement in a company’s risk management strategy.
- Why is it needed?
Mistakes can be made, and Directors and Officers are often personally legally liable for them in respect of actual or alleged mismanagement or breach of duty.
- Who should be protected?
Company Directors/Officers and Senior Management – this cover provides financial protection for them from claims, which may arise from the decisions made when fulfilling their regular managerial duties.
- What is protected?
The personal assets of Directors and Officers.
- Who is included?
Current, future and past directors and officers, which can include non-executive directors.
- What limit of cover should be bought?
This will vary considerably based on the size of the company. In addition, international activity –particularly in the USA – should be taken into account.
- Where can claims originate from?
Liabilities can come from many areas, including shareholder actions, actions by a regulatory body e.g. Environmental Protection Agency Office or Director of Corporate Enforcement, employment related issues, including – but not limited to – discrimination, harassment, wrongful demotion, and so on.
If you are operating in the ICT, Life Sciences, Media and Telecom sectors, it is important that your Insurance Broker understands your business, has the specialist knowledge to tailor policies to meet your requirements, negotiates with Insurers to support contract conditions as far as possible, and has the global network facility required to enable it to act as your one-stop shop for all your insurance requirements.
Written by: Zita Erdis, A.C.I.I. Chartered Insurance Practitioner, Director, Keaney Insurance Brokers Ltd. – specialist Brokers to ICT, Life Sciences, Digital Media and Telecommunication Sectors and providers of global management programmes.
Please be aware that all of the views expressed in this Blog are purely the personal views of the authors and commentators (including those working for AIB as members of the AIB website team or in any other capacity) and are based on their personal experiences and knowledge at the time of writing.
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