In economically troubled times business risks take on increased weight. You need to understand clearly what risk you can transfer – and what risk you cannot.
Client expectations of their insurers have recently led to huge claims in areas never contemplated by insurers. Contract disputes, once strictly in the realm of business risk, have been transported to insurance claims unintended by the carrier. 2003 has seen considerable constriction in coverage terms and language, even while costs are continuing to increase.
Solvency issues raise questions when partnering, when licensing, and when depending on sole sources for parts or services. Capital funding resources scrutinize such issues much more carefully, being sure that business continuity is as secure as possible. Software code escrow, licensing contracts, and similar arcane matters have grown in complexity as national and international commerce raises new levels of concern.
Write your customer contracts in a way that limits your liability for consequential damages and economic loss. Then, your insurer should be by your side to defend in the event of a claim for damage caused by your hardware, software, service, or people.
This is how you should expect to be covered by your E&O insurer:
|Types of Problems||Yes||No|
|errors in code||x|
|consequential (financial) damages||x|
|contract performance quality||x|
|problems prior to client sign-off||x|
|economic loss to client’s relying on your work||x|
|damage to client’s system you cause||x|
|shut-down economic loss||x|