Commercial Insurance Blog

Many IT companies grow steadily for several years without having their risk and insurance program evolve to match the needs of a larger enterprise.  When a company first opens, insurance is one of many simple checklist items: get essential general liability and workers compensation in place.   As the business grows and evolves, risks are attended to more on an ad hoc basis rather than with a strategy or plan in place.

The risks and exposures that IT companies face are greater and more complex than just a few short years ago.  Add a little growth and new services and that early insurance program can't do what it's supposed to do: protect the business.

Recently we were referred to a growing IT company and discovered five areas not attended to, each which could quickly put them out of business and not addressed in their old program:

1. Professional Liability (aka E&O) – The advice a professional gives to its customers is very important and ideally leads to the client's success.  In a worst case scenario, that advice could lead to the client's demise.  If a client claims the IT Company provided bad advice, or misguided the client, and/or if there are financial damages, the company may be sued.  A Professional Liability policy provides defense coverage and judgments for "errors and omissions."(More)
2. Cyber Liability – The IT Company was surely assisting its clients with the creation and setup of servers, phones, computers, Wi-Fi and other services.  Acknowledging that, if the client ever gets hacked and loses sensitive customer information the IT Company may be on the hook.  Cyber Liability insurance protects the IT Company for this exposure.  (See: How Target was hacked via it’s HVAC System)
3. Business Interruption – If the IT company’s office was impacted by a fire or storm and could not operate because its infrastructure (servers, laptops, etc.) was damaged, significant revenue could be lost before they're back up and running.  Further, they may not be able to make payments for rent, vendor contracts, employee wages, utilities, etc.  Adding Business Income coverage would protect them for this kind of lost revenue. 
4. Employment Practice Liability (EPLI) – Employees are a company's most valuable asset, but there are a host of issues your staff can bring to bear on any business, not just an IT firm.  EPLI protects against accusations of discrimination, wrongful termination and harassment.
5. Business Personal Property (BPP) – The IT Company had inventory, computers, cable, equipment, and other items that valued well over $100,000 in its office that has no coverage under a "liability" policy. If the office was damaged by fire or another event, the company could have lost all their investment in the physical stuff.  BPP coverage protects the company’s “stuff.” 

Each example above can be mitigated with an organized risk management program in place to help buy insurance smartly.  Risk management paired with insurance such as using a good HR partner for hiring and firing can lower your chances of getting sued by a disgruntled employee. 

Knowing your true risk and addressing it carefully will help you sleep easy at night in case disaster strikes.  To discuss your exposures and the right risk management and insurance program, please call me toll free at (800) 649-3252.  Prefer to type instead of talk?  Click below.