You will need E andO and D andO and Tech and Privacy Breach E andO insurance if you are a private, government, or public entity. E and O insurance, also known as Errors & Omissions insurance, covers both the service you provide and the representations your employees make to customers. D and O (also known as Directors and Officers Insurance), protects officers and directors in the management of the company’s affairs. Tech and Privacy E and O covers what you post and do on your website. It also covers you if there is a security breach and confidential information stolen from clients or employees. If you’re a tech company and your technology causes harm to another person (viruses or lack of data breach protection), your system malfunctions and clients are financially harmed, Tech and Privacy O insurance will protect your company.
D and O (Directors and Officers Insurance), coverage covers your board members who make decisions regarding the direction of the business. It covers the manager, employees, and officers who make decisions about the operation or direction the company. The company itself is covered, if it is named in an action for such types of actions.
Here are some examples of claims:
1. Director has a friend who is in the carpet industry. The director suggests that the company purchase carpet from his friend. The company spent three times the normal cost of carpet and the director received a kickback from his friend. Stockholders are sued for self-dealing, wasting company assets, and other charges. Two sales managers recruit two reps from a rival and tell them to go get the competitor’s client lists. The competitor files a lawsuit for business interference and other related matters.
3. Privately held businesses are sold. Before the sale, the owner signed a 10-year lease at a rate above the market rent rate. The buyer sues the seller for non-disclosure or wasting corporate assets. Only if the seller purchased prior acts for D and O insurance is the seller covered.
E and O (Errors & Omissions) – This covers employees and representatives who take actions to deliver your product/service. This covers any misrepresentations, errors or lack thereof. It does not cover fraud or other criminal activity.
Here are some examples of claims:
1. A sales representative for a technology company sells a $2million contract to a client and promises that the software will work with their systems. The software damages the client’s legacy systems, and the representative was incorrect. The customer files a lawsuit against the representative.
2. A medical supply company sells an expensive new machine to a hospital, but fails to inform the customer that it will fail if it isn’t grounded. A patient is killed when the machine fails to function properly. Both the hospital and the patient can sue for wrongful Death.
3. An agent for insurance tells a client that wind damage is covered under his/her homeowner’s policy. The client loses his home to a severe windstorm. His policy does not cover wind damage. The agent is being sued.
Tech and Privacy Break E and O insurance are new areas of insurance. If you have any of the following: website, client personal information and/or employees. If you have a website that is accused of damaging another person’s reputation or publishing copyrighted material, you will need this coverage to protect yourself from lawsuits. Although General Liability covers advertising, it is not a common coverage. Therefore, it is unlikely you will be covered since a website isn’t considered advertising. You are covered if you have Tech and Privacy Breakach E and O insurance. You will also be covered if your computer system or confidential information is compromised. This coverage will cover the costs of defending any lawsuits and advising all affected.
Here are some examples of claims:
1. A laptop containing 10,000 patient records was stolen by a medical group. The thief steals patient records and sells them to others. Patients sue the medical organization in a class action suit to recover the damages.
2. A virus infects 50 aircraft computers at a technology company that produces software for them. The airline sued for $20 million
3. The website designer of a flooring company used an Elmer Thud cartoon. He assured them that he had paid the license fee. Its use of the image generates a lot of traffic and leads to new business. Elmer, the licensor, finds the site and sues the company for $1 million for numerous infringements.
Every company should have E andO and D andO, and Tech and Privacy Breach E andO insurance. The risk is far less expensive than the insurance.
About HCP National Insurance Services
HCP National is your one-stop insurance shop. We offer all types of insurance coverage, including ASO and Stop Loss Insurances, Fully Insured Managed Car Programs, Medical Malpractice E & O & O, Reinsurance and Product Liability.
