Entrepreneurship & Small Business

Recommendations for general liability insurance for a tech company

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  • May 11th, 2018 4:19 pm
[OP]
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Feb 9, 2009
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Vancouver

Recommendations for general liability insurance for a tech company

We work with clients to create custom software for them and publish our own for sale on distribution networks.

Any recommendations? Thanks
7 replies
[OP]
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Feb 9, 2009
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Vancouver
Looking for recommendations for a broker as well.
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Jul 3, 2017
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You will find that insurers segment the market so that there is very little competition on price. For a small tech company in Vancouver, the brokers will likely only be able to offer liability coverage from a couple of insurers who have remarkably similar pricing.

You might want to check if a current recommendation and a small discount is available through the BC Technology Industry Association (https://wearebctech.com/). That's what we did originally to end up with our current agent (Hub International).

You will likely require Commercial General Liability (CGL) insurance to obtain an office lease and as a condition of contract with large organizations, probably on the order of $2-3 million worth.

We did have a problem in one year that all the companies offering CGL insurance decided jointly that they would only offer it together with Errors and Omissions (E&O) insurance at 5x the cost. We just steadfastly said "no" until they changed their minds the following year. The key factors regarding E&O insurance are: do you do business in the United State? and is there any remote chance that a fault in your custom software could cause damages to a client?
[OP]
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BC Tech is a great suggestion. I haven't considered them as a way to reduce our insurance premiums. The membership from them and the discounts they give on insurance may be worth the membership fee.

We'll be selling software via a US retailer so yes I believe we'll need E&O.

If you don't mind me asking how much are you paying for your insurance and what does it cover?
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We pay about $1500/yr for $3 million CGL coverage.

The one year the insurance companies were insisting on E&O insurance, my recollection is that it was about $10,000/yr!

Their obscure reasoning as to why they could not offer CGL insurance without it went like this:

1. The U.S. is highly litigious, and lawyers there tend to drag anyone and everyone into civil damages cases, naming every possible party as a co-defendant, including insurance companies.
2. Even if you don't have E&O insurance, there was a case where the insurance company was included in the lawsuit because the plaintiffs said that they should have recommended E&O insurance to their client, the main defendant, and it was negligent of them not to.
3. So even if there is no chance of your company or product being found liable for any damages, even if customers have to accept disclaimers absolving you of any responsibility, there remains a possibility that your insurance company might have to pay legal fees to show up in court and defend itself.

Therefore: you require E&O insurance if you are doing business in the U.S..

We called BS, and said that we wouldn't pay. Eventually, the insurance companies agreed to drop it, and they've never raised it again.
[OP]
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So are you actually protected if you're doing business in the US with your current CGL coverage?

I was told that if we were to sell our software to the states we'll want a different or additional coverage.
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pkpower wrote:
May 11th, 2018 3:50 pm
So are you actually protected if you're doing business in the US with your current CGL coverage?

I was told that if we were to sell our software to the states we'll want a different or additional coverage.
If your software is sold with a prominent disclaimer along the following lines, you do not have any liability concern:

"This software is provided 'as is', and is not warranted to be free from errors or to be suitable for any specific purpose. The purchaser should verify its suitability for their own purposes. The seller accepts no liability for consequential damages resulting from the use of the software."

The type of software liability cases that the insurers are concerned about were all unsuccessful in obtaining damages where software was sold subject to such disclaimers. They are concerned only about their own legal defence costs. In any case, does your software even do anything that could result in consequential damages not directly attributable to a careless human misusing the software? (e.g., fails to close a railroad crossing gate, or incorrectly doubles the dose of a radiation treatment - that sort of thing).
[OP]
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Feb 9, 2009
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Got it. Thanks for your help.

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