Business Insurance FAQs

Question: I’m starting a new buisness – what insurance do I need?

Answer

Different types of business require different policies to protect their business assets and to protect against business legal liabilities.
To assist new business owners Donnellys has developed a Small Business Guide to Insurance which shows the majority of business types and the range of policies available to suit each type of business listed.
Refer to our Home page for a link to the Small Business Guide.

Question: What’s the difference between Public Liability or Professional Indemnity?

Answer

It is important to understand the differences between Public Liability insurance and Professional Indemnity insurance.
Public Liability covers claims against you for bodily injury and property damage to  someone that arises from the operation of your business. For example, if a person  is injured on your premises, or if you damage property while visiting a client.
Professional Indemnity insurance covers claims that arise from a breach of the duty that you owe as a professional or an expert for services such as:

  • advice,
  • design,
  • consultancy,
  • analysis services.

Professional Indemnity insurance covers your civil liability that results from the conduct of your professional services.
This includes:

  • contractual liability,
  • liability under the Trade Practices Act,
  • defamation,
  • infringement of intellectual property right,
  • liability for the acts of sub-contractors and consultants, and
  • compensation and claimant’s costs and expenses.

Question: What about Technology Liability Insurance Issues?

Answer

Any organisation that develops, manufactures, licenses, sells, provides, advises, integrates any form of Technology and related services is exposed to litigation. The failure of a product, service or incorrect advice will expose that organisation to claims.

Legal Confusion
There is no consistent legal opinion as to whether software developed for a client is a “product” or a “service”. This is particularly important because most software developers are required to provide evidence of Professional Indemnity insurance under client contract  conditions – but claims in respect of Products liability are excluded so there would be no cover if software is deemed to be a product.
Circuit board manufacturers & other hardware suppliers need Products Liability insurance to protect their legal liability for injury or property damage claims in respect of their products. They also need Professional Indemnity for in-house design activities if applicable.
However, the most likely claim against a circuit board manufacturer or hardware suppliers is for financial compensation as a result of the failure of the product to perform as specified in a contract, rather than an injury or property damage liability claim. Claims for financial loss are not covered by a Products Liability policy which is the domain of Professional Indemnity insurance.

How closely do you look at contract conditions?
Many contracts routinely entered into by companies contain provisions that impose liabilities which can be very onerous and may not be covered by their Liability insurance leaving them unprotected for these assumed liabilities. Insurers exclude any additional liability assumed under contract beyond which would normally apply by law. So you could be your own insurer for additional liabilities you have inadvertently assumed by signing a contract without reference to a legal adviser first, unless your insurer has endorsed your policy to accept particular liabilities.

Technology Liability Insurance is the best solution
Technology Liability Insurance provides protection for organisations against legal liability for economic loss arising from the failure of their products, services and or advice in the conduct of the business in respect of acts, error or omissions and includes alleged breach of contract. It covers both hardware and software businesses.
This Insurance combines Professional Indemnity and Public & Products Liability insurance coverage to respond to the unique exposures of the Technology industry. Technology  Liability insurance eliminates the potential coverage gaps which can occur when these policies are arranged separately due to legal issues. The cover includes defence costs associated with defending legal actions – even if you are found not liable.
This insurance also provides coverage for infringement of copyright, trademark, registered design or any other plagiarism. It also covers breach of confidentiality, privacy or defamation. Contractors can also be insured for their own liability as well as your vicarious liability for their performance.
Donnelly Insurance Brokers, can provide a specific offering for professionals involved in the Technology industry and the policy coverage is superior to other Technology insurance products available in the market through added benefits.

Contract Review Service
A Contract Review Service is available as an extension to the Technology Liability insurance product offered by Donnellys. This service includes up to 4 individual reviews during the policy period for:
Contractual agreements used by your company
Review of a client agreement to engage your services to ensure you are not left unprotected through assumed liabilities
Why take the risk with superseded and outdated policies when you can take advantage of a special arrangement designed specifically for your business?
Check the following examples how software developers can be exposed to financial loss claims from aggrieved clients which might not be covered by your existing insurance!

Claims example 1
A web designer was retained to upgrade/design the webpage for an online bookstore.  The client complained that the web designer did not perform the work according to the specifications provided by the client when it was discovered that there was an error in the payment page which omitted the credit card details for visa cards.
Online purchasers could not pay for their purchasers with visa cards and failed to complete the payment transaction.  It was soon discovered that over $50,000 worth of sales were not processed as a result of this error.  The client issued proceedings against the web designer for lost sales totalling $52,500 together with costs and interest.

Claims example 2
A retailer contracted a software developer to customise and install a software system to enable the process of payments.  The system was tested and was found to be working and problem free.  Shortly after going ‘live’ orders placed utilising the system were lost with payments not being received and delivery of goods not being provided to customers.  The retailer sued the software developer for $750,000 claiming breach of duty, lost of business and loss of reputation.

Claims example 3
A large accountancy firm retained a software developer to design and implement a solution to automate their business activities.  After the system was developed and installed the company’s records were transferred to the system.  Soon after, the system crashed and it was soon discovered that the developer had not properly installed a back up for the data transferred to the system. As a result, the company’s client information, billing records and other account details were lost. The software developer was sued for damages in excess of $300,000 with the client claiming breach of contract, negligence and the cost of installing a replacement system.