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Insuring A Tech Company’s Management Liability Exposures

Insuring A Tech Company’s Management Liability ExposuresInformation Technology (IT) firms have a number of management liability exposures that, without the proper insurance coverage, can result in serious financial damage. Management liability lawsuits range from workplace-related issues such as discrimination and wrongful termination, to business practices issues such as misappropriation, financial mismanagement and negligence. Lawsuits can be lodged by employees, customers, lenders, vendors and suppliers, competitors and shareholders.

Unfortunately, many smaller tech companies, including start-ups, mistakenly believe that employment practices and directors and officers liability related risks are covered under their Commercial General Liability policy. However, these types of risks are specifically excluded and typically must be addressed by stand-alone custom policies.

For example, an Employment Practices Liability Insurance (EPLI) policy covers claims against an employer being sued for sexual harassment, wage discrimination, invasion of an employee’s privacy, wrongful infliction of emotional distress, deprivation of a career opportunity, wrongful discipline, negligent evaluation, and wrongful termination, among others. Coverage is available on a “claims-made” basis, meaning that the claim only will be covered if the incident in question occurred while the insurance policy was active, with the policy still in force at the time the claim is filed.

How much EPLI coverage you need varies depending on your operation, whether your business has faced lawsuits related to employment practices in the past and other risk factors, and how many employees you have. EPLI policies provide reimbursement not just for your company’s costs related to fighting lawsuits in court, but also for costs from settlements and judgments. Regardless of the outcome of the suit, an EPLI policy will cover legal costs. Some policies can also provide third-party liability coverage for claims brought by customers for discrimination and/or harassment.

Directors & Officers (D&O) Liability insurance for tech companies is designed to safeguard board members, directors, and officers from lawsuits arising from management decisions they made on behalf of the company. A D&O policy primarily provides protection in the event of any actual or alleged error, misstatement, omission, or breach of duty. Claims from clients, employees, or stockholders may be made against any company and against the directors and officers of a company. Most directors and officers will want to be covered rather than risk their personal assets since a director or officer can be held responsible for acts of the company.

Axis Insurance Services specializes EPLI and D&O insurance coverages for technology companies and can work with you to secure comprehensive policies to protect your firm against your management liability exposures. Give us a call at (877) 787-5258.

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Blogged on: February 15, 2016 by Mike Smith
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