Trouble Caused by Faulty Software
A programmer was commissioned to create bespoke software for a significant German sports association. The federation wanted to use the software to create personalised membership cards for each member club - including the relevant permissions and the club's logo. The self-employed IT expert first programmed the software and then took out Professional Indemnity cover through exali. This small detail will become important in a moment.
The badge production seemed to run smoothly for the first three months (December to February). Still, then there was a flood of complaints: Some 30,000 membership cards had the wrong entitlements, which meant that the holders could not access the sports facilities, and were naturally angry with their club, which in turn complained to the sports federation. As it transpired, the error was due to an incorrect date field in the identification routine developed by the programmer.
Sports Association Seeks 23,000 Euros in Damages
Ultimately, the faulty badges had to be re-produced and sent individually to each club. The costs quickly added up to around 23,000 euros - an amount that the sports association then demanded back from the programmer. After assessing the situation, the IT expert immediately reported the claim to exali's customer service department, which passed it on to the insurer. After programming the software and starting the roll-out of the ID cards to clubs, the programmer had taken out Professional Indemnity cover in December.
The insurer reviewed the case and paid the claim to the sports association - even though the policy had only been in force for ten weeks. This was possible because exali's Professional Indemnity includes a so-called pre-sales cover in the insurance conditions.
Tip:
In practice, a small programming error can cause expensive waves more often than you might think. This is illustrated by this damage event, in which an IT service provider ruined a marketing campaign due to a typing error and had to pay a whopping 750,000 euros in damages: IT freelancer ruins advertising.
When Does Professional Indemnity from exali Provide Coverage?
In this case, there were only ten weeks between the inception of the policy and the damage event. In addition, the software itself was created prior to the policy commencing, which means that the programmer had already performed most of his services prior to the purchase of the policy. This raises two fundamental questions:
1.Is the damage covered because it occurred during the policy period?
2.Is the damage not covered because the programming of the label routing that caused
the damage had already been done before the policy commenced?
The answer depends on whether or not the Professional Indemnity Insurance includes pre-sale cover. This refers to the co-insurance in the policy of activities or projects that were started or even completed before the policy was taken out.
The Claims Made Principle
Professional Indemnity Insurance through exali defines the insured damage event according to the "claims-made" principle, i.e. it is not the time at which the damage occurs that is decisive, but the time at which the claim is made, i.e. when the claimant makes a claim for damages or issues a written warning. If the claim is made within the policy period - as in the case of the IT expert in the example above - then the claim is covered.
Protection without Clauses and Loopholes
Our clear recommendation is to take out Professional Indemnity Insurance when you start a business or become self-employed. This will eliminate any gaps in cover from the outset. However, we know from many years of insurance experience that Professional Indemnity is often not considered until later in practice. In these cases, pre-sales cover using the claims-made principle - as is the point with Professional Indemnity through exali - is crucial. This means that even older projects are covered, provided the damage has not yet occurred. And that can make all the difference in the event of a claim.
If you have any questions about Professional Indemnity Insurance, please do not hesitate to contact our customer service. You can reach our insurance experts Monday to Friday from 9 am to 6 pm (CET) on +49 (0) 821 / 80 99 46 - 0 or via the contact form.
<span class='visible--desktop'>First-Party Cyber and Data Risks Insurance (FPC)</span>
<span class='visible--tablet'>First-Party Cyber and Data Risks Insurance (FPC)</span>
<span class='visible--mobile'>FIrst-Party Cyber and Data Risks Insurance (FPC)</span>
<span class='visible--desktop'><p><strong>This add-on protects your business from the risk of hacking, DDoS attacks or other internet crime.</strong></p>
<p>Reimbursed/covered:<strong> </strong>for example costs for the <strong>restoration of your IT systems</strong>, the commissioning of professional <strong>computer forensics analysts</strong> or specialised <strong>lawyers</strong> (including criminal defence) as well as for <strong>crisis management & PR</strong>. Additional costs for the quick elimination or avoidance of an interruption to your business are also insured.</p>
<h5>Further Examples of Damages We Insure</h5>
<ul class="liste">
<li>Damage to your own IT systems (from hacking)</li>
<li>First-party data rights claim (in particular spying on personal data)</li>
<li>Expenses for an (imminent) interruption of business (additional cost coverage)</li>
<li>Breach of trust damage (intentional damage to own IT by employees)</li>
<li>Costs for criminal defence (internet criminal legal protection)</li>
</ul>
<h5>Insurer Services</h5>
<p>The special benefit about this add-on is the assumption of your own <strong>costs</strong>, e.g. for the commissioning of:</p>
<ul class="liste">
<li>Computer forensics specialists</li>
<li>Specialised lawyers</li>
<li>Consultants to provide information to data owners</li>
<li>Professionals for PR & crisis management</li>
<li>Credit protection and monitoring services</li>
</ul>
<p>as well as the assumption of <strong>additional costs, e.g. for the use of third-party IT and computer systems.</strong></p>
</span>
<span class='visible--tablet'><p><strong>This add-on protects your business from the risk of hacking, DDoS attacks or other internet crime.</strong></p>
<p>Reimbursed/covered:<strong> </strong>for example costs for the <strong>restoration of your IT systems</strong>, the commissioning of professional <strong>computer forensics analysts</strong> or specialised <strong>lawyers</strong> (including criminal defence) as well as for <strong>crisis management & PR</strong>. Additional costs for the quick elimination or avoidance of an interruption to your business are also insured.</p>
<h5>Further Examples of Damages We Insure</h5>
<ul class="liste">
<li>Damage to your own IT systems (from hacking)</li>
<li>First-party data rights claim (in particular spying on personal data)</li>
<li>Expenses for an (imminent) interruption of business (additional cost coverage)</li>
<li>Breach of trust damage (intentional damage to own IT by employees)</li>
<li>Costs for criminal defence (internet criminal legal protection)</li>
</ul>
<h5>Insurer Services</h5>
<p>The special benefit about this add-on is the assumption of your own <strong>costs</strong>, e.g. for the commissioning of:</p>
<ul class="liste">
<li>Computer forensics specialists</li>
<li>Specialised lawyers</li>
<li>Consultants to provide information to data owners</li>
<li>Professionals for PR & crisis management</li>
<li>Credit protection and monitoring services</li>
</ul>
<p>as well as the assumption of <strong>additional costs, e.g. for the use of third-party IT and computer systems.</strong></p>
</span>
<span class='visible--mobile'><p>Protection against hacking damage to your own IT systems, DDoS attacks, computer misuse, theft of data carriers and other data rights violations and the majority of the resulting expenses and costs.</p>
</span>
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<div>If you have any further questions, our customer service is happy to help.</div>
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<span class='visible--desktop'>Engineering Activities (ENG)</span>
<span class='visible--tablet'>Engineering Activities (ENG)</span>
<span class='visible--mobile'>Engineering Activities (ENG)</span>
<span class='visible--desktop'><p><strong>If you provide engineering services exclusively or in addition to IT/telecommunications, you can insure the liability risks with the „Engineering Activities“ endorsement.</strong></p>
<p>The Engineering Activities extension provides <strong>blanket coverage</strong>. This means that all engineering activities are covered without the need for listing each and every activity. Those listed in the engineering endorsement are therefore merely illustrative examples:</p>
<ul class="liste">
<li>Hardware and software development for machinery and plant, embedded software</li>
<li>Machinery and plant testing, commissioning support</li>
<li>Quality management and assurance</li>
<li>Technical drawing, CAD, CAM</li>
<li>Technical management consultancy, in particular purchasing, strategy, process design, activities as expert</li>
</ul>
<h5>Requirements for Engineering Insurance</h5>
<ul class="liste">
<li>You <strong>do not provide engineering services</strong>, plants, machinery or associated parts and/or <strong>planning</strong>.</li>
<li>You provide engineering products <strong>in a supporting and/or advisory capacity</strong> and are not responsible fort he final engineering product.</li>
<li>No machines, systems, engineering products or other parts shall be put into series production directly / <strong>without approval and acceptance</strong> by the principal (keyword: final sign-off).</li>
</ul>
<h5>Deductible</h5>
<p>The deductible for financial loss and property damage is the same as the deductible selected for the financial loss insurance (FLI).</p>
<p>For more information, please refer to <strong>Section A.7 "Engineering Activities (ENG)"</strong> of the Insurance Conditions.</p>
</span>
<span class='visible--tablet'><p><strong>If you provide engineering services exclusively or in addition to IT/telecommunications, you can insure the liability risks with the „Engineering Activities“ endorsement.</strong></p>
<p>The Engineering Activities extension provides <strong>blanket coverage</strong>. This means that all engineering activities are covered without the need for listing each and every activity. Those listed in the engineering endorsement are therefore merely illustrative examples:</p>
<ul class="liste">
<li>Hardware and software development for machinery and plant, embedded software</li>
<li>Machinery and plant testing, commissioning support</li>
<li>Quality management and assurance</li>
<li>Technical drawing, CAD, CAM</li>
<li>Technical management consultancy, in particular purchasing, strategy, process design, activities as expert</li>
</ul>
<h5>Requirements for Engineering Insurance</h5>
<ul class="liste">
<li>You <strong>do not provide engineering services</strong>, plants, machinery or associated parts and/or <strong>planning</strong>.</li>
<li>You provide engineering products <strong>in a supporting and/or advisory capacity</strong> and are not responsible fort he final engineering product.</li>
<li>No machines, systems, engineering products or other parts shall be put into series production directly / <strong>without approval and acceptance</strong> by the principal (keyword: final sign-off).</li>
</ul>
<h5>Deductible</h5>
<p>The deductible for financial loss and property damage is the same as the deductible selected for the financial loss insurance (FLI).</p>
<p>For more information, please refer to <strong>Section A.7 "Engineering Activities (ENG)"</strong> of the Insurance Conditions.</p>
</span>
<span class='visible--mobile'><p>The Engineering Activities extension provides <strong>blanket coverage</strong>.</p>
<h5>Requirements for Engineering Insurance</h5>
<ul class="liste">
<li>You <strong>do not provide engineering services</strong>, plants, machinery or associated parts.</li>
<li>You provide engineering products <strong>in a supporting and/or advisory capacity</strong>.</li>
<li>No machines, systems, engineering products or other parts shall be put into series production directly/<strong>without the client's approval</strong> (final sign-off).</li>
</ul>
<h5>Deductible</h5>
<p>Same as the deductible selected for the financial loss insurance (FLI).</p>
</span>
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<div>If you have any further questions, our customer service is happy to help.</div>
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