Due to the everchanging IT landscape, the risks of liability are changing to be complicated and problematic for MSPs to manage. As a result of this change – and data becoming more pervasive – MSPs are looking for liability insurance policies in order to protect their businesses should anything go wrong.
However the world of insurance policies can be tricky to manage – especially when you’re not familiar with them. Below is some general information on them and some helpful tips to ensure you get the best liability insurance policy you can.
Why Buy One?
The type of liability you want to be looking for is cyber liability insurance. It’s important for a number of reasons. But the biggest is that it provides additional coverage in situations where you’re at fault and harm is done to the customer.
A lot of businesses lack that particular policy due in part that they think a general or professional liability coverage is enough. It’s not as those policies lack coverage in cyberattacks, data loss and other similar events. Events that are happening more and more.
Another reason for getting this coverage is that it prevents lawsuits. When something goes wrong in your client’s company they’re likely going to turn to you as being responsible – whether that’s right or wrong.
As a result, if you lack coverage, your client has no possibility of recouping costs unless they file a lawsuit.
Other general risks that MSPs face if they aren’t covered are:
- Losing out on a client.
- Inability to claim from data breaches, and ransomware attacks.
- Business interruptions that could’ve been prevented.
Avoiding all of these reasons is reason enough to buy one.
Tips For Getting The Best Coverage
Be Ready To Make Policy Changes
When out on the market for an insurance policy, you have to keep in mind that each insurance company presents their professional liability coverages in different ways. Regardless of what insurance company you go with in the end, you’ll still need to make changes to the policy so that they cover technology services as well.
Check Customer Contracts Too
Once you get your contract written up, it’s important to look at your own customers contracts as well. The reason for this is simple: many customer contracts will have provisions in place that could be affected by you having a insurance policy or having certain coverages.
To ensure nothing gets overlooked, it would be ideal to get an attorney to look at the customer contracts and ensure the contracts align with your insurance contracts.
Consider The Following Provisions In Your Policy
An insurance policy is something that must be done with patience in mind. As such, make sure you have the following provisions addressed in your policy:
- Commercial general provisions. Things like property damage, injury, medical care, legal fees, legal judgements, and claims based on libel and slander are good provisions to have. They’ll protect you from general claims and the costs pertaining to them. Even if you don’t think your business will ever run into those situations (i.e. you do everything remotely so there is no risk of injury at a client’s place of business), it’s better to have it covered.
- Errors and omissions. Also called E&O, this is to cover you when you fail to perform in accordance with your contractual obligations.
- Automobile liability. Even if your company owns no vehicles, you may handle customers who do have their own service vehicles or hires cars on the regular. This provides coverage in the event of accidents.
- Workers’ compensation. Working with other people? Then it’s smart to have this. Even if you’re flying solo, it would be in your best interest to have coverage. Workers’ compensation covers any job-related illness and injuries.
- Employment practice liability insurance. EPLI is intended to cover work-based claims that aren’t covered by workers’ comp or by the general liability policy. Things like wrongful termination and harassment charges.
- Umbrella liability insurance. In the event that a loss exceeds the limit of your other policies, the umbrella policy will be there. They cover any legal fees, protect your assets, and are good to have if the nature of your work leaves you more prone to legal claims.
Remember You Can Self-Insure
Not recommended for new MSPs but if you’re well established, you could self-insure yourself in relation to the various risks that your business takes. Just keep in mind that you’ll need to address the matter to your customers in your MSA if you’re going down this path.
Coverages For Cyber Liability Insurance
The coverages mentioned above are solid for a general liability policy, however they don’t cover the technology side of things. As such, it’s important you have a cyber liability insurance that can cover first-party liability and third-party liability too.
First-party is going to apply to direct costs you’ll encounter. Third-party will cover independent contractors.
In your MSP insurance requirements, you’ll want to have the following:
- Network security and privacy. Protects you in the event that you fail to protect a customer’s personally identifiable information (like credit card numbers, medical information, passwords, etc.).
- Media communication liability/Reputation or brand protections. This covers libel and slander like the general liability policy but goes beyond that. It covers defamation, invasion or violation of privacy, plagiarism or piracy, copyright, trademark infringement, and wrongful media communication acts.
- Data breach protection. Data breaches won’t just happen to your clients but to you as well. Having a policy to protect you from them will be smart.
- Data loss/ Interruption of computer operations protection. Data losses that are directly related to inadequate backups or insured losses (disasters or viruses) that result in the destruction or interruption of computer systems will be covered. These policies can also cover income losses for you and your customers.
- Regulatory response coverage. These protect you from a wide amount of fines and defense costs that flow from proceedings brought by regulatory agencies.
- Regulatory defense/Penalty protection. Coverage of defense expenses, regulatory fines, and penalties that are imposed by regulatory agencies in relation to data breaches.
- Systems damage. Computer systems that get damaged during the retrieval, restoration, or replacement of programs or other data media.
- Threats or extortion. Protects you in the event you experience any threats or extortion from hackers or viruses with your computer system.
About MSP Corp
MSP Corp understands you’ve worked hard to build your business and you want to protect it. With a mission to be a world-class business partner for MSP owners across Canada, we actively seek to acquire and partner with owners looking to secure the value of the business they have built and provide a seamless exit process that ensures business continuity and employee and client stability.
Contact us today to learn more about selling your business and maximizing its value.