Unlike standard lines, base policies can vary widely, making it difficult to compare products and a struggle to predict how a company or a court will interpret or apply a policy provision. Here are common approaches on what we think are key issues a producer must consider. These terms come from technology products on the market during the past few years.
- the policy covers “any form of” defamation, disparagement or harm to character, reputation or feelings, including libel and slander” when done in content while performing the professional services being insured
- the policy covers libel and slander but without expansive wording
- the policy excludes defamation
- the policy excludes defamation and might be interpreted to completely exclude coverage for any claim in which a defamation allegation is made, even though other parts of the same case would otherwise be covered.
- the policy covers a broad range of intellectual property offenses (not including trade secrets or patents, which are rarely covered and then can usually only be found in a specialized patent policy)
- the policy covers some intellectual property, for example copyright infringement; but the coverage is limited and won’t apply if the alleged or actual copyright infringement takes place in source code. (This should raise a question as to where the technology client’s primary exposure to copyright claims is found.)
- the policy excludes intellectual property
- the policy excludes intellectual property and might be interpreted to completely exclude coverage for any claim in which an intellectual property allegation is made, even though other parts of the same case would otherwise be covered
- the policy covers the insured’s liability for failing to prevent security-related incidents like unauthorized access or use, denial of service attacks, repudiation of access, identity theft and introduction of malicious code
- the policy covers security-related incidents, but only if the breach was performed by a third-party and not by the insured
- the flip side — only breaches by an insured are covered
- the policy covers security-related incidents, but only if the breach occurred in the insured’s system; in some variations, the policy doesn’t cover outsourced operations, co-location operations operated by a third party, or third-party web hosting
- the flip side — only breaches of the system of the insured’s client or another third party are covered
- the policy excludes all security-related incidents
Reps and Warranties
- the policy covers breach of reps and warranties as to the fitness, quality, performance and use of the professional services or products. (Even companies providing this coverage may exclude items like cost of recall, cost of completion, repair, correction, etc.)
- the policy excludes breach of reps and warranties
Obviously a policy’s exclusions also must be considered as part of the overall picture, and they, too, vary widely. There is no substitute for both producer and client carefully comparing the available options and being familiar with the product finally purchased.