Sometimes the coverage features Insurers promote on their internet and tech forms really are not that special. Here are a few coverage features you mention to us that may not pass the hype test.
Bilateral ERP means the insured can purchase the ERP regardless of whether the policy is cancelled or non-renewed by the Insured or by the Insurer. Unilateral ERP means the Insured can only purchase the ERP if the Insurer cancels or non-renews. Beyond this basic definition, there can be subtle nuances in a policy’s ERP language that affect what the Insurer might offer and what the Insurer definitely will offer. In addition, ERP pricing and length of options can vary greatly by Insurer. Overall, you just may find your clients have really already been buying a bilateral ERP even though it has not previously been referred to as such. So don’t be wooed by the jargon but do pay close attention to the coverage grant behind it.
Option to Provide Notice of Circumstances
This feature suggests that the Insured has the option to give the Insurer notice of circumstances that may lead to a claim. Consider what is at stake. Most policies will treat a written report to the Insurer of circumstances the same way that they would treat a written claim against the Insured — that is, they treat the report of circumstances as if a claim has been made, and a policy trigger met, upon the reporting of the circumstances.
Failure to report circumstances during the policy period of a claims made policy may result in that policy not applying. This creates a problem for the Insured if it ceases business operations or otherwise drops coverage, merges and adopts the coverage of the other entity being merged with or even if the Insured just changes Insurers (because the old Insurer’s policy was not triggered by either a claim or the reporting of circumstances during its period and the new Insurer may not provide coverage because the Insured knew of circumstances that could lead to a claim at the time the Insured bought the policy).
Since the risk of not reporting a circumstance is borne by the Insured in the form of losing coverage, why should the Insurer care? The “option” not to report seems to be a false promise. The Insurer is giving up nothing and the Insured may lose coverage if it decides to exercise its option of not reporting. (Read about the dangers of late claim reporting.)
Spousal extension coverage on a D&O policy is pretty commonplace because the policy is designed to protect the personal assets of the Directors and Officers, and commonly some assets would be jointly or solely in the spouses’ name. But do your clients really need it on an E&O form? Stop and consider what your client’s exposure really is and if your client does not want the coverage, you might want to ask for the coverage to be excluded for a return premium. And if the spouse is also an owner, check the policy definitions—owners are sometimes included as insureds.
Covered Services Definition not Limited to Services “For a Fee”
We surveyed 8 internet/tech basic policy forms and found only 2 that limited the coverage to services performed for a fee. This appears to be a fading issue.
These terms aside, there are many advances in coverage features for the internet/tech space that can be meaningful to your client. Just some of these include privacy, security, intellectual property and advertising injury/personal injury protections. These types of coverage options should be the real attention-getters.