In addition to counseling startups, I also own one with partners and act as its General Counsel. One of my roles is to make sure we have adequate insurance coverage for the business. For many years as a trial attorney I litigated against insurance companies that failed to pay out on claims made by my business clients. The claims ranged from business losses and damages to interruption of the business.
Though I understood the policies and contracts perfectly well, they didn’t hold any meaning for me at the time. It wasn’t until I owned a business with partners that those very same insurance policies became very personal to me.
If you own a tech company and make software that other companies are going to use and rely upon, do yourself a favor and look into buying Errors and Omissions Insurance.
Why You Need It
Let’s say you create a software product and you test it and test it then debug it and it finally works. A client installs the software and unfortunately it has a glitch. The client then suffers a business interruption and caused damages, and you get sued for tens of thousands of dollars. Yikes! You’re a startup and don’t have that kind of money to pay for the damages, let alone pay for an attorney to defend the lawsuit.
This is where a really good E&O Policy comes into play. Unless you did something insane with your product, such as building bugs into it, your E&O policy would defend the lawsuit and pay out if your company were found liable for the damages caused by its software.
What else should a good E&O policy cover? How about a cyber-attack? Most comprehensive E&O Policies will cover damages caused to your company or a third party as a result of a cyber-attack that hits your computer systems.
How Much Does it Cost?
A good E&O policy for a small startup with zero to ten employees should cost no more than $5,000 a year.
Please contact Business Startup Lawyer Andrew S. Bosin at 201-446-9643. Andrew is located in New Jersey outside of New York and charges flat rate fixed legal fees for most projects and engagements.
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