Most business owners and management spend their time appropriately thinking about revenue, marketing, payroll and profits. The modern entrepreneur will also consider the importance of the local community and environmental impact. What about insurance? Probably not a topic of regular discussions at weekly meetings, lunches or companywide motivational retreats. While business leaders understand the necessity of insurance, they often look past the “boilerplate” details and only look at the simple question of whether insurance is in place.
A company is typically not faced with looking closely at the terms of boilerplate insurance language until an insurable incident occurs, which is too late. Unfortunately, the “boilerplate” language has been developed through years of insurance claims and court decisions, with specific exclusions and definitions impacting what constitutes an insured claim. These complexities should be considered when evaluating or renewing your company’s insurance portfolio so there are no surprises when the unexpected occurs.
In addition to the complexities of the policy language, there is the issue of what insurance coverage is necessary or optimal for a given company or industry. Insurance issues impact most aspects of business, from employment issues to real estate transactions and protecting directors and officers of the company, and the ever-increasing risk of cyber-crime.
The most common insurance policy is comprehensive general liability coverage, which insures a business against accidents and injury, as well as exposures related to the company’s products and services, among other general risks. General liability coverage, however, contains numerous exclusions, which must be examined carefully in conjunction with company specific risks.
Property insurance is just as common, but the company must also account for any environmental risks associated with the property outside of a general property insurance coverage. Business interruption coverage is also available, which can be utilized to meet overhead and other expenses during unexpected business interruptions such as natural disasters. Other policies to consider include directors and officers coverage, employment policies, and workers’ compensation insurance. Each of these contains their own defined coverages and exclusions, which must be examined as part of an insurance portfolio.
One of the newest and growing risks to companies, however, is cybercrime; which affects companies across the country. Traditional commercial general liability and property insurance policies typically exclude cyber risks, which can include data destruction, data theft, hacking, and denial of service attacks among others. At the same time companies are taking steps to protect against cyber-attacks, the insurance industry is developing cyber insurance policies to protect against such risks. Because this is a relatively new risk being faced by companies and insurers alike, policies vary greatly across insurers and industry. Boilerplate language is still being developed as the insurance industry evaluates how to handle this growing risk. Both the cyber risks facing a company and the coverage available should be closely evaluated in this ever-advancing industry.
The lesson for business leaders today is to take a closer look at your company’s insurance portfolio. This previous Metropreneur post addresses another important insurance consideration – building the best team to help you accomplish your goals. While insurance should not take precedence over issues like revenue, expenses, profit, marketing and other important business decisions; the complexities and importance of a company’s insurance decisions cannot be overstated.
Barnes & Thornburg LLP is a large, full-service law firm that seeks to take a more entrepreneurial and cost-effective approach both to client service and its own business.