Why IT Liability Insurance is a Combined Policy
IT Liability insurance policies come in various forms. Some include various add-on’s you expect and some you don’t expect. However one of the common components that an IT Liability insurance policy has is the provision of a Professional Indemnity Section and a Public and Products Liability Section
The appearance of the Professional Indemnity and General Liability sections may differ between Insurers where some Insurers provide two distinct policies under the IT Liability umbrella, although more commonly is where one policy is issued with two included sections.
So why does the IT Liability policy include the two sections? Is it just for convenience or something more.
As we know the Professional Indemnity coverage is providing coverage for legal liability for financial type losses sustained by a third party due to the provision of your IT Services or IT products. The Public and Products Liability coverage is providing coverage for compensation for bodily injury and/or property damage out of the supply or provision of your IT services or IT products or caused by any IT products you supplied.
What if the Insured had two separate policies with different insurers?
Issues can arise if an insured takes out separate Professional Indemnity and Pubic Liability policies with different insurance providers. Firstly you are then dealing with two providers, and secondly, you are then dealing with two different sets of policy terms, conditions and exclusions.
In the past examples have arisen where a claim has resulted and the Professional Indemnity insurer has argued that a claim does not trigger the policy and that it should be lodged under a Public/Products Liability policy. The Insured has then approached the Insurer who holds the Public/Product Liability and received feedback saying it isn’t covered and they should be contacting the Professional Indemnity Insurer, as such it is falling through the gaps. Having the combined package with one insurer eliminates this potential situation.
What would happen if they did have a claim?
An example of this could be where an IT consultant has designed a computer server enclosure for a setup as a professional service and specified due to the dimensions that 10 devices maybe fitted. Unfortunately the IT consultant has miscalculated the amount of heat generated by 10 devices and should have only specified that 5 devices can be installed in that area. Following the advice 10 devices were installed by the customer and during operation they have overheated and caused a fire which has also injured a technician who was working in the area when the fire occurred.
On one hand incorrect professional advice has lead to a loss occurring, however this was not as a result of the Insureds product causing the loss, it was professional advice or duty. Often is the case is that a Public & Products Liability policy will include a professional duty exclusion. Depending on the policy a Professional indemnity policy may have a Bodily Injury/Property Damage exclusion.
The above example could easily result in a dispute between two insurers as to where the claim lies.
As such when purchasing an IT Liability policy it is highly recommended to take both sections of coverage in order to minimize any such coverage gaps from occurring as well as only dealing with one set of policy conditions, terms and exclusions.