As your business grows, your insurance needs inevitably change—sometimes in ways that create new and different risks or increase the odds that your current policies leave unintended gaps. That’s especially true when it comes to ensuring you’re adequately covered for three critical, interrelated exposures: errors & omissions (E&O), cyber, and general liability (GL).
All Growth Isn’t Created Equal
If the growth you’re experiencing mostly involves higher revenues and a larger staff, and you haven’t changed your product offering or your operations considerably, then the insurance implications will be more straightforward. You might need to increase your policy limits to match your risk exposure or to satisfy new contractual obligations, or you might opt for higher retentions if you’re willing to assume more risk.
On the other hand, if you’re expanding into new sectors, operating in new jurisdictions, or acquiring new businesses, your insurance needs are likely to change considerably. Yet, in middle market companies that don’t have a risk manager on staff, it might not be readily apparent that your business’s evolution is creating new or different exposures.
Whenever your organization undergoes substantive changes like these, new risks can arise, especially in the interrelated areas of GL, cyber, and E&O.
The Interplay Between GL, Cyber, and E&O
While some businesses view GL, cyber, and E&O insurance as distinctly different risks, the truth is they often intersect.
Many times, smaller organizations with relatively straightforward risks attempt to get by with a single policy that provides limited coverage for multiple types of risks. For example, it’s not uncommon for a business to start out with a GL policy that includes limited cyber and E&O coverage. But over time that approach may not suffice, especially if you begin to work with larger customers with more stringent contractual requirements for insurance and more onerous indemnification clauses. Eventually, the business grows large enough to be perceived as having deep pockets…and that places a large liability target on the company’s back.
The more complex the operation becomes, the more likely these three exposures could overlap and intersect, making the task of properly covering the business much more complicated.
Two Cautionary Tales
The experience of two different companies underscores how organizations can run into problems in adequately addressing the interrelated risks of GL, cyber, and E&O exposures.
- A company that installs IT systems didn’t carry E&O insurance because its contracts didn’t require this type of coverage and senior leaders didn’t perceive a need for it. Then the company took on a major contract, installing a system at a customer’s manufacturing plant. When a technician made an error that unintentionally activated the sprinkler system, the water damage took over a week to resolve, requiring a complete plant shutdown. The GL policy covered the cost to repair the physical damage, but it specifically excluded the financial loss from the resulting business interruption. If the installation company had made E&O a priority and purchased a separate E&O policy, the business interruption caused by the technician’s error would have been covered.
- An association began broadening its services to members, adding certification services, educational webinars, and other professional services. Without consulting an independent broker, the organization decided to purchase separate E&O and cyber policies from different carriers. When an employee’s error caused a cyber breach that exposed members’ personal information, the E&O and cyber insurance carriers each denied coverage, instead pointing the finger at the other policy. Based on the evolving nature of the association’s work, it would have been more advantageous to purchase a policy that combined professional services liability, cyber liability, and media liability.
An Independent Broker Can Cut Through the Complexity
When it comes to protecting against GL, cyber, and E&O risks, there is no single right answer.
Sometimes, buying separate policies for these exposures can cause coverage gaps or open the door for one carrier to deny a claim and assert that a different insurer is responsible. Other times, it may be difficult to find a single policy that provides broad enough coverage for all three risks. For companies that provide technology products and services, securing proper protection can prove even more challenging since most cyber policies have E&O exclusions and vice versa.
Given the complexities of ensuring your organization is well protected against GL, cyber, and E&O exposures—especially as your operations evolve—it’s prudent to partner with an independent broker and keep them informed of your business’s changing needs.
At B. F. Saul Insurance, we establish open lines of communication with every client to ensure we’re aware of how your business is changing and what that might mean from a risk exposure standpoint. Through regular check-ins, we stay up to date on your current operation and future plans—along with new developments in your industry and new contractual obligations imposed by your customers—so we can stay one step ahead of your evolving risks. Then we help craft the most effective insurance solution to keep you protected from the risks that most concern you.
Adrienne Schickert is an insurance advisor with over 15 years of experience in the industry. As Vice President and Account Executive in B. F. Saul Insurance’s Commercial Lines practice, she provides clients with guidance on coverage, appropriate limits, risk management, and claims. Adrienne specializes in advising clients with difficult or diverse operations and helping them manage their risk holistically.