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2011 Insurance Seminar Penn Biotech Group March 15, 2011
SECTION I.“Insurance 101 For a Start-up” Presented by Cohen Partners LLC: Barry Cohen Karl Janssen
As a startup, you have a million things to think about. Insurance is often overlooked.
“ I should have reviewed the contract with both my legal and insurance professionals before executing!”
Avoid the financial black hole of having unknown insurance costs for customer requirements!
So the question is….. What types of insurance do I need for my startup?
Typical Insurance Coverage Required by VC Firms and/ or Customers Professional Liability/ Errors & Omissions Directors & Officers Liability General Liability (Public Liability) Workers Compensation Required once your company starts payroll
General Liability(Public Liability) Legal Liability coverage for bodily injury/ property damage resulting from accidents on your premises or use of your product
Professional Liability/ Errors & Omissions Coverage for claims from programming errors, software performance, or the failure of your work to perform as promised in your contract.
Directors & Officers Liability Financial protection for the directors & officers of your company in the event they are sued in conjunction with the performance of their duties as they relate to the company
Other Suggested Coverages • Property Insurance including Business Interruption • Employment Practices Liability • Cyber Liability/ Network Security
Contract/ Insurance Pitfalls to Avoid “One Sided” Indemnity Agreements Improper Risk Transfer Unreasonable Limits of Insurance
“One-Sided” Indemnity Agreements Client may ask you to assume liability for their negligence Proper Agreement will limit your liability to the extent your firm is negligent. “One Sided” Indemnity Agreements are often uninsurable!
Improper Risk Transfer Does your agreement with your independent contractors or subcontractors clearly state that they are not employees? Does your independent/subcontractor agreement include hold harmless language in your favor? Does your independent/subcontractor agreement require that they carry liability insurance with your firm listed as an additional insured?
Unreasonable Limits of Insurance Frequently the result of an inexperienced lawyer or risk manager! Limits required should be commensurate with risk and size of contract!
Conclusion: • Consult with your insurance professional before signing the contract! • Improper risk transfer can cause your company to assume unnecessary liabilities and lead to disastrous results. • Discuss with your insurance agent what coverages you need for your company’s current stage of development.