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Professional Liability Insurance?

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Just received a contract from a Publisher that wants my company to have a million dollars in liability insurance.

Any idea how much this costs per year?
Any suggestions for Canadian/Ontario based liability insurance providers?

Cheers,
Tristan

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It's insurance, so it depends on lots of factors.

Exactly what industry is it? How long have you been in business? How many employees and contractors do you have? How much business do you do? What other insurance do you carry? What are your deductibles? What are the details of your general liability insurance? Do you need IP coverage, unauthorized access coverage, or malicious code coverage? How much experience do you as a business owner, and as a group collectively, have in the industry? What are the deductibles you want on this insurance policy?



It can range anywhere from a hundred or so per month up to a small fortune. Expect at least $1500/year for a microbusiness.

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Quotes also vary depending on the type of insurance the publisher is requiring you to obtain. Commercial General Liability is pretty easy to get and is often included as part of standard business packages offered by insurance carriers. However most CGL policies exclude claims for IP infringement. Note that if the publisher requires a Technology Errors & Omissions policies (E&O) to cover a IP infringement (copyright, trademark and Trade secrets) that most of those policies exclude patents. The good thing about these types of policies is that they pay your legal fees in the event of a claim.

In general, if the size of the total dollar amount for the project is small (say less than the $1M limit) you may want to ask the publisher to delete the provision or waive the insurance requirement. If they are reputable, they have their own policies to cover infringement claims anyway. Otherwise contact your insurance agent and ask them to get quotes a business package policy and Tech E&O. Good luck!

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We're primarily a games company, designing a game for a publisher with a budget less than $100K. Currently we've been around full-time for a year with 3 full time employees and several contractors.

I can see them being the most worried about any accidental copyright infringement as the contract already states that they we idemnify them from any responsibility in those matters. I suspect it might be their lawyers trying to cover every angle.

I'll definitely check with the Publisher and figure out what their motives for having it are and see if it can be dropped or at least clarify what specific type of insurance they require.

Thanks for the tips!

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Quote:
Original post by armaids
I can see them being the most worried about any accidental copyright infringement as the contract already states that they we idemnify them from any responsibility in those matters. I suspect it might be their lawyers trying to cover every angle.

Your right. This is, at least in part, to protect against Copyright/Trademark infringement claims and is standard in most publishing contracts these days. I have dealt with a lot of these clauses and it is often the case that the publishers staff you are dealing with don't actually understand how insurance works or what the realistic amounts of money involved will be. For this reason the coverage is often too high - which means you are paying a higher premium for coverage that will never be used.

On a $100,000 project the total damage you can cause for failing to deliver is $100,000 - they can't sue for the hundreds of millions they would like to game to make in sales revenue because that isn't real earnings, it is only potential earnings. Likewise a claim for Copyright infringement - if successful will result in the award of a small share of the money earned by the publisher - probably considerably less than a $1 a unit. Given that a $100,000 project is unlikely to sell more that a million units 10, 25 or even 50 cents on the unit won't amount to $1 million. If it is an iPhone/mobile game being sold for 99 cents then the likely award would be pennies per unit.

First thing you should do is talk to an insurer that provides game industry indemnity insurance and ask them to explain what the likely payout would be in the various potential scenarios, what the total coverage should be and what the premium will be. A good one will say what I just said above (but my have a better idea of the actual likely numbers). Then armed with that info go back to the publisher.

If the insurer says the coverage is too high you can use that to negotiate the coverage down and whatever the case you should make it clear that the current price you quoted doesn't include this cost and so an additional charge will need to be added. A developer I work with just did this recently. The publisher wanted to keep the over-large coverage but agree to pay the cost.

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