I had the same problem here in the UK about three months ago.
Several companies declined to quote but I eventually got insured by Axa for £359 per annum. I think they may have a presence in the USA, If so it may be worth a try.
I just went through this and there are two types of policies you really need to look at. A business Liability policy covers you if someone comes in your business and falls or that type of thing, your agent can give you more specifics. But an Errors and Ommissions Policy covers you if your servers go down or something you build like a website malfunctions and the client tries to sue you. Its basically like a policy to cover your work. I use State Farm in the US.
|A business Liability policy covers you if someone comes in your business and falls or that type of thing, your agent can give you more specifics. |
This is all I really need.
|I use State Farm in the US. |
That's the first company I went to, since I use them for something else, and they said that they couldn't offer general liability to a design company.
Actually its funny you mention this, becuase its not uncommon. Here is the reason why this happens. Most of my wifes family are all State Farm agents, which is why I know alot of this trivial insurance stuff. State Farm can actually have different rules depending on what state you are in based on the type of business it will cover. I actaully also own a video company and they will not insure that becuase they dont have a "code" in their system for Video Production Studio. You may want to go back to your agent and see if they can classify your business under a different code, like Advertising, Marketing or something like that. I think I al actually listed as a "Consultant" since a I also do a good bit of that as well as web design and marketing.
|Errors and Ommissions Policy |
I checked into this a couple of years ago and it was pretty hefty for a web designer. I don't remember exactly, but seems to me it was around $3K per year. I think the problem was the insurance company didn't do a lot of companies like this and didn't understand the risk so they just charged a lot to cover "whatever" may go wrong.
After more consideration I wasn't sure I really needed a policy like this. If you save all of sites you work on BEFORE you start changing them and can always revert back to an older *working* copy and don't do your own hosting I am not sure what liability you face.
However having said that and realizing there is some shark like attorney out there looking for the next payment to cover his yacht I did put my business into an LLC. The LLC has no assets so if someone sued me I can simply close up shop declare the company out of business and open up under a different name the next day...or so my attorney says ;)
Well the Errors and omissions policy is good if you have a server, or are responsible for an ecommerce site and due to whatever reason, a server error, or code error they lose sales, then they could sue you and an Errors and Ommissions policy would cover it. If you handle secure credit card data I think its an important policy, especially if you are building mission critical websites for businesses, where if they go down they could face significant revenue loss.
I really wouldn't need a fancy policy, it's mostly just needed to do business or rent an office. I did find a company offering insurance for about $250/year, which I may contract with.
|I did find a company offering insurance for about $250/year, |
Can you sticky me with the company name and product you were quoted on?
|...I did put my business into an LLC. The LLC has no assets so if someone sued me I can simply close up shop declare the company out of business and open up under a different name the next day...or so my attorney says |
My atty said quite the opposite. An LLC does not effectively protect against personal liability, and personal liability is where the risk is for most sole proprieters.
He gave the example of a farmer. If a farm hand drives a truck through the front the feed store and kills the owner, the farmer would be protected if the farm were organized as an LLC. However, if it was the farmer driving the truck then the atty's would simply do an end run around the LLC and go after the farmer personally.
So it is (according to my atty) with any other business, and far too many sole proprieters are finding far too much comfort in being LLC's.
Thats true, its also the case with mis-selling a solution.
You can reduce the risk of personal negligence a number of ways, none are guaranteed and you should take out insurances and seek legal advice too.
- Join a professional body and follow thier code of practice (they also help reduced cost for prof liability insurance)
- Have processes defined for risky areas like deployment, sales
- Get vendor qualified in the areas you feel are high risk follow there guides
- ask the clients staff to perform areas you feel migt open you up to risks of losses
|if it was the farmer driving the truck then the atty's would simply do an end run around the LLC and go after the farmer personally. |
This might be a slightly different scenario as it involves driving a vehicle which is under a different set of laws. I am definitely not an attorney so I don't know for sure, but the purpose of any entity being set up is to create a firewall around the business. If you are operating within the confines of that business when something happens I believe you are safe. It would seem kind of pointless to set up an LLC if it offered no protection to you in the event that something happened.
In any case my LLC is actually inside a corporation as well, so I have two layers of protection.
"No" protection is quite different from "Limited" protection (as in "Limited Liabilty Corporation" or LLC).
To move from the farm to the web...
If the employee of an LLC web development firm installed a backdoor into an E-Commerce site, and subsequently engaged in rampant identity theft, the LLC would shield the owner(s) personal assets from the subsequent lawsuit (but would do nothing to protect the guilty employee).
If the owner of the same design firm negligently left a gaping security hole leading to unauthorized access and rampant identity theft, the LLC might provide very little shielding of those assets.
In both cases there is a level of business liability, and of personal liability. The LLC does not protect against personal liability (thus it is limited).
Or, so it was explained to me.
The average freelance web developer is probably better as a sole proprietorship, saving the expense and reporting requirements of an LLC.
On the other hand, if there are employees, outsourcing and all those other things that one might want to protect their personal assets from, then some version of an LLC might well make sense.
|If you are operating within the confines of that business when something happens I believe you are safe. |
Thats the key issue, if you are negligent then you are not acting within the confines and therefore have no protection whatesover from the LLC status.
Negligence is installing software you are not qualified to do or not taking adequate proection of client data etc.