Below is a summary of the mandatory and optional insurance options that SaaS suppliers should consider when selling SaaS products and services via a UK based company.
Employers Liability Insurance
This insurance is mandatory. It covers claims relating to injuries to your employees. All businesses in Great Britain (England, Scotland and Wales) who have employees working in Great Britain must have this insurance in place. Failure to do so could result in a fine of 2,500 GBP per day.
The insurance must be:
- an approved policy;
- with an authorised insurer; and
- provide a minimum cover of 5 million GBP.
Directors and Officers Liability Insurance
This insurance is optional. It covers the liability of directors and specified persons such as the CEO, CFO for the way in which the SaaS business is run. As directors are personally liable for their acts or omissions, it is advisable that such insurance is put in place to protect them and the company.
Product Liability/ Professional Indemnity/ Public Liability Insurance
This insurance is optional. It covers the liability of the SaaS supplier to third parties and customers for claims arising out of the activities and conduct of the supplier in providing the SaaS services.
Usually SaaS suppliers take out IT specific cyber insurance to cover the following risks:
- damage to hardware and/or software;
- loss or damage to data or computer records;
- infringement of the intellectual property rights of third parties;
- breaches of data protection law;
- defects in computer programmes;
- physical damage to customer property;
- injury to visitors.
Property Damage and Business Interruption Insurance
This insurance is optional. It should cover property damage including machinery breakdown and business interruption. All leased, loaned and rented equipment used in your SaaS business should be covered. The insurance should also cover any customer or third party property that you may use or have access to i.e. servers located in a data centre.
This insurance is optional. It covers losses suffered as a result of a criminal act by an employee or third party. For example:
- contractual penalties payable for an employee’s criminal acts;
- cyber crime i.e. hacking, theft;
- criminal damage; and
- damage to electronic data.
The exact nature of the liabilities to be covered and the level of insurance cover you require will depend upon the type of SaaS services and products that you supply, where your customers are based and your SaaS business model. For example, if you are a global SaaS supplier you will need additional local insurance policies in some markets, particularly in the USA and Canada.
In order to establish your exact insurance needs and level of cover required for each type of insurance you should discuss this with an insurance broker, who can advise on what is “standard” or currently acceptable to customers in your business area.
Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:
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