What You Need to Know about WIPO and IP Insurance

  

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You may enjoy strolling around with a fake Fendi bag or a ripoff Rolex watch, but what if someone is inappropriately copying your product? Your business may be protected against patent, copyright, and trademark infringement in the United States, but are you protected abroad? In this increasingly global economy, the risks of intellectual property theft are growing. Thankfully, the World Intellectual Property Organization (WIPO) exists to provide an international framework for protection. Knowing that this organization exists and understanding what it can do for you will help you protect your valuable intellectual property. And once you are protected, IP insurance provides the funding to defend yourself against infringement.

What falls into the category of Intellectual Property?

Intellectual property falls into two categories:  Industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source; and Copyright, which includes literary and artistic works.

What is WIPO?

The WIPO, established in 1970 and headquartered in Geneva, Switzerland , is a worldwide organization with 186 member states—representing more than 90% of the world’s countries.  The mission of the WIPO is to “promote innovation and creativity for the economic, social and cultural development of all countries, through a balanced and effective international intellectual property system.”  In other words, they help you fight imposters across the globe.  International applications allow you to file in multiple countries using a single application, even though you receive a separate patent, trademark, or copyright registration in each country. Think of it as the “Common App” for patents. 

Why would I want to file an International protection?

Not only is it less expensive to file a single application vs. filing one in each country.  You have up to 30 months from your filing date to decide in which countries you choose to receive a patent. This gives you a lot of flexibility and allows you to work on growing your business and your markets before you choose where to expand your presence or operations.

So I’ve filed my patents, trademarks, and copyrights. Why do I need IP Insurance?

Simply and frankly, a single lawsuit can wipe out your company if you do not have the funds to pay an attorney to defend your property. More than ever before, in our global, high-tech economy, there are intellectual property claims involving patent, copyright, and trademark infringements. However, it is important to note that IP Insurance does not typically cover patent claims. While it is available, it is also quite difficult to place and is therefore rarely purchased. Commercial general liability insurance may not sufficiently cover all your expenses. In this sense, IP insurance is like fire insurance. Just as you don’t want to wait until your house is on fire to purchase fire insurance, you don’t want to wait until you want to sue someone else—or until someone is suing you—to purchase IP insurance.

If you are pulling all-nighters, it should be because you are furiously building your next great invention, not because you are tearing your hair out trying figure out how you can afford to defend yourself against copycats. Rollins can help you understand which IP insurance policy works best for you. Call us. 

Photo: MikeBlogs via Photopin cc

How D&O Insurance Can Save Your Business

  

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Directors & Officers Liability (D&O) insurance is one of the fastest growing yet least understood forms of insurance. In our increasingly litigious society, headlines abound with stories of class-action lawsuits and major claims against company managers.

Not just for mega-corporations, D&O insurance can protect directors and officers of small-to-medium enterprises, volunteer board members and non-executive directors as well.

What is Directors & Officers (D&O) insurance?

D&O insurance is designed to protect personnel from claims that arise due to actions they have taken within the scope of their duties as officers, directors, or company individuals.  There are actually three parts or “sides” to D&O insurance:

Side A: protects directors and officers when the company cannot indemnify them as individuals;

Side B: reimburses the organization when it indemnifies individuals;

Side C: eliminates disputes of coverage allocation when directors, officers and the insured organization itself are named as co-defendants in securities and class-action lawsuits.

D&O insurance can cover all current, future, and past directors and officers of a company and its subsidiaries.

What types of claims are covered?

D&O insurance covers most employment practices and HR issues, shareholder actions, reporting errors, inaccurate disclosures of company accounts, misrepresentations, inappropriate decisions made by company officers, and failure to comply with regulations or laws.

What types of D&O insurance claims are typically made?

More than 50% of claims against a company are related to employment practices, including discrimination, wage disputes, sexual harassment, and wrongful termination. Shareholder suits are common as well. Lawsuits are not only initiated by employees. They can be brought by competitors, customers, creditors, investors, government agencies and vendors.

 Why should you have D&O insurance?

If your for-profit or non-profit operation has a board of directors and/or corporate officers, you should consider D&O insurance. Your director and officers are at risk of losing their life savings from legal actions filed by customers, stockholders, or disgruntled employees. When you consider the cost of defending your company from claims as well as the risk of a major settlement against your firm, you can appreciate the importance of a D&O insurance policy. If you sit on the board of directors of an organization, especially if that board is occasionally faced with making unpopular decisions, you should make sure that organization has D&O insurance. If you are looking to attract board members and officers, you want to be able to assure candidates that you have appropriate D&O insurance in place.

D&O insurance can be quite complex to procure. Rollins Insurance is here to help you navigate the complexities and challenges of adequate and appropriate D&O coverage for your organization. Call us for a comprehensive review of your needs and specific recommendations.

Photo: Emdot via Photopin cc

How to GET PAID by your E&O policy

  

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In previous posts we discussed how an E&O policy can provide your company with a shield for various liability claims.  As with all liability policies, E&O claims that are paid out will always go to a third party:  the law firm providing your defense or the claimant if there should be a settlement or judgment made against you.  The insurer will never make out a check with your name on it, right?  Wrong.  Here’s how you can get paid by your own E&O policy:

With the adoption of technology platforms (the Internet) as a source of income and the proliferation of new regulatory guidelines, businesses face many new financial risks.  Most of these have, to date, gone unaddressed by traditional insurance policies.  For example if your company is selling its products or services either partially or entirely over the Internet, and that channel is compromised by a hacker you will lose revenue.  Even if you have business interruption coverage on your company’s standard policy, it will not respond to the loss as there needs to be physical damage to tangible property.  Some errors and omissions policies now offer business interruption/lost revenue protection for security breach and other internet related losses.  Another example that highlights this gap in 1^st party insurance coverage (meaning the policy holder is paid by the insurer, not a third party claimant) has to do with privacy.  Suppose you collect data from your clients or users and have a security incident.  Almost every State now requires that you notify these users that their personal data may be at risk as a result of your security failure.  Some requirements go as far as to require ongoing credit monitoring for several years.  For a company with thousands of clients/users this could pose a huge financial burden.  Breach notification coverage, available on some E&O policies, will provide you with the necessary funds to cover these expenses.

Errors and Omissions insurance has morphed in recent years to address risks such as those cited in the examples above.  This insurance often goes by other names such as “cyber insurance” as the intent is to cover the losses associated with doing business on the Internet.  As a Tech company you would be wise to have a hybrid policy that provides the liability protection of an errors and omissions policy along with the first party coverage that is found in cyber insurance.  This way you transfer the risk of defense and indemnity (liability) to the insurance company – while also protecting the top line of your balance sheet.

How Much Should Startups Expect to Pay for Health Insurance?

  

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 This is a re-blog of one of our most popular posts which was originally published in October 2010.  The same concept still applies – health insurance is available to small NY businesses, but it is not cheap!  We also wrote a guest post in BetaBeat on this topic that generated a lot of feedback.

"How to Get Health Insurance as a Startup Founder in New York"

Let us know how your company is handling the challenge of group medical insurance.

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One of the biggest challenges for startups is finding a solution for employee health insurance - without bankrupting the company.  In order to grow your company you are going to have to be able to attract and retain the best talent.  Sure, a nice salary will go a long way, but everyone is going to want to know that they will have a good medical insurance plan in place if they work for you.  This is especially true if they have a family (including children - who spend a lot of time in doctor's offices), or they are coming from a company (or are being recruited by other companies) where they had extensive benefits.

Why you might as well start smoking

The first thing you need to understand is that, as a startup, you will have fewer than 50 employees.  This means that you will be subject to NY State's community rating guidelines.....these dictate that any company with fewer than 50 employees can purchase medical insurance and the rates cannot deviate from one employer to another.  So your firm of 3 healthy people in their mid-20's that never go to the doctor and never have medical claims will get the same rate as the three 60 year old chain smoking, former coal miners running an asbestos removal company next door.  So for obvious reasons the insurance companies are not inclined to provide their best rates to employers with less than 50 employees.

(once you reach 50 employees your company stands on its own performance - insurers will negotiate their rates, and as a "healthy company" you will have lower rates....lower than the community rates)

One solution is a PEO, where you can get broad employee benefits packages as part of their large group of employees.  The downside is that you have to buy everything else the PEO is selling plus pay their administrative fees.  The alternative:  Do it yourself.

The million dollar question - answered

That brings us back to the original question:  How much does health insurance cost for a startup?  The rates vary by insurer and change quarterly.  There are also variables that will affect your bottom line expense (employee contribution, increasing deductibles and copays, etc).  If you are interested in the current rates for a NYC company follow the link below.

When Should Startups Consider D&O Liability Coverage?

  

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The acquisition of a D&O policy is often triggered by one of the following events:

• new board member requires that company has D&O
• new investor (such as a VC) requires D&O insurance as part of term sheet

Ultimately the D&O policy is the mechanism by which you will be shielding the personal assets of the officers and directors - as well as the balance sheet of the company (most company have an indemnification agreement in their bi-laws that basically translates into this: the company is responsible to cover claims against the D&O's out of its coffers...the problem comes when there is no money available or the indemnification is prohibited by law). Most people who will agree to be on your board will not be willing to risk their personal assets based on the performance of your company.  You might not either.

So back to the original question - When? As soon as company is operational with a management team and board AND as soon as you can afford to transfer the risk to an insurer (minimum premium can be about $2,500/year)

One other important point to consider - as a private company your biggest threat of action against the management team will be from employees.  D&O policies can cover employment practices claims (wrongful termination, failure to hire, discrimination...) once you have a workforce it will increase your risk and be another factor to consider when thinking about D&O insurance. 

Venture Capital Insurance Cheaper for Some than Others

  

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In a previous post I discussed how we have found that many Venture Capital firms pay more for insurance than they should - often for policies that don't even properly address the risks of their company.  The National Venture Capital Association just circulated an illustration with 9 specific examples of their member firms who, through the VentureInsure program, have saved as much as 57% on their insurance costs (where's that Geico lizard now??), while getting better coverage.

Check this out - this represents only the basic office coverage such as General Liability, Property, Umbrella.  Venture Capital insurance policies such as D&O and Professional Liability are not included in this illustration - however it is worth noting that historically the savings on that line of coverage, when moved to VentureInsure, has averaged more than 20%....

Tech Errors & Omissions Insurance Series

  

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Errors & Omissions insurance is one of the most misunderstood coverages that Technology & Digital Media companies will encounter – and with good reason.  It is a coverage that goes by many different names (E&O, professional liability, cyber liability…), has no industry standard policy form (like a general liability policy, where every carrier is providing essentially the same coverage) and it changes on what seems like a daily basis.  To help simplify and demystify Errors and Omissions coverage, we will provide a multi-part series of posts that cover the basics about Errors & Omissions insurance.   These are the topics that we will addess in the coming weeks:

1. E&O – WTF? (What’s that for??)
2. E&O Insurance – Checking the box
3. The E&O Trifecta – Covering Intellectual Property, Privacy and Media
4. How to GET PAID by your E&O policy
5. How Much does E&O insurance cost ?(& secrets to getting the cost down)
6. What is involved in getting E&O Insurance?
7. How E&O Claims are triggered and what happens when they are?
8. The 5 Most Important Considerations for E&O Buyers

Venture Capital Insurance and the A Team

  

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I didn’t see the A-Team movie this Summer, but have to admit as a child of the 80’s I was a big fan of the TV show.  I remember vividly watching the pilot as a 13 year old after the Redskins beat the Dolphins in Super Bowl XVII.  I know BA hates flying, I know the crack commando team went to prison in 1972 for a crime they didn’t commit, and I know that Hannibal (George Peppard, the only Hannibal) is a cigar smoking, master of disguise.  

The real A Team

So what does this all have to do with insurance?  Probably not alot…but here’s a shot:

We work with many VC’s as part of our role in managing the insurance program for members of the NVCA.  And we have found that, like most innovators, Venture Capitalists are so focused on working IN their business that they sometimes don’t spend enough time working  ON their business.  This is evidenced with our frequent discovery of poorly structured insurance placements for VC’s, on even the simplest of insurance policies.  (Clarification – it’s not a policy holder’s fault if their insurance is not up to par….that is their broker’s job.  The policyholder is only responsible for choosing the right broker)  Take a General Liability (GL) policy for example:  every company has one of these babies.  It covers your business for claims that you, your employees or products/services caused someone else bodily injury or property damage.  But it also covers a wide variety of personal injury issues that could come into play for a VC.  Since most insurers (I’m not aware of any) don’t have a specific classification in their policies for a VC firm, they will categorize them as investment advisors or some other similar financial organization.  And in doing so they will also receive a myriad of exclusions that are typical for financial organizations….inluding ones that will severly limit their ability to cover personal injury claims.  Insurers also worry about picking up vicarious risks stemming from activities of portfolio companies….hence, more exclusions.

Another problem in this scenario is the pricing.  Since most insurers shy away from insuring smaller financial organizations (due to perceived high risk trading/transactional risk that could spill over onto a GL policy) they don’t even offer a small business policy.  So most VC’s are placed on a policy that is designed, and priced, for larger firms. 

Recognizing these issues and shortcomings our crack team at TechAssure set out with NVCA to build a solution for Venture Capital companies.  The result, which is exclusively available to it’s members, corrects the coverage problems, removing almost every exclusion, and has reduced the average venture capital firm’s costs by more than 20%.  The policy recognizes VC’s as a “small business” as it pertains to risks covered by basic insurance – the way it should be.

Ready for the tie-in??  As Hannibal Smith said best- I love it when a plan comes together.

Startup Tech Co's - PEO or DIY?

  

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When faced with the task of setting up Payroll, Employee Benefits, Human Resources and Workers Compensation Insurance many startup Tech/Digital Media companies turn to Professional Employer Organizations(PEOs).  The concept is that, using a PEO, the company can outsource all of these items to another company and take advantage of economies of scale by participating in their larger group buying power.  And by using a PEO they can pass off unwanted administrative tasks and focus on their own business.  When working with a PEO the company pays the cost of the services plus a monthly, per employee, fee for the administration of the program.  The startup must take the entire bundled package from the PEO, which often includes HR services that they, as a small company, may never use (recruiting, workplace safety, training, etc.). 

But what would the cost be to do it yourself (DIY)?  Do the benefits of outsourcing really make financial sense?  And does it scale for a company that expects high growth, or will it create an unnecessary financial drain on much needed cash?

InnovationGuard has a Startup Package  that is available on an a la carte basis – meaning they choose only the services they need – including a full suite of Payroll and HR services.  We recently did a conceptual comparison for a startup who was considering a PEO for their company.  For illustrative purpose we used the same actual costs for the basic products/services such as workers compensation (for example, the cost is set by the State, so there should be no difference).  Then we added the PEO’s monthly per employee administrative charge.  (A PEO does not typically break out these costs in their bill – they simply charge a single all inclusive fee.)

Total Annual Cost PEO – $10,980 (plus each additional new employee will be another $1,800/year more than a DIY program)

Total Annual Cost InnovationGuard – $3,780

*includes direct deposit, UPS delivery, and option for paperless paychecks

Based on the Following:
3 Male Employees, Programmers – $240,000 annual salary
1 Female Employee, Exec Officer – $60,000 annual salary

Are there administrative costs associated with a DIY that do not appear here?  Perhaps.  But for tasks like filling out applications, gathering and submitting employee and payroll info – both will require some time on the company’s part.  Once all of these things are set up there is very little ongoing administration necessary.  A key missing piece to all this is Employee Medical insurance, an area where the PEO as an “employer” of potentially thousands of employees can get better rates from insurers.  While groups of over 50 employees can benefit with lower health rates, that is dependent upon the group’s overall claims history.  In the case of this company, for whom we did the conceptual, the PEO’s single rate was estimated to be $350/mo.  A small group rate from Oxford for an HMO in NY would be appx $400/mo…..and that is before increasing co-pays, deductibles, employee contributions, etc. to bring cost down.  Another thought – while there may be a financial advantage on the medical insurance, our experience is that most startups hire young healthy employees who rarely even use their medical coverage.

I obviously come at this issue from a biased perspective.  I would be interested to hear thoughts and feedback on other company’s experiences with PEO’s, including the pros and cons.

7 Things You'll Say That Could Blow Up Your Insurance Coverage

  

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Under most Errors and Omissions, Directors and Officers and other liability policies there are certain terms that you must comply with in order for the policy to respond to a claim.  The issue that seems to be causing problems for insureds recently is the timeliness of claim reporting.  All policies require that the insurer is notified in a certain way, in a specified time frame.  And because most people don’t read the “fine print” of their policy, and most brokers do a poor job educating their clients, people tend to sit on potential claims – sometimes until it’s too late.  The insurer can deny your claim simply because it was reported too late.

 Click Below to see the 7 Common Reasons Why Claims are Not Reported on Time (And As a Result are NOT Covered)

1.  “It wouldn’t be covered anyway”

Let the insurance company decide.  Another similar statement we often hear is “I didn’t think it would be covered, and didn’t want the insurer to raise my rates if I reported it”.  There is no cost to reporting a claim that is not covered.  Better safe than sorry.

2.  “I referenced the claim on the application”

Under terms of policy indicating on the application isn’t notice

 3.  “I told my General Liability carrier”

Notice to one insurer is not notice to all insurers

 4.  “I didn’t have a law suit”

Review your policy’s definition of “claim” (not always a suit)

5.   ”We were going to work out the problem”

That means that you knew about the potential claim or should have – and reported it.  You can’t decide after your own negotiations fell apart to then hand off the carnage to the insurer

6.   ”People are always asking for their money back”

This is often first sign of an unhappy customer and a resulting claim. Check your policy’s  definition of “claim”

7.  “I protected the insurance company’s interests, too, by engaging my current lawyer who knows my business best”

Don’t assign your own counsel to a claim.  Insurers don’t like that!  I can’t tell you how many times we get calls from insureds and their lawyers who are months or even years into a claim that we were not aware of –  and only decide to look into insurance when they realize how much it is going to cost

Proper notice is critical for coverage to be applicable.  All too often policy holders take their coverage for granted and in doing so fail to comply with the terms of their contract – jeopardizing or ruling out coverage.  Some simple practices, including open communication with your broker, can help preserve your rights to be afforded coverage under your insurance policy.

• Do not make assumptions
• Talk to your broker
• Remember that a demand for service or money could trigger a notice requirement
• They should know the difference between claims made and claims made and reported
• Look at your policy’s definitions of Claim, Wrongful Act and requirements related to notice of claims or circumstances
• NEVER assign counsel, or try to settle a claim on your own without talking with your carrier

Note:  Assist from Chubb presentation at 2010 TechAssure national conference