Four Management Liability Coverages that Will Protect Your Expanding Technology Firm

You’re a technology entrepreneur and your firm is doing pretty well. You’ve secured Directors & Officers’ coverage to establish your company as legitimate, secured reputable board members, and protected you and your firm against potential — and costly — risks, such as shareholder issues, security class actions, or merger & acquisition litigation.

Now that your tech firm is no longer in its infancy, what other Management Liability coverages are appropriate? Consider these four:
  

1. Employment liability. As your workforce grows, your firm may face allegations of wrongful dismissal or sexual harassment, which I previously outlined in “8 Reasons Why Growing Technology Firms Need D&O Insurance Coverage.” No one thinks that he or she is a bad employer, and therefore, no one thinks that an employee will sue. That type of thinking can have devastating consequences, because defending an employee lawsuit costs you growing capital that your growing technology firm needs. Employment Liability insurance can give you piece of mind and protect your assets.
     
2. Crime. When your company was in its infancy, you had a smaller workforce and most likely knew everyone personally. But with growth comes quick hires. You may not know everyone’s names and any gaps in your hiring processes may lead to theft by dishonest employees. In addition, employees at many tech firms are exposed to online scams. Your IT staff can be savvy to phishing, social engineering and fund transfer fraud, but your treasurer might not be.
     
3. Fiduciary. Once your tech firm has achieved a level of growth and success, you’ll likely provide an employee benefit plan for your employees, such as an RRSP (registered retirement savings plan). Again, proper diligence may be lost when a firm rapidly grows. If you bring in an RRSP third-party administrator who acts negligently, or without proper governance and controls, your employees may have a case for a lawsuit regarding RRSP management.
     
4. Crisis management expense. Technology firms push the boundaries of innovation, as they often are looking to disrupt the way companies or individuals operate. Unfortunately, not all ideas are winners, such as in the case of Samsung Galaxy Note 7, a product failure in which the batteries spontaneously caused the phone to catch on fire. When the best idea turns out to be a bad idea — and the product flops — you may be left scrambling to manage the crisis and minimize the damage. A solid crisis management expense coverage can help mitigate the expenses incurred trying to restore public confidence in your product.
     

For a reasonable cost, these four coverages give you the peace of mind, as your technology firm is now protected against unforeseen events that can derail your costs and funding expectations. These coverages are even more appropriate if you are looking to expand internationally. When choosing an insurance carrier for Management Liability, consider how that carrier will be able to keep up with your coverage needs as your firm grows. Visit CNA Canada’s website to learn more about Management Liability coverages.