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a division of Gaston & Associates, Inc. 
Technology Insurance
  Jury award for compensatory damages.
When a software solutions provider fails to live up to performance commitments made via a contract for a new software system, a local jury awards the plaintiff in excess of $2 million in compensatory damages.
Indemnity Paid: $2,400,000
Defense Cost Paid: $345,000
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No Policy Covers Everything

When reviewing policies, clients often express surprise that a particular activity or item is excluded from coverage. “But that happens all the time in my business! How could that not be covered?” Contrary to popular opinion, exclusions aren't created just to avoid paying claims. In fact, of the three major purposes for exclusions, only one refers to “uninsurable” situations. The other two might better be seen as attempts to provide coverages in the most efficient and economical manner. The three purposes are “covered elsewhere; coverable only by extra cost or modification; or uninsurable.”

  • “Covered elsewhere” focuses primarily on efficiency. These exclusions are added to policies when another policy is intended to cover the specific item or activity. For example, automobiles are excluded under general liability forms because the liability for operating autos is properly addressed by automobile policies. The efficiency arises from minimizing duplication of coverages — just get it right in the proper policy and there's no need for other policies to step in.
  • A key goal of “covered only by extra cost or modification” exclusions is keeping coverage economical. Items and activities eliminated by this group of exclusions are those not typically associated with most insureds. Why charge everyone to include coverage pertinent to only a few? If you need the coverage, you can add the endorsement and pay the extra premium, while allowing others to forgo the added expense.
  • “Uninsurable” actually represents the smallest number of exclusions. These are items and operations (such as intentional damage, warfare, or nuclear activities) that are either considered so dangerous as to be insurable only through special programs (nuclear) or governmental authorities (warfare), or so clearly not intended to be covered by insurance (intentional damage) that who could argue?

Next time you find an exclusion in your coverage that you're not sure you want to live with, don't automatically assume that it falls into the third category. Give us a call. In most cases, we'll be happy to point out where it's already covered or what would be involved in adding it to your policy. If there's no way to provide the coverage, we'll tell you that, too. When it comes to us, good advice to our clients is never excluded.

 
 
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