Contractual Liability (Obligation) Insurance Policies

In today’s competitive corporate world, all businesses have contractual obligations. It is inevitable that you need to adhere to the compliance requirements of your clients. In this regard, you have to purchase a few insurance policies that will help you and your clients in case there is litigation or disagreement over the execution of the project.

Explanation of the policies:

– Employer’s Liability or Workmen Compensation: This covers worksite accidents leading to death or disability of your direct employees and contract employees. You can also add Medical Expenses Cover to the policy. The settlement is made as per the WC Act.
– Professional Indemnity or Technology Errors & Omissions Policy: Professional negligence in offering services, which leads to a financial loss to the client, is covered under this insurance. Breach of Contract, Infringement of Intellectual Property rights, Employee Dishonesty, and Loss of Documents are key covers in this policy.
– Commercial General Liability: Third-party bodily injury or property damage occurring in your business premises or due to your business operations are covered in this insurance. Employees deputed to a client location whose negligent act causes damage to a fixed asset or bodily injury are also covered. European and US clients refer to this as General Liability. Product Liability is an extension of CGL.
– Cyber Crime Liability: Cyber-insurance is an insurance product used to protect businesses and individual users from Internet-based risks and, more generally, from risks relating to information technology infrastructure and activities. Coverage provided by cyber-insurance policies may include first-party coverage against losses such as data destruction, extortion, theft, hacking, and denial of service attacks; liability coverage indemnifying companies for losses to others caused by a cyber hack of the insured systems where their clients hold the insured legally responsible.

Conclusion:

Most Indian companies that provide services to international clients don’t have these coverages. Once the requirement comes from their vendors, our Indian companies try to procure these policies. At that time, they overlook the purpose of the policy and try to take care of only the contractual obligation and costing of the policies. These are the covers that safeguard your business operations from potential legal issues. The wordings of these policies are in legal language, and it is very difficult to understand the conditions placed by the underwriters. The onus is on the company to take the right decision that will suffice the contractual requirements of the client and cover the company’s future legal liabilities as well.