3 big mistakes agencies make when setting up insurance
Three of the most common mistakes I’ve witnessed agencies make when setting up their insurance protection
(1) Smoke and mirrors
The power of a brand message is understood; how an image can differ from reality, influencing purchasing decisions. Ironically, when it comes to insurance, agencies are not immune
Look at Professional Indemnity (also known as Errors & Omissions), a cover taken out by most reputable agencies.
I’ve lost track of the times during an initial meeting when a client smiles, states they have a specialist policy covering their business, and slides across a copy of their “media liability” document.
60 seconds later reality kicks in. Just because a policy says tailored for the creative industries, doesn’t make it so. Closer inspection reveals absence of vital protection such as intellectual property infringement and breach of contract, leaving potentially disastrous consequences when the unfortunate happens.
The good news is that insurance policies giving the right cover are usually similar in price to those arguably misleading ones
(2) Don’t forget yourself
Most agencies I work with are limited companies. Limited status gives you personal protection for all your actions running, or working within an agency?
Whilst it’s fair to say third parties taking action against limited companies leave the individual with a degree of protection over their personal assets, it doesn’t apply when the individual is sued in their personal capacity.
What if an investor, shareholder or even another director, claims financials have been misrepresented, or that the business has been run negligently, maybe even trading when technically insolvent?
What if an aggrieved party sues you in your professional capacity for making defamatory comments on a personal social media account?
In these instances you are liable as an individual, and your liability is unlimited. It could even be your own home on the line.
When I review the insurance purchased, it is usual to see core covers, such as Employers Liability, or Professional Indemnity. It is rare to come across clients insuring their liability as a Director or Officer
Management liability policies should be near the top of the list for anyone running a business. It is relatively inexpensive and protects the individual liability of those running the agency
(3) The one you just can’t turn down
We all want to work on the interesting projects, with the profile high, and sometimes the fees too.
It’s a given the competition is also keen; negotiation and compromise inevitable, however its at these times you need to remain vigilant
Through insuring creative businesses, both as a broker and insurer, it has always amazed me how readily agencies sign up to contracts they are just not insured for.
It may be they agree not to cap their liability, or to compensate their client for lost revenue if the campaign doesn’t work.
It is most common though to see agencies sign up to US jurisdiction contracts (those where it states disputes would be heard in the courts of, say, Arkansas, or New Jersey for example)
I’m not saying agencies should never sign up to these contracts. I’m saying they should be more careful when doing so, as I’ve seen several neglecting to check their insurance extends to US court actions.
Getting it wrong in the US can be ridiculously expensive, so it is crucial to ensure the policy extends far enough before putting pen to paper.