Minimum Essential Coverage – Setnor Byer Insurance & Risk

Insurance for Tech Companies

Since most businesses rely on technology, providing technology services has become big business. Technology companies provide goods, services and expertise that can increase efficiency, productivity and profitability. These businesses may involve:

System / network development and administration
Application and website programming and design
Hardware installation and repair
Website hosting, maintenance and optimization
Information Technology consulting, staffing and training
Project management
Consulting

Technology companies face the same risks as other businesses, so traditional insurance coverages are required, such as general liability, property, automobile and workers compensation insurance. However, additional insurance coverage may also be necessary to address the unique risks facing technology companies.

For example, many technology companies do not believe they need Errors & Omissions (Professional Liability) insurance. The reality is that technology companies, just like doctors and lawyers, can be held liable for errors and omissions committed in the performance of their professional services.

Unfortunately, a traditional E&O policy may not protect against many of the risks unique to technology companies. This is why technology-specific insurance is needed to cover technology-specific risks. To ensure adequate insurance coverage, technology companies should look for an E&O policy that, at a minimum:

Broadly defines “Computer Technology Services”
Provides coverage for failure to prevent unauthorized access to or use of any electronic system or program of a third party
Provides coverage for unauthorized, corrupting or harmful pieces of code, including, computer viruses, worms and Trojan Horses
Covers personal injury claims alleging wrongful entry, wrongful eviction, wrongful detention, false arrest, false imprisonment, libel, slander or defamation, advertising injury or violation of any right of privacy
Provides sufficient coverage limits

The right E&O policy lets technology companies focus on their business knowing that they are protected in the event of a claim. And, since clients are increasingly requiring proof of E&O insurance from their technology vendors, an E&O policy may also create new opportunities.

Given the complexity of the risks facing technology companies, evaluating insurance needs and options is not always easy. For example, in addition to E&O insurance, technology companies may also need coverage for cyber liability claims, including data security breaches, which are becoming more common.

An experienced insurance agent can guide you through the process of protecting your technology company. If you would like to learn more about insuring a technology company, contact us.

If you would like to learn more about preventing data security breaches, take our online course Information Risk Management: Strategies for Preventing and Mitigating Information Security Breaches.

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What is a Certificate of Insurance?

Certificates of Insurance are documents provided by Agents to verify the existence of insurance coverage. They are commonly used when an agreement or contract requires a party to maintain specific types of insurance. For example, a Certificate of Insurance can be used when:

A general contractor wants to verify that its subcontractor has the statutorily required workers’ compensation insurance;
A mortgage lender wants to verify that the homeowner has sufficient property insurance;
A commercial landlord wants to verify that its tenant has all the insurance coverage required by the lease; or
A homeowner wants to verify that its lawn service company has general liability insurance.

Certificates of Insurance are issued to the certificate holder—the person or entity that needs to verify insurance coverage. Though common and relatively straightforward, there is quite a bit of confusion about what Certificates of Insurance do, and more importantly, do not do.

A Certificate of Insurance provides a superficial snapshot of insurance coverage that is in place at the time it is created. Contrary to what many believe, Certificates of Insurance:

Are NOT insurance policies.
Do NOT provide certificate holders with any rights under the insured’s policies. This means certificate holders cannot file a claim or request a defense under the insured’s policies.
Do NOT amend, extend or alter the coverage provided by the insured’s policies. This can only be accomplished with an endorsement, rider or amendment to the policy.
Do NOT create a contract between the insurance company and the certificate holder.
Do NOT guarantee that insurance coverages listed on a Certificate of Insurance will continue in the future. A Certificate of Insurance issued today may not be accurate tomorrow.
Are provided for informational purposes ONLY.

Though there are various Certificate of Insurance forms, those developed by ACORD (Association for Cooperative Operations Research and Development) are widely used to provide specific information about existing insurance coverage, such as:

the insurance companies issuing the policy
the policy numbers
effective dates
types of insurance (ex. general liability, automobile, workers’ compensation, property)
policy limits

These forms also provide a space to add additional comments or conditions. This is where problems may arise if an insured or certificate holder wants to add specific language to their Certificates of Insurance. For example, a certificate holder may want to state that there is an additional insured under the policy, or an insured may want the certificate to state that any obligation to indemnify the certificate holder is covered by the policy.

If such statements happen to be true, it is not because they were typed on the certificate. Remember that Certificates of Insurance do not affect, extend, or change the insurance policy, so any incorrect or contradictory statements are meaningless to the insurance company. They can, however, be grounds for a costly lawsuit, so an experienced insurance agent should be used when issuing or receiving Certificates of Insurance.

If you would like to learn more about dealing with Certificates of Insurance or how we can help, please contact us.

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Preventing Data Security Breaches

Every business must be able to identify the likeliest source of a data security breach so that they can also identify how to prevent it. Is it an executive’s laptop computer, the copy machine or the office’s wireless network? Could it be something else? Since the first step to preventing a data security breach is understanding the risk, it’s time to learn more about your business’s sensitive data.

Effective data security starts by assessing the kind of information a business has and identifying who has access to it. Evaluating data security vulnerabilities requires an understanding of how sensitive data moves into, through, and out of a business, and who has or could have access to it. Here are some tips from the Federal Trade Commission.

Take Inventory

Take an inventory of all devices and equipment capable of storing sensitive data, such as laptop computers, mobile devices, flash drives, off-site servers, disks and digital copiers. Do employees work from home? If so, add their home computers to the list.

The type and location of sensitive data should also be inventoried. Don’t stop with the office’s filing cabinets and computer systems. Sensitive data may also be received from other sources, such as websites, contractors or call centers. Every possible source and destination for sensitive data must be considered.

Track Sensitive Data

It is important to know how the business obtains, stores, shares and disposes of sensitive data. Every department should be consulted, including sales, information technology, human resources and accounting. Don’t forget about contractors and other third-party service providers.

This process should provide a business with a thorough understanding of:

Who provides sensitive data? Does it come from customers, credit card companies, banks or other financial institutions, credit bureaus, job applicants, contractors, third-party service providers?
How is sensitive data received? Does it come via phone, fax, mail or email? Is there a website designed to request and receive sensitive data? Are there any other possible entry points?
What kind of sensitive data is collected? Do business operations require or permit collecting financial information (credit cards, bank accounts, credit reports), personally identifying information (drivers’ licenses, social security numbers) or medical information?
Where is sensitive data stored? Is it kept on disks, tapes, laptops, smartphones, tablets or other mobile devices? Employees’ personal computers or mobile devices? Where are data backups and copies stored?
Who can access sensitive data? Is access to sensitive data limited to only those who need it? Are there security measures in place? Is sensitive data protected against unauthorized access by contractors or other third-party service providers?

Throughout this process, pay particular attention to certain kinds of sensitive data. Identity thieves typically look for social security numbers, credit card and other financial information.

Organizations should also consider protecting against data security breaches with insurance.Various cyber liability products are available to protect against privacy injuries, such as identity theft, and to cover the cost of complying with various data breach notice laws. Given the complexity of the risk, an experienced insurance agent should be consulted to ensure that adequate coverage is obtained. If you would like to learn more about insuring against data security breaches, contact us.

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The Affordable Care Act’s Individual Mandate

The Affordable Care Act’s Individual Shared Responsibility provision requires nonexempt individuals to obtain minimum essential coverage for themselves and any nonexempt dependents. Starting January 1, 2014, those failing to get the required health insurance will have to pay a monthly penalty.

Who is subject to the penalty?

The penalty, which is calculated monthly, applies to individuals of all ages, including senior citizens and children. An individual is liable for the penalty assessed against any other individual who can be claimed as a dependent for federal income tax purposes. If an individual files a joint return, that individual and their spouse are jointly liable for the penalty. Penalties will be paid by including them with an individual’s tax return.

What is Minimum Essential Coverage?

Minimum essential coverage generally includes:

Employer-sponsored coverage (including COBRA coverage and retiree coverage)
Coverage purchased in the individual market
Grandfathered health plans
Medicare and Medicaid coverage
Children’s Health Insurance Program (CHIP) coverage
Certain types of Veterans’ health coverage
TRICARE (Department of Defense health care program)

How much is the penalty?

The Individual Shared Responsibility penalty is calculated monthly by using a flat dollar amount or a percentage of household income, whichever is greater. Under the flat dollar amount method, each nonexempt individual is penalized a fixed amount. For individuals under the age of 18, the penalty is one-half the fixed amount. If an individual is responsible for multiple dependents, the total penalty cannot be more than 300% of the applicable fixed amount.

The fixed amounts used to calculate the penalty are:

$95 in 2014 ($7.92 per month)
$325 in 2015 ($27.08 per month)
$695 in 2016 ($57.92 per month)
$695 + cost-of-living increase in 2017 and beyond.

Under the percentage of income method, the penalty is a percentage of an individual’s household income, less specific deductions. To calculate household income, add the individual’s modified adjusted gross income to the modified adjusted gross incomes of the individual’s family members.

The percentages used to calculate the penalty are:

1% in 2014
2% in 2015
2.5% in 2016 and beyond.

For example, in 2014, the annual penalty will be $95 per adult and $47.50 per child, but no more than $285 (300% of $95) or 1% of the household income, whichever is greater.

Is there a maximum limit for the penalty?

Yes. The Individual Shared Responsibility penalty cannot be more than the national average premium for bronze-level (covering 60% of costs) qualified health plans offered through Affordable Insurance Exchanges. The Congressional Budget Office estimates that in 2016, the national average will be approximately $5,000 for individuals and $12,500 for families of four.

Are there any exemptions from the Minimum Essential Coverage requirement?

Yes. The following individuals are not required to obtain Minimum Essential Coverage:

Members of a religious sect that is legally recognized as being conscientiously opposed to accepting any insurance benefits.
Members of a recognized health care sharing ministry.
Individuals who are not U.S. Citizens, U.S. Nationals or lawfully present aliens.
Individuals incarcerated following disposition of criminal charges.
Members of a recognized Indian tribe.
Individuals with income below the threshold for filing a tax return.
Individuals whose required contribution for coverage exceeds 8% of their household income.
Individuals who have been certified as suffering a hardship.
Individuals with a gap in health insurance coverage of less than three consecutive months during the year.

Though proposed regulations explaining the Individual Shared Responsibility penalty have been published by the Internal Revenue Service and the Department of Health and Human Services, they are not final and may change.

At Setnor Byer Insurance & Risk, we are committed to guiding you through Health Care Reform. Check back with us periodically for future informational updates about the Affordable Care Act. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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