Recommendations for IT contractor (limited company) Insurance

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#2004190 28-Apr-2018 17:24

dejadeadnz:
[ For the provision of IT services, it was my experience that it is a standard warranty term that, for example, a service provider warrants that the services provided contains no errors or, in the case of software code, the errors are not such that they would put certain crucial infrastructure at risk or are below a specified threshold.

That’s laughable. No-one would sign a software contract that warrants no errors, or errors below some sort of a threshold. If they did, that would be a sign they don’t know what they’re doing and that would be a massive risk.

Certainly lawyers give it a go, because they don’t understand the industry. But these clauses had to go because no-one would agree to them. Especially in Central Government - those contracts are much better these days.

All you can warrant is that you apply skill and expertise, use reasonable good practice, and you don’t act without due care and and attention.

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surfisup1000

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#2004211 28-Apr-2018 18:29

BlinkyBill:

That’s laughable. No-one would sign a software contract that warrants no errors, or errors below some sort of a threshold. If they did, that would be a sign they don’t know what they’re doing and that would be a massive risk.

Certainly lawyers give it a go, because they don’t understand the industry. But these clauses had to go because no-one would agree to them. Especially in Central Government - those contracts are much better these days.

All you can warrant is that you apply skill and expertise, use reasonable good practice, and you don’t act without due care and and attention.

The way it works on large projects I've been involved with, is that there is a process called 'business acceptance testing'. Once the client is happy the software is fit for purpose, they sign off on this.

Then, you complete the implementation phase and again the client will sign off on the production go-live. So, it is more like a partnership where both parties accept responsibility and cooperate to fix errors rather than start pointing fingers.

However, at an independent contractor level, if you accidentally delete the production customer database instead of the test database (it has happened before and can be easier than you might think haha), you could cause quite a bit of downtime and monetary loss.

It is an error, i wouldn't say necessarily negligent error as you may have thought you were connected to a different system. Just a mistake. But, a mistake in which you could be sued for damages.

So, situations differ, I think at an independent contractor level it is probably wise to take the insurance. Just as you'd expect the guy building your house to take insurance.

But, I'm not a lawyer of course, maybe things don't work like this in the real world for IT developers. Usually companies do not want to advertise critical mistakes.

mattwnz

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#2004222 28-Apr-2018 19:00

surfisup1000:

However, at an independent contractor level, if you accidentally delete the production customer database instead of the test database (it has happened before and can be easier than you might think haha), you could cause quite a bit of downtime and monetary loss.

If you did make that sort of error though, would the insurance company cover you? They may claim it was negligence, and if you didn't have a backup for the live database in case of that sort of error.

dejadeadnz

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#2004343 29-Apr-2018 01:19

BlinkyBill:

That’s negligence and you should be sued for it. Insurance won’t cover you for that.

Sorry BlinkyBill, it's really time you stop embarrassing yourself on a public forum. First of all, there is no way that anyone who knows one bit about insurance law can make the very broad claim that you just did. There's nothing called "insurance" generally -- what each insurance policy covers and does not cover is entirely dependent on the terms of the insurance policy between the insured and the insurance company. However, most people with some understanding of public liability insurance does recognise that one of the reasons why people buy PL insurance is to cover accidental damage or destruction to others' property due to negligence on the part of the insured. Don't believe me? Not that I care (since I know you're wrong) but since I operate in the realm of reality and evidence, let's see what an insurance pricing website has to say about public liability insurance, shall we?

There are many different events covered by public liability insurance, however the most common claims involve the following:

Damage to your client’s property
Damage to another person’s property
...

Your Responsibilities

Although public liability does cover you for negligence, you still need to take responsibility and act in a professional way.

A good example of this is overspray. Although many policies will cover overspray damage caused when spray painting, you still need to use your good judgement and not spray paint on a windy day, without any protection and in close proximity to cars or other property which could be damaged by overspray.

Whilst your public liability insurance would possibly still payout in this situation, if the insurance company felt that you had acted recklessly they would likely not offer to renew your insurance at its next expiry. After one insurer has refused a renewal, you must tell any other insurance company about the refusal, which can often lead to them refusing you as well and leaving you without any insurance.

source

And for some additional fun, let's examine an actual PL policy's (described here as general liability) wording and see what it has to say:

We agree to indemnify you for all amounts which you shall become liable to pay as a result of claims or legal proceedings for personal injury or property damage. Cover under these insuring clauses is afforded solely with respect to claims first made against you during the period of insurance that are reported to us as required by this policy

And one of the primary basis in law for claiming against another party for property damage is, you guessed it, negligence. Moreover, to no one's great surprise, the policy does say that the insured has an obligation not to:

not cause or facilitate loss or damage to any property covered by this policy or incur liability by any unreasonable, reckless or wilful act or omission

source

This is actually a serious topic where someone is looking for real information. If you don't want to help, that's fine; just don't lead the OP down a dangerous road for your own ego trip.

Pillmonsta:

This ^^ sort of tripe could only come from someone who's obviously:

(1) never worked in IT, let alone in "corporates".

(2) has no idea of ITIL practices or New Zealand civil liability laws.

Geez that's funny. I wonder what I was doing working in three listed companies during my career and negotiating/managing the contracts (in the context of getting them finalised with internal and external lawyers, obtaining board approval, and also actually getting staff disciplined for making unauthorised alterations etc) that I was talking about. And here's the thing that you aren't getting. I already told you that I recognised that if an entity was big enough, it won't be operating under the standard corporate contracts that ALL of the listed corporates that I worked in required their staff to use on their "small" contractors (and by "small" I mean basically nearly everybody other than counterparts with market caps worth hundreds of million). But the context of the discussion here is likely some one man band, not somebody who has much clout or negotiating power. This is why it pays to learn to read.

And, no, I won't be showing you those contracts that I was talking about because I actually recognise duties of confidentiality. And I must also have been dreaming when I was giving advice as a practicing lawyer on IT contracts/related negligence lawsuits.

dejadeadnz

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#2004344 29-Apr-2018 01:28

BlinkyBill:

That’s laughable. No-one would sign a software contract that warrants no errors, or errors below some sort of a threshold. If they did, that would be a sign they don’t know what they’re doing and that would be a massive risk.

Certainly lawyers give it a go, because they don’t understand the industry. But these clauses had to go because no-one would agree to them. Especially in Central Government - those contracts are much better these days.

All you can warrant is that you apply skill and expertise, use reasonable good practice, and you don’t act without due care and and attention.

That's funny -- a contract just crossed my desk the other day where a small company (they probably have revenues of about 5 - 10m a year max) agreed to exactly the kind of terms I described to work for my employer.

pillmonsta

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#2004349 29-Apr-2018 05:10

dejadeadnz:

BlinkyBill: That’s laughable. No-one would sign a software contract that warrants no errors, or errors below some sort of a threshold. If they did, that would be a sign they don’t know what they’re doing and that would be a massive risk.

Certainly lawyers give it a go, because they don’t understand the industry. But these clauses had to go because no-one would agree to them. Especially in Central Government - those contracts are much better these days.

All you can warrant is that you apply skill and expertise, use reasonable good practice, and you don’t act without due care and and attention.

That's funny -- a contract just crossed my desk the other day where a small company (they probably have revenues of about 5 - 10m a year max) agreed to exactly the kind of terms I described to work for my employer.

Nice story. You're outta credit with me sorry.

Did I mention I worked at Datacom? As a contractor. Must've forgot that bit.

Btw Mr IT - there's no such thing as a warranty - particularly in enterprise. They're called SLA's.

BlinkyBill

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#2004350 29-Apr-2018 07:04

dejadeadnz:

BlinkyBill:

That’s laughable. No-one would sign a software contract that warrants no errors, or errors below some sort of a threshold. If they did, that would be a sign they don’t know what they’re doing and that would be a massive risk.

Certainly lawyers give it a go, because they don’t understand the industry. But these clauses had to go because no-one would agree to them. Especially in Central Government - those contracts are much better these days.

All you can warrant is that you apply skill and expertise, use reasonable good practice, and you don’t act without due care and and attention.

That's funny -- a contract just crossed my desk the other day where a small company (they probably have revenues of about 5 - 10m a year max) agreed to exactly the kind of terms I described to work for my employer.

Lawyers don’t mitigate risk. They write contract terms so they can attempt to gain recourse if the risk eventuates.

You thinking that someone agreeing to terms that are not possible to comply with, and that therefore you are safe from incident, is indicative of the problem.

That firm probably also carries insurances of the type discussed in this thread. But if they screw up negligently, my experience predicts you won’t see a cent of redress.

dejadeadnz

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#2004351 29-Apr-2018 07:09

Pillmonsta: Here’s the problem you still aren’t getting. When I used Datacom as an example, I actually raised the point that they would not sign on to the type of standard terms I was highlighting. And all along I am talking about other parties acting as contractors to my current and old workplaces. So I am not sure what your ravings about you working as a contractor for Datacom has anything to do with, well, anything.

No warranties In IT contracts? What a joke. Yeah you must have missed the typical bits where contractors are required not to, for example, breach others’ IP, introduce malicious code code deliberately or recklessly, and so forth. Clients are able to sue on those as breaches of contract. That’s a warranty on any view of an actual lawyer.

To the OP: there has been plenty of sound and useful advice provided to you. Up to you whether you want to risk getting no PL and PI insurance.

BlinkyBill

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#2004354 29-Apr-2018 07:13

mattwnz:

surfisup1000:

However, at an independent contractor level, if you accidentally delete the production customer database instead of the test database (it has happened before and can be easier than you might think haha), you could cause quite a bit of downtime and monetary loss.

If you did make that sort of error though, would the insurance company cover you? They may claim it was negligence, and if you didn't have a backup for the live database in case of that sort of error.

Absolutely this has happened before, and it will happen again. A million things can happen - there are all kinds of fragilities in IT systems that require humans to manually intervene to prevent an incident.

Making a human error - no one in the IT sector would get sued or fired for such. These happen every single day and the industry would grind to a halt if every time a production system went out because of a mistake and people got fired or sued. That’s why an action rarely happens.

Come in drunk and do it though - i’ve seen people fired for that.

Bottom line is, if you make a genuine error doing your best, then you don’t need liability insurance; if you break stuff negligently you may as well.

BlinkyBill

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#2004355 29-Apr-2018 07:31

dejadeadnz:

BlinkyBill:

That’s negligence and you should be sued for it. Insurance won’t cover you for that.

First of all, there is no way that anyone who knows one bit about insurance law can make the very broad claim that you just did.

YOU should stop embarrassing yourself. Public liability and professional indemnity insurances won’t pay out in cases of negligence. That is my claim.

Just because you worked at listed companies, and on negligence claims, and wrote contracts, doesn’t mean you know what you are doing.

You didn’t work for a company that successfully sued an independent contractor for making a human-error mistake. Because no company in NZ sued an independent contractor for such a mistake.

My advice to independent contractors is, take up these insurances if you want to, and it might smooth the waters when negotiating. However, unless you are negligent you won’t need the insurances, and if you are negligent they won’t pay out.

dejadeadnz

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#2004383 29-Apr-2018 08:00

There’s nothing in law called “human-error mistake”. You either discharged your general duty of care or not (if there was no contract) or you failed to live up to the duty of care agreed under the contract.

What you continue to overlook is the fact that when you do not have the appropriate insurances, you will need to fund your own responses to any initial threats or claims from the other side. Trust me, your average Joe wouldn’t survive very long in any correspondences with a top tier law firm without grabbing the rope they will gladly give you to hang yourself with.

As a rule, no insurance will cover you for risks that you deliberately or explicitly agree by commercial arrangements that go beyond the ordinary course of business. But to say that insurers don’t pay out when contractors are negligent is laughable. Just look at plain, simple stuff like real property damage that’s less liable to raise causation and other issues that you aren’t going to understand: utility owners, for example, successfully claim contractors for striking their assets through inadequate plans and practices. The basis? Negligence.

[Mod edit (MF)]

kryptonjohn

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#2004389 29-Apr-2018 08:24

BB is right practise, DDNZ may be right in theory but not in practice.
This is also based on 30+ years of it contracting experience in NZ, Aus and UK.
Some clients insist on pi and pl insurance but most NZ corporates don't. Any that are US owned will. Some Australian ones will.
The reality is that no NZ it contractor has ever claimed on a pi policy.
So bottom line is you don't need a $3k pa pi policy unless your client insists on it.

BlinkyBill

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#2004407 29-Apr-2018 09:43

One of my good friends is a QC. He believes that 80% of lawyers have an over-developed sense of entitlement and superiority, and I would agree. He also suggests that in the next 10-15 years 90% of legal work will be performed by robots (not actual robots, robotic intelligence) and the majority of lawyers will be looking for new employment.

I am actually qualified here; I run an IT consulting business with 100 staff, we work in NZ, AU and USA. I hold contracts with 65 central government and listed company organisations in NZ.

dejadeadnz

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#2004409 29-Apr-2018 09:44

Well that’s funny because I actually was involved in a number of successful claims against contractors in both IT and non-IT contexts. Again, we seem to have people who think that they know about every confidential settlement and lawsuit in the land. With such clever people around, who can confidently speak for the whole of NZ across multiple decades, everyone else has clearly been conned.

Seriously guys, get off whatever you are on. You aren’t going to be able to know/conclusively speak to everythin, including professional fields where it takes multiple years of study just to get an entry ticket.

dejadeadnz

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#2004420 29-Apr-2018 10:03

For Blinky “Insurers don’t pay out for negligence” Bill (who will probably give us more imaginary anecdotes), here’s what 20 seconds of Google revealed in respect of what a typical public liability policy says about property damage that is covered. The following is a definition of “damage” under said policy.

Any of the following:
a. accidental physical loss or accidental physical damage to
any tangible property, including its subsequent loss of use,
b. accidental loss of use of any tangible property that has not suffered physical loss or physical damage.

Accidental covers negligent conduct/not taking sufficient care. For further context, let’s just relate that back to some reality that even Blinky can understand. If insurers don’t pay out for negligence (again, I emphasise that I speak from both practical and thereotical experience), why do you think Auckland Council’s insurers ran their leaky building lawsuits when they were sued for, wait for it, negligence for giving out Code of Compliance certificates to buildings that turned out to leak? Did the insurers just join the defence out of the goodness of their hearts? And there are oublically available reports showing that AC met its obligations to successful claimants via their insurance. Is the AC lying?

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