Whether it’s raising a new round of funding, impressing the board or making a key hire, startup executives have plenty to worry about. But the most dangerous threats to small businesses can often times be the most unexpected.
We selected five common blunders that could topple your business and asked Jon Zabikow, Technology Segment Director at
Located in the heart of the loop, CNA’s headquarters are at 151 N Franklin. With close proximity to both L and Metra stations.
The Lifted Laptop
The real world example:
Todd has 15 minutes until his flight to New York for an important meeting with a StartupX client. He makes a last-minute decision to grab a Cinnabon before take off, leaving his iPad charging at the nearby outlet. Upon his return, the iPad has vanished. The scent of his newly purchased, frosted treat is quickly overshadowed by the terrifying realization that his iPad housed several documents containing sensitive information about his clients.
What is Cyber Liability?
Cyber and privacy policies cover a business’ liability for a data breach in which a company’s client or customer’s personally identifiable information, like credit card or Social Security numbers, are stolen by either a hacker or someone who has stolen a device.
What you can do:
“Educating your employees about device best practices and establishing a companywide policy to encrypt mobile devices are great places to start when looking to establish a foundational approach to taking care of sensitive data. In addition to that, a Cyber policy can be an important layer when it comes to tackling both 1st party expenses such as breach notification or credit monitoring, as well as third party damages that may arise from releasing your customer data.” — Jon Zabikow,
Located in the heart of the loop, CNA’s headquarters are at 151 N Franklin. With close proximity to both L and Metra stations.
The Disorderly Disaster
The real world example:
StartupX decides to celebrate its five year anniversary by throwing a party at the office. The catered BBQ is a hit, but the bar is receiving even more traffic from the lively employees and guests. The most recent addition to the sales team, Jane, invited her new boyfriend to the event, and he helps himself to one too many IPAs. As he staggers out the door to his Lyft, he slips down the office’s steps, breaking his arm.
What is General Liability?
In order to reduce a small business' exposure to more common claims, including bodily injury, property damage and personal injury, general liability insurance (GL) is often bundled with property insurance in a Business Owner’s Policy but can also be obtained as stand-alone coverage.
What you can do:
“The example above, and many claims that we see on a regular basis, happen at the most unexpected moment. Whether it is someone getting hurt at your facility like Jane’s boyfriend or your tech service causing bodily injury or property damage, you want to be sure that your business has appropriate programs in place. With General Liability insurance you would have the appropriate product to tackle potential items such as defense costs, as well as damages that may arise.” — Charlie Phillips,
Letting People Go
The real world example:
At first, Sarah was a thriving employee for StartupX, but her performance has slipped drastically in the past year. Her work continues to have glaring errors and after several warnings, StartupX decides to let her go. After the termination, Sarah reveals she recently became pregnant and accuses StartupX of firing her for that reason. A lengthy legal battle ensues, and StartupX begins to rack up attorney fees.
What is EPL?
Employment Practices Liability (EPL) applies to wrongful acts arising from the employment process. This coverage is critically important for protecting businesses from its own employees in regards to wrongful termination, sexual harassment, discrimination, invasion of privacy, false imprisonment, breach of contract, emotional distress, and wage and hour law violations.
What you can do:
“The best way to think of EPL coverage is as prepaid defense cost. Any fast growing startup is hiring and firing employees on a regular basis. This coverage line is there to support your company from the inevitable lawsuit alleging discrimination, wrongful termination, sexual harassment etc. Even though you likely did nothing wrong, this coverage can help you from having to defend yourself from the claim and resulting (large) legal defense bills.” — Charlie Phillips,
The Wreck with Repercussions
The real world example:
Jake is representing StartupX at a hiring fair and needs to use his own car to transport the company’s promotional materials. While driving down LaSalle Street he T-bones an oblivious Uber driver who suffers minor injuries as does his passenger. The Uber driver and passengers hospital bills, pain and suffering, lost wages, car damage etc. add up to hundreds of thousands of dollars. Their attorney sues your driver and also includes Startup X to recover damages (as your employee’s auto policy didn’t have sufficient limit).
What is Employers Non-Owned Auto Coverage?
This liability insurance is for companies that have employees that tend to use personal cars for work-related trips. This policy could extend the liability coverage you have on your commercial policy to your employees’ vehicles in case of a work related auto accident.
What you can do:
“Knowing that your company can be responsible for any employee that is driving on business whether it is the employee’s own car, or a rented vehicle, should create a need for awareness. The first line of defense always begins with employee education, for example prohibiting mobile device use while driving. With that being said, even with the best educational program in place, auto accidents can happen so having a business auto policy that responds to all types of exposure (owned autos, non-owned autos and rented autos), as well as provides adequate enough limits to make sure that an accident on the road does not lead to financial disruption back in the office. Please note that there are other items that can act as a buffer to a business auto policy, such as the employee’s own auto policy, or a rental agreement that picks up some portion of the liability.” — Jon Zabikow,
Located in the heart of the loop, CNA’s headquarters are at 151 N Franklin. With close proximity to both L and Metra stations.
The Deadline Debacle
The real world example:
StartupX is a SaaS company that has promised to build an application for one of their clients before the holiday break. The project’s lead developer gets the flu, and they don’t meet the deadline — causing their client to lose out on a large amount of potential revenue. The client sues StartupX seeking damages for all the lost revenue totaling over one million dollars.
What is E&O?
Errors and Omissions (E&O) insurance addresses accusations of negligence or the failure to perform professional services. E&O is also known as professional liability insurance and can be crucial for small businesses that provide services or regularly give advice.
What you can do:
“Errors & Omissions insurance is a critical component to a risk management program for any technology firm. While every customer complaint is unique to its own set of circumstances, this type of insurance can provide support when it comes to such things as defense costs, as well as potential damages that your company may become responsible to pay as a result of a failure in your product or service. Common situations such as scope creep, software performance issues or StartupX missing a deadline can all leave your customer with an unexpected financial burden, and your business facing a legal battle.” — Jon Zabikow,
Located in the heart of the loop, CNA’s headquarters are at 151 N Franklin. With close proximity to both L and Metra stations.
Have more questions about how you can protect your business? Contact Charlie Phillips at [email protected], check out CNA's Guide for Tech Companies or use this tool to get a quick insurance quote for your business.
