ELECTRONIC DATA LIABILITY INSURANCE ANALYSIS

(May 2022)

Collapsible Index

Section I – Coverages

Section IV – Electronic Data Liability Conditions

Computer and technology services include electronic data processing, computer programming, database management, systems analysis, software design, image processing systems, online publishing services, Internet service providers and a variety of related consultants.

This business segment has a critical need for professional liability and errors and omissions coverage. Along with coverage written through specialty or nonstandard markets, a standard source also exists. Insurance Services Office, Inc. (ISO) provides CG 00 65–Electronic Data Liability Coverage Form as a stand-alone coverage part. It contains its own coverages, exclusions, conditions, and definitions.

This analysis focuses on the ISO option. Keep in mind that coverage offered by specialty or nonstandard insurers may be significantly broader or narrower than the ISO form. We will comment on some of the key approaches taken by specialty or nonstandard insurers in our discussion. This analysis is based on the 04 13 edition of the ISO CG 00 65.

SECTION I–COVERAGES

Damage to Electronic Data Liability

1. Insuring Agreement

a. CG 00 65–Electronic Data Liability Coverage Form makes the insurer responsible for paying damages to third parties that were caused by the loss of certain types of electronic data.

Example: A hacker entered one of Web Farm Inc.’s servers and crashed it. A dozen retail clients’ websites that were hosted on the server could not process customer orders. The clients sued Web Farm for their lost sales.

If coverage applies, the insurer has several rights and duties such as providing a legal defense against claims and suits brought by parties claiming damages. The insurer is permitted to investigate all claims to determine whether they are covered by the policy and they may choose to litigate, deny or settle claims. The sums that the insurer will pay are limited to the amounts shown in the policy’s Declarations.

Once the Limit of Insurance is exhausted by payments or settlements, the insurer’s obligation to continue a legal defense ends.

Example: A construction subcontractor is hired to provide a network that handles all of the job scheduling and material management for a project to build a basketball arena. A virus infects the subcontractor’s network, causing a three-week project delay. The subcontractor is sued by the general contractor, other subcontractors and a municipal sports commission that ordered the arena’s construction. The subcontractor’s $2,000,000 limits are exhausted by payments on the multiple, substantial claims and the insurance company advices that the subcontractor will have to take over its legal defense of the outstanding lawsuits.

Some specialty or nonstandard insurers that provide Electronic Data coverage require the named insured’s permission to settle a claim. This is the case because such suits may question the insured's competence and affect its professional reputation. The covered business has a huge stake in seeing that a claim or lawsuit has a minimal effect on its goodwill. In cases where the insurer offers to settle a claim, and the insured wants to litigate, the insurer’s liability will be limited to the amount of settlement the insurer was willing to offer and settle the claim for prior to the legal action by the insured.

Example: Acme Computer Services develops a new software program to track inventory for Felicity’s Fine Fashions, Inc. There are numerous problems resulting in the corruption of inventory records, and Felicity’s sues. Acme’s insurer negotiates a $300,000 settlement but Acme does not agree to the settlement. Acme’s owners believe that Felicity’s management was uncooperative during the design and testing phases of software development, contributing to the later problems. The case goes to trial, and the judge awards damages of $650,000. The insurer will pay $300,000 of this award and Acme is responsible for the additional $350,000 (even though their Electronic Data policy limit was large enough to handle the entire award).

b. Most policies providing coverage for electronic data liability, computer professional liability, and computer errors and omissions are claims-made contracts. Under the ISO form, coverage applies only if the data loss is caused by an electronic data incident, takes place in the coverage territory, and occurs after the Retroactive Date shown in the Declarations and before the policy expiration period. If no Retroactive Date is shown, the ISO form provides coverage for any claim occurring before the policy expiration date. The claim must be first made against an insured during the policy period or any Extended Reporting Period provided by the insurer. We will look at the Extended Reporting Period later in this analysis.

Example: A policy is effective 2-1-2022. The Retroactive Date is shown as 2-1-2021. If a loss happens on 3-1-2021 (after the Retroactive Date), and the claim is first reported on 3-1-2022 (during the policy period), it is covered by the policy. An offense that occurred on 3-1-2021 and reported on 3-1-2022 would not be covered because the offense occurred before the Retroactive Date.

c. A claim is considered to have been made either when notice of the claim is received and reported to the insurer in writing, or when the claim is settled, whichever happens first. All claims are considered to be made when the first of those claims is made against any insured. If an insured is notified of a claim during the policy period, the insured has up to 30 days from the end of the policy period to report it to the insurer. It is at that point where the incident is considered as made to the insurer. The 30-day extension period for reporting does not apply to any claim that is covered by any renewal or subsequent coverage on the insured. Nor does the 30-day extension apply if available limits have already been exhausted.

According to ISO rules, once a Retroactive Date is established, it can only be changed with the written consent of the first Named Insured on the policy under one or more of the following circumstances:

· There is a change in the insurer.

· There is a significant change in the insured’s operations resulting in an increased exposure to loss.

· The insured does not provide the insurer with information they have requested, or material misrepresentation by the insured that affected the insurer’s initial acceptance of the risk.

2. Exclusions

The ISO form contains ten exclusions. There is no coverage for:

a. Expected or Intended Loss

There is no coverage for loss of electronic data that is expected or intended from the standpoint of the insured.

b. Contractual Liability

If the insured becomes liable for damages because of assuming liability in a contract or agreement, coverage under the policy does not apply unless the insured would have been liable for the loss even without the contract or agreement.

Example: Analawg Analetiks acquires a new client, Picky Poynts Processors. As part of its client agreement, Analawg agrees to pay Picky up to $75,000 to assist with paying costs to handle loss of data or downtime that is related to the records of their shared customers, regardless the cause of any loss. Picky requests Analawg to pay $32,000 because of expenses to recover from a data loss that was caused when Picky installed a corrupted software update. This loss is not eligible for coverage under Analawg’s policy. However, due to their contract, it’s likely that Analawg would have to handle this as an out-of-pocket expense.

c. Computer Products or Services Exclusion

There is no coverage for loss of electronic data that results from a negligent act, error or omission by the named insured or anyone acting on the named insured’s behalf in providing computer products or services. This type of coverage is generally provided under a specialty or nonstandard program.

d. Bodily Injury, Property Damage or Personal and Advertising Injury

These are excluded since they should be, rightfully, covered under a Commercial General Liability policy.

e. Damage to Your Data

There is no coverage for damage to electronic data owned by the named insured, developed by or for the named insured, or that is the named insured’s work or product.

f. Performance of a Contract

Coverage does not apply to any loss that is created by a delay or failure of the named insured or anyone acting on the named insured’s behalf to perform a contract or agreement in accordance with its terms.

Example: Cyber Obersyte is sued by a client after the opening of their business is delayed three weeks because of website malfunctions. They sue since their client contract stipulated the original opening date was supposed to be the website completion date.

g. Infringement of Intellectual Property Rights

There is no coverage for loss resulting from the actual or alleged infringement of trademark, copyright, patent, trade secret or other intellectual property rights.

h. Unauthorized Use of Electronic Data

There is no coverage for loss resulting from theft or unauthorized viewing, copying, use, corruption, manipulation or deletion, of electronic data. This applies only if perpetrated by any named insured or any past or present employee, temporary worker or volunteer worker of a named insured.

i. Violation of an Antitrust Law

Losses caused by parties breaking antitrust laws are ineligible for coverage.

j. Criminal or Fraudulent Acts

There is no coverage for loss resulting from a criminal or fraudulent act committed by or that involve orders to others that are made by an insured.

Supplementary Payments

With the exception of the inapplicable item on bonds related to traffic incidents, the Supplementary Payments in the ISO form are the same as those in the first paragraph of the same section in the Commercial General Liability Coverage Form CG 00 01.

The Supplementary Payments are in addition to the policy Limits of Insurance; they do not reduce the limit of insurance. This is an important coverage as the policy pays defense and settlement costs even if the claims or allegations made against the insured are fraudulent or groundless.

Note: Specialty or nonstandard forms may have a separate limit or amount for defense and defense expense. Other forms may include the defense costs within the limit of insurance. Capping the amount of defense costs available to an insured can pose a serious restriction on the insured and should be evaluated carefully.

SECTION II–Who Is an Insured

1. This section identifies insureds with respect to this insurance. This applies to the entity or entities on the declarations:

a. If the named insured is an individual, that individual is the named insured as well as the named insured's spouse. They are insureds only with respect to operations of the business the named insured solely owns.

b. If the named insured is a partnership or joint venture, that partnership or joint venture is an insured. In addition, the named insured's members and partners, as well as their spouses, are insureds. Their status as insureds is limited to operations of the named insured's business.

c. If the named insured is a limited liability company, the limited liability company is an insured. In addition, members of the company are insureds but only with respect to conduct of the named insured's business.

Example: Creative Softspaces is a programming consulting firm and was formed as an LLC. Paula, a Creative consultant and co-founder, is sued:

Scenario 1: By Towndale Accounting after the Website that Creative modified for them malfunctioned. Paula failed to thoroughly test the client info portion of the site and it was hacked, releasing customer ID and account information on hundreds of clients. This loss is eligible for coverage.

Scenario 2: By a friend of Paula. The friend's business system was crashed for two weeks because of flaws that needed correcting in the product order portion the site. Paula had installed that part of the friend’s site as a favor. This loss is ineligible for coverage.

The named insured's managers are also insureds but only to the extent of their specific duties as managers.

d. If the named insured is any other organization, it is an insured. In addition, the executive officers and directors are insureds but only to the extent of their duties as such. Stockholders are also insureds but their status is limited to the extent of their liability as stockholders.

e. If the named insured is a trust, the trust is an insured. In addition, the trustees are insureds with respect to their duties within the trust

2. Each of the following is also an insured:

a. Volunteer workers but only when performing duties related to the named insured's business. Employees, excluding executive officers and managers of a limited liability company, are insureds within the narrow range of activities within the scope of their employment or while conducting the named insured's business.

Note: It is important to understand how coverage extends to volunteers and their duties. Their covered duties are not the same as employee duties. Volunteers are usually involved in non-work activities, such as special events and charitable functions. For this reason, their covered duties are those that the business establishes for them.

b. Any party that is not an employee or volunteer who manages real estate that belongs to the named insured

c. Any party that has proper temporary legal custody of a deceased named insured's property but only with respect to liability that arises out of or is caused by maintenance or use of that property and then only until a legal representative is appointed

d. A properly appointed legal representative for a deceased named insured but only while carrying out its duties as the legal representative.

Note: The legal representative assumes all of the deceased named insured's rights and duties. This goes beyond the standard insured status and extends to rights to cancellation, conditions and other elements assigned only to named insureds.

3. Any newly formed or acquired organization qualifies as a named insured if there is no other similar coverage available to it. This does not include partnerships, joint ventures or limited liability companies the named insured has majority interest in or owns.

a. This provision applies for only 90 days after the organization is formed or acquired, or until the end of the policy period, whichever comes first.

b. Coverage does not apply to any electronic data loss that occurred before the organization was acquired or formed.

No party is an insured concerning conduct of any current or previous partnership, joint venture, or limited liability company that is not on the declarations as an insured.

SECTION III–Limits of Insurance

The ISO form describes two different Limits of Insurance that are shown in the Declarations. The first is the Limit of Insurance that applies to all damages because of loss of electronic data that arises out of any one electronic data incident. The second is the Aggregate Limit that is the most that the policy will pay for all such losses, regardless of the number of losses.

The Limits of Insurance apply separately to each consecutive annual period and to any remaining period of less than 12 months, starting with the beginning of the policy period shown in the Declarations. If the policy period is extended after issuance for an additional period of less than 12 months, the additional period will be deemed part of the last preceding period.

While the ISO form does not have provisions for a deductible, many specialty or nonstandard policy forms offer a deductible. When there is a deductible, the Limits of Insurance apply only when the amount of the claim or damages exceeds that deductible. The deductible amount does not reduce the limit of insurance available.

Example: High-End Management Information Systems Company carries an electronic data liability policy from Insurer A with a Limit of Insurance of $1,000,000 per claim. The policy has a deductible of $10,000. High End also has an excess policy from Insurer B with a limit of $2,000,000. A claim is made against High-End with a judgment for $2,000,000. High-End must pay the first $10,000. Insurer A pays the next $1,000,000. The remaining amount of $990,000 would be paid by Insurer B.

SECTION IV–Electronic Data Liability Conditions

The ISO form has nine conditions. Seven of these are identical to the conditions found in CG 00 01–Commercial General Liability Coverage Form. Two have been rewritten to address terms unique to CG 00 65–Electronic Data Liability Coverage Form and will be discussed below. The conditions are:

1. Bankruptcy

Same as CG 00 01 which states that the insurance company’s contractual obligations aren’t affected by a policyholder (including a deceased policyholder’s estate) that declares insolvency.

2. Duties in the Event of an Electronic Data Incident

The term “electronic data incident” is unique under form CG 00 65.

a. The insured is required to notify the insurer when they know or suspect that a covered incident has taken place which will result in a claim. However, this notice does not qualify as notice of a claim.

b. Requirements are triggered if an insured becomes aware of an incident that may be eligible under this coverage. If such information is received, the named insured has to gather details about the incident and, as soon as circumstances permit, must send written information about the claim to the insurance company.

c. Under this provision, the named insured is obligated to provide copies of any documents and legal papers it receives that are relevant to a possible loss. Further, the insurance company claims the right from the named insured to secure any information it deems important with regard to handling a possible claim. The named insured is also required to participate, as needed, in any claims process and/or lawsuit. Such cooperation extends to any insurance company effort to secure reimbursement from third parties who may bear any responsibility for a loss handled under this coverage.

d. If a named insured agrees to make a payment or handle a loss related expense without authorization form the insurance company, such payment becomes the sole responsibility of the named insured. Such a move by a named insured does not create an obligation for the insurance company.

3. Legal Action against Us

Same as CG 00 01

No party has the right to join the insurance company in any way, bring it into a suit that claims damages from an insured, or to sue the insurance company unless all of the coverage form’s terms and conditions are completely met and complied with.

The insurance company can be sued to recover on an agreed settlement or on a final judgment against the insured. However, its liability does not go beyond what is available in this coverage form's terms. That liability is also limited to this coverage form’s limit of insurance.

An agreed settlement is a settlement and release of liability that the insured, the insurance company, and the claimant or its legal representative signs.

4. Other Insurance

Form CG 00 65 always applies as excess coverage unless the other insurance was specifically purchased to apply in excess of its coverage. Since the CG 00 65 is designed to respond only as excess over other insurance, the insurer has no duty to defend the insured against any suit if the other insurer has the obligation to do so. If the other insurer does not defend the insured, the insurer carrying form CG 00 65 will do so but will then be entitled to the insured’s rights against the other insurer.

When the coverage is excess, the insurer pays only the amount of loss that exceeds the sum of the total amount that any other insurance would pay plus the total of all deductible and self-insured amounts under that other insurance. Any remaining loss is shared with the other insurer.

5. Premium Audit

Same as CG 00 01

a. All premiums are calculated according to the insurance company's rules and rates.

b. The advance premium shown on the declaration is actually only a deposit because it is subject to audit. At the end of each audit period, the insurance company determines the actual earned premium for the period. That premium is compared to the deposit. If the audit premium is higher than the deposit premium, the insurance company mails a bill for the difference to the first named insured. The premium is required by the due date on the bill. If the audit premium is lower than the deposit, the insurance company will return the premium difference to the first named insured.

Note: The policy doesn’t state when the first named insured can expect to receive the refund.

c. An audit can be conducted only if accurate records are available. The first named insured is required to keep records of the information that is necessary for the insurance company to complete a calculation and to send copies of such records when requested.

6. Representations

Same as CG 00 01

By accepting this coverage form as issued, the named insured agrees that the statements on the declarations are complete and accurate and are based on its own representations. It further agrees that coverage the insurance company issues is based on those representations.

Note: This is very important because these statements allow the insurance company to use inaccurate statements in any application to void coverage.

7. Separation of Insureds

Same as CG 00 01

Other than the Limits of Insurance and any rights and duties that apply specifically to the first named insured, the insurance provided applies to each named insured as if it is the only named insured. It also applies separately to each insured against whom claim is made or suit is brought.

8. Transfer of Rights of Recovery Against Others to Us

Same as CG 00 01

Any rights the insured has against others to recover all or part of any payment the insurance company makes transfer to the insurance company. The insured must preserve those rights and not do anything after the loss occurs to impair them. The company can request that the insured bring suit or transfer those rights to it and help it enforce them.

Note: The only rights that can be transferred to the insurance company are those which exist at the time of the loss. This means that the insured can waive any or all of its rights of recovery before a loss occurs. This condition applies only to rights that remain available at the time of loss.

9. When We Do Not Renew

Same as CG 00 01

If the insurance company decides to not renew, it mails or delivers written notice of the non-renewal to the first named insured on the declarations. A minimum of 30 days before the expiration date is required. Proof of mailing is sufficient proof of notice if the notice is mailed.

Note: State amendatory endorsements may supersede this paragraph.

Some specialty or nonstandard forms have additional conditions not found in the ISO form. It is important to review any conditions carefully as wording may restrict the insured’s coverage substantially.

SECTION V–Extended Reporting Period

1. The ISO form gives the named insured the right to purchase an Extended Reporting Period within 30 days after the end of the policy period. This is available if the coverage is cancelled or not renewed by the insurer for any reason, or if the insurer renews or replaces the coverage with insurance that has a Retroactive Date later than the date shown in the Declarations or does not apply to loss of electronic data on a claims-made basis.

2. The Extended Reporting Period lasts three years and is available for an additional charge determined by the insurer. The charge may be based on the exposures insured, previous types and amounts of coverage, Limit of Insurance, and other related factors, but cannot exceed 100% of the annual premium for the policy. If purchased, CG 31 73– Extended Reporting Period Endorsement for Electronic Data Liability Coverage is attached to the policy. The extension does not go into effect unless the additional premium is paid promptly when due and any premium or deductible owed to the insurer for the coverage provided has also been paid. Once in effect, the Extended Reporting Period cannot be canceled.

3. The Extended Reporting Period starts with the end of the policy period. It does not extend the policy period or change the scope of coverage provided. It applies only to claims first made during the Extended Reporting Period for loss that occurs before the end of the policy period that did not occur before the Retroactive Date.

4. The Extended Reporting Period endorsement sets forth the terms applicable to the Extended Reporting Period. It includes a provision to the effect that insurance provided for claims first received during the Extended Reporting Period is excess over any other valid and collectible insurance available under policies in force after the Extended Reporting Period starts.

5. Use of this provision has no effect on policy limits that have been exhausted, nor does it increase applicable limits.

SECTION VI–Definitions

Understanding a given insurance contract depends upon being familiar with its language and terms. We will begin our analysis by looking at the terms defined in the ISO form. As used in all the ISO General Liability coverage forms, the words “we”, “us”, and “our” refer to the insurer writing the coverage. The words “you” and “your” refer to the named insured shown in the Declarations of the policy plus any entity that qualifies as a named insured. The word “insured” has a different meaning than named insured. “Insured” refers to any entity that qualifies as an insured under the WHO IS AN INSURED section of a specific ISO form. We will address WHO IS AN INSURED later in this analysis.

The CG 00 65 form contains seventeen defined terms and thirteen of them are identical to those used in the ISO General Liability Coverage Form CG 00 01 and will not be discussed in this analysis.

Here is a list of defined terms.

1. Advertisement

Same as CG 00 01

This is a published or broadcasted notice to the general public or specific market segments concerning the named insured's goods, products, or services. The reason for the notice is to attract customers or supporters. Material that is placed on or in the Internet and other electronic forms of communication are considered published notices. An entire website is not considered advertisement. However, notices on a website that provides information about the named insured's goods, products, or services as a means to attract customers or supporters are advertisement.

2. Bodily injury

Same as CG 00 01

This is bodily injury, disability, sickness, or disease a person sustains. Death that occurs as a result of bodily injury, sickness, or disease is also considered bodily injury regardless of when the death occurs.

3. Coverage territory

Coverage may apply worldwide. However, the suit establishing the insured’s responsibility must result from litigation in the U.S., its territories/possessions, Puerto Rico or Canada. Territorial coverage may also apply according to any specific decision that is made under a settlement made by the insurance company.

Note: The Internet allows insureds to promote their products and services globally. This provision should be carefully evaluated for insureds with extensive foreign business operations.

4. Computer products or services

Products refers to the manufacturing, developing, designing, creating, selling, handling, marketing, distributing, licensing or disposing of computer or electronic goods performed either by or on the behalf of an insured business. Goods include hardware, software, components, peripherals, communications or broadcasting equipment or industrial or robotic equipment. The definition is broad enough to include any non-vehicular containers, materials, parts or equipment furnished in connection with these goods.

Services address eligible activities that may create a loss for a third party. The term applies to installation, testing, service, maintenance, technical support, repair, integration, networking, consulting or analysis of or training for computer software or computer programming, electronic or computer equipment, components or peripherals, communications or broadcasting equipment, or industrial or robotic equipment. Another area of covered services can include processing, storage, transmission or other handling of electronic data for others.

Example: Omnibust Infocave, Inc. provided backup storage for Acme Intergames, Inc. Acme sues Omnibust when it discovers that beta game programming Omnibust was supposed to have safely stored was destroyed when its equipment suffered from storm-related power surges.

Finally, covered services can include providing broadcasting or communication services for others, or consulting, evaluating or advising on such services using television, cable satellite, radio, internet, wireless transmissions or cellular transmissions.

5. Electronic data

This term is broadly defined to be information, facts or programs stored as or on, created or used on, or transmitted. It can be used with or stored on any type of media used with electronically controlled equipment such as computer software, hard or floppy disks, CD-ROMS, tapes, drives, cells, data processing devices.

6. Electronic data incident

This term means the loss of electronic data caused by an accident, or negligent act, error or omission. When multiple such events occur in a series, they are considered a single incident.

7. Employee

Same as CG 00 01

The term employee is broadened to include leased workers. It does not include temporary workers.

8. Executive officer

Same as CG 00 01

This is any person who occupies any officer position that the named insured's charter, constitution, by-laws, or similar governing documents creates.

9. Leased worker

Same as CG 00 01

This is a person a labor leasing firm leases to the named insured. There must be an agreement between the named insured and the labor leasing firm. The duties the leased worker is to do must be related to conduct of the named insured's business. Temporary workers are not considered leased workers.

10. Loss of electronic data

This term extends beyond the mere loss of data to include damage to, loss of use of, corruption of electronic data. Not having free access to and/or the ability to control electronic data also qualify as a loss of such data.

11. Personal and advertising injury

Same as CG 00 01

This is any injury that arises out of one or more of the following offenses.

a. False arrest, detention or imprisonment

Note: These offenses apply far beyond law enforcement activities. Impeding the progress of a shoplifter is an example of detention and imprisonment. Not allowing persons to leave an area, for whatever reason, is another example of imprisonment.

b. Malicious prosecution

Note: Repeated reports to authorities about a neighbor’s conduct can be considered malicious prosecution.

c. When an owner, landlord, or lessor of a premises wrongfully evicts, enters, or invades the rights of a person who occupies that premises. The owner, landlord, or lessor may actually commit the wrongful act(s) or someone who acts on behalf of the owner, landlord, or lessor may commit them.

Note: This offense focuses on the relationship between the landlord and the tenant. A landlord may believe that because he owns the property, he has the right of access to all of it at any time and can force tenants to leave at will. However, thanks to various state laws, tenants have protected rights of occupancy.

d. The publication of slandering or libeling a person or organization. Also, publication of material disparaging a person's or organization's goods, products, or services. The publication can be either written or oral and can take place using any form of communication, including the Internet and other electronic forms.

e. The publication of material that violates a person's right of privacy. The publication can be either written or oral and can take place using any form of communication, including the Internet and other electronic forms.

f. Another party’s advertising idea being used in the named insured’s advertisement

g. The named insured's advertisement that infringes on another party’s copyright, trade dress, or slogan

12. Property damage

Property damage is physical injury to tangible property and includes the resulting loss of use because the property is damaged.

Property damage is also the loss of use of tangible property even if no property has been physically injured. Loss of use is considered to have occurred at the time of the electronic data incident that resulted in the tangible property not being used.

Electronic data is not tangible property.

13. Suit

Same as CG 00 01

This is a civil proceeding that alleges damages for bodily injury, property damage, or personal and advertising injury that this insurance covers. Arbitration proceedings and any other alternative dispute resolution proceeding that claims such damages is also considered suit provided that the insurance company agrees that the insured should participate in them.

14. Temporary worker

Same as CG 00 01

There are two types of temporary worker. One type is furnished to the named insured to substitute for a permanent employee. The employee that the temporary employee substitutes for must be only temporarily away from work. Another type is a person who is furnished for seasonal or short-term needs.

Related Court Case: Leased Worker Considered a Temporary Employee

15. Volunteer worker

Same as CG 00 01

This is a person the named insured does not employ but who donates his or her work and acts at the named insured’s direction and within the scope of duties it prescribes. Volunteer workers are not paid fees, salaries, or any other form of compensation for the work they perform for the named insured or any other party.

16. Your product

Same as CG 00 01

Any goods or products manufactured, sold, handled, distributed or disposed of by the named insured are your product. It is also such goods or products that are manufactured, sold, handled, distributed or disposed of by others that trade under the named insured’s name, or by any party whose business or assets the named insured acquired. Your Product includes containers, materials, parts, or equipment furnished in connection with such goods or products. Vehicles are not considered containers. Real property is not considered your product.
Warranties or representations that are made concerning the fitness, quality, durability, performance, or use of the product are also your product.
The providing of warnings or instructions that are adequate is also your products and this includes the failing to provide them.
Vending machines or other property that are rented to or located for the use of others but not sold are not considered your product.

17. Your work

Same as CG 00 01

This is work or operations performed by the named insured or by others on its behalf. Materials, parts, or equipment furnished in connection with such work are included. The warranties or representations made concerning the fitness, quality, durability, performance, or use of the work are also your work. The providing of warnings or instructions that are adequate is also your work and this includes the failing to provide them.

NON-ISO DEFINED TERMS

Specialty or nonstandard carriers may define terms not found in the ISO form, such as the following:

Computer programming

The design, development, writing, testing, installation and maintenance of computer programs including the writing of documentation.

Data processing consultant

The persons or parties who provide opinions, recommendations and advice regarding the electronic processing of data, including needs assessments, feasibility studies and who assist in creating and reviewing related business objectives.

Data processor

The business of inputting, retrieving, combining, converting, storing or processing data and information for others in electronic format—for others for a fee.

Database management and/or consulting

The related design, development and maintenance of a database.

Systems analysis and/or software design

The review and analysis of information needed to plan, design or recommend an electronic data processing system.

The possibility of different terms and policy language makes it critical to thoroughly examine the applicable coverage form being considered for use, particularly when comparing coverages or changing a client’s existing coverage.

Non-ISO Exclusions

Specialty or nonstandard policies may not provide the same type of coverage as the ISO form, so may have additional exclusions, such as:

· Direct or indirect loss or damage to or destruction of documents, records, papers, accounts, data processing equipment, computers parts, computers or computer systems

· Direct or indirect loss of damage caused by mechanical or electrical breakdown, or by malfunction of the hardware, equipment, components or parts, or from any other business machine or equipment

· Any delay, loss of market, business interruption or other consequential loss

· Liability arising out of the insured’s services for any other operation, business, organization (whether for-profit or not-for-profit), charity, or for any benefit, pension, welfare profit-sharing, or investment fund or trust that is not named in the declarations as a covered named insured

· A result of the insolvency of the insured

· Illegal discrimination of any kind

· Failure to provide, procure, advise or maintain monies or financing

· Pollution in any form or in any manner

· Any loss resulting from any nuclear hazard

Rate and Premium

Rating approaches vary by carrier. ISO does not provide rates or a rating methodology for the coverage form discussed in this article; instead, they leave this up to each individual company who writes their coverage. In general, rates will be determined based on the amount of insurance per claim and the annual aggregate claim limit, with the insured’s receipts for computer-related operations used as the rating exposure base.