Professional Indemnity insurance

Drawcard
Drawcard Posts: 70
edited February 18 in Type Business
Hi,

I am getting ready to release a font (selling in USA, foundry based in Australia) and am at the contract stage.
I was wondering if other foundries here have taken out professional indemnity insurance to sell fonts internationally?
To cover scenarios like the ones listed here: https://www.insurance.com.au/business-insurance/professional-indemnity-insurance
What advice can you offer? 
Thanks
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Comments

  • JoyceKetterer
    JoyceKetterer Posts: 821
    I looked into it ages ago, and also errors and omissions.  I talked to a few insurance companies and in all cases I didn't have confidence that they understood our business enough to intelligently write a policy.  That could have meant that they wouldn't honor it in the end because they could argue it hadn't actually covered the issue.  Also, I think it makes a lot more sense for foundries doing custom work than for lost of us selling retail licensing.  Darden Studio has been around almost 20 years and has a lot of popular fonts and we've never so much as had to settle an issue like this.
  • Thomas Phinney
    Thomas Phinney Posts: 2,954
    I have such insurance for my work, covering both my consulting and font forensics.

    BUT the primary reason for it was that one of my major clients required it. That alone made it worthwhile for me. So I would still have it, even if I knew or believed it would be completely ineffective in providing actual protection aside from that one client!

    If it wasn’t for that client? I might well still get it, but it would be a close call.

    If I were a typical foundry or solo type designer doing retail and commission work? I might be easily swayed to Joyce’s point of view on it. I would have to give it considerable thought.
  • JoyceKetterer
    JoyceKetterer Posts: 821
    @Thomas Phinney to be clear, if I believed the insurance company understood our business and it really was going to protect us I'd have got it.  As it stood I felt that I might be paying for a mirage.  

    PS -   I think at least one of our large clients did try to require it, when we did a minor customisation for them of Omnes years ago.  We talked them out of it.  There may have been others I'm forgetting.  
  • John Hudson
    John Hudson Posts: 3,349
    I dimly recall a draft contract from a client requiring us to obtain such insurance, and I struck out the clause. After a bit of back and forth with their lawyers, they agreed that fonts were low risk and accepted the deletion.
  • Thomas Phinney
    Thomas Phinney Posts: 2,954
    I should mention that I also have an LLC, through which all my business runs.

    But to be sure, the combination of having a large corporate client for whom I do ongoing font work that could impact all their divisions, plus lots of lawyers as clients, clearly puts me at higher risk than the average type designer — or indeed almost anyone else on this forum.
  • Thierry Blancpain
    Thierry Blancpain Posts: 211
    edited February 19
    We have it as it’s often required doing custom work for larger companies. I agree that’s it’s mostly useless. One company even tried to require us to get automobile insurance, despite the company not using any cars. I would not get it for retail work.
  • Drawcard
    Drawcard Posts: 70
    edited February 20
    Thanks everyone for the fantastic insights. I think it pretty much lands with where I'm at too - while it's a good idea to have PI cover for domestic activities, and also incorporating a company for extra protection, it's likely not worth the exorbitant cost to get international cover when simply retailing in online stores.
  • Ray Larabie
    Ray Larabie Posts: 1,450
    I've tried in Canada and Japan and got similar answers from typical small business insurance companies: since my business deals with US companies, they wouldn't touch it. International coverage wasn't the issue; in both cases, it was specifically due to the USA factor. The only options I could find that would cover the US were far too expensive. If it weren't for the US factor, it was quite affordable. Since I rarely do any domestic business, I couldn't justify the cost.
  • Miles Newlyn
    Miles Newlyn Posts: 261
    edited February 26
    A significant number of custom typeface contracts have indemnity clauses, and if you don't like it the client will give the work to someone else. That is not relevant to selling retail font licenses though.

    The important thing about retail licenses (EULAs) in this regard are the Disclaimer & Excluded Loss clause, and the Maximum Liability clause. Get these right and I personally would not worry about indemnity insurance.


  • TimAhrens
    TimAhrens Posts: 64
    We have had an indemnification clause in several contracts but this is not directly related to professional indemnity insurance, is it? I am not so confident I understand legalese correctly but my understanding is that insisting on an indemnification clause is not the same as requiring an indemnity insurance.
  • Miles Newlyn
    Miles Newlyn Posts: 261
    edited February 27
    @TimAhrens I think it is directly related. If an indemnity clause in your contract is exposing you to significant liabilities, then indemnity insurance is the only way you can cover yourself in the event of a claim.

    For example:
    If you indemnify another business against claims for damages on copyright infringement on something you are selling them, and that business then receives a claim on the thing that you produced, the business can then simply pay the claimed damages and seek that money from you, without needing to question the claim.
  • John Hudson
    John Hudson Posts: 3,349
    my understanding is that insisting on an indemnification clause is not the same as requiring an indemnity insurance.
    That is technically correct, Tim: requiring an indemnity clause and requiring indemnity insurance are contractually different things. Miles is right that they are directly related, though. The reason a company might require a manufacturer to carry insurance is to ensure that it is able to collect in the event of involing the indemnity clause.
  • John Butler
    John Butler Posts: 305
    “If you require me to have an E&O policy to do business with you, you’re welcome to buy me such a policy and pay the premiums for the duration we’re conducting business, then terminate it when you’re finished. If this sounds stupid to you, I agree.”

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