#IEBA2018 Recap: Terms & Conditions Power Panel Part 2 – Professional Liability, Cyber, D&O, EPLI, and other types of coverage beyond CGL & Workers’ Comp


Jason Bernstein, AEG Presents

Berkeley Reinhold, Business & Law Office of Berkeley Reinhold

Tim Epstein, Duggan Bertsch, LLC

Brent Daughrity, Anderson Benson Insurance


Moderated by Pam Matthews, IEBA


Matthews moved the conversation to different types of insurance and began with errors and omissions insurance (E&O), which is a type of professional liability insurance that protects against claims made by clients for inadequate work or negligent actions – professional mistakes including software bugs, failure to deliver, and professional negligence.


Bernstein said, “I actually just wrote a new E&O policy with Beazley, out of London. It deals with songwriter infringement. E&O is a financial coverage. All of us sitting up here today have errors and omissions insurance, if we overlook something or if we leave something out.”


“Just remember that it is professional coverage for anybody who operates as a professional giving advice,’” Daughrity added. “There is a reason that E&O insurance is more expensive than your commercial general liability package – E&O claims get into some real money.”


Epstein continued, “Take the t-shirt security that you’re going to have at an event – if [a patron] gets hurt, that is going to be CGL. If security staff gets hurt, it’s going to be workers’ comp. But if somebody is giving you an overall security plan, that is going to be E&O.”


Reinhold and Epstein both urged everyone to make sure, with all insurance, that defense costs are on top of limits. Many carriers are happy to extend defense cost outside of limits. Reinhold said, “If you have a million-dollar policy, you want to make sure that attorney fees are above that because that is the most expensive part.”


Cyber insurance, aka cyber liability insurance coverage (CLIC), is designed to mitigate risk exposure after a cyber-related security breach. Epstein is general counsel for Riot Fest. Ticketfly experienced a cyber attack during the Riot Fest on-sale earlier this year. Addressing this incident, Epstein said, “There are different policies that can cover hacks. When Ticketfly got hacked, tens of millions of people’s information got out. A cyber security policy would be the coverage Ticketfly or Eventbrite would have for third party suits from someone [whose information was exposed]. If a promoter sued a ticketing company for something like that, coverage would be arguably under their E&O policy. Because Ticketfly marketed for them, handled emails for them, set up their webpage, and was kind of everything-in-one, that [attack] materially affected the promoter’s ability to sell tickets and market their shows.”


“Cyber is an incredible coverage that everybody should have in this day and time, with emails and social engineering,” Bernstein added. “When private information from 10, 20, 30 million people gets out, people must be put on notice and some type of credit monitoring must be put in place. It typically costs about $150 per person. $150 x 30 million people – that’s a big number. Without cyber coverage, you would be out of pocket that amount of money. And who knows if you have a limit that big.”


Epstein agreed, “And that coverage is not just for a claim made by a third party – it could potentially step in and give you some money to help with your security moving forward or help you with a forensic analysis of your system to see what happened.”


Directors & officers insurance is designed for claims that may arise when directors & officers are acting in the scope of their managerial duties. Employment practices liability insurance covers harassment, discrimination, retaliation, and wrongful termination. “You can get these professional packages and it is a great way to have multiple coverages,” said Daughrity. “Employment practices liability is if an employee makes an allegation against anyone within the company. D&O is management liability. EPL just covers what happens in the walls of your business and any suit that would come from an employee. A suit coming out of a nonemployee would most likely be D&O. It is very important to know the difference between those two. If you are serving on boards or are a shareholder, D&O gives you liability for decisions that you might make on behalf of that board. There is a lot of protection within those. For people who don’t necessarily need a professional policy but sit on a lot of boards, there are a couple of really good endorsements coming from the personal insurance side that you might ask about. If you are on a board and they don’t have D&O, you might go to your personal provider and see if they can endorse D&O coverage fairly inexpensively.”


Epstein advised D&O coverage as a condition of serving on any board. “I have clients say to me ‘I only got selected for this board position because of what I do at my day job, so can I tap into that insurance coverage?’ The answer is a hard no.”


“A lot of EPL professional carriers are requiring sexual harassment training,” Bernstein said. “E&O, D&O, and EPL professional coverage are packaged together. If you have any of those coverages, and you would like workplace training, your EPL carrier would be happy to [provide] resources. I think people forget that you pay money for insurance, and there’s a shitload of resources out there for you. It is a risk management tool. If you don’t know where to go, call your insurance broker. If they don’t know, call me. I have so many resources that I am happy to send to anybody.”


Matthews and Daughrity both encourage regular insurance checkups, at least on an annual basis. Matthews suggested, “Bring a list from this panel and say ‘Talk to me about this. Am I covered?’”


“If you are in the business of entertainment, be with an entertainment broker,” Daughrity added. “There are great firms in New York, L.A., and Nashville. We are all friendly competitors. What drives me insane is when someone brings me a State Farm policy and it’s not covering anything that they think that it is and they’re paying $250 for it. Also, entertainment insurance doesn’t have to be expensive. I think that people think if they go to an entertainment broker, they are going to pay 10x the amount. That’s not the case. We are here to get you what you need and only that. I think that everyone up here would back that up. Go to an entertainment broker because there are niches within insurance and, if you are not in entertainment, you know nothing about it.”


Reinhold agreed, “Brent is 100% right. On top of that, don’t be afraid to ask questions to your insurance broker. If they don’t know the answer or it’s not sounding right, maybe they aren’t the right one for you. They should be able to have a conversation with you. You should be able to show them your contract and say ‘Does my insurance cover me for this type of liability that I am agreeing to?’ If they just say ‘Yes, yes, it’s fine,’ and you don’t feel comfortable with that, they might not actually know the answer. Don’t be intimidated. Send them your contracts and have conversations with them. You can learn from that too.”


“And get entertainment attorneys,” Epstein added. “If you represent talent, get a talent lawyer. If you’re a buyer, get a buyer lawyer. There are specialties. Lawyers who don’t practice entertainment should stay out of it. The problem is that you might be their only client in entertainment. When they go out with their other lawyer buddies, they get to talk about that sexy client that has a venue and gets them free tickets. They don’t want to give that up. But you might not get the best service. That’s not to criticize them as lawyers. They just don’t know. Unless you see deals over and over again, you have no idea what is out there.”