Creating a Brand without Doing the Research
A Estonian IT service provider created a website for a sports club, including their name and logo. Unfortunately, a fitness studio had already trademarked the name in 2006. The only difference was that the IT service provider separated the two words in the trademark with an “and”, while the fitness studio used “&”.
Legally, this resulted in a violation of competition law due to the risk of confusion between the two company names. This led to the sports club receiving a warning a short time later including a cease-and-desist letter from the fitness studio’s legal team. The client forwarded this warning to the IT service provider, who then made an expensive mistake.
IT Service Provider Negotiates on his Own
Instead of reporting the damage event directly to exali’s customer service team, he decided to negotiate on his own with the other party’s lawyer. A quick and, unfortunately, somewhat hasty reaction, because it involved him directly in the damage event – so he was promptly included in the lawyer’s revised cease-and-desist letter. The first version had only included the sports club.
But it wasn’t just the cease-and-desist letter that was changed – due to the additional expenses of the legal team, the fine increased from originally 900 euros to now almost 2.000 euros. That’s when the IT from Estonia service provider remembered his Professional Indemnity Insurance and reported the damage event to one of our insurance experts at exali, who forwarded the case to the insurer.
Professional Indemnity Insurance Covers the Costs for the Original Warning
The insurer’s legal team quickly realised that the written warning had been justified due to the violation of competition law and that further negotiations would only drive up the costs. After the IT service provider had sent a copy of the signed cease-and-desist letter to the insurer, the insurer assumed the costs for the original written warning in the amount of 900 euros (less the deductible).
However, the Professional Indemnity Insurance did not cover the settlement fee of almost 1.000 euros, which resulted from the unauthorised negotiations between the Estonian IT service provider and the team of lawyers from the fitness studio. The reason for this is that the cost was not associated with compensation, but was a fee (so-called conciliation fee) that the lawyer charged for the order to modify the cease-and-desist letter.
You’ve Received a Written Warning: This Is how you Respond Correctly
This damage event shows all to well that negotiating on your own after receiving a written warning is not a good idea. Instead, you should ALWAYS have both the warning and the cease-and-desist letter, which is usually attached, checked by a lawyer or, in the best case, your Professional Indemnity Insurance.
In that particular case, for example, it could have been clarified from the outset whether the IT service provider was liable at all. He only received a fee of 200 euros for the job – so the client’s claim to extensive trademark research would not have been justified.
Comprehensively Covered with Professional Indemnity Insurance – in the Event of Errors or Legal Infringements
Regardless of whether a programming error has crept in, installed software isn’t working properly or trademark research isn’t done before creating a website: With Professional Indemnity Insurance, you are comprehensively insured for your own mistakes as well as for legal infringements (e.g. trademark law, copyright law, competition law). If a real damage event occurs, the insurer will check at its own expense whether a claim for damages is justified – unjustified claims will be defended against on your behalf, while justified claims will be settled.
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<span class='visible--desktop'>First-Party Cyber and Data Risks Insurance (FPC)</span>
<span class='visible--tablet'>First-Party Cyber and Data Risks Insurance (FPC)</span>
<span class='visible--mobile'>FIrst-Party Cyber and Data Risks Insurance (FPC)</span>
<span class='visible--desktop'><p><strong>This add-on protects your business from the risk of hacking, DDoS attacks or other internet crime.</strong></p>
<p>Reimbursed/covered:<strong> </strong>for example costs for the <strong>restoration of your IT systems</strong>, the commissioning of professional <strong>computer forensics analysts</strong> or specialised <strong>lawyers</strong> (including criminal defence) as well as for <strong>crisis management & PR</strong>. Additional costs for the quick elimination or avoidance of an interruption to your business are also insured.</p>
<h5>Further Examples of Damages We Insure</h5>
<ul class="liste">
<li>Damage to your own IT systems (from hacking)</li>
<li>First-party data rights claim (in particular spying on personal data)</li>
<li>Expenses for an (imminent) interruption of business (additional cost coverage)</li>
<li>Breach of trust damage (intentional damage to own IT by employees)</li>
<li>Costs for criminal defence (internet criminal legal protection)</li>
</ul>
<h5>Insurer Services</h5>
<p>The special benefit about this add-on is the assumption of your own <strong>costs</strong>, e.g. for the commissioning of:</p>
<ul class="liste">
<li>Computer forensics specialists</li>
<li>Specialised lawyers</li>
<li>Consultants to provide information to data owners</li>
<li>Professionals for PR & crisis management</li>
<li>Credit protection and monitoring services</li>
</ul>
<p>as well as the assumption of <strong>additional costs, e.g. for the use of third-party IT and computer systems.</strong></p>
<p>For this add-on an <strong>deductible of € 1,000 per damage event</strong> applies.</p>
<p>For more details, see Section <strong>6. First-Party Cyber and Data Risks Insurance (FPC)</strong>, in the insurance policy terms and conditions.</p>
</span>
<span class='visible--tablet'><p><strong>This add-on protects your business from the risk of hacking, DDoS attacks or other internet crime.</strong></p>
<p>Reimbursed/covered:<strong> </strong>for example costs for the <strong>restoration of your IT systems</strong>, the commissioning of professional <strong>computer forensics analysts</strong> or specialised <strong>lawyers</strong> (including criminal defence) as well as for <strong>crisis management & PR</strong>. Additional costs for the quick elimination or avoidance of an interruption to your business are also insured.</p>
<h5>Further Examples of Damages We Insure</h5>
<ul class="liste">
<li>Damage to your own IT systems (from hacking)</li>
<li>First-party data rights claim (in particular spying on personal data)</li>
<li>Expenses for an (imminent) interruption of business (additional cost coverage)</li>
<li>Breach of trust damage (intentional damage to own IT by employees)</li>
<li>Costs for criminal defence (internet criminal legal protection)</li>
</ul>
<h5>Insurer Services</h5>
<p>The special benefit about this add-on is the assumption of your own <strong>costs</strong>, e.g. for the commissioning of:</p>
<ul class="liste">
<li>Computer forensics specialists</li>
<li>Specialised lawyers</li>
<li>Consultants to provide information to data owners</li>
<li>Professionals for PR & crisis management</li>
<li>Credit protection and monitoring services</li>
</ul>
<p>as well as the assumption of <strong>additional costs, e.g. for the use of third-party IT and computer systems.</strong></p>
<p>For this add-on an <strong>deductible of € 1,000 per damage event</strong> applies.</p>
<p>For more details, see Section <strong>6. First-Party Cyber and Data Risks Insurance (FPC)</strong>, in the insurance policy terms and conditions.</p>
</span>
<span class='visible--mobile'><p>Protection against hacking damage to your own IT systems, DDoS attacks, computer misuse, theft of data carriers and other data rights violations and the majority of the resulting expenses and costs.</p>
</span>
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Add-on: AI-Related First-Party Losses (ARL)
<h5>What is covered?</h5>
<p>The policy covers <strong>first-party losses</strong> incurred by you or your company <strong>as a result of malfunctions when using AI systems</strong>, such as</p>
<ul class="list--checkmark">
<li>Incorrect, incomplete, or hallucinated results from AI tools</li>
<li>Erroneous decisions or unintended processes by AI agents and applications</li>
<li>Incorrect processing or interpretation of data by AI systems</li>
</ul>
<h5>What is reimbursed?</h5>
<p>Your <strong>additional costs</strong> for remedying the damage are reimbursed, including, for example:</p>
<ul class="list--checkmark">
<li>Analysis and correction of AI errors (e.g., root cause analysis, rollback, deactivation)</li>
<li>Restoration, cleanup, or recreation of corrupted data</li>
<li>Additional personnel costs (e.g., overtime or replacement staff)</li>
<li>Manual post-processing and temporary solutions to maintain operations</li>
<li>Costs for external service providers, consultants, or experts</li>
</ul>
<h5>Important Limitations</h5>
<ul class="list--checkmark">
<li>No coverage for loss of revenue</li>
<li>No coverage for further development or new AI functions</li>
</ul>
<p>The compensation limit is € 50,000 per insured event and insurance year; the deductible is € 1,000.</p>
<p>For more details, see <strong>Section A.7, AI-Related First-Party Losses (ARL)</strong>, in the insurance policy terms and conditions.</p>
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Add-on: Engineering Activities (ENG)
<h5>What is covered?</h5>
<p>These activities are insured under an open-ended occupational coverage policy, specifically:</p>
<ul class="liste">
<li>Development of hardware and software in mechanical and plant engineering (including embedded software)</li>
<li>Programming of control, automation, CNC, and PLC applications</li>
<li>Design, technical drafting, and CAD/CAM services</li>
<li>Prototyping, testing, simulations, and commissioning</li>
<li>Robotics applications and engineering services, e.g., in the field of renewable energy or regulated environments (e.g., pharmaceutical, biotech)</li>
</ul>
<p>Certain types of <strong>property damage</strong> are also covered if they result directly from your engineering services.</p>
<h5>Scope of the Additional Coverage Module</h5>
<p>Coverage for clearly defined technical units, such as software modules, control logic, or interfaces that can be tested independently, including assistance with integration into an overall system.</p>
<h5>Important Limitations</h5>
<ul class="liste">
<li>No assumption of <strong>overall responsibility</strong> for complete systems</li>
<li>No coverage for damage occurring <strong>during ongoing operation</strong> or <strong>after acceptance</strong></li>
<li>No coverage for <strong>production downtime</strong></li>
<li><strong>No liability </strong>for product characteristics <strong>during subsequent use</strong></li>
</ul>
<h5>Deductible</h5>
<p>The deductible for financial loss and property damage is the same as the deductible selected for the financial loss insurance (FLI).</p>
<p>For more details, see the insurance terms and conditions under Section<strong> A.8 Engineering Activities (ENG).</strong></p>
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