Errors and Omissions Insurance for a game company?
I run a mobile game company with my partner, we publish to the Android market and iOS app store. That's all we do, we don't offer consulting services and we don't work with/for anyone else. Would it be beneficial to get Errors and Omissions Insurance for our company? Would we even need it?
3 Answers
No, it would be silly for you to purchase insurance. If somebody, outside your personal network, has approached you to buy some, they are likely a salesman and are just trying to make a commission.
As you grow, people will begin telling you that you need all this corporate mumbo jumbo. Just ignore them. It's a ridiculous expense to incur for a mobile game company in its growth stages.
Wait until you're making a decent amount of cash to pay for insurance, if at all.
Read:
Anything You Want -Derek Sivers
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Though, at the very least I should get general liability insurance correct? – Edgar Miranda 12 years ago
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What if his application leaves a glaring security hole on someones phone, causing it to be hijacked, or data stolen. Knowing what kinds of things people store on their cellphones, it could lead to identity theft, or worse. Now Edgar's company is liable for the damages, and I would guess they are only operating as a partnership. This means that Edgar and his partner are now 100% personally liable for an unlimited amount of damages relating to this security hole. – Bwasson 12 years ago
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That is so highly unlikely with a game. The code should have no interaction with the system OS code at all, it will merely be installed on top of it. If Edgar is any good at what he does, which I'm guessing he is, he would need to TRY to do that in order to create a security hole. – Ryan Chatterton 12 years ago
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Edgar, you can get insurance when you're making a million + per year. – Ryan Chatterton 12 years ago
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I'm always surprised at how 0day exploits work, I'm not saying it's a strong possibility, but there is still a possibility. That's what insurance is for, to protect against possibilities. Whether or not it's a great enough probability, I can't say, that's why the lawyer was suggested. – Bwasson 12 years ago
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I understand where you're coming from, but I'm betting that at this point Edgar is likely not going to be able, or want, to pay for a lawyer fee and insurance. I personally feel that he should grow to a certain size before he actually buys insurance. – Ryan Chatterton 12 years ago
Whether being sued for frivolous claims or not, the simple fact is that defending your company from these allegations can be very expensive. E&O as well as D&O insurance will pay for your defence. If you simply think of your insurance premium as an attorney retainer you'll be much better off understanding the huge benefits of having coverage vs. being on your own.
Especially in today's high litigation world, copyright claims are common and getting a good E&O as well as D&O policy would be prudent for any company to get.
It is not that expensive in relation to time and money spent defending from a law suit out of pocket.
You need some form of insurance for sure. Whether it be Errors or Omissions or not, I could not tell you. I would suggest you talk to a lawyer, and then take their recommendation to a reputable insurance agent to fill your needs.
With software, there's always the possibility of having some sort of liability to your users, no matter how strict your TOS, or your SLA is, there's always a way for them to come after you. Keeping this in mind, you should do everything you can to protect your personal assets against these situations.
In addition to insurance, I would strongly urge you to register as an LLC, or similar business entity so that you will not be personally connected with your businesses liabilities. This covers debt, product, and professional liabilities. Unless of course your pledge personal assets to a bank for financing, or you do not handle your money correctly, and 'pierce the corporate veil'. Again, talk to a lawyer to find out what business entity best suites your company's needs.
Good luck.
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Totally agree that you need to register as a business entity of some type. LLC sounds like it would be the most effective for your size, but if you grow, you'll likely change it. – Ryan Chatterton 12 years ago
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Insurance for a game company? I am hard-pressed to see why an errors and omissions would be needed for an entertainment company. Skip the insurance. Especially once you see how expensive it is to get insurance - it is unlikely your company can justify the expense... One would have to prove damages and that is just not going to happen – Tim J 12 years ago
