In an increasingly litigious environment, understanding your customer's legal contract is becoming more important, in particular how your insurance policy protects you against the contract you have signed. Listen to Andrew Bremner from SherpaTech discuss professional indemnity, cyber insurance and legal contract review with James David from Pax8.
Featuring: Andrew Bremner (SherpaTech) and James David (Pax8)
Length: 3 minutes
Part of a three-part series. Watch Part 1: Professional Indemnity and Part 3: Cyber Insurance.
Key takeaways
- SherpaTech offers a free legal contract review that compares a customer's contract with the MSP's insurance and identifies the gaps.
- Once the gaps are known there are three options: negotiate the contract with the customer, ask the insurer to tighten cover on a particular clause, or knowingly accept the risk.
- The key is to sign a contract with your eyes wide open, rather than hoping your insurance will cover it.
- Many MSPs work without written contracts, but a contract can still exist through offer, acceptance and consideration.
- Without a written contract, a court may end up deciding where the MSP's role starts and finishes, so MSPs should get legal advice.
Transcript
Andrew Bremner: One of the things we refer customers to, to help them, is our free legal contract review service. What that means is we take the external contract from the potential customer, we compare it to the insurances of the MSP, and then we identify the gaps.
Once the gaps are known, there are three avenues. The first is you go back to the customer and say, "Hey, we can't accept this, but perhaps this is more acceptable to us," again to reduce your risk. The second is we, as the insurance adviser, go back to the insurer and say, "Can you just button up a bit on this particular clause?" And the third option is, "This is the business risk that we're willing to accept."
But the big part of this is that you do it with your eyes wide open, rather than signing the contract and thinking, "I hope I'm okay. I think our insurance might cover it. I think we're okay there." At least you go in with your eyes wide open.
James David: Well, what happens when you don't have a contract? Most MSPs I come across are very proud that they don't have contracts. They say, "We've been in business for 10 or 20 years, and our clients have stayed for that length of time without a contract." So what happens in the event of a claim when you've got no contract? What's likely to happen?
Andrew Bremner: My first reaction is they need to speak to their lawyer. They need legal counsel. We're not lawyers, we're insurance brokers and insurance advisers, so we would strongly recommend they speak with their lawyer.
But even though they may not have a written contract, and I know this from my student days, when I had to do some law papers as part of my course, there will still be a contract in place. Offer, acceptance and consideration are all happening. So you might end up with a court of law deciding where the MSP's role starts and finishes. But again, you need to seek legal counsel on that one.
