7 Common Risks Your Web Design Business May Face
To help you decide which insurance policies your web design business can benefit from, let's first take a look at some common risks you might face:
- Image infringement. You're working on a real estate company's website, and your client sends you photos she would like featured on the site. You're on a tight deadline, so you don't think to double-check that the images are properly licensed. Plus, you figured your client knows better than to send you photos they don't have the rights to use. Wrong. Your web design firm is eventually sued for license infringement. You have a General Liability Insurance policy, so you call your insurer. It arranges for a lawyer to represent your business in court and pays for the damages you owe.
- Business equipment goes up in flames. Your teenage son is teaching himself to cook. Unfortunately, he leaves an oven mitt too close to the stove, and the subsequent fire destroys the kitchen and your home office before the fire department arrives. Your homeowner's insurance policy doesn't cover business equipment, so you file a Business Property Insurance claim via your Business Owner's Policy to replace your dual-screen desktop, fax, printer, and tablet.
- Missed deadline. You've agreed to help your (difficult) brother-in-law design a website for his business at a discounted rate – but only if he agrees to sign your standard client contract. Together, you outline a design plan and create a few benchmark dates. Of course, he keeps adding to the design – which breaks deadline – but he's family and you soldier on. Finally, four months after the projected deadline, you finish the site – and he has the nerve to sue you over a breach of contract. Your Errors & Omissions Insurance can cover the claim, but you vow never to do that kind of favor again.
- Data breach lawsuits. You back up your business's data with a private cloud provider. The cloud provider notifies you that its system has been compromised and your (and your customers') data has been exposed. The provider also makes sure to remind you that they are not liable for any damages because you signed a contract that passed the insurance burden on to you. And now you are facing multiple lawsuits from your clients over the breach. Time to take a deep breath and take advantage of the Cyber Liability Insurance coverage included in your Errors and Omissions policy.
- Employee injury. The ceilings in your old Victorian office building are 12 feet high, which makes replacing burnt bulbs a real pain. One of your designers gets on a ladder to change the bulb, but he slips and falls, breaking an ankle. Your Workers' Compensation Insurance can pay for the employee's medical expenses and lost wages. The Employer's Liability Insurance portion of the policy can cover lawsuits over employee injuries if he sues.
- Employee dishonesty. A local credit union hires your business to design a new website. This is the biggest redesign you've done yet, and it includes a lot more security protocols then you're used to. The project is going great until you discover that one of your employees helped herself to a couple thousand dollars while setting up credentials for bank employees. Your contract with the credit union required you to purchase Fidelity Bond Insurance just in case this happened so it could get its money back.
- Wrongful termination lawsuit. After you fire your employee for stealing from the credit union, she sues you over wrongful termination. She claims she didn't do it, despite the overwhelming evidence to the contrary, including a mysterious transfer into her back account shortly before the funds were discovered missing. Even though the case seems pretty open and shut, you will still need to defend your business in court, which can get expensive fast. Your Employment Practices Liability Insurance can pay for legal costs, including attorney fees, as you fight the lawsuit.
Risk Management Resources for Web Designers
As you can see, even the most ordinary operations at a web design business can lead to an insurance claim. Take a look at our risk management blog, free sample contracts, insurance cost estimates, and other free resources to learn how to manage your risks from the start.