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Can insurance company refuse claim because of service agreement?

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kathyjudd

New member
Hi everyone,

I have an E&O insurance for my business in Idaho. I had a bug in my system which caused my client to have a large monetary loss. I want to do the right thing and get it paid because it's completely my fault.

I submitted a claim to my insurance company and they are asking for the service agreement. Now I'm worried they will refuse to pay the claim.

Here is a portion of my service agreement. Can the insurance company deny my claim?



1) Limitation of Liability
a) The remedies set forth in this Agreement are exclusive and in no event shall __Company__, its directors, officers, agents, or employees be liable for special, indirect, incidental, or consequential damages, including, but not limited to, lost income or lost revenues, whether such damages arise out of breach of contract, negligence, strict liability, or any other theory of liability. Such damages shall in any event be limited to the charges paid for the previous month by Subscriber for the services in connection with which a claim of liability is asserted or imposed. Subscriber specifically understands and recognizes that the system by which these services are offered to him may experience problems of various kinds resulting in an inability to provide services.
b) Subscriber agrees that __Company__ will not be liable for any claim or demand of any nature or kind whether asserted against __Company__ or against Subscriber by any third party, arising out of the services or materials provided for their use; Subscriber agrees to indemnify and hold __Company__ harmless from claims of third parties arising out of the Subscriber’s use of the services or materials provided pursuant to this Agreement.
c) __Company__ shall not be liable for or deemed to be in default for any delays or failure in performance or interruption of service resulting directly or indirectly from any cause or circumstance beyond its reasonable control, including problems with or delays caused by its database or other providers and by acts of God, flood, fire, war, or public enemy.
d) No action or suit, regardless of form, other than an action for payments due __Company__, arising out of the transactions pursuant to this Agreement may be brought by either party more than one year after the cause of the action accrues.
e) __Company__ shall at no time be liable for any errors in or omissions from information.
2) Warranty
a) __Company__ makes no warranties express or implied, including but not limited to the implied warranties of merchantability and fitness for any particular purpose. While __Company__ and its suppliers strive for accuracy and completeness of data and services furnished pursuant to this Agreement, no warranty or representation as to accuracy or completeness is made or implied.
b) Subscriber warrants that he is aware of and will comply with all applicable federal, state, local, or other laws and regulations with regard to access to or use of any and all information, databases, programs, or other products to which access is provided by or through __Company__.
 


Just Blue

Senior Member
Hi everyone,

I have an E&O insurance for my business in Idaho. I had a bug in my system which caused my client to have a large monetary loss. I want to do the right thing and get it paid because it's completely my fault.

I submitted a claim to my insurance company and they are asking for the service agreement. Now I'm worried they will refuse to pay the claim.

Here is a portion of my service agreement. Can the insurance company deny my claim?



1) Limitation of Liability
a) The remedies set forth in this Agreement are exclusive and in no event shall __Company__, its directors, officers, agents, or employees be liable for special, indirect, incidental, or consequential damages, including, but not limited to, lost income or lost revenues, whether such damages arise out of breach of contract, negligence, strict liability, or any other theory of liability. Such damages shall in any event be limited to the charges paid for the previous month by Subscriber for the services in connection with which a claim of liability is asserted or imposed. Subscriber specifically understands and recognizes that the system by which these services are offered to him may experience problems of various kinds resulting in an inability to provide services.
b) Subscriber agrees that __Company__ will not be liable for any claim or demand of any nature or kind whether asserted against __Company__ or against Subscriber by any third party, arising out of the services or materials provided for their use; Subscriber agrees to indemnify and hold __Company__ harmless from claims of third parties arising out of the Subscriber’s use of the services or materials provided pursuant to this Agreement.
c) __Company__ shall not be liable for or deemed to be in default for any delays or failure in performance or interruption of service resulting directly or indirectly from any cause or circumstance beyond its reasonable control, including problems with or delays caused by its database or other providers and by acts of God, flood, fire, war, or public enemy.
d) No action or suit, regardless of form, other than an action for payments due __Company__, arising out of the transactions pursuant to this Agreement may be brought by either party more than one year after the cause of the action accrues.
e) __Company__ shall at no time be liable for any errors in or omissions from information.
2) Warranty
a) __Company__ makes no warranties express or implied, including but not limited to the implied warranties of merchantability and fitness for any particular purpose. While __Company__ and its suppliers strive for accuracy and completeness of data and services furnished pursuant to this Agreement, no warranty or representation as to accuracy or completeness is made or implied.
b) Subscriber warrants that he is aware of and will comply with all applicable federal, state, local, or other laws and regulations with regard to access to or use of any and all information, databases, programs, or other products to which access is provided by or through __Company__.
Define "bug in the system". Thanks.
 

quincy

Senior Member
It sounds as if your insurer can deny your claim but contract review and analysis falls outside the scope of this forum. You will need to see an attorney in your area for a personal review of the entire service agreement. Contracts should always be read in their entirety.

You might find some relief for your client from the source of the bug.
 

kathyjudd

New member
Define "bug in the system". Thanks.
There is a feature on the software where it will perform a certain action. The certain action the client was expecting didn't happen. So my client didn't take neccesary precuations to avoid the monetary loss.
 

PayrollHRGuy

Senior Member
There is a feature on the software where it will perform a certain action. The certain action the client was expecting didn't happen. So my client didn't take neccesary precuations to avoid the monetary loss.
Are you the software provider? If so that really doesn't sound like that was your software's fault.
 

quincy

Senior Member
There is a feature on the software where it will perform a certain action. The certain action the client was expecting didn't happen. So my client didn't take neccesary precuations to avoid the monetary loss.
So ... it was your client’s error?
 

kathyjudd

New member
So ... it was your client’s error?
Are you the software provider? If so that really doesn't sound like that was your software's fault.
I'm the software provider. The client did use the software correctly. There was an flaw in the code that didn't work. Basically the software is a search program kind of like google. The feature with the bug did not return the accurate search results that it was suppose to return for the client to see.
 

quincy

Senior Member
I'm the software provider. The client did use the software correctly. There was an flaw in the code that didn't work. Basically the software is a search program kind of like google. The feature with the bug did not return the accurate search results that it was suppose to return for the client to see.
Thank you for clarifying. I can see now how your client could be upset and how your business potentially could be held liable for the client’s losses.

Again, you should have the agreement personally reviewed, along with your insurance documents, to better determine if your insurance should cover your client’s money damages.

Good luck.
 

kathyjudd

New member
I hope you have NOT conveyed that sentiment to your client.
Yes, I did. They've been my clients for 15 years and I want to keep them for another 15 year. I care about the long term and the best outcome is to get it paid even if I have to do it out of pocket. Also builds trust.
 

quincy

Senior Member
If your business can absorb the cost, that is certainly one way to handle the error. I hope for your sake it doesn’t come to that, though, and that your insurance will cover the loss instead.
 

Just Blue

Senior Member
Yes, I did. They've been my clients for 15 years and I want to keep them for another 15 year. I care about the long term and the best outcome is to get it paid even if I have to do it out of pocket. Also builds trust.
How much money is involved?
 

adjusterjack

Senior Member
I submitted a claim to my insurance company and they are asking for the service agreement. Now I'm worried they will refuse to pay the claim.

Here is a portion of my service agreement. Can the insurance company deny my claim?
Can it? Sure. Will it? No way to predict. But I can tell you this. When you file a claim and your insurance claim rep asks you for your service agreement you comply with the request because compliance is a condition of your policy and failure to comply almost assuredly gets your claim denied. There's no reason for me to read it because I won't second guess your claim rep.

I want to do the right thing and get it paid because it's completely my fault.
I hope you have NOT conveyed that sentiment to your client.
Yes, I did.
Then you have prejudiced your insurance company's right to investigate and defend. That does not bode well for you. Did you ever bother to actually read the terms and conditions of your E&O policy as to your duties in the event of a claim?

They've been my clients for 15 years and I want to keep them for another 15 year. I care about the long term and the best outcome is to get it paid even if I have to do it out of pocket. Also builds trust.
Then pay it out of pocket and withdraw your claim. Otherwise you may lose your E&O policy on expiration (non-renewed) or even get cancelled mid-term) and have difficulty getting it replaced when you have to explain to the next insurance company why you lost your coverage.

By the way, if you get sued, your insurance might not be obligated to defend you if you did not comply with the policy conditions. If there is a judgment against you, your insurance might not be obligated to pay if you did not comply with the policy conditions.
 

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