Insurance for independent game developers

Erin Webb, of  Dickstein Shapiro LLP, and Sara Owens, founder of Game Guard™, gave a fantastic talk at PAX Dev 2014 today, regarding insurance for developers in the gaming industry.

Game Guard is “a first of its kind risk management and insurance program specifically tailored to the unique needs and risks of the video game industry.”

Below, you’ll find the detailed notes I took along the way. If you found them to be helpful, let me know!

We can get almost anything online today, so why use a broker?

  • Need a specialist
  • Company –> Broker –> Insurer
  • You are paying for insurance, but hoping you never have to use it
  • You should ask the broker what they are getting paid
  • Generally it is ~10% of the cost of the insurance plan, and paid for by the insurance company
  • It is built into the rates — you have a right to have them disclosed to you

Risk Management

  • Have an employee handbook
    • Sets up culture the right way.
    • Prevents you from having a discrimination issue
    • Who do they contact for HR issues, or want vacation?
  • Have contracts in place with 1099 employees
    • “All of the work that they create, belongs to the studio.”
    • “All of the content they are working on must be original.”

Underwriting

  • The process of putting together a policy for your company
  • Talk about what you do / do not need
  • Presents what you do TO the insurance company
  • Puts together a price and program

Insurance in gaming is new to everyone

  • New to the industry, new to insurance
  • Underwriters tend to be scared or nervous of the VG industry
  • Often overprice or don’t provide the correct coverage
  • Insurance companies need to have an accurate picture of what you are doing as a dev / pub
  • The more info you can share with the underwriter, the better it is for both sides
    • Who is working on the game?
    • Type of game?
    • Generally a FPS costs more to insurance than a children’s edu game
    • Where did you get the music from? DO you have the rights?
    • Do you have independent contractors?
    • Projected revenues?
  • A lot of it can be guess work, especially in the beginning!
  • Is it a software company? Entertainment? A bit of both?
    • The ESA is working to help clarify that

How to respond to “no” from the insurance company

  • A specialist can mediate or arbitrate
  • Last option is file a lawsuit, although this is generally avoided
  • You can’t sure your insurance company to give you coverage, though

 

 Find the best fit

  • Avoid gaps in coverage
  • Pay only for what you need

CGL – Commercial General Liability

  • Infringement claims and “advertising injury”
    • Konami v. Hartford, 2002
      • Goes back to the standup arcade games
    • Hyundai Motor America v. National Union
  • Rights, rights, rights

 

 Workers compensation Insurance

  • Every company is required to have this
    • Even if you only have 2 employees, or contractors
    • B/c you are giving them “direction” you are still considered the “employer-in-fact”
    • Slips, falls, etc.
  • Not looking at huge dollars being spent on premium
    • Likely not doing anything dangerous (programmers, right?)
    • Will likely cost you $300-1k / yr for most small companies
  • The laws for workers comp change on a state-by-state basis

 

 Errors and omissions

  • Leasing space? Landlord likely requires you to carry general liability
  • Still need to make sure it covers what you do as a game developer
    • Very different policy from what a standard manufacturer would get
  • Why get coverage?
    • Copyright, trademark, etc.
  • Anyone, at any time, can allege that you infringed on their copyright
    • Could be completely bogus, but you still have to pay to defend it
    • Insurance can help pay for that defense or settlement
  • If you have a claim, 99% of the time it will fall under errors and omissions

 

 Employment Practices Liability

  • What does it cover?
    • Wrongful termination
    • Sexual Harassment
    • Wage and hour payments
  • What happens when you lay people off, then they sue you?
    • That’s what this kind of insurance is for

 

Specialized “cyber policies”

  • Sony v. Zurich
    • During the PSN breach
    • Zurich said, “We don’t cover this”
  • Cover 1st party loss
    • Ie – when you have to pay to notify all users of a breach
  • The worst name they could call this policy, a new-er type of insurance
    • Should be called “privacy” coverage, b/c it doesn’t cover just online coverage
    • Covers info incase a breach happens
      • CC numbers, identifiable data you capture (name, zip, #)
    • This policy can help pay for settlement, notices, legal fees, etc.
    • In CA, notices need to be sent 2x and MUST be done in paper-mail
      • Need to pay for ID monitor for 2 years afterwards (~$15/mo, per person)

 

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  1. Pingback: Insurance for independent game developers - Dave Voyles for Gaming, HTML5, Startups, & Xbox - Site Home - MSDN Blogs

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