We provide comprehensive professional liability insurance cover to digital asset businesses. Unlike traditional underwriters which exclude start-up digital asset businesses and invalidate insurance for the digital risks of existing clients – RELM’s clients can be confident they are covered even if the worst should happen and they are subject to regulatory action.
Professional liability insurance provides protection against claims made by third parties against the insured business for actual or alleged breach of duty, negligent acts, errors or omissions in the performance of or failure to perform professional services.
Within the digital asset ecosystem, what we have found is that there are two general categories of businesses that exist: (1) new businesses with an operating mandate squarely focused on digital asset operations; and (2) pre-existing businesses with pre-existing revenue models that have since branched out into the digital asset space. The majority of companies that fall into category one are “bare” when it comes to professional liability protection because of the inability to obtain coverage in the marketplace. In other words, insurance companies are effectively qualifying all newly established digital asset businesses as an excluded class. Perhaps just as precarious as not having any insurance is when a business thinks it is adequately covered under a current professional liability policy only to find out that new operations or ventures within the digital asset space fall outside the previously defined scope of “professional services”. This is the reality for many of the companies that fall into category two above.
The realization of the potential impact of the professional services restriction became very tangible in February 2018 following the SEC’s issuance of a reported 80 subpoenas to entities and individuals related to the purported unlawful sale of securities via ICOs. While the ICO issuers appear to be the primary focus of the SEC inquiries, the “gatekeepers” (attorneys, consultants and accountants) to these issuers have been brought squarely into the center of these enforcement actions. Regardless of whether the gatekeepers themselves are ultimately on the receiving end of SEC enforcement actions, the fact remains that the ICO issuers are likely to turn to their advisors and sue for negligence for playing a role in the ultimate decision to proceed with the offering. These advisors will then turn to their professional liability policy with a rational expectation of coverage. However, there have already been reports of insurers denying claims arising from the rendering or failure to render professional services related to cryptocurrency, blockchain, virtual currency, tokenized crowdfunding, etc. based on the failure of the insured to provide an adequate description of their professional services prior to filing the claim.
In light of this dynamic environment, we are seeking to have a full understanding of the breadth and scope of an insured’s professional service offerings to arrive at a mutually beneficial conclusion where Relm can make effective underwriting decisions and our policyholders can rely on an expectation of coverage in the event that claims arise.
Who is covered?
The company and its employees
Joint ventures subject to restriction
What is covered?
Claims for actual or alleged wrongful acts in the rendering or failure to render professional services
Claims arising from written demands or notices
Claims arising from any civil proceedings, including any mediation or other alternative dispute resolution ordered by the Court, administrative, regulatory and arbitration proceedings
Claims arising from vicarious liability, i.e. if the insured is named in a claim in connection with an outside service provider’s rendering or failure to render professional services on behalf of the insured
Defense and investigation costs incurred to respond to a claim
What is excluded? (examples of exclusions – not meant to be exhaustive)
Claims arising from actual or alleged fraud, dishonesty or criminal misconduct
Claims based upon gaining a profit or advantage to which you were not legal entitled
Claims arising out of prior acts
Claims based upon bodily injury or property damage
Claims based on false or deceptive advertising
Claims based upon failure to protect non-public personally identifiable information in your care, custody or control.