The Economics of Ergonomics

It’s not something to be overlooked

Think your technology firm’s employees aren’t likely to get injured on the job? Think again. More than half of all workplace injuries are related to musculoskeletal disorders. MSD injuries are common among those who engage in repetitive motion activities such as as typing on a computer keyboard or working on a manufacturing assembly line.

“It’s easy for technology firms to overlook workplace safety issues,” says Toby Levy, The Hartford technology industry manager. “Just because this is not a traditionally high-hazard industry does not mean that it’s risk free.”

Long days hunched over keyboards, or on the assembly line endlessly snapping in the same part, can lead to cumulative trauma disorders (CTDs) and lower back aliments. In fact, nearly 60 percent of employees doing computer work say the have wrist pain. Here are some other common complaints:

  • Muscle fatigue or pain. Working for long periods in the same position or in awkward positions can put stress on hands and wrists and lead to injury.
  • Eye strain. Sitting too close to – or prolonged gazing at – a monitor can reduce eye blinking and may lead to dry or aching eyes.
  • Lower back pain. Using laptops or non adjustable office furniture can cause employees to work at awkward angles, and lead to back stress.

Several trends make CTDs a special concern for technology firms. First, so many employees in the industry use computers. Many of these same people also sit down at the computer at home, to surf the Internet or play games. Second, specialized jobs are increasing every day. This means more people are doing the same thing all day. Finally, people are living longer. “The aging body can be more susceptible to aches, pains and MSDs,” says Levy.

Not only can these disorders take a major toll on the body, they can have a significant impact on your business. Last year, the average medical claim associated with a CTD was over $43,000. And that doesn’t even include the hidden costs for employers of lost productivity when an employee is disabled or the cost of hiring and training a replacement worker.

What’s a tech business to do? Ergonomics, or the process of safely and comfortably relating workers to their work spaces can help. For instance, the Centers for Disease Control and Prevention suggests: Leaving enough room for range of motion; adjusting desk chairs to individuals; positioning monitors so eye level is at the top of the screen; and finding a pointing device, such as a mouse, stylus or tablet, suited to the individual.

Levy suggests there are many other simple things employers can consider to help protect their workers and their pocketbooks. For example:

  • Stress the importance of good posture at the computer. Levy likens this to the results focused golfers can get. “A good swing only comes with proper foot and hand placement and good balance,” he says.
  • Use smart lifting techniques and tools that can make the job easier.
  • Appoint someone on your staff to take responsibility for safety issues. Have this person research ergonomics best practices, review resources provided by your workers’ compensation insurance company, train employees.

Common sense measures can go a long way to preventing tech industry injuries. “Adjust workstations, take advantage of training, see what other equipment is available,” Levy counsels. “Obviously, you can’t prevent every CTD, but you can take actions that will help prevent problems.

Risk factors that contribute to CTDs: Safe behaviors that can limit CTDs:
  • Static posture
  • Good posture
  • Awkward posture
  • Correct workstation setup
  • Repetition
  • Occasional rest breaks
  • Force and/or vibration
  • Task variation
  • Extreme temperature
  • Proper lifting techniques

For more information on factors to consider in creating an ergonomically friendly work environment, visit

How to Set Up Ergonomically Correct Workstations

Work-related MSDs such as back injuries and repetitive motion injuries are the most prevalent among programmers, engineers, Web designers and technical writers.

They are, however, preventable — just by making adjustments to their workstations. To the right is a handy diagram that illustrates the proper positioning and components in an employee’s workstation.

Keeping an Eye on Avoiding Eye Strain

For professionals in the technology industry — whether sitting in front of a computer or standing in an assembly line — eye strain can be a major factor in workplace discomfort as well as a drain on employee productivity.

According to specialists in The Hartford’s Loss Control Department, eye strain in the workplace can be caused by several factors, including:

  • inappropriate lighting levels;
  • difficult viewing distances and angles;
  • poor contrast between the foreground and background colors on a computer screen;
  • small print or font sizes;
  • long periods of visual attention; and
  • incorrect height of monitor.

So what can you do to alleviate eye discomfort your employees may experience?

  1. Match lighting to job functions.
    • More light is required for reading, writing, and fine motor tasks such as small component assembly or computer work.
    • Assess overhead lights.
      • Use filters to diffuse overhead lights where ambient lighting level is too high.
      • Comply with the recommended ambient lighting level of 300-500 lux* for computer operations. Provide task lighting for non-computer, clerical operations.

    *Lighting levels are measured in lux or foot-candles; 1 lux = .0929 foot- candles.

Seeing things in a good light
Inappropriate levels of light in work spaces are not good for employees – or business. So make sure your employees are always in a good light.
Office Situation Recommended Lighting
Ambient lighting for computers: 30-50 foot-candles*
Task lighting for reading or writing: 75 foot-candles*
Source: The Hartford Loss Control Department, 2002
    3. Evaluate windows and walls.
  • Cover windows with blinds and use matte finishes on walls, floors and furniture, to reduce glare.

4. Adjust computer screens.

  • Adjust the brightness and contrast according to an individual’s preference, and set a light color for the background on the screen.
  • Place the monitor parallel with (not directly below) overhead lights.
  • Angle the monitor away from light sources.
  • Make sure that task lamps illuminate the document — not the monitor.

Experts also suggest that workers who work on a computer for long periods should look away from the screen for a few seconds about every 20-30 minutes — and blink a few times — to keep eyes from drying out. For more eyestrain prevention tips, check out our loss control tips at The Hartford.

Just the Stats

  • OSHA estimates that $1 of every $3 paid in workers’ compensation goes toward employees injured by musculoskeletal disorders. In other words, preventing just one worker from developing an MSD can save an employer more than $27,000 in direct costs.
  • According to the American Optometric Association:
    • – Approximately 12 million people visit eye doctors for computer-related problems each year; and
    • – 60-90% of software professionals suffer from visual fatigue at some time.
  • Often work-related musculoskeletal disorders can be prevented by simple and inexpensive changes in the workplace. The President’s Committee’s Job Accommodation Network found:
    • – 31% cost nothing; 50% cost less than $50; 69% cost less than $500. (Source:

Avoid Back Strain with Proper Lifting Techniques

Although computers are getting smaller, lifting them — or other equipment — can still take its toll on even the fittest employee.

For many technology businesses, back injury prevention is a major safety issue. The Bureau of Labor Statistics (BLS) reports that:

  • over one million workers suffer back injuries each year; and
  • back injuries account for one out of every five workplace injuries and illnesses.

Perhaps even more startling is that back problems have become the second biggest reason for missed work, costing about $30 to $80 billion a year including the cost of lost productivity.*

With exposures like this, it’s wise to advise workers who are responsible for routinely lifting, moving and hauling IT equipment on proper lifting techniques. The best preventative measures for back injuries is employee training are listed in these dos and don’ts.

Do Don’t
Think before lifting. Before lifting something, consider how heavy the object is, where it has to be moved, and whether or not it’s cumbersome. Avoid planning — just to save time.
Lift with the legs. Since leg muscles are stronger than back muscles, it’s a good idea to bend at the knees and lift with the legs — so there’s no undue pressure exerted on the back. Bend at the waist when lifting — or twist at the stomach while turning. Both can cause injury.
Get help. If the load appears to be too heavy, find someone to help with the move, use a dolly or a cart, or break it into smaller loads. Lift anything alone — if you think it’s too heavy to handle.

Not only can back injury prevention help protect your employees, it may also be an excellent investment of your time and resources. Want more helpful tips to share with your employees? The Hartford offers several training tools including a Back Injury Prevention video that addresses many common problems. Contact your local Hartford agent for more details.

Your Opinions Welcome!
To make this newsletter as valuable as possible, we welcome your ideas and suggestions. If you have any feedback on this issue or story ideas for future issues, just e-mail them to Toby Levy, Technology Industry Manager at

The information provided in this document is of a general nature, based on certain assumptions, and cannot be regarded as advice that would be applicable to all businesses. Readers seeking resolution of specific safety issues or business concerns regarding this topic should consult a professional safety consultant. We do not warrant that the implementation of any view or recommendation contained herein will result in the elimination of any unsafe conditions at your business locations or with respect to your business operations. We assume no responsibility for the control or correction of hazards, and the views and recommendations contained herein shall not constitute our undertaking, on your behalf or for the benefit of others, to determine or warrant that your business locations or business operations are safe or healthful, or are in compliance with any law, rule or regulation.

Riskbytes is brought to you by The Hartford.

To find out more about what The Hartford offers small and midsize technology businesses, visit us at

105693 (Summer 2004) Printed in USA ©2004 The Hartford, Hartford, CT 06115

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Categories: Hartford Articles

What to Look for in Technology Contracts

Agreements in the technology area are unique. Although many provisions in these agreements are substantially the same as those in other industries, many are quite different. These differences arise primarily because of the nature of computer technology and intellectual property often involved. Many Agreements in the technology area are entered into pursuant to the performance of computer software and equipment, installation, custom programming, software modifications and other software integration services.

Three of the most important provisions that should be included in every Technology Agreement are: (i) price and payment terms; (ii) service performance and delivery schedule; and (iii) product and service specifications. If the parties do not reach a complete understanding and agreement on these terms and clearly specify these terms unambiguously then the Technology Agreement will not successfully protect either party.
Technology contractors who are performing custom services usually request payment based on the amount of time involved in providing the services (time and materials). However, some customers insist on a fixed price agreement. Agreeing upon a fixed price for custom services can be difficult. In many ways computer development and integration services are similar to constructing a building. Just as in the construction of a building, a technology contractor can encounter unanticipated problems beyond the control of the contractor that may delay completion or make it impossible to complete the project. Although technology contractors will not discover granite while excavating a building foundation there are other problems that can be just as severe. If the parties do agree upon an appropriate fixed price for services, then the contractor should try to establish a payment structure that will allow adjustments in the price for unanticipated difficulties and delays especially if the delays or difficulties are caused by the customer.

Payments are rarely due on specific calendar dates. Except for initial payments, the payment times are usually based on completion of performance or portion of the performance that are typically called milestones. Some common payment structures are: (i) payment upon acceptance; (ii) periodic payments based on the level of effort, including the number of hours expended in the programming or integration effort; (iii) payments scheduled upon accomplishing certain milestones; (iv) payments based on the percentage of completion; and (v) limited periodic payments and a final larger payment due upon completion and acceptance.

It is very difficult to predict the exact time required to perform development or integration services. In many cases a flexible work schedule may be necessary. You will see these timelines and schedules in the “Scope of Work” section of a contract.

However, the customer will often ask for a final completion date. While the completion schedule should meet the customer’s requirements and expectations the schedule should also realistically anticipate the time that will be necessary to accomplish the work. When preparing a completion schedule to be included in a Technology Agreement you should keep in mind that software development is always late and that both parties to the Agreement are benefited by establishing a realistic and flexible schedule in order to avoid inaccurate schedules, disputes, irritation and liability . Analyzing past performance and how well projects had been completed in the past can give you a good picture of what to expect in the future. Technology Agreement completion schedules should provide for extension of the completion date if: (i) the customer or a third party delays the work; (ii) the customer requests changes in the specifications or additional services; or (iii) unanticipated problems in accomplishing the specifications in the required time occur.

The specifications and completion criteria should describe the required work in as much detail as possible. For example, the software’s response time, volume of transactions and other performance criteria should be set forth in the specifications.

There have been many legal battles between contractors and their customers that were caused by the failure of the specifications to properly describe the expectations and requirements of both parties. Also, general or non-specific services are bound to cause a problem if there are any types of customer dissatisfaction problems.

In addition to price, schedule and specifications, Technology Agreements should also contain the following provisions, although the exact form of these provisions will vary depending upon the agreement of the parties:

Important Note – The following contract terms and language possibilities ARE NOT MEANT as the ONLY wording or “THE” rule of thumb. They are shown here as examples only. NEVER give a broker or customer “suggestions” or “advice” on contract wording. ALWAYS refer them to their legal committee.

Testing, Acceptance and Duty to Correct Although the completion schedule will set forth the delivery dates, it is important for other portions of the Agreement to set forth the review, testing and acceptance procedures. These procedures usually give the customer an opportunity to test the product and require the contractor to correct any reproducible errors pointed out by the customer or the customer’s testing consultant.
This provision should set forth the remedies available to the customer if the contractor cannot produce a product that complies with the specifications. The contractor should make sure that this provision does not base testing and acceptance upon the subjective satisfaction of the customer (see above – specific and not general language). It is important for the customer and the contractor to be in a position to appeal to an expert or to a judge to determine if the contractor’s work product complies with the requirements of the specifications if there is a disagreement. Mediation and arbitration provisions are a useful method of resolving serious conflicts about Agreement performance since mediation and arbitration avoid some of the delay of litigation and place the decision in the hands of those persons more familiar with the technology industry .

Ownership of Copyrights, Trademarks. Trade Secrets and Patents The Agreement should clearly state who would own the work product copyright, trademarks, trade secrets and patent rights. If the contractor will own the copyrights, trademarks, trade secrets and patent rights then the contractor should grant license rights to the customer pursuant to a license agreement. These licenses are often perpetual and do not require additional license fees. The ability of the customer to obtain source code and make additional modifications is a very important issue that should be specified. If the customer will not receive source code then a source code escrow should be established to protect the customer if the contractor is no longer supporting the product.

Trade Secrets and Non-disclosure Agreements Technology Agreements often contain trade secret and non-disclosure provisions. These provisions can benefit both parties. Many contractors want to prevent their customers from disclosing the special techniques and programming code used by the contractor in performing the services. Many contractors want to prevent their competitors from viewing and using the product because their competitors can obtain competitive advantages. The customer will be concerned about inappropriate disclosure of its data and other business records that may be involved in the computer project. However, these trade secret and non-disclosure provisions must be carefully drafted so that the contractor is not later prevented from performing services for a competitor of a former customer and so that competitors of the contractor can be used for further services in the future, including the modification and support of the product if the contractor is no longer providing adequate support or modification services.

Warranties Some contractors warrant that the software will perform substantially in accordance with the material provisions of the specifications. This is more reasonable when the software exists and is operating properly at the time the Agreement is executed. In a development or integration Agreement this type of warranty is more risky. Some Agreements contain a warranty that the software will be free of defects and will meet the needs of the customer. Contractors should avoid this type of broad warranty and attempt to limit the scope and duration of any warranties. The duration of warranties and other support obligations must be limited specifically in the Agreement. Otherwise, the contractor can find that it has long term obligations that do not provide for further compensation. Many customers ask for a guarantied period of support and limits on support and maintenance fee increases. These can be very dangerous to the contractor since costs may rise in the future.

Disclaimers of Implied Warranties Except for any express warranties contained in the Agreement, the Agreement should disclaim, in capital letters, all warranties, including a disclaimer of all implied warranties of non-infringement, merchantability and fitness for a particular purpose.

Sample of typical language within a contract:

Disclaimer of Warranties:

1. “Except for the express warranty stated above. vendor makes no warranties, express or implied, including any implied warranties of merchantability or fitness for a particular purpose.”

Limitations of Liability .Many Agreements provide that the contractor’s liability for all causes of action and damages are limited to the sums paid to the contractor under the Agreement. However, many customers will not agree to these provisions unless the amount of the limitation is sufficiently large to provide protection. Contractors should also obtain errors and omission insurance. Errors and omission insurance will often cover the contractor and provide a legal defense if a customer claims that the contractor was negligent in performing the services.

Sample of typical language within a contract:

“Without limiting the effect of the preceding paragraph (i.e., limitation of liability), vendor’s maximum liability. if any, for damages shall not exceed the allocable portion of the price paid for the contract.”

Disclaimers of Consequential Damages Disclaimers of liability for consequential and indirect damages provide that the contractor is not liable for indirect or consequential damages. Indirect and consequential damages result, for example, from loss of the customer’s customers because of contractor’s failure to properly implement software in a timely manner according to the Agreement’s specifications.

Sample of typical language within a contract:

“In no event shall Vendor be liable under any legal theory for any indirect. special or consequential damages. even if Vendor has notice of the possibility of such damages.”

Integration Clauses The Agreement should contain a provision that provides that prior written and oral representations, statements and agreements relating to the subject matter of the agreement are terminated and are superseded by the present written Agreement. This provision has saved many contractors from liability for misrepresentations made during the “sales” stage of the negotiations. This has always been referred to as “oversell” (The salesman told me that the program would…).

Sample of typical language within a contract:

“This Agreement supersedes all prior agreements and understandings between the parties, whether written or oral, related to the subject matter and is intended by the parties as the complete and exclusive statement of the terms of their Agreement. No modification, addition to. or waiver of any of the terms hereof shall be effective unless in writing and signed by an authorized officer of Vendor.”

Continuing Obligation to Provide Error Fixes. There is no such thing as bug free software. The contractor should avoid statements, obligations and warranties that provide that the product will be free of defects entirely. However, it may be reasonable for the contractor to agree to exercise reasonable efforts for a limited period of time to correct errors that prevent the software from operating substantially in accordance with the specifications.

Sample of typical language within a contract:

” As the sole and exclusive remedy for breach of the warranty provided above. Vendor shall…(e.g.. repair or replace any component that proves defective within 90 days after delivery).”

Continuing Support and Update Obligations. Some contractors find that continuing support and update obligations are a business opportunity to obtain recurring revenue. However, if it is not contemplated in the pricing structure and if the description of the work can be construed to require the contractor to perform the continuing support or update duties after completion of the product then the Agreement can cause large losses and liability to the contractor. Contractors should not agree to support a product at a set price for a long term. Support Agreements should have short terms and provide that the contractor is only obligated to support current versions of the software. These Agreements should provide that training or support requests that constitute training are to be charged separately. Remind anyone of Year2000 concerns?

Non-Infringement Warranties and Indemnification Concerning Ownership
Many customers will require that the contractor warrant ownership of the software product and that the software does not infringe any copyright, trademark, trade secret or patent of another. Typically these include indemnities and agreements to provide a defense if someone asserts an infringement claim. Although this is a reasonable request it is important for the contractor to limit these warranties to United States law and attempt to exclude warranties concerning patents if possible. Contractors should attempt to avoid ownership warranties and infringement indemnification for software created by third parties. It is dangerous to warrant the ownership of software that has been prepared by another company.

Assignment Customers can reasonably request that the contractor not substitute another party to perform the work, including subcontractors, because the customer has been “sold” by the expertise of the contractor. However, the assignment provision should allow both parties to engage in corporate reorganizations, mergers and sales of the company as long as the parties performing the work and controlling the contractor do not change.

Arbitration and Dispute Resolution. Many disputes and much potential litigation can be resolved if unrelated senior executives of both parties meet, in person, to discuss and attempt to resolve disputes prior to either party filing suit. Some agreements require this type of unofficial consultation. Many agreements require binding arbitration in an effort to reduce the cost of litigation.

Each Agreement must be prepared so that it properly covers all of the issues raised by the specific agreement between the contractor and the customer. Since the specifications and terms of each Agreement are different it is important to ask an attorney to review the issues involved in the negotiation and preparation of each Technology Agreement. You should consult an attorney who practices in the computer area before preparing or signing any Technology Agreement, regardless of whether you are a contractor or a customer.

Underwriting Vendor Contracts – THE BASICS

When evaluating the exposures involved in providing coverage to prospective insureds for E&O, it is important to have a basic understanding of the legal principles affecting potential liability, as well as the steps that insureds can take to contractually limit their liability exposure.

Consequential Damages; Warranty, Representation, Breach of Contract Coverage

It is important to remember that —coverage forms for errors and omissions cover only consequential damages resulting from errors and omissions. Warranties and representations must be well-defined and limited in the contract, for the insured’s protection, since claims for damages that fall under failure to fulfill warranties or representations are not covered.

A well-written contract will disclaim liability for consequential damages. This vastly improves our ability to successfully defend the insured and reduces the exposure under the coverage part.

These factors require that the Underwriter carefully underwrite all contracts used by the insured and that the insured notify the Company if contracts are changed in general or are individually negotiated to change terms in these key areas.

The application requires that copies of contracts be provided. The Underwriter should be sure to get a new application, with current contracts for each renewal.

When Contracts Are Necessary

Almost all insureds should sell their products or services under terms and conditions specified by mutual agreement in the form of a contract. As a practical matter many sole proprietors or very small consultants, consumer products manufacturers, or small manufacturers may not use contracts in all situations.

For all submissions that do not use contracts the Underwriter must evaluate the extent of additional exposure and either increase the rate or decline to provide the coverage.

Current and Prior Contracts

Since E&O is a claims-made policy with, in some cases, full prior acts coverage, the Underwriter must also underwrite all contracts the insured has used in the past as well as current contracts. We must review the contracts used by the insured in the past 3 years.

It is extremely important to underwrite prior contracts on new business or renewals, if the prior contracts issue has not previously been addressed.

Use of the Contracts Checklist

The following is a checklist of important provisions. This checklist is for internal use only. Agents/brokers and insureds may be told of the clauses that are necessary, but the Underwriter should not give them the language to use. The important point to remember is that we cannot be in the position of telling insureds how to specifically write their contracts.

Use the following information to evaluate the contracts used by a risk. Discussion of the Underwriting Importance of each Provision,

  1. Disclaimer of Warranties: The contract should provide for reasonable warranties (e.g.. the product should do what it was sold to do. and disclaim all other warranties).
  2. Exclusive Remedy: Very important clause. Debit the rate if this clause is missing. In other words, within this contract is the only remedy if we should have a problem.
  • Limitation of Liability:A well-written contract will disclaim liability for consequential damages. This provision vastly improves our ability to successfully defend the insured and reduces the exposure to loss under the coverage parts. Full Disclaimer of Consequential Losses : This is the norm.
    Partial Disclaimer : This is where consequential damages are assumed to a limited amount
    No Disclaimer : Not acceptable.
  • Liquidated Damages: This is where the contract indicated the “maximum liability, if any, usually limited to the cost of the contract.
  • Conditions Voiding Warranty: the contract will list circumstances where the warranty is voided. Examples include – accident, alteration, modification, etc.
  • Delivery: Important provision. Delay in providing services, software or products most often is caused by errors that can lead to E&O suits. The customer of the insured will most often resist this clause. This is a business risk and usually involves getting a beta-tested product out to market too quickly.
  • Risk of Loss : Not of great importance for E&O.
  • Site Preparation : It is necessary for the contract to specify who is responsible for site preparation prior to the installation of the product/service. Particularly important for an insured doing business with first time or naive users.
  • Force Majeure : “Acts of God”. The contract is not considered void if wars, riots, floods, strikes, etc., delay the completion of the contract.
  • Integration: Very important to eliminate misunderstandings due to overselling or excessive expectations a customer may have. In other words, the contract states all of the warranties. No oral “oversell by the salesman” or other types of agreements are valid unless in writing and part of this particular contract.
  • Period of Limitation: May already be limited by statute.

Computer Litigation

A leading computer expert once opinioned in testimony in a major lawsuit that approximately forty percent (40%) of all computer installations fail. That is a staggering number, and it helps to explain why there has been such an explosion in litigation involving computer product performance. Also staggering is the size of the recoveries being obtained in some cases, rising at times in excess of seven figures.
Problems with the performance of a computer system can arise from a variety of sources, including defects in the system’s requirements definition. Hardware (the central processing unit, memory and various peripheral devices), system software (the basic software that allows the computer to perform any useful task), application software (the specific programming written to enable a user to perform a particular job. such as billing or accounts receivable) or a combination of these. Problems can also arise because of poor environmental conditions, operator error or just plain unrealistic expectations on the part of the user.
Unlike early lawsuits involving computers, the bulk of future litigation is not likely to focus on the reliability of the physical components of a computer system. Hardware, by and large. is becoming more reliable. While there will always be the occasional lemon, the primary concern in the future will be related to software, particularly application software.

What users are interested in is a result. Most complaints in the future will center on failure to meet the needs of a particular user rather than on the total inability of a computer system to work. Vendors who undertake to provide solutions in the form of application software or complete turnkey systems will have greater exposure than those who offer only tools, that is, the hardware and system software.

The outcome of any litigation involving computers will be colored by the business context of the particular contract being litigated. Who, for example, are the parties? Is the vendee an unsophisticated computer neophyte purchasing a complete turnkey system on faith? Is it perhaps itself one of the constituent elements of the information technology industry such as OEM or a service bureau? Even if the vendee is an end-user not engaged in some aspect of the computer business, does it have computer expertise –either in-house or through the use of independent consultants? What is the product being purchased. licensed or leased? Is it hardware or software, off-the-shelf or custom-designed, extensively field-tested or experimental? What are the expectations of the vendee? Are those expectations realistic and, if not, what is the source of those unrealistic expectations? The answers to such questions will strongly influence a court’s attitude toward the parties’ legal arguments.

Theories of Legal Liability

Vendors of computer products have potential liability in both contract and tort law.

Contractual Liability

Although commercial law is the province of state rather than federal law, substantial similarity has been achieved between states as the result of the Uniform Commercial Code (“UCC”). This statute, adopted with minor variations in all states was the culmination of a long effort to codify, simplify and make uniform the law of commercial transactions. Article 2 of the UCC deals with analysis of the law of sales and is the usual point of departure in any potential vendor liability.

There has been substantial debate in the legal community whether software (as distinguished from hardware) is even within the scope of the UCC. One difficulty is that Article 2 specifies that it deals with transactions in “goods.” which are defined as “things’. which can be “moved.” Does software generally viewed as an intangible, constitute .’goods” within the meaning of the statute. The court decisions, which have considered the question to date, have generally been in the context of systems consisting of both hardware and software and have answered the question affirmatively. No published judicial opinion has yet dealt squarely with the issue as applied to software alone, but many courts in deciding cases seem to have tacitly assumed that programs constitute goods. Moreover, many commentators and the computer law committee of at least one prestigious bar association have expressed the view that software should be deemed “goods.”

Another problem in applying Article 2 to software transactions is that software is typically licensed rather than sold. Although Article 2 states that it deals with “transactions” in goods. most of its specific provisions speak in terms of a “sale.’. Is Article 2 flexible enough to encompass software licenses? Again, there is no definitive answer in the published judicial opinions, but courts seem to have assumed that the answer is “yes.’. In fact, the UCC has often been applied to the lease of tangible personal property, including computers. Many observers seem to agree that the UCC is properly applied to program licenses as well.

It is advantageous from a vendor’s viewpoint to have the UCC apply to a transaction, because UCC rules are clearer and easier to deal with than those encompassed within the common lay of contracts. In particular, the UCC lays down rather specific guidelines as to the creation and disclaimer of warranties. (Since they are by their nature service contracts and not the sale of goods, service bureau and consulting arrangements are outside the UCC.)

Breach of a warranty can result in liability of a vendor for monetary damages. The difference between the value of the goods, as delivered, and what they would have been worth “if as warranted” measure such damages. In addition, in the absence of any contractual restriction. a buyer may in a proper case also recover consequential damages (i.e., losses flowing from the breach over and above reduction in value of the goods themselves). The classic example of consequential damages is lost profits resulting from the inability to use the goods in one’s business. Given the critical importance of computers in the conduct of modern business, the consequential damages flowing from a system failure could conceivably run into , hundreds of thousands or even millions of dollars.

The UCC recognizes two basic types of warranties: Implied and Express. As to the former, there are two principal implied warranties. These are the warranties of “merchantability” and “fitness for a particular purpose”, There are clear distinctions between the scope of each of these warranties. The warranty of merchantability, unless disclaimed, arises in every contract for sale where the seller is a “merchant “. It imposes an obligation that the goods be fit for the ordinary purposes for which such goods are used. The warranty of fitness arises only if the vendor “at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods,”

nfortunately, the scope of the two implied warranties in the context of computer or software acquisitions is not always clear. What is a “merchantable” computer system? Unless it fails to operate at all, or generates incorrect results, the vendor can make a strong argument that the implied warranty of merchantability is not violated simply because the system does not perform the user’s particular application in accordance with the user’s expectations. Similarly, in the case of the implied warranty of fitness there may be substantial questions relating to whether the vendor had reasons to know of the vendor’s particular purpose and whether the vendee relied on the vendor’s skill and judgment. In the case of certain types of vendees, such as sophisticated OEMs or users with in-house data processing staffs, the answer to either or both of these queries may be “no.” Obviously, it would be preferable for the vendor if it could exclude these rather uncertain implied warranties from its contract.

An express warranty is “any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain”. In addition to specification incorporated into the contract itself, express warranties can arise by virtue of demonstrations, oral representations by salesmen. or statements contained in advertising and promotional literature. It is not necessary that any particular words, such as “warrant” or “guarantee” be used in order to create an express warranty. Again, it would be to a vendor’s advantage if it could obviate liability for any vague or broadly stated “express” warranties allegedly made by sales personnel or in promotional materials during the pre-contract marketing phase of a transaction and limit its legal obligations to the specific representations set forth within the four corners of a written contract.

Limiting Contractual Liability

In fact, the UCC does permit vendors to exclude the implied warranties and to otherwise circumscribe the scope of its contractual liability, The implied warranties of merchantability and fitness can be effectively disclaimed if the rules set forth in the UCC are followed. These rules essentially require conspicuousness of the disclaimer and specific use of the word “merchantability.” Assuming compliance with the language and conspicuousness requirements, disclaimers of the implied warranties in computer systems procurement contracts have regularly been found to be valid. (The federal Magnuson-Moss act substantially limits the ability of a vendor of “consumer” goods to disclaim the implied warranties. What constitutes a “consumer” good in the context of computers is debatable, although many personal computers probably qualify. Whether software is a “good” for Magnuson-Moss purposes is an unanswered question.

Similarly, a purchaser can usually be successfully precluded from purporting to reply on supposed pre-contractual express warranties by the so-called “parol evidence rule”. This rule provides that, where a written contract is intended by the parties to be the final and complete expression (“integration”) of their agreement. pre-contractual statements are not admissible in evidence to vary or add to the provisions of the contract. The likelihood of establishing an integration is substantially enhanced by the inclusion of a clause (often called a “merger” clause) in the written agreement specifically stating that the contract is the complete and final expression of the parties’ agreement. Thus, by appropriate drafting of the contract (including disclaimers and a merger clause), a vendor can assure that it will be held accountable only for the specific express warranties set forth in the written agreement.

There are other ways in which the UCC allows a vendor to circumscribe its potential liability exposure. One is by contractually limiting the remedies available to an aggrieved buyer. Thus, a vendor may extend a limited, but exclusive, remedy (typically repair or replacement) for breach of warranty, exclude consequential damages (including lost profits) and provide for a “liquidated” (fixed) ceiling on recoverable damages.

Another way of reducing the vendor’s risk is to contractually limit the period in which a lawsuit may be brought. The normal statute of limitations for breach of warranty is four years from tender of delivery. Under the UCC, however, the normal statute of limitations can be reduced in the original agreement between the parties to not less than one year.

Non-Contractual Theories of Liability

Because the UCC permits vendors to substantially’ limit their contractual liability, disappointed users and their lawyers have sought legal theories by which to circumvent contractual restrictions. There are two principal avenues that such disappointed vendees have pursued.

First, the buyer may argue that the restrictions contained in the contract simply are not fair or, in the semantics of the UCC, that they are “unconscionable.” There appear to be only two reported cases in which the unconscionability argument has been successfully advanced in the context of computer procurement. These cases notwithstanding, the applicability of the unconscionability notion in an “arm’s length” commercial transaction is doubtful. The UCC, as has been seen, explicitly authorizes disclaimers of warranty. Similarly, the UCC permits various limitations on remedies. Indeed. the UCC specifically permits exclusions of consequential damages and provides that such clauses are not presumed to be unconscionable where the loss involved is commercial in nature. Accordingly, the vast majority of judicial decisions dealing with such restrictive provisions in computer contracts have upheld them against “attachment” on the purported ground of unconscionability.

The more likely route to circumventing contractual disclaimers and limitations of remedy is the assertion of so called “tort” causes of action. Since tort law’ compensates for violations of duties imposed by operation of law rather than assumed consensually, contractual restrictions are usually not deemed to bar recovery in tort. The broader question, however, is whether the importation of tort theories into the area of commercial transactions is appropriate.

Tort theories generally fall into two categories, namely, errors of omission or commission in the design or manufacture of the product and misrepresentation of the attributes or capabilities of the product. As to the former, while some states have allowed tort recovery for purely economic loss based on faulty design or manufacture, the majority view seems to be that, in the absence of personal injury, negligence and similar tort theories are inappropriate. This has certainly been the holding so far in the few computer-related cases that have considered the issue. The rationale appears to be that there is no duty imposed by law separate and apart from the contract itself and hence no room for non-contractual liability. (In service contracts not covered by the UCC, however, the possibility of tort liability is substantially increased.)

The tort theory most in vogue among disgruntled users in that of fraud. It is easy to see why. In the first place, all those disclaimed extra-contractual “express warranties,” which would otherwise be excluded pursuant to the parol evidence rule, suddenly become provable. Moreover, a successful plaintiff is entitled to recover all their damages, regardless of any contractual limitation of liability, plus (in some instances at least) punitive damages.

Although the UCC specifically recognizes the possibility of recovery for tortious misrepresentation separate and apart from recovery for breach of warranty, a number of courts have displayed reluctance to permit disappointed users to avoid the bargained for terms of their contracts by resort to misrepresentation theories.

Such decisions are generally predicated upon either failure to prove fraudulent intent or failure to plead the alleged misrepresentation with sufficient particularity. To the extent that allegations of misrepresentation are merely contract claims disguised in order to circumvent contractual disclaimers of warranty, the results seem appropriate. Nevertheless, if the necessary elements of a cause of action for misrepresentation can be properly pleaded and proved, no contractual disclaimer of warranty is likely to prevent the imposition of liability. (In addition to common law fraud, some states have adopted deceptive trade practices statutes. Typically, such statutes allow recovery for false promotional statements regardless of either an intent to deceive or even negligence. Often a successful plaintiff can recover multiple damages and attorneys’ fees.)

Considerations in Drafting Computer Contracts

The importance of a well-drafted contract can hardly be overstated. The more precisely the rules of the game are drawn in the contract, the less room there will be at a later date for a court or jury to import into the balance its own peculiar “notions of fairness” (often born of an imprecise understanding of the nature of the relationship). In this regard the vendor frequently has the advantage in that it prepares the contract The price one pays for this privilege, however, is the judicial doctrine that ambiguities in a contract will be resolved against the draftsman. This rule of construction is even more strictly applied in the case of standard form con tracts.

Careless use of language can be devastating. In one case, the court completely read out of the contract the vendor’s warranty disclaimers and limitations of liability because the front of the form referenced the terms on the reverse side of the so-called “security agreement ” In fact, the transaction did not involve a financing and the court found the standard terms (which should have governed regardless of the form of the transaction) to be inapplicable.

It is essential that the vendor’s performance obligations as to both hardware and software be defined clearly and in sufficient technical detail. This can be done by incorporating detailed specifications into the contract and making it clear that such specifications are the criteria by which to measure the vendor’s performance. This will go a long way both to assure the vendee’s satisfaction and to protect the vendor from assertions that the equipment fails to meet either “promised” or “generally accepted” standards of performance or functionality. It is advisable to avoid terms that may come back some day to haunt, such as “turnkey,” “management information system,” etc. All such terminology does is to invite argument over interpretation.

The contract should also be specific in defining the vendor’s obligations regarding site preparation, delivery, installation, interfacing with foreign devices, maintenance, conversion of data, acceptance testing, provision of documentation and so forth. Likewise, the agreement should be clear in spelling out the duties of the vendee, such as to provide a proper environment and clean power, as well as to pay in accordance with a specified payment schedule.


Contractual agreements affecting a business is unique due to the nature of computer technology and intellectual property involved. Most contracts are related to design and installation of equipment, the performance or modification of computer software and other related services performed by a technology firm.

How well the insured is protected depends, in large part, on the specific provisions contained in the contract. The following are some of the more common contract provisions used in the technology area.

  1. Integration Merger Clause – All prior agreements and oral and written communications are superseded.
  • Limitation of Liability – Liability will in no event exceed the total amount paid pursuant to the contract during the last twelve months.
  • Warranty and Representation Disclaimer – Gives no warranty or representations, express or implied, except as expressly stated herein.
  • Waiver of Consequential Damages.
  • Ownership of Proprietary Rights – Does the Insured or the customer own copyrights and patent rights produced pursuant to the agreement.
  • Non-Disclosure Agreements.
  • Payment Provisions.
  • Representations of Authority and Ownership by the other party.
  • Assignment Allowed?
  • Length of Term.
  • Clear description of each party’s performance obligations.
  • Obligation to Pay Expenses.
  • Payment in U.S. Currency.
  • Who Pays Taxes and Withholding Payments?
  • Scope of Right to Use Proprietary Information and Software.
  • Territory Limitations.
  • Arbitration and Dispute Resolution Provisions.
  • Non-Solicitation and Non-Compete Agreements.
  • Written Default Notices and Termination Provision.
  • Choice of Law and Jurisdiction for Arbitration and Law Suits.
  • Right to Disable Software for Nonpayment or Default.(Dangerous Provision)
  • Right to Use Work in Other Engagements.
  • Right to make Derivative Work of Client’s Work.
  • Right of Each Party to Audit the Other.
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Risk Management Tips for Technology Firms

How better contract management can improve your firm’s risk management

Read it once, toss it in a desk drawer — and leave it to the lawyers to sort out if problems arise. Is this your company’s idea of contract management?

Fact is, contracts can be used to prevent problems from surfacing and to more effectively manage them when they do. What’s more, well-written contracts clarify agreements, improve project outcomes and create good working relationships between you and your clients, suppliers and business partners.

But contracts for high-tech initiatives, such as Web site generation, or software development present unique challenges. Because many of the projects are complex and are often mission critical for businesses, there are no precedents- and not approved languages. So they are usually written from scratch or pieced together – and end up being overly vague or incredibly complex.
The biggest problem many technology companies have with their contracts is that they tend to over promise, according to The Hartford Technology Industry Manager Toby Levy. He says, “This industry is so fiercely competitive that many contracts are overly optimistic about when a project will be completed, like when a new software package will be available for sale, or when a newly designed web site will go live. And that can lead to disappointment on the part of the client – and legal disputes with their technology firm.”

So how can you manage risk through contracts? Hartford attorney Rich Gentile, outlines some best practices for managing, reviewing and drafting contracts for technology-related firms.

  1. Understand what a contract is. A contract is a legal document that clearly states what service each party has agreed to perform. And in order for it to be legal, there must be an offer and an acceptance.
  2. Ask a lawyer to review any and all contracts. As a legally enforceable agreement, and contract has important consequences that can impact your business. Therefore, you should always ask an attorney familiar with contract law to review your firm’s contracts.
  3. Beware of sample documents or forms available on the internet or in books. Not all forms fit all situations – and simply using one that seems to fit your particular cirsumstances may result in unintended legal consequences for your company. As Gentile advises, “There can be different interpretations of a clause in a standard contract that, in your particular situation, may be better worded another way — for
    both you and your client’s mutual benefit.”
  4. Identify all parties in your contract. Don’t just include names of employees. Be sure to list names of any third parties or subsidiaries that will be supplying any services during the project as well as their addresses.
  5. Describe the specifics of the work involved. In your contracts, cover such details as the scope of the work, the tasks included, the amount of time required, the costs involved, and any necessary insurance requirements.

Don’t incorporate or reference other documents in your contract. Remember, a contract should contain all the material terms for a specific project. If the work is similar to another job you’ve performed, don’t just attach an old agreement. Instead, repeat the same terms, so there’s no confusion about what your company is being asked to do.

  • Address roles and responsibilities. It’s critically important to state in writing who’s responsible for what. . .and what the liability is if something doesn’t happen according to plan.
  • Include a default and termination provision. While you always want to assume a project will go smoothly, you’ll want to spell out what your remedies are . . . just in case it doesn’t.
  • Specify how to terminate the contract. Let’s say, midway through a project, you assess that it’s not going well . . . and that it’s in your best interest to severe the agreement. Have you allowed for that in your contract? Or can you be sued for damages?
  • Specify choice of law. In case a dispute does arise and your company is sued, you’ll want your contracts to specify what laws will be appli­cable and in what state the lawsuit can be filed.
  • Identify your risk management goals. Know your company’s approach to planning, direct¬ing and controlling resources to manage risk. Be clear about what activities management will negotiate on — and which ones they’ll never agree to.

Of course, proper contract management is only one of the ways you can minimize the financial risk of legal disputes. Contact The Hartford agent in your area to discuss other ways to better manage and cost efficiently transfer some of this risk.

Sound Advice Whether you’re signing a lease agreement for new computer equipment or a multimillion dollar work authorization to program a new software application, contracts are a fact of life in the tech
industry. Carefully review your drafts and consider:

  • The scope of the agreement. Your contracts should address all the terms and conditions of the agreement.
  • Legal enforceability. Remember, any contract that violates public law is unenforceable.
  • The ability to manage financial risk. If you’re transferring the responsibility for payment, make sure to assess the other party’s capability to pay.
Just the Stats

  • Independent studies show that the number of errors and omissions suits and allegations in the tech sector are increasing faster than in other economic sectors.
  • The size of errors and omissions claims is also growing. The largest information technology E&O case that was publicly announced involved damages and expenses in excess of $130 million.
  • A recent PricewaterhouseCoopers study entitled, “Patterns in Litigation: Systems Failure 1976-2000” reveals that most tech claims involve system failures which includes breach of warranty, breach of contract, fraud, negligence and misrepresentation.


Defend Your Firm Against Lawsuits with Professional Liability Coverage

Today, more than ever, companies across all industries rely on technology. But when systems go down, or do not perform as expected, companies are filing lawsuits against their technology providers, software developers, programmers, Web hosting firms, information technology consultants — regardless of the terms outlined in their contracts.

So what else can your company do to protect itself from the threat of a suit? One thing is to make sure you’re covered by professional liability insurance.
For tech professionals, this coverage can protect you in the event you’re sued for a variety of issues:

  • negligent acts, errors and omissions;
  • copyright or trademark infringement and plagiarism;
  • libel, slander and invasion of privacy as a result of the work you performed;
  • failure of the technology services you provide to perform as intended, such as failing to prevent unauthorized access to a Web site;
  • breach of warranties or representations.

While many insurers offer this type of coverage, The Hartford uses an innovative approach. Michael Dandini, Assistant Vice President, Technology Errors and Omissions at The Hartford, explains: “We realize that no two technology companies are alike. So we tailor our professional liability cover-age, known as FailSafe, to the specific needs of your business. This way, if you need, let’s say, insurance protection for errors and omissions, but not for security claims, we can customize coverage for you.”

Better yet, Dandini states that The Hartford will package all the technology errors and omissions coverages you need into a single integrated policy. “Unlike other insurers, we can structure your pro­tection so there’s one premium, one deductible and one policy. So there’s no reason to piece together coverages . . . or go to several different companies,” he explains.

For more information on The Hartford’s FailSafe technology liability insurance, contact The Hartford agent in your area.

General Liability Coverage Is Not Enough…Don’t think you need professional liability coverage because your business insurance policy covers general liability claims? Think again. The two offer drastically different coverages. So not choosing the one or the other can expose you to unnecessary risk.Here’s a quick rundown of why you may actually need both to protect your business.General Liability coverage

  • protects you if someone is injured physically by the products you sell or the services you provide;
  • protects you if a product or service you provide causes damage to someone else’s property; and
  • will not pay for a pure economic loss. For example, general liability coverage would not protect you if an accounting software package you

For example, general liability coverage would not protect you if an accounting software package you developed calculates taxes incorrectly and causes a state to lose millions in tax revenue.

Professional Liability coverage:

  • covers economic loss from a technology product or service that you provide – or didn’t provide;
  • addresses a range of exposures inherent in the tech industry, including: errors and omissions, copyright infringement, and Web security.

For example, professional liability coverage could protect you if the e-commerce site you were building for a client was released late because of a glitch or programming error, allowing a competitor to capitalize on a market opportunity. . .and causing your client to lose substantial revenue.

For more on The Hartford’s professional liability insurance for technology companies, go to

Structure Your Contracts to Avoid These Common Mistakes
Learn More About What Mistakes To Avoid When Drafting Your Contracts.

Because of the inherent complexity of many high-tech projects, you may try to draft your contracts to cover every possible situation and outcome to mitigate risk. Or depending on the project, you may think the best strategy may be to keep the contract vague and sketchy.

Either way, contracts can end up confusing — and never address any of the risks you were hoping to cover. So if you want to make sure your contracts are off to a good start, iDealReview (Sept. 2000) recommends avoiding these common mistakes.

Don’t :
  • Change the contract so that “this can never happen again.”
  • Draft your contracts before thinking through the entire project— both “real” opportunities — and risks.
  • Expect every single risk to be addressed within the contract.
  • Negotiate agreements without considering your overall business relationship with the client.
  • Suggest approval procedures that are too time-consuming or inflexible.
  • Rely on negotiators to use tactics to force the other side to agree to an unacceptable risk.
  • Think that the law holds every answer for new technology.

 Your Opinions Welcome!

To make this newsletter as valuable as possible, we welcome your ideas and suggestions. If you have any feedback on this issue or story ideas for future issues, just e-mail them to Toby Levy, Technology Manager at

This document is provided for information purposes only. It is not intended to be a substitute for individual legal counsel or advice on issues discussed within. Readers seeking resolution of specific legal issues or business concerns related to the captioned topics should consult their attorney and/or insurance representative.

This document provides an overview of coverages and services. Coverages may differ in availability by state. All coverages are individually underwritten. For a complete description of all coverages, terms and conditions, refer to the insurance policy. In the event of a conflict, the terms and conditions of the policy prevail.

Riskbytes is brought to you as a service from the Middle Market business unit of The Hartford.

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Transporting Tech Goods Requires Sound Navigation

Unsavory characters. Unrelenting natural disasters. Unexplained explosions. Are these the elements of the latest action flick? Or the newest best-selling adventure novel?

No. They’re just some of the risks technology businesses may encounter when shipping goods. No matter what type of transportation you use, tech shipments are exposed to a number of dangers including theft, damage or loss.

The threat of theft is perhaps the most significant. According to a 2001 National Cargo Security Council report, $50 billion worth of goods worldwide is lost to cargo crime each year. About $5 billion of that includes goods stolen from U.S. technology manufacturers. And the majority of the theft takes place at terminals, transfer facilities and cargo consolidation areas.

Among the favorite targets for thieves? According to Toby Levy, Technology Industry Manager at The Hartford, “Whatever you want, they want. It’s the latest gadgets, like PDAs, digital cameras and consumer electronics. These goods are highly valued, highly portable and in high demand.”

And the smaller and more portable the products become, the greater the threat. “It’s a never-ending cycle,” Levy notes. “There’s always new technology on the horizon, so there’s always something to target. That’s why this problem won’t go away any time soon.” Besides theft, technology business owners also have to guard their shipments against physical damage. Tech goods need to be packed properly to protect them from rough handling, such as being dropped from forklifts or loading docks, as well as moisture damage incurred while being transported on ships.

Another exposure that business owners typically over look is the possibility that a shipment simply gets misplaced – at a loading dock. When this happens, it may take weeks to find it, re-route it and deliver it to its actual destination.

Regardless of what specific tech goods you ship, loss or damage to them while in transit costs you money, disrupts operations and can ultimately result in unhappy customers.

If tech companies recognize that things can (and often do) happen to goods in transit, they can take measures to protect their shipments. Levy advises that the basics are still the most important.

“Always keep accurate and detailed documentation of what you ship,” he says. “This way there won’t be discrepancies about the condition or the number of items you shipped. That means a faster resolution if there’s a claim.”

Lauren Berry, AVP Marine Operations, also notes many carriers provide only basic protection or limited value per pound. “Declare a value of your goods,” she says. “If goods are damaged, the carrier should pay a higher amount than if you elected not to declare a value. Of course, this means you’ll spend a little more to ship, but this will serve as a signal to the carrier to use extra care when handling your that shipment. “Once the items are delivered, Lauren advises, “Completely inspect them. Don’t sign a carrier release until you’ve verified that all pieces were delivered and are in good condition. If you see any damage, note it on the shipping documents.”

For more tips on how to best protect your property when it’s in transit, review the checklist below.

Cargo Checklist

Here are suggested steps you can take in three general areas to protect your goods in transit.

Step 1: Choose Your Transportation Carrier Carefully

  • Only use reputable shippers, drivers and warehouses that are experienced at handling valuable cargo.
  • Pick a carrier that uses driving teams, which may minimize time your goods will be left unattended.
  • Make sure the carrier has adequate security programs and systems in place to protect your goods.
  • Confirm that they’ve done background checks on all their employees.
  • Approve any subcontractors who will also handle your goods for any portion of the trip.
  • Look for carriers with GPS/satellite tracking if you ship higher-valued commodities.

Step 2: Adopt Sound Shipping Practices

  • Keep a manifest of what you ship.
  • Vary shipping schedules, so thieves can’t expect a shipment.
  • Don’t share shipment information with everyone. And limit what you say about it in shipping documents.
  • Use sealed, generic cartons so tampering can be evident – and items can’t be seen.
  • Cushion easily damaged goods by using Styrofoam® boxes or peanuts.
  • Shrink wrap cartons to protect against water damage.
  • Avoid sending cargo over weekends to minimize the amount of time it sits (unattended) in terminals.
  • Choose direct routes to reduce the number of stops between warehouse and destination.
  • Set limits on the value of your lessen a loss if it does occur.

Step 3: Communicate with Everyone

  • Use cell phones to keep in touch with drivers. Consider satellite tracking systems to keep track of shipments.
  • Train employees on potential risks to your shipments. Provide specific training for staff on cargo security.
  • Report any loss or damage to law enforcement authorities and your insurer.

Weigh Benefits of Different Transportation Methods

What is the “safest,” most efficient way to get your goods to their destination?

There’s no answer that’s right for every company and every shipment. Depending on what you ship – and how far you’re shipping it – one method may offer certain advantages over another.

But each method also comes with specific risks you should consider since your cargo is often out of your control for a period of time no matter which method you use, it’s best to evaluate transportation carefully and focus on minimizing as many risks as possible. The chart below lists key modes of transportation – and key factors to consider.

Type of

Factors to Consider
Motor Freight
  • May be least expensive method.
  • Exposed to rough handling, vibration and crime; most vulnerable to crime while waiting to be loaded onto the truck or sitting in warehouses.
  • Consider specialized carriers, with satellite tracking for highly valued goods, like computers.
  • Common carriers are only liable for values declared in your bill of lading if a loss occurs.
  • Contract carriers transport goods only for customers with an ongoing contract; the contract dictates their liability for losses.
Durable low-value goods
Air Freight
  • Not handled as many times as motor freight.
  • May not always go by plane for the entire goods route, so packing must be secure.
  • Has high fluctuation of air pressure.
  • Most expensive, but typically takes the least amount of time.
Valuable, fragile or time-sensitive goods
  • Ocean freight involves “perils of the sea.”
  • Weight allowances for cargo are substantially bulky items that do not need more than air transport. speedy delivery
  • May be economical, but you may also have to pay for transport from dock to destination.
  • Be prepared for delays, which can be as long as four weeks.
  • Risk of moisture damage.
International freight; large
bulky items that do not need speedy delivery

Look for C_TPAT Carriers to Increase Security

Increased customs regulations. More stringent inspections. Added security measures. This is the reality of shipping your goods in a post­9/11 world.

Enter C_TPAT, the Customer¬Trade Partnership Against Terrorism. C_TPAT encourages businesses and govern¬ments to work together to enhance security procedures. C_TPAT¬compliant companies are committed to monitoring their own activities and adhering to programs led by the U.S. Bureau of Customs and Border Protection.

So what does this mean for your company? When shipping goods internationally, look for a carrier that is C_TPAT¬compliant. These carriers may experience fewer delays at U.S. Customs compared to others who do not comply. As a result, your products may keep moving – and be less susceptible to theft or other losses.

Insure Your Tech Cargo from Origin to Destination

How do you best protect your tech products, whether you’re importing servers from Malaysia or exporting computers to China?

One way, according to Patrick Smith, Transportation Product Specialist at The Hartford, is to make sure you have insurance that protects your goods from point of origin to point of destination.

For instance, if you regularly use trucks provided by a common carrier, Smith points to shipper’s interest coverage which protects you if your goods don’t arrive in the same condition or as specified in your bill of lading. Says Smith, “It’s good protection because you never know what happens to your goods once they’re driven out of sight.”

For companies that regularly ship goods internationally by air or sea, Smith says, “An open ocean cargo policy is a must-have. It offers protection from perils of the sea as well as other exposures to which goods in transit are typically exposed. Like a home equity line of credit, business owners pay a premium for how much or how little they use every month.”

Ocean cargo insurance has historically addressed risks of loss that are also of particular concern today.

  • War coverage insures against damage or loss to your cargo caused by a variety of hostile acts instigated by a sovereign power.
  • Strikes, riots and civil commotion coverage may protect against losses that are directly caused by terrorists or anyone acting with political motives.
  • Customs damage and detainment coverage pays for direct physical damage to your goods caused by customs officials while performing their inspections.

For more information about The Hartford’s full range of marine insurance, go to:

Your Opinions Welcome!
To make this newsletter as valuable as possible, we welcome your ideas and suggestions. If you have any feedback on this issue or story ideas for future issues, just e-mail them to Toby Levy, Technology Industry Manager, at

The information provided in this document is of a general nature, based on certain assumptions, and cannot be regarded as advice that would be applicable to all businesses. Readers seeking resolution of specific business concerns regarding this topic should consult their legal and insurance professional. We do not warrant that the implementation of any view or recommendation contained herein will result in the elimination of the dangers of theft, loss or damage associated with the transportation of Tech cargo.

This document provides an overview of coverages and services. Coverages may differ in availability by state. All coverages are individually underwritten. For a complete description of all coverages, terms and conditions, refer to the insurance policy. In the event of a conflict, the terms and conditions of the policy prevail. Riskbytes is brought to you as a service from The Hartford.
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Super Stretch Technology and Software Service Providers Summary


Information Technology LiabilitiesThis is a summary of the Coverages and the Limits of Insurance provided by the Super Stretch Coverage form SS 40 61 which is included in this policy. No coverage is provided by this summary. Refer to coverage form SS 40 61 to determine the scope of your insurance protection.

Blanket Coverage Limit : $250,000
Blanket Coverages
Accounts Receivable
Computers and Media Debris Removal
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Technology and Software Service Providers Stretch Summary


This is a summary of the Coverages and the Limits of Insurance provided by the Stretch Coverage form SS 40 12, which is included in this policy. No coverage is provided by this summary. Refer to coverage form SS 40 12 to determine the scope of your insurance protection.

Coverage Limit

Accounts Receivable – On/Off­Premises $ 25,000
Back Up of Sewer or Drain Water Damage
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