Minimise Risk of Doing Business in the U.S.
At a time when technology can make it feel like a customer in a different part of the world is in the next room, it can be easy to forget about the challenges that remain when contracting with a business overseas. European Technology and Medical Technology companies that contract with US entities or sell their products/services in North America, for example, must consider a range of risks that may not come into play when transacting business closer to home. Differences in regulatory structures – or simply differences in how conflicts are settled in the US – can expose a European company to significant expense when problems occur. It’s important to be familiar with the potential exposures based on local laws and jurisdictions when trading (whether purposefully or inadvertently) in the US.
An insurer who appreciates these differences and provides expertise to navigate them can help. When contracting with a US business, consider these factors:
Legal/damages landscape: UK and Irish businesses may be vulnerable to risks when trading in the US. There are US laws that may overrule a choice of law clause, including laws relating to competition, intellectual property and data protection, and federal and state laws on warranties, guarantees and product-related consumer protection. Further, several features of the US legal system increase the potential exposure of defendants that come before it. Damages may be assessed by a jury, rather than a judge. A jury assessing damages may sympathise with a US claimant – or many US claimants in the case of a mass tort.
The Public, Products, Professional Indemnity and Cyber Liability covers should provide worldwide jurisdiction, including North America, to enable the defence of a claim in North American courts. An undefended claim could result in a company losing the ability to trade in that market.
Contractual requirements: Contracts are the foundation of the relationship between the technology company and their customer. Contract terms can help regulate the relationship and manage risks. Clauses such as a waiver of subrogation, hold-harmless agreement, or additional insured clause, for example, should be agreed to only after legal consultation, since they can limit the rights of the insured and increase their liability.
Public, Products & Professional Indemnity insurance that automatically includes additional insureds will enable the technology company to meet their contractual obligations.
Vendor’s liability: When selling a product via a US distributor, cover may be required under the Public & Products Liability section for Vendor’s Liability to indemnify the distributor for distribution or sales of that product.
US subsidiaries: A business whose insurer can provide a global and compliant solution can connect with experts who are aware of the risks of conducting business in a specific region. UK or Ireland companies with US subsidiaries may need this level of support to understand what legal differences exist across states and jurisdictions.
Local claims handling: When something goes wrong, it can be a relief to speak with someone local who can provide the prompt claims support needed to settle a problem. Again here, the support of a global insurer ensures local support is available to insureds.
When a European technology company has exposures in North America, it’s important that their insurance solution provides the appropriate coverage & expertise necessary to handle the exposures including, contractual, regulatory & business risks.
Mark Lawrence is a Technology Underwriting Development Manager at Travelers Europe.
