Many of our clients who are new to handling technology claims or only handle the occasional claim as part of a larger portfolio, ask us for our advice regarding areas they should focus on when a new claim is notified.
Here are some of the main areas we suggest for review when a claim comes in:
- Get the right documentation from the start: Tech disputes are predominantly contract focused and it is important to obtain a full set of contractual documentation early on including pre-contractual sales documentation, scoping documents, project plans and termination correspondence
- Termination conduct: We see many disputes where the insured has substantially damaged its position by its conduct after a dispute has arisen. It is important to make sure the insured is not proposing to do anything which might make matters worse such as refusing to continue to perform the contract (thereby giving the claimant grounds to argue the insured has repudiated)
- Ascertain the scope of the contract: Once a dispute has found its way to insurers it is surprising how often one or both sides have lost sight of what they contracted to do. Insurers can often help by pulling the debate back to what the parties are actually contractually entitled to
- Terms regarding timeframe: many technology disputes are essentially delay claims. It is important to establish issues such as whether there are contractual penalties for late delivery, (and if there are whether they are insured) and whether time is of the essence. If it is the client may be able to terminate for delay. If it is not, it is very difficult to terminate a technology contract where the vendor is attempting to perform it – albeit slowly
- Scope Creep: Commonly disputes relate to changes in the project scope, who should pay for them and the extent to which they justify project delays. Consider the evidence that the changes were agreed and understood by the customer. Does the contract allocate the costs, or specify the effect of changes; has proper change control procedure (such as the issue of change orders) been followed?
- Termination Provisions: Ascertain that the proper procedure has been followed after termination/escalation of the dispute. Consider the contractual remedies that are alternatives to a legal claim. Is there a sole remedy clause; are there additional performance commitments which may be outside the scope of coverage; are any warranties subject to challenge because they are effectively limitations/exclusions?
- Limitations and Exclusions: A variety of contractual caps may apply. However, are they enforceable and do they apply to the dispute in hand? In the case of exclusion clauses, are they as wide as the insured thinks they are, eg exclusions that apply to “consequential” or “indirect” losses that the insured wrongly considers will apply to claims for lost profit or business benefits which are in fact direct losses as those losses would have been reasonably foreseeable by the parties when the contract was made