If your business gets hit with a demand letter or lawsuit, your first inclination might be to get rid of the problem as soon as possible. In the tech world, particularly for companies that are just getting off the ground, the last thing you need is expensive litigation to burden your bottom line, or adverse publicity that could give an edge to your competitors.
Most business owners procure basic insurance protection as part of their standard business operations. As the business grows, insurance coverage and limits are broadened. But the pressure to get rid of claims fast can make even the most prudent business executive take a “settle now, check other boxes later” approach. This might be a big mistake—and one that could be easily remedied by taking some simple early steps.
Most insurance policies contain “no action” and/or what is known as “no voluntary payment” or “no voluntary settlement” clauses. These clauses typically look like this:
No insured will, except at that insured’s own cost, voluntarily make a payment, assume any obligation or incur any expense other than for first aid, without our [that is, the insurer’s] consent.