Advertising Agencies & Risk
Any advertising agency faces risks related to protecting physical property used to conduct business, such as valuable computer equipment, forming marketing strategies that target the right audiences, providing appropriate service to clients and even covering employee health and safety concerns as your agency grows in size.
Advertising Agency Insurance
Advertising agencies often handle risks associated with how advertisements are perceived, physical property, and legal requirements to protect workers. For most liability concerns, advertising agencies will likely find value in the following insurance policies:
- Business Owners Policy (BOP)
- Workers Compensation
- Errors and Omissions (E&O)
Let’s explore why these policies hold value for agencies.
Business Owners Policy (BOP)
A Business Owners Policy combines aspects of a few distinct policies that are applicable to advertising agencies, particularly General Liability and Commercial Property. Depending on how your agency operates, the Commercial Property aspect may or may not be as applicable as the General Liability feature. However, the General Liability coverage is perhaps one of the most important for ad agencies.
General Liability coverage offers an advertising agency protection against third party claims. This includes any claims related to bodily injury or property damage, such as a client slipping and falling while visiting your offices. While a General Liability policy also offers protection for advertising injury, such as copyright infringement, this only extends to advertising for the business itself. Coverage for issues in regard to advertising or promotion created as part of work for a client would require an Errors and Omissions policy, as detailed below.
Meanwhile, the Commercial Property aspect of a BOP may cover your business property should that be a concern. Many advertising agencies increasingly rely on technical equipment to create and produce advertising material. This can include cameras for video production as well. That property, as well as the offices your business operates from, can be covered under a BOP.
Workers Compensation
Whether a Workers Compensation policy is mandatory depends on the state you operate in and number of employees. While the requirement varies by state, coverage will often be required once your company has 3-5 employees. While advertising is generally not a high-risk industry for physical injuries, ignoring your legal obligations to purchase this insurance could be significantly costlier than the insurance itself.
Additionally, settlements can be high for uninsured companies and can easily reach into the tens of thousands of dollars, a far greater cost than purchasing the insurance. Workers Compensation will cover lost wages and medical expenses for injured workers so your company does not have to bear the expense.
Errors and Omissions (E&O)
Errors and Omissions insurance, also referred to as media liability insurance, is a valuable coverage for an advertising agency. In this industry, mistakes or perceived errors can be quite costly, both for your clients and the ad agency.
A typo, instance of copyright infringement, or inaccurate description in an advertisement can cost the client a lot of money, while the agency may be held liable for all associated costs (including lost business). Subsequent lawsuits are generally also covered by the policy, mitigating the risk and reducing the cost to you. Given how quickly such mistakes can spread in an online space and impact a company’s brand, E&O is possibly more valuable than ever for ad agencies.
What type of insurance does this industry need?
- General Liability: This policy protects your business in case of third party claims, such as bodily injury or property damage. For example, the common "slip-and-fall" claim would be covered by your General Liability policy. General Liability insurance is often considered to be the core coverage, particularly for businesses that regularly physically interact with customers or sell physical goods. In addition, many businesses have a contract, like a loan or a lease, requiring that they have this coverage.
- Professional Liability: This policy, common in the professional services industry, helps to protect your business if a client believes they've suffered a loss due to a mistake or error made in a professional capacity. Your business may have contracts with clients or partners that require Professional Liability coverage, provide a "warranty or guarantee," or have clauses that require you to "indemnify or hold harmless" your clients. If so, Professional Liability coverage is often recommended. This coverage is also commonly recommended for any businesses providing advice related to legal or financial matters.
- Errors & Omissions (E&O): This policy, common in the professional services industry, helps to protect your business if a client believes they've suffered a loss due to an error or omission on your part. Your business may have contracts with clients or partners that require E&O coverage, provide a "warranty or guarantee," or have clauses that require you to "indemnify or hold harmless" your clients. If so, E&O coverage is often recommended. This coverage is also commonly recommended for any businesses providing advice related to legal or financial matters.
- Workers Compensation: Workers Compensation covers an employee's lost wages and the cost of resulting medical treatment if they suffer a work-related injury or disease. It also covers services needed to help the employee recover and return to work. Workers Compensation coverage is mandatory in most states. The number of employees after which it's required differs by state, but you will generally need coverage once you have employees.
- Commercial Property: This policy protects the business's physical assets and is appropriate whether you own or lease your space. Keep in mind that this policy will only offer protection in the case of covered events. If you need protection for certain scenarios, such as floods or earthquakes, you may need additional coverage. If you have a mortgage or a lease, you may be required to have property insurance. Even if you are not, this is the best way to protect the building you are in and the business property you have in case of a natural disaster or some other accident.
- Cyber Liability: Cyber Liability insurance helps to protect a company that has been the victim of a cyber attack or data breach. When confidential records are breached, companies face a variety of fees (e.g., notification costs, credit monitoring, defending claims by regulators, fines and penalties), and this policy will help to cover those claims If your business collects or stores personally identifiable information on customers or employees digitally, there's the risk that this information may be breached and your company will face significant fees. Cyber Liability insurance, alongside cyber security and an effective response plan, is a simple way to protect your business from these potential costs.
