Liability insurance for an app development company
As long as an app only fills screens, an agency's liability risk is limited. As soon as that app controls a door, a machine or a vehicle, the conversation changes.
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In brief
For a software agency the AVB is a policy with a narrow but real function. It covers injury and property damage: a developer who knocks over a server rack at a customer's premises, a visitor who falls during a demo in your office, fire or water damage in the building you rent. Ask expressly about the clause for tenant's liability, because that is not always included as standard. The main outline is on the hub page public and employers' liability insurance.
More interesting is the boundary that shifts as soon as you control hardware. An app that operates an access system, regulates a refrigeration installation or reads a production line can certainly cause physical damage if something goes wrong: spoiled stock, a damaged machine, injury. There is then no longer merely financial loss and the AVB comes into play. At the same time that policy has an exclusion for the item supplied itself and for the cost of replacing or redeploying your software.
The rest of your claims risk lies elsewhere. A failed project, an overrun budget or a delivery the customer refuses belongs on professional indemnity insurance. Data breaches and ransomware belong on a cyber insurance for IT companies. Disputes about invoices and contracts you deal with through business legal expenses insurance.
This page deals with one situation. The full overview is on Compare public and employers' liability insurance (AVB).
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What to look out for
Four points on which a software agency's policy is tested in practice.
Software that operates something physical
If you build apps for logistics, building management, medical applications or machine control, declare that by name. Insurers assess this as a different risk from a marketing app and sometimes impose additional conditions. If it is not declared, the insurer can point to the Articles 7:928 and 7:930 of the Dutch Civil Code about the duty of disclosure.
Your people at customers' premises and on the road
Developers seconded to work at a client's premises remain under your duty of care. If you work with freelancers under your direction, Article 7:658(4) of the Dutch Civil Code applies to them as well. If staff drive for work, the ordinary AVB is not sufficient for that and you should look at WEGAS and WEGAM.
What falls outside the cover
Excluded are pure financial loss, the cost of repairing or replacing your own software, customers' equipment that you in your care infringement of intellectual property and licence conditions, administrative fines, contractual guarantees above liability in law and intent under Article 7:952 of the Dutch Civil Code.
Office, visitors and rented space
If you receive customers, trainees or users for testing, your office is a place where injury can occur and for which you are responsible as the occupier. If the building belongs to a landlord, check whether tenant's liability is included and which part of the installations is for your account under the contract.
What does your premium depend on?
- Annual turnover: split between development, management and advice
- Payroll and team size: the basis for employer's liability
- Field of application of the software: consumer apps or the control of equipment
- Secondment and work on site: more presence at third parties' premises means more risk of damage to property
- Area of cover: supply outside the European Union requires a separate assessment
- Sum insured and excess: per claim and per insurance year
Insurers weigh these details differently. That is where your saving is.
What is covered
| Situation | AVB | BAV |
|---|---|---|
| A trainee falls down the stairs in your office during a demo evening | Yes | No |
| A seconded developer is injured at the client's site | Yes | No |
| An overheated server cabinet sets fire to the office building you rent | Provided that | No |
| An error in the invoicing module costs the customer a month's turnover | No | Yes |
| The Autoriteit Persoonsgegevens imposes a penalty payment after a leak in the app | No | No |
| The customer breaks off the project halfway and demands the instalments paid back | No | No |
With every claim the first question is not how large the amount is, but whether something was broken or someone was injured.
Frequently asked questions
This is what people ask us most.
Our app controls a refrigeration system and the stock has spoiled. Covered?
This is the case in which a software error does produce damage to property, and the AVB can then come into play. What is decisive is whether the risk was declared and whether your capacity covers this work. Repairing or redeploying your own software remains excluded. That is performance of your assignment and not damage to someone else's property.
A developer damaged equipment in a customer's server room.
Damage to a third party's property falls within the cover, provided the business is liable under Article 6:162 of the Dutch Civil Code. The exception is equipment you had in your care for the work, for example during a migration: that falls under the care, custody and control exclusion. Report the loss straight away and have it recorded what was there and in what condition.
We hire in freelancers. Do they fall under our policy?
For the duty of care, yes: if they work under your direction, Article 7:658(4) of the Dutch Civil Code applies to them as well. For their own professional errors, not automatically. Ask for a certificate of insurance, therefore, and set out in the agreement who delivers which part. Report the number of hired-in workers to your insurer, because it counts in the assessment.
The customer requires cover of a certain size in the contract.
That is usual in tenders and framework contracts. Note that the amount asked for often relates to professional indemnity insurance and not to the AVB, because in software projects the risk is financial loss. Have the contract set alongside both policies before you sign, so that you do not promise cover you do not have.
Every situation is different. For these situations we have a separate page.
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