February, 2001

Shand Morahan and Company

1. GENERAL DESCRIPTION

Shand Morahan offers errors and omissions coverage for information technology (IT) professionals. The policy is written on a claims-made basis, with an optional extension period. It offers two distinct coverages: errors and omissions and intellectual property infringement.

2. CONTACT

Shand Morahan and Company Shand Morahan Plaza Evanston  IL  60201 (708) 866-0711 FAX: (708) 866-0866

3. UNDERWRITING GUIDELINES

Not provided.

4. AVAILABILITY OF COVERAGE

All states.

5. LIMITS AVAILABLE/DEDUCTIBLES

Information not made available.

6. INSURING AGREEMENT

Coverage A – E&O Liability: the policy promises to pay on behalf of the insured all claims arising out of any error or omission in professional services.

Coverage B – Intellectual Property Right Infringement: the policy promises to pay on behalf of the insured all claims arising out of the insured's infringement of someone else's intellectual property.

7. DEFINITIONS

The following terms are defined:

     Claim—a demand received by the insured. A claim includes arbitration proceedings.

     Claim expenses—connected with the settlement and investigation of the claim. The policy says that the insurer determines the “reasonableness” of such expenses.

     Damages—monetary damages. Fines and penalties are not damages, nor are the return of fees by the insured. The term also does not include actions by the insured to correct his/her professional services. Note that the policy is silent on whether or not punitive damages are covered.

     Intellectual property—copyright, service mark, service name or trademark, title, trade dress, trade name or slogan. The definition specifies that a patent is not intellectual property.

     Policy period—as indicated on the declarations page.

     Professional services—the IT services indicated on the declarations page.

8. WHO IS INSURED

In addition to the person or organization shown on the declarations, named insured includes partners, officers, directors, and shareholders while acting in their capacity as such.

The policy says the following are insureds: employees of the named insured or a predecessor firm; former partners, directors, and employees; heirs and legal representatives of the above.

9. WHAT IS INSURED

Liability

The Shand policy provides E&O coverage for claims arising out of the insured's rendering (or failure to render) the professional services described in the declarations. It includes the infection of a client's computer system.

The policy also covers claims that allege infringement of intellectual property or unfair competition. The acts that give rise to a claim—under both sections—must happen during the policy period and after the retroactive date.

10. EXCLUSIONS

The policy covers all claims for the above coverages except:

A.     Knowingly wrongful acts committed by the insured.

B.     The insured's liability as a director, partner, etc. of a business not named on the declarations.

C.     ERISA liability.

D.     Discrimination.

E.     Securities Act.

F.     Liability assumed in a contract.

G.     Express warranties or guarantees.

H.     Unauthorized access to the insured's EDP equipment.

Two exclusions apply only to the coverage for errors and omissions:

A.     Patent infringement.

B.     Any claim covered by coverage B, intellectual property infringement.

Three exclusions apply only to the coverage for infringement of intellectual property:

A.     Failure to obtain a site license.

B.     Patent infringement.

C.     Infringement of a copyright or trademark for anything on a Web site that the insured designs or maintains.

11. CONDITIONS

The following conditions appear in the policy:

A.     Defense, settlement.

B.     Discovery clause—the insured must give notice of any acts, errors, or omissions that might result in a claim.

C.     Optional extension period—the policy may be extended for 12 months following cancellation or nonrenewal.

D.     Territory—worldwide.

E.     Limits of liability—a limit applies to each coverage, as well as to the entire policy.

F.     Multiple insureds, claims, and claimants—do not increase the limits.

G.     Payment of claim expenses—even though expenses are included in the deductible, the insurer may pay them up front.

H.     Notice of claims.

I.     Assistance and cooperation of the insured.

J.     Subrogation.

K.     Fraudulent claims—the insurance is void as of the date of a fraudulent claim.

L.     Application.

M.     Other insurance—this policy is excess of other valid and collectible insurance.

N.     Cancellations—non-pay requires a 10-day notice; all other reasons, a 60-day notice.

O.     Audit—the insurer may audit the insured's books any time within 3 years after the policy terminates.

P.     Premium adjustment—the premium may be based on the insured's total gross receipts, in which case the insured must turn over evidence of the total gross receipts.

Q.     Service of suit.

R.     Integration of document—all provisions are to be read together as one document.

S.     Use of singular and plural—any defined term may be used in either the singular or plural.

T.     Authorization—the named insured agrees to act on behalf of all other insureds.

U.     Changes.