I was in the server room installing a rack-mounted unit. I tripped over a cable, and my oversized travel mug splashed hot coffee directly into the vents of the client’s $100,000 legacy mainframe. It shorted out instantly. The client isn’t just asking for a replacement; they want payment for the 2 days of downtime and the data recovery.
Key Takeaways
- The Split Claim: This is the perfect example of why you need both General Liability (GL) and Professional Liability (E&O).
- GL pays the Hardware: Your General Liability covers “Property Damage” to the mainframe itself ($100k).
- E&O pays the Data: Your GL excludes “Electronic Data.” The lost data and downtime costs must be paid by your Tech E&O.
- Care, Custody, Control: If you were “working on” the machine, GL might exclude damage to that specific machine under the “Damage to Your Work” clause. You need a “Voluntary Property Damage” extension.
The “Why”: The Property Damage Exclusion
The Trap:
- In E&O: “We exclude property damage.” (So E&O won’t pay for the melted circuit board).
- In GL: “We exclude damage to electronic data and financial loss.” (So GL won’t pay for the downtime/data).
The Solution: You need a Tech Package Policy that handles the hardware under GL and the intangible loss under E&O without pointing fingers at each other.
The Investigation: I Quoted 3 Major Carriers
1. Travelers (Tech Package)
- My Analysis: Travelers writes a seamless package. If you spill the coffee, one adjuster handles both the hardware and the data claim. This is the “no headache” option.
2. State Farm (Standard BOP)
- My Analysis: Their BOP covers the hardware (GL). But their “Tech E&O” endorsement is often weak on data restoration costs. You might get the $100k for the server but be sued for the $50k data loss.
3. The Hartford
- My Analysis: They have a specific endorsement for “Damage to Property of Others” while in your care. This overrides the “Care, Custody, Control” exclusion. Essential for onsite technicians.
[IMAGE: Venn diagram showing GL (Hardware) vs E&O (Data) coverage areas]
Comparison Table: Hardware vs. Data
| Carrier | Hardware Coverage (GL) | Data Coverage (E&O) | Unified Claim? | Best For… |
| Travelers | Excellent | Excellent | Yes | Onsite Techs |
| Hartford | Excellent | Good | Yes | MSPs |
| State Farm | Good | Weak | No | Low Risk |
Step-by-Step Action Plan
- Unplug Immediately: Safety first. Don’t get electrocuted.
- Admit the Accident: This is a physical accident, not a nuanced design error. “I tripped.”
- File GL Claim First: Report the property damage.
- File E&O Claim Second: Report the potential “Loss of Use” / Data claim.
FAQ
Does my business property insurance cover this?
No, that covers your laptop. You need Liability insurance for their mainframe.
What if I didn’t have coffee?
If you just dropped the server, it’s the same thing. Negligent handling of property.
Is there a deductible for both?
Usually, yes. You might pay two deductibles if the policies are separate.