The challenge
A leading SaaS provider specializing in cloud-based IT management faced a critical challenge when a major client filed a lawsuit, accusing them of breaching their contract. The client alleged the provider’s platform contained significant security vulnerabilities, making it practically unusable, and demanded a substantial refund for prepaid subscription services and implementation fees totaling $3.4 million.
This wasn’t just a financial headache—it was a direct threat to the SaaS provider’s reputation, financial stability and ability to win future business.
How the policy responds
A proactive approach
Since the SaaS provider held a technology policy with CFC, we offered vital support to navigate the crisis. First CFC helped to identify an appropriate defense attorney, crucial in assisting them in defending the lawsuit. The defense counsel conducted a thorough investigation, analyzed the contract terms, client allegations and took all immediate procedural steps to protect the insured’s interests in the lawsuit.
As such, potential coverage under the policy was quickly determined, enabling the policy to immediately respond to covering legal costs in defending the claim. At the same time, certain elements of the claim were considered “unjust enrichment” and so outside the scope of indemnity coverage.
CFC quickly engaged with the insured and defense counsel to explore potential resolutions. Taking this proactive approach, we aimed to expedite the resolution process, minimizing potential costs and helping the insured to move forward and continue to operate fully as a business.
Negotiation and mediation
Even though the “unjust enrichment” exclusion seemed to apply to a part of the claimed damages, CFC decided to waive the consent to settlement condition. This allowed the insured to join a mediation and try to resolve the dispute before the parties incurred litigation costs. The goal was to facilitate a swift and amicable resolution while still preserving CFC’s rights
under the policy.
A successful outcome
Through skillful negotiation and mediation, the parties reached a mutually agreeable settlement of $3 million. CFC contributed a portion of this settlement for the covered parts of the claim. This successful resolution not only mitigated the insured’s financial loss but also protected their reputation and allowed them to maintain business continuity.
Key takeaways:
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Proactive risk management
Prompt notification and engagement with the CFC claims adjusters are crucial in effectively managing complex claims.
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Strategic negotiation
A collaborative approach between CFC, the insured and counsel can lead to successful outcomes and minimize financial impact.
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Deep industry expertise
CFC’s understanding and appreciation of the unique
risks and challenges faced by SaaS companies is essential for providing effective coverage and guidance.
Results
Significant cost savings: CFC’s proactive involvement and strategic guidance
helped the insured avoid potentially substantial litigation costs, including expensive
legal fees and potential reputational damage.
Legal disclaimer: These examples are intended for illustrative purposes only and not intended to address the circumstances of any particular insured. Each claim submitted to CFC by an insured is based on the terms and conditions of the coverage provided to that particular insured and the facts and circumstances relating to a particular claim.
