-Partners in Practice -

A decade ago the problem scarcely existed. How best to safeguard a sophisticated, costly computer system was not high on the list of burning issues for more than a handful of architects and engineers.

Today this is no longer so. Thousands of firms across the country have turned to automation, not only to relieve burdens of management and administration, but to enhance design and production capabilities, as well. Now even the smallest of firms are beginning to venture into CADD. Yesterday's competitive edge is rapidly becoming tomorrow's essential resource.

All this represents a dramatic change in the nature of professional practice. We are moving from a highly labor intensive to a highly capital intensive professional environment. Major investment decisions have to be made, and there are risks to be considered as well as rewards.

Unlike most of the furnishings and equipment in your office, your computer system is vulnerable to "perils" you may have considered unimportant in the past: Smoke, dust, electrical disturbances, mechanical malfunction, temperature extremes, and humidity are examples. Unintentional (or even malicious) destruction or alteration of data are others.

Should the janitorial service inadvertently turn the thermostat to "bake" late one Friday night, you could find yourself with a serious problem early Monday morning. In a very dry environment, your operations could be thrown into turmoil by static electricity. Should a disgruntled employee gain unauthorized access to your system, the result could be disastrous. In any event, the cost of sorting it out and putting it all back together again could be substantial.

None of this is news to most architects and engineers. What may come as a surprise to some, however, is that these losses may not be covered by insurance. If your computer is simply included as another unscheduled item under the standard property insurance you carry, such coverage is unlikely.

Most forms of property insurance, including the so-called, "all-risk" policies, provide little or no protection where, at least as respects your computer system, it may be needed most: Losses caused by power fluctuations, temperature extremes, corrosion, and contamination are typically excluded.

You could even find yourself less than whole after a loss which is covered--a fire, for example. Your recovery of the cost of reconstructing proprietary software (or the data you have so meticulously compiled) is likely to be limited to $1,000 at best.

Special insurance protection for your computer system is available, but whether you need special coverage may well depend upon conditions unique to your practice. As you consider your options, you might raise these questions: 1) How much do we really stand to lose? 2) What are the real risks we face? 3) What steps can be taken to minimize or eliminate those risks? 4) What insurance alternatives are available at what cost?

You can address the first three of these questions on your own. The guidelines set forth below may assist you in doing so. The final question, however, is something you may want to discuss with us. Not all "Electronic Data Processing" policy forms are the same, and even the most comprehensive may require modification to meet your specific needs.

What you have at stake depends upon how vulnerable you are to losses arising from the investments you have made. Certainly there is a value to be placed on your hardware and software. In the event of a total loss, both would somehow have to be replaced.

Beyond this, you need to consider the cost of reconstructing essential data that may be destroyed, altered, or erased. You may also face the possibility of extra expense should you be forced, on a temporary basis, to resume operations immediately following a loss. There may even be the possibility of a loss of income should damage to your computer cause an interruption in your business or professional activities. Each of these potential exposures needs to be evaluated (and valued) separately.

Establishing a replacement value for computer hardware can be a bit like tossing darts at a dartboard. A few years hence, you are likely to be able to replace your present system for substantially less than you paid for it. Thus, it may not make sense to insure it at full replacement value. On the other hand, insuring your system at actual cash value can leave you with less coverage than you need. Fortunately, there is another alternative.

The fact is, you are unlikely to want to replace your present system in the future. More probably, you will want to upgrade your equipment to take advantage of new technology and declining costs. Because it may be possible to make a special arrangement with your insurer for replacement on an upgraded basis, you might look ahead to the next generation of equipment you are going to need. If its cost bears a reasonable relationship to your insurable interest in your present system, you may be able to specify that cost in lieu of the replacement value of the equipment you have.

The cost of reconstructing data stored on disk or tape can be far more difficult to estimate than the value of your equipment. The risk of losing that data, however, is more easily controlled. It can make a lot of sense, and it is likely to be far less expensive in the long run, to have periodic, back-up copies of your data base and working files made for storage at a remote location. You can even keep them at home, if necessary. Many firms copy their files daily; others do so on a weekly or a monthly basis.

This has the effect of limiting the risk of loss to that small portion of your payroll records, accounts receivable, project management files, and design data represented by work in progress. Not only is the cost of reconstructing this data easily estimated, it is something you can insure without having to increase your line of credit at the bank. It may even be something you can choose not to insure without losing sleep at night.

You can also take steps to control the environment in which your equipment is operated. You can install both physical and systems safeguards to prevent unauthorized access. Sprinklers can reduce the risk of fire (and introduce the risk of sprinkler leakage). Ready access to an alternate system can help to control extra expense and potential loss of income.

Such preventive measures reduce your need for insurance. But, after you have considered reasonable precautions, you will probably want to evaluate the insurance alternatives. Give us a call. We would be pleased to lend whatever assistance we can.

For inquiries or problems please contact us via e-mail at Earleen Thomas or call us directly at 800-705-7742.
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