3 Legs of the MSP Risk Mitigation Stool
MSPs who wish to significantly lower the likelihood of being sued and significantly increase the likelihood of surviving litigation need to implement the 3 legs of the MSP risk mitigation stool: legal agreements, certification, and insurance.
Outlandish Claims and Their Impact on Premiums
While you increase your odds of winning a lawsuit, it does not prevent someone making an outlandish claim against your MSP practice. Outlandish claims can have a profound effect on insurance premiums. These claims often lead to increased scrutiny and higher costs for carriers, resulting in higher premiums for policyholders. The nature of these claims can be absurd, yet they must be addressed with the same level of seriousness as any other claim. Taking the preventative steps mentioned above will increase your odds of winning.
The judicial system mandates that all claims be tried, regardless of their merit. This requirement increases the overall costs for insurance companies, as they must allocate resources to defend against every claim. The necessity to try all claims can lead to prolonged litigation and higher expenses.
Accumulating Legal Defense Expenses
Legal defense costs can quickly accumulate, placing a substantial financial burden on insurance carriers. The need for a robust legal defense is crucial, as it can determine the outcome of litigation and the financial impact on the carrier. Lawyer fees, in particular, contribute heavily to the overall expenses.
When you have an MSP practice leveraging the contracts, certification, and insurance, you can improve your options when facing a plaintiff in a dispute.
The Role of Forensic and IT Experts
In complex cases, the involvement of forensic and IT experts is often necessary. These experts provide critical insights and evidence that can make or break a case. However, their services come at a high cost, adding to the financial burden of litigation.
Financial Burden of Lawyer Fees
Lawyer fees are another significant component of the financial burden associated with MSP litigation. The expertise and time required to defend against claims can lead to substantial expenses. Insurance carriers must be prepared to invest in quality legal representation to navigate these challenges effectively.
Carrier Responsibility in Defending Claims
Insurance carriers bear the responsibility for defending all claims, regardless of their nature. This responsibility underscores the importance of having a comprehensive legal strategy in place. Effective legal defense is essential to mitigate costs and protect the MSP’s interests.
Rising Premiums Due to Claims
The nature and frequency of claims can lead to a rise in insurance premiums. As carriers face increased costs from defending against outlandish claims, these expenses are often passed on to policyholders in the form of higher premiums. Understanding this dynamic is crucial for both carriers and policyholders. However, when you are implementing best practices around MSP risk mitigation, your insurance carrier should reflect that investment in the form of lower premiums!
Understanding Cost Implications
Understanding the cost implications of MSP litigation is essential for the insurance industry and the MSP. Carriers must be aware of the financial burden associated with defending claims and the impact on premiums. By comprehensively understanding these costs, carriers can better prepare for and navigate the challenges of MSP litigation.
Surviving MSP litigation is possible. When MSPs implement a comprehensive strategy around best practices, articulated agreements, and cyber insurance, the odds of winning increase dramatically. These practices do not necessarily change the likelihood of someone bringing a case against your MSP practice, but it can certainly weigh in your favor as the merits of the case (or lack thereof) become evident.