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Insurance product targets enterprises using open source

Oct 31, 2005 — by LinuxDevices Staff — from the LinuxDevices Archive — views

Three companies will create an insurance product for large corporations using open source software. Open Source Compliance Insurance will be underwritten by Kiln of London, and brokered in England and the US by Miller Insurance Services. Open Source Risk Management (OSRM) will serve as advisor and exclusive worldwide risk-assessor.

OSRM began offering three “reinsurance” (definition) products for open source software users in April of 2004. It says more than 30 legal claims alleging open source license infringement have been brought against corporations during the last two years, with plaintiffs prevailing in each case.

Open Source Compliance Insurance will cover up to $10M for direct loss from license suits, as well as loss of profits due to product withdrawal or alteration. It will also cover “impaired valuation” of acquisition agreements exchanging open source software — open source compliance is excluded from standard “Errors and Omissions” insurance, and is a concern for privately-held technology companies seeking to be acquired, go public, or obtain equity financing, OSRM says.

Open source license compliance is also a potential material risk for public companies reporting finances under Sarbanes-Oxley, according to OSRM.

Companies most at risk of license disputes are those using open source software within proprietary software, such as trading tools or inventory management applications, OSRM says. If such applications are distributed in any form — to trading partners via an extranet, for example — companies are then obliged to distribute them to everyone — including competitors — under the GPL, OSRM says.

Kiln Risk Solutions's underwriter, Matthew Hogg, said, “Open source risk is already material to many Global 2,000 companies, and will soon be an issue for both large and small enterprises. We anticipate significant worldwide demand for this product.”

OSRM CEO Daniel Egger said, “Not every company using open source is exposed to risks, but it is critical that companies take licenses seriously and fully understand what constitutes violation and therefore exposure. This product will help eliminate one of the last reasons for corporate resistance to Linux and other open source software.”

Miller's director of science and technology, Ian Lewis, said, “Open Source is one of the most important emerging trends in technology, and sophisticated clients are already demanding solutions in this area.”

Additional details are available in an eWEEK story, here.

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