Avoid threats to your business from liabilities caused by technology errors and omissions as well as from the consequences of a data breach.
Technology Errors and Omissions Insurance Claims Can Happen To Your Business
It’s a high tech firm’s worst nightmare: The product you designed, built and sold suddenly isn’t performing as it should. Your customers’ businesses grind to a halt because your product isn’t working. First, they call you, demanding a prompt fix. Next, they call their attorneys to begin legal proceedings against you.
This is why companies that produce high-tech hardware and software purchase technology errors and omissions insurance, sometimes called performance insurance. If the worst-case scenario comes true, they’ll be covered. Technology errors and omissions insurance provides coverage for costs associated with the malfunction of a policyholder’s product, from the cost of fixing the error and replacing the product to the lost business customers experience because of the product’s failure.
In today’s business environment, technology errors and omissions insurance is essential. Whether you’re a contractor, an employer, a full-time employee, a programmer, computer repair technician, or the CEO of a computer consulting firm, you’re at risk of being sued for errors or oversight
We provide coverage with targeted protection against breach of contract liability, negligence and payments relating to data breach notification, legal liability, and network attacks.
Who Benefits from this Coverage?
■■ Application Services Providers
■■ Billing Software Providers
■■ Co-Location Services
■■ Data Warehousing
■■ Managed Hosting Services
■■ Custom Software Developers
■■ IT Consulting Services
■■ Project Management
■■ Backup/Disaster Recovery Services
■■ Cloud Computing Services
■■ Telecommunications
■■ Technology Training Services
■■ System Implementation Services
■■ Internet Service Providers
■■ Data Processing
■■ Website Design Services
What is Tech E&O?
Technology errors and omissions insurance, or Tech E&O, is coverage for IT professionals and companies. There are many causes of technology errors and omissions suits: software crashes, hardware failures, and network interruptions, that can be caused by a wide variety of factors. Tech E&O does not require the events that lead to the faults to be intentional—negligence or consultation that led to unforeseen problems are also grounds for a suit. In addition, the timeframe for Tech E&O suits is wide; litigation may be brought against you months after work has been completed. As the IT landscape expands into mobile and cloud computing, and more and more companies turn to technology to manage their businesses and engage customers, the risks for IT professionals broaden. Tech E&O allows you to focus your time and energy on your profession.
Technology E&O professional liability protects your company from claims if your client holds you responsible for programming errors, software performance, or the failure of your work to perform as promised in your contract.
Coverage includes legal defense costs – no matter how baseless the allegations. E&O insurance will pay for any resulting judgments against you, including court costs, up to the coverage limits on your policy.
Coverage extends to both W2 employees and 1099 subcontractors, and can be worldwide in scope.
Why Do I Need Technology Errors and Omissions Insurance?
Technology errors and omissions insurance is a must for IT professionals, as computer and technology-related industries are growing rapidly and in a constant state of change. In many instances, laws and legal protections lag behind developments in the field, leaving IT workers in a precarious position. The integral role technology plays in many large businesses means the damages caused by malfunction can be extremely costly. Even if your firm is not found liable the cost of a suit and harm to your company’s reputation can be enough to put you out of business. Tech E&O not only covers you in case of litigation, having technology errors and omissions insurance will also cause companies to think twice before suing you. Lawsuits resulting from coding problems, security breaches, hardware issues, and IT consultation are not covered by general liability insurance. If your company provides any kind of IT service, or employs contractors or subcontractors that do, it’s essential you’re covered by technology errors and omissions insurance.
Don’t Be Fooled. Professional Liability Insurance coverage is not provided by a Commercial General Liability policy. Commercial General Liability does NOT provide coverage for programming errors, contract performance disputes or any other Professional Liability issues. IT consultants and companies who have General Liability without Professional Liability (Errors or Omissions) coverage are taking a serious risk. It’s like a doctor practicing medicine without Malpractice insurance.
Mistakes Happen. Every company messes up at some point. For example, you recommend to a client that they run a certain test of their system, after you did some extensive work on it. The client takes your advice, the system crashes, and they are unable to conduct business for a whole week. The client becomes enraged, calls his attorney, and looks to you for reimbursement.
You Can’t Be Everywhere. Sometimes you can’t personally handle every job. E&O coverage insures not only your mistakes, but also the mistakes of the employees and Independent Contractors you hire.
Most Importantly: Technology E&O professional liability insurance might save you from extreme embarrassment, a lost client, or worst of all, a bad reputation.
It can be required by web hosting companies, as well as by investors, particularly VC’s.
What are some examples of actual claims regarding Tech Professional Liability Insurance?
A software developer was hired to provide special tax revenue collection software for a state agency in the southern US. The contract amount was approximately $11 million. The consultant failed to deliver the software in a timely manner, resulting in a significant loss of tax revenue to the state. The state agency sued and the trial court returned a verdict in favor of the state agency in the amount of $474 million, much of which was punitive damages. This is an example of a claim where the consequences of an error or omission greatly exceed the value of the work completed.
A large, publicly traded company’s entire database was encrypted by a disgruntled employee. A ransom note read in effect: ‘try to crack the code or pay me $1,000,000 and I’ll give you the password’. The company paid the $1,000,000.
An accounting firm wanted to upgrade their office desktop technology. In the process of replacing their old computers they ‘cleaned’ the hard drives as the manual suggested prior to throwing them out. A hacker recovered the discarded computers and restored the data on three of the hard drives. He then threatened to disclose the financial records of the firm’s private clients. The firm bought back the hard drives from the hacker for a multi-million dollar fee.
Hacking Repeated denial of service attacks by a computer hacker have virtually shut down a state’s Public Access Network Computer. The attacks have overwhelmed the computers capacity to respond to requests for an electronic handshake by sending as many as 150 bogus requests a second.
An Internet Service Provider (ISP) was the victim of a hacker attack. The hacker planted swastikas and racist messages on web pages while masquerading as the provider’s administrator, erased data on two computers and shut down the system. The ISP was unable to operate for approximately 12 hours, and files created in the several days prior to the attack were lost.
Loss of Data. A personal laptop computer stolen from a data processing center contained the account numbers for over 300,000 credit card customers of several major issuers.
A technical instruments manufacturer had a disgruntled employee delete their entire database. It cost the company $7.8 million in lost revenues and $2.2 million to replace the lost data.
Examples of other exposures: service outages and interruptions; faulty technical support; faulty security measures; release of confidential
information; designing, constructing or maintaining an Internet site; maintenance of chat rooms or bulletin boards; and faulty software.
| Coverage Comparison | ||
|
General Liability |
Tech Errors & Omissions |
|
| Bodily injury to third parties | Yes | NO |
| Damage to tangible property of third parties | Yes | NO |
| Loss of intangible property of third parties (e.g., software, data) | NO | Yes |
| Failure of product/service to meet | ||
| the level of ordinary or particular | NO | Yes |
| purpose, resulting in loss of use of | ||
| tangible or intangible property of | ||
| third parties (including loss of | ||
| revenue or reputation, but | ||
| without physical injury) | ||
| revenue or reputation, but | ||
| without physical injury) | ||