Technology Errors and Omissions Liability Insurance

Technology Errors and Omissions insurance, also referred to as professional liability, protects IT based businesses against claims for programming errors, software performance, or the failure to perform the work as promised in a contract.

More formally explained, it protects technology companies if they are faced with the two most common forms of liability risks:

1. claims for “malpractice” in which companies are sued for failing to maintain accepted standards of care as a technology professional or company, and
2. breach of contract claims for failing to perform contracted services in a timely manner and within the contractual terms.

To paint a picture of an actual claim scenario, consider this:

Your design team spent numerous hours creating a website they felt met the client’s needs perfectly. But weeks after the site launched, you learn that a member of your team accidentally deleted critical content on the site. This created a liability exposure for your client who sues you for restitution. Just when you think things can’t get worse, you learn that your general liability insurance will not cover your employee’s error.

How will you pay for damages to your client – and the legal expenses related to the lawsuit? Either of the types of errors and omissions allegations outlined above can tie up company funds, personnel and focus for years; and IT based businesses are especially prone to high dollar lawsuits.

Don’t be fooled, however. Technology Errors and Omissions insurance coverage is NOT provided by a commercial general liability policy. IT consultants and companies who have general liability without professional liability (Errors or Omissions) coverage are taking a serious risk. It’s the same concept as a doctor practicing medicine without malpractice insurance.

All Types of IT Firms Need Errors and Omissions Insurance:

From massive software giants to individual consultants writing programs or servicing computers out of their homes, all are equally at risk for E&O liability suits. Here are some more examples of the types of businesses that need this coverage:

Software and computer-related services

• Prepackaged or custom software developers
• Website designers
• Computer consultants
• Systems integrators

Electronics manufacturing

• Electronic components
• Consumer electronics
• Computers
• Communications equipment

Telecommunications & connectivity services

• Long distance telecommunications carriers
• Internet/Application Service Providers
• Web site hosting

Technology Errors & Omissions insurance is a technical and specialized line of insurance. If your business is in need of this coverage, be certain the insurance agent you’re reaching out to is knowledgeable on the subject and understands ins and outs of these policy forms!

–JK