Professional Liability

Technology Professional Liability

Technology Professional Liability is at the heart of an insurance portfolio for tech companies.

What is Technology Professional Liability?

In the marketplace, Technology Professional Liability is often referred to as “Technology Errors & Omissions” or “Tech E&O.” For many technology products, the likelihood of causing financial harm is greater than causing actual bodily injury or property damage. Tech E&O is an essential coverage for tech companies because it:

• Addresses the exposure of financial harm to a third party that occurs because of a “glitch” or negligence in a tech company’s products or services

• Closes a significant gap in coverage for tech companies, since General Liability coverage typically does not address claims of pure financial harm to third parties because of the interrelation between the two coverages, whenever possible, it is desirable to have Tech E&O and General Liability placed with the same carrier. Typically, Tech E&O:

• Is considered a severity type of coverage
because it is not typical to see a high frequency
of these claims from one company

• Covers significant defense and indemnity costs,
with claims for defense costs generally ranging from $200,000 to $300,000

• Can help to keep a small to moderate-sized tech
company in business, since the defense costs alone for a Tech E&O claim can jeopardize their
ability to remain in business – even if the defense costs do not reach the typical E&O
claim levels

Typical Causes of Tech E&O Claims

Common reasons that E&O claims are made against a tech company include:
• Programming errors
• Poor customer communication
• Problems with large integration/installation projects
• Delay in delivery resulting from:
• Development problems
• Problems with combining or integrating software or hardware components
• Customer changing project scope (often referred to as “project creep”)
• Turnover of key personnel
• Short cuts during testing
• Poor accounts receivable controls that:
• Require the tech company to sue their customer for fees owed
• Result in a countersuit for negligence in the performance of their tech services/products
• Shortfall in externally furnished products or externally performed tasks

Typical Allegations in Litigation for E&O

• Negligence
• Breach of Contract
• Failure to perform
• Breach of Warranty
• Misrepresentation
• Fraud

Tech companies face unique risks and require specific insurance coverages to protect your business from financial loss. Technology professional liability insurance is a key element of risk management in the technology industry. Since 1946 we have been customizing products to our client’s unique exposures to risks. We look forward to helping your protect and achieve your goals.

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