As a technology company or consultant, you know that there’s always the chance that a client is going to claim you’re at-fault if they don’t get the results they desire from your work – even if you do everything right. In fact, your industry ranks relatively high when it comes to risk of “malpractice” lawsuits, similar to law firms and medical practices. That’s why comprehensive errors & omissions insurance is so important for companies in the tech industry.
Did you know that you could be held liable if the installation of your new SaaS product damages a client’s legacy computer system?
What would happen if you failed to meet the contractual deadline on a development project, and the client’s business operations were impacted?
Errors & omissions insurance is a type of professional liability insurance that provides coverage if you’ve been accused of omissions, negligence, misrepresentation, violation of good faith and fair dealings, or inaccurate advice. In other words, if you’re blamed for a client’s losses, errors & omissions insurance helps you mount a defense and/or pay damages – so you can move on with as little disruption as possible.
The 4 Essential E&O Questions (for Tech Companies)
Here are four questions you should ask your insurance broker to be sure you have the coverage you need.
1. What Happens When We Release New Products?
In your innovation-driven industry, it’s very likely that you release new products and product upgrades on a regular basis. However, not all errors & omissions insurance policies are designed to keep up. What happens if you release a new version of your product right after you’ve renewed your policy? Would you be covered? Talk with your broker about enterprise-wide insurance options and, at the very least, understand what actions you need to take prior to each release to be sure you’re covered immediately.
2. Are We Covered for Breach of Contract and Negligence?
Not all errors & omissions insurance policies provide equal coverage – often resulting in unexpected risk exposures for tech companies. There’s a difference between breach of contract (contract law) and negligence (tort law). Breach of contract involves claims of one party failing to deliver on the obligations agreed upon in the contract. Negligence involves claims that one party’s actions (or failure to act) caused harm to others, regardless of whether a contract was in place or not. It’s a subtle difference, but a significant one.
3. Are We Covered for Copyright Infringement?
Of course, you do everything in your power to ensure you aren’t violating any copyright laws, but the integrated nature of many software products means you may be at a heightened risk for claims of copyright infringement. For example, it’s common for tech products to include copyrighted code from other companies (legally), so that different products can seamlessly work together. But what happens if your customer does something unexpected with your product and gets sued by one of your suppliers, and the client in-turn sues you? If your policy doesn’t cover copyright infringement, you’ll be facing major out-of-pocket legal fees that could put you out of business.
4. What are the Policy Exclusions?
Many errors & omissions insurance policies (many insurance policies in general) have important exclusions that you need to understand. For example, it’s common to see exclusions for delays and for wear and tear – both of which are incredibly important in the tech industry. What if a key component from an overseas vendor gets delayed in customs and you’re unable to meet your contractual deadlines? What if a malfunction occurs not because of poor quality but because it had been subjected to harsh operating environments? The exclusions in your policy can significantly limit the amount of coverage you actually have.
Let’s Protect Your Tech Business from Damaging Lawsuits with Errors & Omissions Insurance
At Swarts, Manning & Associates, we provide a unique perspective on all of your commercial coverage options, and we help to determine which carrier best fits your business needs. We strive to find you the broadest coverage at the best available rate. Give us a call to get started: (833) 878-2820.Each week, Swarts, Manning & Associates covers relevant topics for your business. Stay tuned to hear more discussions about managing your insurance and industry-specific tips.
