Tech companies regularly have their products or work called into question. Even your best customer may file a claim against your company, alleging you are responsible for causing their lost profits or business disruption. Beyond the time involved in responding to such claims, the potential costs to defend your company and settle a claim could be ruinous to your business if you don’t have the right insurance coverage. Does your tech company have an errors and omissions (E&O) insurance policy?
Technology errors and omissions liability coverage helps cover the costs when your company is blamed for causing damages due to errors, omissions or negligent acts related to the products or services provided by your business. Claims and suits for these types of damages typically are not covered under a commercial general liability policy.
Not all errors and omissions policies offer the same protection, and it’s important to understand both the specific types of coverage offered and the unique risks facing your company when choosing coverage. Here are five things to consider when choosing E&O coverage for tech companies.
1. Is coverage enterprise-wide? Tech companies regularly release new products and versions. That continuous innovation can be the key to your company’s success, but if customers file a lawsuit targeting a new product that was released just after you last renewed your E&O insurance coverage, it might not be covered.
Look for enterprise-wide coverage for Technology Errors and Omissions Liability Coverage . The broad definitions of your product and your work include products or work that may change mid-policy, not just products in place at the time of renewal. For tech companies that frequently release new products, this coverage could be critical.
2. Are you covered for both breach of contract and negligence? If you have an E&O policy, it might cover either breach of contract or negligence (tort) claims. A lawsuit about a specific incident could be based in both, potentially leaving your company at risk.
3. Are there exclusions for delays? Sometimes, delays are hard to avoid. Imagine a key piece of equipment in your plant fails, and that delays part of a large shipment, which leads to a customer suing you for failing to deliver on time.
Many technology E&O forms have a delay exclusion, but Travelers CyberFirst does not. This can be especially critical for companies that work on large projects or provide products within tight timeframes.
4. Are there exclusions for wear and tear? If your products malfunction due to wear and tear, you’ll want to be covered in the event of a lawsuit. Some E&O policies have a wear and tear exclusion. Look for a policy without such an exclusion when evaluating an E&O policy.
5. Is software copyright infringement covered? Your customers could face a loss that arises out of the infringement of copyrighted software in your products. For example, if you integrate software code created by your supplier into one of your products, and your customer for that product is sued by the software copyright owner for infringement of copyrighted software, your customer, in turn, might file a lawsuit against you claiming that they suffered a product loss or business interruption as a result of the lawsuit against them. If your firm has software copyright infringement exposures, you’ll want to make sure that exposure isn’t excluded in the E&O policy. It is common for insurers to exclude this exposure.
The cost to defend any claim, even the most frivolous, has the potential to be financially devastating. These include:
- Network & Information Security Liability,
- Communications & Media Liability,
- Employed Legal Professional Liability, and
- Expense Reimbursement Coverage.
Travelers Tech E&O coverage is a modular solution specifically designed to address the unique needs of today’s high-tech companies. It also includes worldwide coverage (except where prohibited by law or regulation); an expanded list of insureds, which includes your newly acquired or formed organizations; employees, including permanent and temporary workers; and independent contractors during the time they are performing duties for your business.
Contact your agent or broker to discuss the specific risks and coverage solutions recommended for your business.