The technology industry is one that continuously faces financial losses as a result of an error or omission in the services or products being offered. Most companies believe that their General Liability and Cyber Insurance policies will cover all bases; however, there are a variety of professional service-related losses that can only be covered by Errors & Omissions Insurance coverage.
Here are the top 3 E&O insurance claims in the technology industry:
1. Breach of Contract
Breach of Contract (or Failure to Perform) claims are the most frequent and costly in the tech industry. As a business, it’s your responsibility to meet the duties promised to your customers. If a client feels that you’ve breached a contract with your products or services, you may be brought into a lawsuit for lost income or revenue loss.
Example: Your company developed software that its users relied on to make financial decisions. The user (client) went bankrupt and sues your company for inadequate software that led to its collapse.
Human error remains a top cause in almost 30% of data breaches. Negligence can cause mistakes that can lead to losses due to bad practices. Lack of precautionary training and education typically leads to mistakes that could cost your company or even affect its reputation. Tech E&O provides coverage that protects your business from lawsuits related to financial loss or breach of privacy.
Example: Your employee opens a suspicious email attachment that allows a hacker to enter your network and steal clients’ personal information.
3. Theft of Personal Information
Technology companies are usually responsible for storing and protecting sensitive customer information such as credit cards, social security numbers, etc. Your company does not have to be a big corporation to be vulnerable to data theft; smaller companies are a target for cyber criminals too! With this responsibility comes the duty to protect your clients’ data and failure to do so will result in major losses. Errors & Omissions insurance can cover credit monitoring for clients and consultative or forensic services to help restore their data infrastructure and reputation.
Example: An IT consulting firm sends a consultant to secure a corporation’s existing data and leaves a “back door” open in the process. Hackers were then able to access and compromise private client and company information resulting in a lawsuit.
If your company has Cyber Insurance, you should consider filling potential coverage gaps with a Tech Errors & Omissions policy. Data collection and information theft continues to increase, leaving the industry vulnerable to new exposures. Your professional services can be your biggest source of profit and your weakest link. Speak with an experienced broker to discuss which Cyber and Tech E&O policies best fit your company’s needs.
Opinions expressed in this article are solely the author’s opinion, not intended to provide the reader with legal or any other professional advice. Should you need advice or opinion, consult with a qualified professional to address your specific needs.