If you provide information technology (IT) services, you should protect yourself from possible errors and omissions or E&O insurance claims. A client who’s unhappy with your service could sue your company, exposing you to potentially destabilizing financial loss. Here’s a look at potential IT E&O claims and lawsuits and a few strategies to mitigate your risk.
Companies that provide tech solutions, such as cloud computing or Software as a Service (SaaS), can be targeted for E&O insurance claims. If you’re in the tech sector, a client could blame and sue you for a data breach even when you’re not at fault. Miscommunication between you and the client and substandard business protocols can trigger a potentially costly dispute.
Generally, tech E&O insurance policies include cyber liability protection, although coverage depth can vary by policy. Here are eight claims/lawsuits that these policies usually cover:
When your tech client is a data breach victim, they can file a lawsuit against you. In court, they could allege that you provided a poorly configured IT network or bad software advice.
This can happen if you’re unable to deliver an IT service on time due to issues like a software bug or distribution bottleneck.
E&O insurance can protect you when a client alleges that you made a false claim about your tech solutions. Such a claim may arise out of a written warranty or verbal promise you or an employee made.
Making a false statement to get a software subscription, such as by not disclosing certain fees up front, may attract a misrepresentation claim.
A client may argue that your negligence exposed their network to a data breach or bug. They might say you failed to implement adequate software security measures as reasonably expected of you.
This dispute can occur when your finished project does not include all the deliverables the client expected.
An employee on the client’s side can make an IT security mistake that results in data loss or cyber fraud.
You can be accused of copying another software’s code or patented feature. Your clients may be sued for this, too.
Proving that you met all your professional responsibilities can minimize the cost of an E&O lawsuit. Moreover, you can reduce the risk of such claims with the following proactive strategies:
With E&O insurance claims coverage, you’re protected against the cost of client lawsuits, including when you’re not at fault. The policy would pay for your legal fees, compensation to the client, or out-of-court settlements.
If you’re a tech business, you should mitigate your risk of E&O insurance claims with proactive strategies. Visit or contact the team at CF&P Insurance Brokers for any questions about liability protection for your tech company. We are happy to discuss ways to customize your professional liability coverage.