4 Technology Errors & Omissions Insurance Risks
Tech companies regularly have their products or services 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. Here are four 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 like Travelers CyberRisk Tech Errors and Omissions Liability Coverage. The broad definitions of technology products and technology services include products or services 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 on both, potentially leaving your company at risk.
For example, a supplier might fail to deliver needed components on time, causing you to miss a customer’s tight deadline. Travelers CyberRisk Tech covers both breach of contract and tort claims.
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 CyberRisk Tech does not. This can be especially critical for companies that work on large projects or provide products within tight timeframes.
4. Is software copyright infringement covered? You could face a loss that arises out of a claim of the infringement of copyrighted software code or any other copyrighted element of any part of a software program in your technology products. For example, if you commit an error that is alleged to have resulted in the integration of copyrighted software code created by a third party into one of your products, that copyright owner could bring a claim against you. Also, one of your customers who uses that product may be sued by the software copyright owner for infringement of copyrighted software code. Your customer, in turn, might file a lawsuit against you claiming that they suffered a financial loss 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.
Travelers CyberRisk Tech E&O coverage is 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 subsidiaries you newly acquire or form; 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.
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