Technology Errors & Omissions – E & O – Insurance for Computer Programmers, Application Developers and Website Designers.
Technology Errors & Omissions – E & O – Insurance for Computer Programmers, Application Developers and Website Designers.If you develop computer programs, script computer applications, create databases or even design websites you may be at risk and need Technology Professional Liability Insurance or Tech E & O.
As the person responsible for creating the backbone of a company or their web presence, you may be singularly responsible for their marketing, revenue stream and reputation.
A Glitch in a system you designed can cost your customers thousands or millions of dollars in lost revenue and a damaged reputation. Security flaws, hacked or compromised systems can lead to identity fraud. This all leads to expenses and lost revenue that your clients may have a claim against you for.
The Solution: Technology Liability Insurance
What is Technology Professional Liability, or Technology Errors & Omissions or Tech E & O?
In the professional liability insurance marketplace, Technology Professional Liability is often referred to as “Technology Errors & Omissions” or “Tech E&O.” For many technology products, the likelihood of causing financial harm is greater than causing actual bodily injury to someone or property damage to something.
Tech E&O is an essential coverage for tech companies because:
• Technology Professional Liability Insurance addresses the exposure of financial harm to a third party that occurs because of a “glitch” or negligence in a technology company’s products or services
• Technology Professional Liability Insurance closes a significant gap in coverage for tech companies, since General Liability coverage typically does not address claims of pure financial harm to third parties.
Because of the mutually exclusive aspects of general liability and Tech E & O whenever possible, it is desirable to have Technology Professional Liability Insurance and General Liability placed with the same carrier.
Typically, Tech E & O Is considered a severity type of coverage because it is not typical to see a high frequency of these claims from one company so by packaging General Liability with Tech E & O the carrier recognizes the ‘bet hedge’ and offers significantly discounted savings.
Also, the policy can cover significant defense and indemnity costs, with claims for defense costs generally ranging from $200,000 to $300,000 for tech E & O Claim, not having Tech Professional Liability Insurance and being named in a law suit can be damaging or even cause bankruptcy,
The proper Tech E & O Insurance Policy can help to keep a small to moderate-sized tech company in business, since the defense costs alone for a Tech E & O claim can jeopardize their ability to remain in business – even if the defense costs do not reach the typical E & O claim levels
Benefits of Technology Professional Liability
Tech E & O is specifically designed specifically for technology companies, including:
- Software & Computer-Related Services
- Electronics Manufacturers
- Telecommunications
Coverage can be offered in several levels, depending on the magnitude of the company.
Basic Technology Professional Liability
For small technologies companies, a Basic Tech E & O Insurance Policy is available as an optional coverage part on Business Owners Policy (BOP Insurance Policy) and includes coverage for a:
- Negligent act, error or omission
- Failure of the insured’s tech products
- Services to perform the function or serve the purpose intended
Special Technology Professional Liability
A stand-alone policy, the Special Tech E & O Policy includes coverage for:
- Negligent act, error or omission
- Breach of warranties and representations
- Failure of the insured’s tech products or services to perform the function or serve the purpose intended Optional coverage grants for Security, Content/ Intellectual Property and Personal Injury are also available on the Special Tech Policy by endorsement.
Superior Technology Professional Liability
A stand-alone policy, the Superior Tech E & O Policy includes the same coverage perils included in the Special Tech Policy form, plus it automatically includes these expanded perils:
- Security
- Content/Intellectual Property
- Personal Injury
Typical Causes of Tech E&O Claims
Common reasons that E&O claims are made against a tech company include:
- Programming errors
- Poor customer communication
- Problems with large integration/installation projects
- Delay in delivery resulting from:
- Development problems
- Problems with combining or integrating software or hardware components
- Customer changing project scope (often referred to as “project creep”)
- Turnover of key personnel
- Short cuts during testing
- Poor accounts receivable controls that:
- Require the tech company to sue their customer for fees owed
- Result in a countersuit for negligence in the performance of their tech services/products
- Shortfall in externally furnished products or externally performed tasks
Typical Allegations in Litigation for Tech E & O
- Negligence
- Breach of Contract
- Failure to perform
- Breach of Warranty
- Misrepresentation
- Fraud
What is the average cost of a Technology professional Liability Insurance Policy?
While every company is different by size, operation, and scope, many Tech E & O policies can start at less than $1,000. Obviously as the risk and scope of your computer programming, website design and application scripting operations increase as does the premium. Additionally, many tech operations should, and have the need to cover general liability to cover bodily injury and property damage claims as well they may have business property to protect i.e. office machines, computers, furniture. For tech companies dealing with high profile clients, designing banking or financial software or applications that access and store private information rate will of course increase.
