What Is Technology Errors and Omissions Insurance?
Technology is integral to the operation of most businesses today. When technology fails, the financial impacts can be significant, and the companies affected often look to their technology product or service providers for compensation. Unfortunately, traditional liability policies are not designed to respond to pure financial claims, that is why we offer Technology Errors and Omissions Insurance. Consider what would happen if your technology company were found legally liable for a financial loss because:
- A glitch in your software caused your client to lose a month’s worth of billing data.
- Equipment you installed caused your customer to be unable to receive online orders for 48 hours.
- Your cloud-based data services failed to backup critical data that a customer cannot recreate.
- The website you designed for a customer too closely resembled its key competitor’s site.
In situations like these, you want to know that your technology company is covered. At The Hartford, we believe that Tech E&O Insurance is an essential part of a comprehensive insurance program for all technology companies. That’s why we developed the FailSafe Technology Liability Product Suite. FailSafe addresses the errors and omissions (E&O) exposures for technology companies of all sizes and, in conjunction with The Hartford’s standard lines solutions, can provide 360 degrees of protection for your company.
Technology Errors and Omissions Insurance helps cover technology companies from any errors, omissions, negligence and product failures that may occur while working with clients. Technology has become ingrained in almost all business practices. This means that when it fails, clients can be faced with financial losses. As a result, they may file a claim against the technology company that provided the product or service. The Hartford’s Technology Errors and Omissions insurance helps cover companies that face these claims.
For many technology company owners, the differences between Cyber Liability Insurance and Technology Errors and Omissions insurance may be a bit fuzzy. To clarify, Cyber Liability Insurance helps cover businesses from cyber-attacks and data lost during them. For example, say you’ve been keeping your customers’ personal information in a secure database for years and recently, it gets hacked. Claims are filed against you for the lost data. Cyber Liability Insurance can help cover the costs associated with the claims made.
In contrast, Technology Errors and Omissions Insurance helps cover businesses from losses caused by a company’s own errors, omissions, negligence and product failures. For example, say a technology company runs out of time while developing a product needed for a business. They rush the production and the product fails. The business responds by filing a claim against the company for negligence. Technology Errors and Omissions insurance can help pay for this claim.
How Does Technology Errors and Omissions Insurance Work?
Technology Errors and Omissions insurance works by helping to protect your company from damage caused by your work performance or products. The following claim scenarios represent Technology Errors and Omissions insurance in action:
- A technology company sells a specific part to a computer manufacturer. The part starts off working well but eventually fails. This results in the manufacturer having to recall their products and replace the part originally supplied. As a result, they file a claim against the company. Technology Errors and Omissions insurance will help cover the costs associated with this claim. This insurance helps cover costs because it helps protect against financial loss caused by a company’s products.
- A technology company fails at meeting important deadlines for developing a new product for a business. This results in a claim filed against them. The business waiting for the product, suffered a loss in profits when the deadlines were missed. Technology Errors and Omissions insurance can help pay for the costs of the claim. This insurance helps cover costs when companies are found negligent in their actions.
- A technology company develops a new product that is not always compatible with older models of computers. While pitching the product to businesses, an employee fails to mention that it may not be compatible with older computer systems. A business buys the product and installs it. As a result, the product immediately causes damage to their older computers. The business then files a claim against the technology company. Technology Errors and Omissions insurance can help pay for costs associated with the claim because it helps cover business owners and their employees against omissions.
Technology Errors and Omissions Insurance Coverage
Specific coverage features of The Hartford’s FailSafe MEGA Technology Errors and Omissions insurance include:
- Breach of warranty coverage along with no contractual liability exclusion.
Security coverage that helps protect against:
- Denial or disruptions of service.
- Unauthorized fireware, data, software, systems or network access, use or tampering.
- Identity theft or exposure of nonpublic personal information.
- Disclosure information belonging to third-party nonpublic corporations.
- Coverage for negligence while supervising employees.
- Coverage extension for the insured’s own computer system and network activities.
- Coverage for “most favorable venue” for punitive, exemplary and multiplied damages.
- Inclusion of the insured’s computer system and network activities into the insurance agreement.
- The right to reject a settlement with soften hammer clause of 50 percent.
- Universal territory coverage for worldwide glitches and lawsuits.
- Coverage for permanent and temporary employees.
- Coverage for independent contractors working with a company.
- A 90-day extended reporting period.
- Additional optional reporting periods offered between one to five years.
- Coverage that is available up to $5 million.
How Technology Errors and Omissions Insurance Works With Contracts
Businesses and professionals typically purchase Errors and Omissions insurance along with General Liability insurance. This is because General Liability insurance policies help cover claims involving bodily injury or property damage while Errors and Omissions insurance helps cover claims involving professional services provided. For complete protection, businesses need both. However, many Errors and Omissions policies exclude coverage for any actions or behaviors that breach a contract.
Contracts are commonly used by technology companies. In fact, most companies have contracts and license agreements that clients sign. Contracts typically outline what duties are expected from the companies providing services. When a claim is filed against a technology company that involves errors, omissions or negligence in services provided, a breach of contract is often considered by officials. Also, due to clients relying solely on professionals for certain services, it becomes possible for them to sue a company for “breach of duty” if a contract was signed. However, many technology companies are not held liable for this because they are not considered to have the same sense of “duty” to clients who buy their products and services compared to other professionals. For example, doctors and lawyers are considered to have a sense of “duty” and therefore have a higher chance of being sued for a “breach of duty.”
Types of Companies That Need Tech E&O Insurance
Software & information technology
- Packaged or custom software developers
- Website designers
- Computer consultants
- Systems integrators
- Federal government IT contractors
- Hardware & electronics manufacturing
- Consumer electronics
- Communications equipment
Telecommunications & integrated communication services
- Local exchange carriers
- Long distance telecom carriers
- Internet/application service providers
- Website hosting