Rapid innovation, disruptive technologies, and progressively demanding consumers have increased the risks of errors and omissions (E&O) exposures for tech companies. Unfortunately, tech E&O claims can have a substantial impact on businesses. Apart from the hefty settlement and legal costs, these claims can cause operational disruptions and reputational damage. Technology E&O Insurance protects tech organizations from these risks.

This guide examines the most common technology claims examples and how E&O Insurance can help protect businesses.

What Is Technology E&O Insurance?

Before diving into technology claims examples, it helps to understand what tech E&O Insurance is. Standard Errors & Omissions Insurance protects businesses and employees who offer services to customers from claims of professional negligence, mistakes, or oversight during their work. Technology E&O Insurance does the same, but it specifically caters to the unique exposures of tech companies. Some businesses that can benefit from this coverage include IT contractors, software developers, and eCommerce companies.

Startup tech companies in the early stages of growing their business may be unable to survive a costly lawsuit. However, brokers can help their clients reduce risks by providing E&O insurance options that address their unique exposures and cover potential legal costs arising from claims.

Common E&O Technology Claims Examples

Customers filing a claim against a product or service can lead to major business interruptions, loss of profits, and hefty legal costs for tech companies. Here are the most common errors and omissions examples in the tech industry and how insurance can help.

1. Breach of Warranty

Breach of warranty is one of the most common examples of technology claims. This situation occurs when a product or service doesn’t meet customer expectations. For instance, if a tech company sells a coding solution that promises better website performance, but the site continues to crash, the customer can sue the company for breach of warranty. While these claims can be hard to prove, the legal costs of defending against this lawsuit can be formidable.

2. Breach of Contract

Contracts are important for business relationships as they detail a company’s deliverables to its clients and hold them accountable for their commitments. Failure to meet these contractual obligations is the most common liability claim in modern business.

Tech companies are particularly susceptible to this claim because contracts accompany their client relationships. As a result, customers can hold them liable for financial losses and business disruptions arising from missed deadlines or inability to deliver. Brokers can help tech companies lower this risk by providing robust E&O Insurance that covers breach of contract.

3. Negligence

E&O claims arising from negligence occur when companies fail to use reasonable care while performing services, resulting in negative consequences for their clients. This situation is typically the result of poor oversight resulting in delivery mistakes. In the tech industry, these claims can stem from simple coding mistakes to critical security gaps due to human error. Regardless if the error is intentional or not, stakeholders and regulators can hold the company accountable for negligence and file a claim.

4. Misrepresentation

When customers feel that a company has misrepresented their products or services, they can file a claim against them. For instance, if a website hosting company charges $300 a month for its services but fails to disclose additional charges included in the package, the client can sue for misrepresentation. Tech E&O Insurance can cover the costs associated with this lawsuit.

5. Copyright Infringement

In the tech landscape, E&O copyright infringement claims are mostly software-related. Technology E&O Insurance can protect organizations accused of copyright infringement by covering the suit’s potential legal and settlement costs. If the policyholder is the victim of the encroachment, E&O Insurance will cover the costs of hiring experts to investigate the infringement and collect appropriate settlement damages.

6. Data Breach

The rise of cyber crime has made tech E&O and Cyber Insurance a priority for tech companies. If clients’ sensitive data is compromised, they can file lawsuits against tech firms, citing reasons like incompetent software recommendations, bad network configuration, or other issues with professional services.

If a company makes a mistake when rendering professional services, technology E&O Insurance will pay for the damages, but Cyber Insurance will shield the business from cyber attacks.

7. Online Defamation

In the digital age, slander is easy to commit online, which is why it is one of the most common technology E&O claim examples. For instance, if a company releases a statement that damages the reputation of another business, the affected party can file a claim. Vicarious liability can also occur if a defamatory statement is made on a platform, website, or profile that a tech company manages.

Help Your Clients Mitigate Risks by Partnering with ProWriters

As the world becomes more digitized, potential exposures for IT and technology companies grow. The technology claims examples presented illustrate the risks that tech companies face in the modern business landscape. As a broker, you can help protect your clients by partnering with ProWriters. We have established partnerships with the industry’s top carriers so brokers like you can offer the best coverage for your clients’ unique needs. Reach out today to learn how we can make a difference in your services.