Technology errors and omissions (tech E&O) is one of the most important types of insurance to have for any business offering a technology service or product; from hardware and electronics, to software app and game developers, to hosting and platform providers. In the emerging and ever-changing world of tech, it is important you have the right protection in place for potential mistakes or negligent actions your business may make.
Technology businesses can often have their service or product questioned. A top or trusted customer may still file a claim against your business making allegations that you are responsible for causing their lost profits or business disruption.
What is tech E&O insurance?
A tech E&O insurance policy is a type of professional liability policy that helps cover the costs if your business is blamed by a customer for causing damages due to errors, omissions or negligent acts, related to the service or products provided by your tech business. It’s important to know that depending on where and who you are providing services to, there may be a contractual requirement for you to have a policy in place.
The value of tech E&O insurance
New start-up businesses who have only just secured funding or launched in the tech sector, may not be able to survive a costly claim or court case. If a customer does file a claim to sue your business, a tech E&O insurance policy will cover legal costs including:
- Court fees
- Lawyer costs
- Settlement / damages costs
Keep in mind that a tech E&O policy will only cover your business if you had a policy at the time of an incident and when the claim is filed, which is why it’s important to check that you have the right cover in place to suit your business’s needs.
Still not sure what it is? Here’s a few examples to bring tech E&O insurance to life:
Example 1: Tech service
A tech business provides a cloud document hosting service, and due to a system glitch, loses a number of files that their customer needs for an acquisition, causing it to be delayed. The delay results in 2 million pounds in damages to the businesses involved with the acquisition, which they could look to recover from the tech business.
Example 2: Tech product
A tech business provides building design software to an architect, and due to a problem with the software, multiple designs for projects have the incorrect specifications. As a result, the architect loses revenue because they have to complete the plans again which takes a lot of time. The architect could sue the tech business and they may have to defend themselves in a lawsuit and possibly pay damages or court fees to the architect.
Whilst these are just simple examples, it demonstrates the importance of having the correct insurance in place to support your tech business whilst you’re at the frontier of emerging risks, pushing boundaries with your business models and disrupting industries.
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