As technology advances and plays an integral role in virtually all businesses, the need for tech companies to have sufficient insurance coverage is crucial. Technology businesses face unique risks that traditional insurance policies may not cover, so having tech errors and omissions (E&O) insurance is vital.
As a leading executive at your tech firm, whether owner, CEO, or CFO, you grasp the significant liabilities your business faces, and no matter how thorough your team is with quality control, customer support, and product development, accidents leading to lawsuits, settlements, or other financial losses can and will happen. That's why it's essential to have Errors and Omissions (E&O) insurance to defend your company from claims and lawsuits that your product wasn't up to par because of carelessness, incompetence, or oversight.
What You Will Learn
- Software Bugs and Malfunctions
- Data Privacy and Security
- Misrepresentation and Misleading Information
- Intellectual Property Infringement
- Human Error
Software Bugs and Malfunctions
Imagine a software company that has developed applications clients use for business operations. After installing the software, it breaks down and damages the client's data and processes. So, the client sued the company that made the software for the damage. E&O insurance would cover the software company's legal costs and compensate clients for their losses.
Data Privacy and Security
Increasingly, data privacy and security are top priorities for clients and customers. So, when a tech company stores sensitive information like personal information or credit card details, it must take steps to protect that information from cyberattacks and data breaches. For example, should a data breach occur that compromises client information, the tech company is virtually sure to face significant legal action brought by impacted clients with accusations of negligence. In such instances, E&O insurance helps pay the technology company's legal bills and settlement costs in defending the case and compensating affected clients for any monetary loss or damages.
Misrepresentation and Misleading Information
A technology company that promotes its product or service with misleading or inaccurate information can face a lawsuit from clients who feel they were misled into purchasing the product. And so, if a company claims that its software can perform a specific function that it cannot or has a feature that doesn't match its claims, clients who have paid for the product may feel that they were misinformed and cheated. Here again, E&O insurance can help the tech company pay for the legal costs of defending the claim and compensating for damages caused to clients.
Intellectual Property Infringement
Imagine a tech company using another business's intellectual property (IP) without permission. In such cases, it could be sued for copyright or trademark infringement. For example, if a software company thinks its ideas and IP have been used without permission, it can file a lawsuit. E&O insurance can help cover the company's legal costs in defending the claim and compensating the third party for damages.
Financial loss, damage to reputation, legal action, and even the closure of a company are all likely outcomes of not having proper coverage in place. As the CEO or CFO of a technology business, it is incumbent on you to ensure the longevity of your company by reviewing your insurance coverage regularly and ensuring that you have adequate protection in place.
Mistakes happen. Therefore, it is good to know how to prevent them. E&O Insurance can help when employees make a mistake that could cause plenty of damage to a tech company. Let's say that you offered coverage but did not document it; therefore, there are restrictions. Then, they could take you to court, alleging you did not inform them of the restrictions. You must document everything in client meetings, and any transactions must be in writing.
There also must be documented adequate coverage for a client that uses a solvent insurance carrier. It is simple to check this through an insurance rating system.
Sahouri Insurance is a leading agency providing insurance for technology companies. We are here to help you get the proper protection at a fair price through our network of insurance carriers. Sahouri recognizes the significance of conducting a thorough analysis to identify and expose possible obstacles that could result in financial losses, harm to reputation, customer attrition, and weakened investor trust.