Professional Liability

Errors and Omissions insurance (also known as Professional Liability insurance) is a basic safeguard for your IT business. Errors and omissions insurance protects technology businesses against potentially catastrophic litigation involving professional negligence or charges of failing to perform professional duties. Errors and Omissions coverage can make the difference between the survival or failure of a business when faced with these types of legal threats.

Errors and Omissions insurance protects technology companies if they are faced with the two most common forms of liability risks; 1) claims for "malpractice" in which companies are sued for failing to maintain accepted standards of care as a technology professional or company, and 2) breach of contract claims for failing to perform contracted services in a timely manner and within the contractual terms. Either one of these types of errors and omissions allegations can tie up company funds, personnel and attention for years. Errors and Omissions insurance is especially necessary in the new technology age where the law is still being formed. In many cases, courts are defining what a computer professional is and what the expectations are for services and contracts. The laws around computer consulting and contracting are too new to have established legal precedents. With no precedents, the legal waters are murky and dangerous for the company or consultant without Errors and Omissions coverage.

Tort law, established law covering contracts, has had time to establish contractual expectations for other types of professionals and professional activities, but the cyber-service world is too new to be clearly addressed by existing law. This means that much of the tort law is still to be formed through court cases and judgments. What may not be actionable today could result in huge court awards next year. The upshot is that no one can protect against what may be decided in court cases in the near future, except with Errors and Omissions insurance.

Massive software giants, multinational hardware producers and individuals writing programs or servicing computers out of their homes are all equally at risk for Errors and Omissions liability suits. Whether it is a catastrophic software crash or network failure that ties up services for expensive hours, the result to the consulting firm or individual can be an unforeseen lawsuit. Errors and Omissions insurance protects against the financial effects of potentially disastrous court cases.

Many computer consulting companies are becoming aware of these legal threats and, to protect themselves and subcontractors, are requiring their subcontractors (generally those workers receiving a 1099 instead of a W-2 at the end of the year) to carry Errors and Omissions Insurance. If a client company experiences what it perceives to be an actionable error or omission, even if the problem occurs months after the initial consulting activities, both the consulting firm and subcontractors can be held liable and met with law suits. Errors and Omissions insurance protects both parties as they face the legal battles.

Errors and Omissions insurance can be highly tailored to the needs of technology firms. For example, the Errors and Omissions insurance policy can include the persons covered, exclusions, length of coverage, definitions, professional responsibilities and other information pertinent to technology businesses.

Errors and Omissions insurance can be the unsung hero of the insurance portfolio, protecting computer companies of all sizes from both known and unknown legal dangers

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