What is Tech E&O Insurance: A Simple Guide

What is tech E&O insurance?

Tech E&O insurance is a specialized policy that protects technology firms from lawsuits after client financial losses.

Let's say you're providing clients with a product that boosts web conversions. But after they install the software, their website crashes due to a small coding error. Your client holds you accountable for lost leads and sales, and depending on the website size, this can cost millions.

Fortunately, tech E&O carriers step in and protect your business against these lawsuits, so you aren't liable for customer losses.

What types of companies need E&O insurance?

Here are some companies that'll benefit from E&O insurance:

  • Software and information technology specialists
  • Website designers and developers
  • Computer consultants

Software and information technology specialists

If you're developing any type of app or software for customers, you must have E&O insurance. This is because a tiny coding flaw can result in massive financial losses, and clients might hold you accountable for these losses.

By taking out E&O insurance, you can code and develop software with peace of mind knowing your carrier will take care of potential lawsuits.

Website designers and developers

Website designers and developers should also use E&O insurance when dealing with big clients.

Like software development, if a website you’ve developed for a client crashes, resulting in lost revenue for the client, lawsuits are likely.

Computer consultants

Another group of technology professionals that benefit from tech E&O insurance is computer consultants.

Computer consultants advise companies on what technologies they should implement into their business. These technologies often include different software, hardware, and workstations.

However, if your advice negatively impacts customer financials, you'll need E&O insurance to protect you.

But what, exactly, does tech E&O insurance cover?

What does tech E&O cover?

In short, tech E&O insurance covers settlements, fines, and court and lawyer fees.

So if a judge finds your company responsible for client losses and orders you to pay a specific amount, your tech E&O policy takes care of the total and any additional fines for negligence.

5 tech E&O examples

Let’s have a look at five typical E&O examples:

1. Data breaches

Data breaches are a common reason clients sue technology companies.

For example, imagine you're gathering customer information, but someone manages to break through your firewall and access this private data; customers will sue if they believe your business is at fault.

But if you have E&O insurance, your carrier pays the legal fees and settlement costs.

2. Breach of contract

Sometimes you can't fulfill the promises you made when signing a contract. This can be entirely outside of your control—maybe the market declined, or a pandemic hit. Either way, if it harms clients financially, you can expect lawsuits.

This is another example of where E&O insurance helps. It protects your business so you can focus on regaining customer trust and attracting new clients.

3. Breach of warranty

You may face lawsuits if clients feel your product didn't live up to their expectations or the promises you made. And like a breach of contract, this is out of your control.

Maybe the customer isn't using your product correctly, or their original expectations are too high.

With tech E&O insurance, you can rest easy knowing you won't have to dig into company cash reserves to pay settlement fees.

4. Copyright infringements

If you're designing a piece of software and another company accuses you of copying their code, you could face lawsuits and pay legal fees.

These infringements won't only cost you financially, but they'll harm your image in the eyes of customers.

Fortunately, tech and E&O insurance help restore your brand identity while using long-term strategies to rebuild consumer trust.

5. Employee mistakes 

Tech E&O also protects your company against employee mistakes.

Let's say one of your employees clicks a phishing link, exposing you to hackers. If these hackers access sensitive client information, you'll need protection against losses. 

But even without employees, E&O insurance is still required. If you're providing cyber security services and a client's employee makes a mistake that gives hackers an entry into data storage, the client might think it's your fault and sue.

Tech E&O insurance is simple with Worth Insurance

Tech E&O insurance protects your firm against client losses, which is crucial for business survival.

It safeguards your brand against data breaches, copyright infringements, and employee mistakes.

So if you're looking for the peace of mind of knowing you aren't responsible for potential losses, request a Worth Insurance quote. Worth Insurance takes care of everything like legal fees and settlement costs, making the entire process less stressful.