E&O insurance is a form of business liability insurance coverage for those who are providing professional services or advice to a customer. If an error or omission causes the customer financial harm, the business is can be protected if it carries an E&O policy.
Professional liability will help cover the legal costs that can accumulate if clients decide that they want to sue you because they believe that an error or miscalculation you made while performing your services has caused them to suffer a loss of some kind, usually financial.
Many industries with particular risks have insurance products tailored to a specific profession; legal professional liability insurance and medical malpractice insurance.
The same goes for the technology industry. Technology errors & omissions policies are designed to protect from risks commonly associated with tech companies, which is currently one of the fastest-growing industries in the world economy.
E&O insurance is vital for those in any industry where the public perceives the professional as having a greater duty of care to provide sound advice or services. For those who regularly put their business interests at risk while providing these services, should consider E&O coverage.
Many commercial general liability insurance policies, according to Hortica.com, don’t include E&O coverage; if they do, the amount is not very large. The risk is significant for those who do not have E&O insurance, and it is not something new to the market either.
Risk management experts who specialize in providing the right coverage for technology companies commonly cite Tech Errors & Omissions as one of the most important policies and an essential piece of the puzzle when putting together a good tech insurance package.
Technology E&O insurance was created to provide coverage for companies working in cutting-edge fields and offering services and products that can impact third parties in a way that requires a new, modern approach to assessing liability and providing coverage for less risky risks tangible and traditional.
Having this form of insurance helps protect individuals, companies, and other professionals from taking on the total cost of defense for lawsuits related to errors or omissions when providing professional services. E&O comes into play if a client holds the company/individual/professional responsible for errors or fails to complete the work as promised in a contract.
Suppose you run a tech company, especially a new company that might be looking to attract investors. E&O should be one of your primary concerns when it comes to putting together the right insurance package.
Along with cyber liability insurance, professional liability is a must for tech companies.
Any company that is working in a cutting-edge industry and offers services and products that are pushing the envelope and exploring new territory need to purchase this coverage because it was created to cover these less tangible and untraditional risks that modern tech companies often face
E&O insurance coverage policies are designed to cover the legal defense costs incurred trying to prove liability or innocence. E&O insurance coverage policies also cover the final judgment or settlement if the business is deemed at fault.
Early-stage and other young tech companies who don’t have a lot of revenue coming in just yet might not be able to survive any costly claim or court case.
That’s why having insurance to protect your company from such possible financial losses is imperative. Tech companies that are just getting started need to properly invest and use every penny they have and be conservative with their spending. In such a situation, it’s easy to understand how devastating a liability claim can be if the company does not have insurance.
The company doesn’t even have to lose the case to lose a lot of money. Court proceedings and trials related to tech companies are often very complex and can take a long time to resolve, during which legal fees and defense costs can pile up.
Tech Errors & Omissions insurance will cover risks related to the financial loss of a third party arising from your company’s product or service’s failure to perform as expected or meant to perform.
As is the case with most types of insurance, there are specific exclusions that a tech E&O policy usually will not cover. Most notably, professional liability will not cover claims that are the direct result of you or your employees engaging in criminal activity or illegal acts.
Financial insolvency is also not covered by a tech E&O policy.
Also, most professional liability policies will not cover copyright infringement or libel claims either. If you need this coverage, you should add intellectual property insurance to your company’s tech E&O coverage.
Errors and omissions insurance doesn’t help cover claims from events that happened before your policy’s retroactive date. It also doesn’t help your business with lawsuits filed after your policy’s extended reporting period.
The cost of purchasing E&O Coverage depends on the amount of coverage, the number of employees, and total revenue. However, with our research, we have found the average cost for a company with under $1mm in revenue, a $1mm limit of E&O, and under ten employees will be approx $1125 / year.
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