Technology Insurance – Liability Coverage in the Digital Age

Anyone who has ever had their computer crash in a corporate environment knows how terrifying it is to be a young employee. What were you doing? However, it seems that IT has taken on the science of networking and has become increasingly complex. Liability for software companies, IT firms and internet business has become a problem that goes beyond the cubicle occupant.

Technology insurance is basically liability insurance. It protects software companies and IT companies from programming errors that cause business setbacks. Technology insurance covers policies that protect internet companies from the unauthorised release of personal information stored on their servers. There are a few main categories of technology insurance that mirror the general business liability categories.

  • Technology errors and omissions insurance protects you if your software fails to deliver as promised or if product structure or programming errors cause major client problems. Cyber liability covers both first- and second-party risks that are associated with ebusiness, the Internet and networks as well as informational assets.
  • For those working in the startup or IPO space, directors and officers liability insurance is now available. This insurance protects the principal players in new and established companies, as well as those who fail to achieve the commercial success early investors expected.

Specific policies that relate to technology are a more specific form of insurance.

  • Network management
  • Computer consulting
  • Transact online
  • Disaster recovery
  • Data processing/programming services
  • Insurance on intellectual property

The amount of assets you want to protect is directly affected by the amount of liability insurance you have. Legal expenses coverage is an important component of any liability insurance policy. Companies that attempt to quantify the damage they have suffered and to put a price on their losses due to digital malfunction will face a complex burden of proof. Obscure problems usually require more time and cost-effective legal representation.

The liability parameters for incidents involving protection against online theft by hackers are still unclear. Due to the disclosure of private records of thousands of individuals, there have not been any major cases in which awards were made in class actions.

Sites that offer a platform for online transactions often have a policy agreement. Users must read it and sign it before they can use the site. This agreement may reduce frivolous lawsuits arising from sour transactions but does not offer complete protection to the site operator.

This coverage is called “first person and three-person” and is slightly different to standard product liability insurance. The only product that the site offers is the transaction platform. Insurance covers all legal actions that any business dealing with high volumes of transactions will encounter.

Answer to the question “How much should I have?” is “consult your broker.” Consult your broker to determine the right amount. The tools and methods for mismanagement have changed, but liability insurance has not changed. An insurance broker is able to assess the coverage required and what clauses are being offered by the underwriter.