Errors & Omissions

What Is Professional Liability Insurance?

And why it’s important

A professional is someone whose vocation or occupation requires special training and skill. Historically, lawyers, accountants, architects, engineers, and medical professionals were the sole occupations that fell into this category as their industries established strict regulation requirements and codes of conduct. In order to practice in these fields, it was necessary to undergo formal training and pass a state licensing exam to be provided with credentials. The first Professional Liability Insurance policies, also known as Errors and Omissions coverage, were devoted exclusively to this elite group.

Gradually, other types of professionals requiring Professional Liability Insurance (Errors and Omissions Insurance) such as real estate agents, business consultants, social services counselors, educators, and computer technology professionals, began to emerge. While these other classes are often referred to as quasi-professionals under the eyes of the law, they have already developed their own industry regulations for education, testing, and accreditation.

Protection for current classes of professionals

Miscellaneous Professional Liability insurance  policies have been developed to address many of the litigation concerns of these new classes of professionals, including computer information technology professionals.

Professional Liability  insurance provides protection against certain types of lawsuits arising out of negligent acts, errors, or omissions committed during business activities and that result primarily in economic damages that are not related to bodily injury, property damage, personal injury, or advertising injury.

Why Professional Liability insurance is important

It is important to understand that a Professional Liability insurance policy is meant to dovetail with a General Liability policy. The General Liability policy covers lawsuits alleging bodily injury, property damage, personal injury, and advertising injury. As a result, these types of injuries are not covered by a Professional Liability insurance policy.

Professional Liability insurance is important because it fills a glaring gap in the General Liability policy, which has a professional services exclusion that takes away coverage for lawsuits resulting from services rendered or failure to render professional services. Professional Liability insurance policies are meant to respond to lawsuits alleging only economic damages where the client has lost money as a result of a negligent act, error, or omission in the performance of the professional services.The definition of Errors and Omissions insurance can vary per policy form.

A good Professional Liability insurance policy is necessary to safeguard the assets of any company that provides professional services.

 

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Categories: Errors & Ommissions, Professional Liability, Reports, Tech Articles and Information, Technology

Tech Professional Services Not Covered by General Liability

But exclusions can be overcome

Tech companies and IT professionals need General Liability to provide coverage for negligence claims or lawsuits alleging bodily injury, property damage, personal injury, and advertising injury.

Many General Liability policy forms have an exclusion which takes away coverage for a laundry list of professional services including legal, accounting, architectural, engineering, medical, health care and computer consulting, design, or programming services including web site design. 

Obviously, this presents a problem for tech companies or IT professionals seeking General Liability coverage. But the problem can be solved by an insurance professional who specializes in insuring tech and IT risks. Carriers like The Hartford can eliminate this harmful Professional Services exclusion by endorsing the policy to add back coverage for tech professional services. Hartford has a special “Technology Services Coverage” endorsement for this purpose.

Tech professionals with General Liability carriers that don’t address the Professional Services Exclusion with a buyback endorsement can find needed coverage under a Professional Liability policy that offers a Contingent Bodily Injury/Property Damage endorsement.

Be sure to avoid these types of problems by dealing with a tech insurance specialist. If you have questions or would like help determining your insurance needs, contact us at 800-622-7370.

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Categories: General Liability, Professional Liability, Technology

Tech Company Advertising Injury Coverage

Why it’s necessary

The standard General Liability policy covers personal injury and advertising injury unless the insured is in the business of advertising, broadcasting, publishing, or telecasting. For this reason, there is no coverage for IT firms that are in the business of designing websites, determining content, providing content, or providing internet access.

Advertising InjuryWhy do tech firms need personal injury coverage? Coverage may be needed to against an allegation of slander, libel, or oral or written publication that violates a person’s right of privacy. It is not too difficult to see how a tech firm could get sued under these circumstances. Coverage may also be needed for advertisement injury to protect against allegation of infringement of copyright, trade dress, or slogan in your advertisement. The key word is advertisement. There is no coverage for infringement of copyright, trade mark, trade dress, or slogan unless they occur in an advertisement.

What’s not covered

An exclusion in the policy form eliminates coverage for injury arising out of electronic chat rooms or bulletin boards that the insured hosts, owns, or exercises control over. In addition, there is an exclusion arising out of the unauthorized use of another’s name or product in your email address, domain name, meta tag, or similar tactic used to mislead the someone else’s potential customers.

It is obvious that the standard General Liability form does not adequately protect tech companies or IT professionals against these important exposures. As a result, coverage can be sought as part of a Professional Liability or Errors & Omissions policy form. These policies can add essential coverages for tech firms in the business of advertising or publishing and violation of a person’s right of privacy or undue publicity, intellectual property infringements, etc.

It is strongly recommended that tech companies or IT professionals deal with a tech insurance specialist to make sure that their coverage needs are addressed.

 

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Categories: Advertising Injury, Errors & Ommissions, Personal / Advertising Injury, Professional Liability, Technology

Loss of Electronic Data

It’s not covered under a General Liability policy

Standard business General Liability policies don’t adequately cover the liability risk of property damage to electronic data.

Service or contracting businesses can cause property damage resulting in loss of or damage to a third party’s digital data that is housed on their computer system. This exposure is not limited to IT firms.

Understanding the terminology

The term property damage used on standard General Liability forms is defined as

  • physical injury to tangible property including loss of use thereof; and
  • loss of use of tangible property that is not injured.

According to these definitions, electronic data is not tangible property.

Electronic data is information, facts, or programs stored as or on, created or used on, or transmitted to or from computer software, hard discs, CD-ROMS, tapes, drives, cells, data processing devices, or any other media used with electronically controlled equipment.

What you can do

This problem can be resolved by the addition of various endorsements to cover property damage to electronic data. The cost is usually minimal.

However, some General Liability carriers that cater to IT firms will not add the endorsements. As a result, IT firms may need to verify that their Professional Liability (Errors & Omissions Liability) policy will cover this exposure. The key is to locate the definition of “tangible property” and find out if electronic data is included.

 

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Categories: General Liability, Professional Liability, Technology

Data Breaches Growing Rapidly

Tech Companies Uninsured

Over the past several years, there have been over 225 million reported consumer data breaches. This year alone, there have been more than 30 million reported security breaches of consumer data. No one knows the actual numbers since it is suspected that most security breaches are unreported.

Most tech firms and regular businesses with exposure don’t have insurance to cover this expensive peril. Liability for the following categories of expenses are common in these breaches of security:

  • Class action lawsuits
  • Regulatory fines, fees, penalties
  • Statutory notification expenses

Tech companies that collect confidential information or assist clients in doing so must make sure that their Professional Liability/Errors & Omissions policy is specially endorsed to respond to breach of security lawsuits. Non tech companies with exposure must make sure that their Cyber Liability policy does the same.

Source: S.H. Smith & Company, Inc. E Bulletin, 10-19-08

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Categories: Breach Of Security, Errors & Ommissions, Professional Liability, Tech Insurance

Professional Liability Covers Countersuit from Fee Collection

The cost of defending against even frivolous lawsuits

Ed Rozak is the president of N2Net, a Cleveland area Internet service provider. The company was started in 1995 offering dial-up IProfessional Liability Insurancenternet service only. Now it operates its own data center with a focus on voice services and phone systems.

Rozark was working in his office one day when one of his administrative assistants buzzed to inform him that N2Net had been served with a lawsuit.  What started as a $300,000 claim quickly grew to over $100 million. The suit alleged breach of warranty, failure to perform, and negligent acts. In reality, N2Net sued its client in an attempt to collect the unpaid fees owed. What they got was a frivolous claim countersuit.

Many professional liability lawsuits start  with a dispute over fees. As the owner of a technology company, it is your responsibility to ensure that your business is protected in the event your company is the target of a frivolous claim. Professional Liability coverage is essential to maintaining everyday business operations. As N2Net discovered, you don’t have to do something wrong to be sued; all it takes is an allegation to cost you thousands or even millions of dollars in legal fees.

N2Net was fortunate enough to have purchased a quality Professional Liability policy. Their insurance company not only provided coverage against the claim, but also brought in the area’s best legal counsel. Summary judgment brought about a positive result, dismissing the plaintiff’s claim and collecting the fees due to N2Net.

Keeping your reputation intact is important, as is keeping your business up and running. Investing in Professional Liability coverage will protect your tech company’s future.

Source – Overcoming the Unexpected; The Hartford; Video Series July, 2013

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Categories: Professional Liability