In early September, I attended the Ann Arbor New Tech showcase. This event featured several startups in the technology sector, ranging from software programming to app development. After three presentations, I offered a two-minute spiel on business insurance, how to procure it for new enterprises and the potential coverages needed to secure a business’ financial future.
In the tech sector, the standard policies apply – property and general liability – but there is also a significant need for cyber and tech errors and omissions, or E&O.
Often there is some confusion about general liability and why you also need E&O coverage. General liability covers bodily injury if a client or customer were to be injured on your property or if your operations or products were to cause physical damage. It also covers advertising injury – if you are sued by a competitor for instance — and copyright infringement. It does not cover claims related to technology that your business has created, however.
Cyber also doesn’t cover the same risks as tech E&O. Cyber coverage protects your business from attacks and leaks, such as ransomware or cyber warfare, safeguarding sometimes critical data – like credit card or health information. Cyberattacks generally come from foreign entities whereas tech E&O is when your company has created something that has erred. In one case, your business is responsible for the harm caused to clients but in cyber the harm is done to you or to your clients through you, but you may not be at fault. Tech E&O, thus, protects your business if the software, equipment, cloud-based services, Web sites, apps, etc. you provide suffers from some sort of glitch that causes harm to your clients and customers. If for instance, you create accounting software that clients use for payroll and taxes and there was a malfunction in programming that causes the client to miscalculate quarterly estimates, you could be liable to them.
In the tech sector, the standard policies apply – property and general liability – but there is also a significant need for cyber and tech errors and omissions, or E&O.
Your general liability package would not cover you for such a suit, but a specific tech E&O policy, typically at a starting point of $1,000,000, would offer you the insurance to cover legal fees and a potential payout if you were found to be responsible.
Like in all situations of insurance, it is important to discuss with your agent the coverage and limits your business requires. Coverage will be dictated by how significant your exposures are and how valuable your company is (or could become).
Contact Michael Spath with any of your insurance questions
I recently worked with an app developer that sought to remedy the cluttering of pictures on a person’s phone, offering suggestions on deleting old photos or videos based off the frequency in which that media was viewed over a 12-month period. Customers could, of course, choose to keep any photos they wanted, even if they had not viewed them in years.
However, in a few cases, the app automatically deleted old videos and photos, causing considerable heartache for a few customers. The bug was detected and fixed before it impacted a massive number but try telling that to the few impacted.
The app developer’s technology had erred, thus creating a vulnerability if lawsuits were filed. Thankfully, their tech E&O covered such instances and the developer was able to regenerate the lost multimedia, soothing legal recourses, but the business owner became distinctly aware that a simple mistake could have led to thousands of customers losing their memories. While the technology was fixed, the business immediately upped their limit to $2,000,000.
Errors and omissions happen and can devastate a business, which is why it is important to have an insurance adviser who can help you fully understand how to mitigate your risks with the proper insurance coverages.
