Tech Errors and Omissions Insurance Explained

Tech Errors and Omissions Insurance Explained

Every business has unique risks that can seriously harm an organization’s operations if it is not properly protected. As a business using or “manufacturing”  technology to produce and deliver products and/or services, it’s important to recognize and take precautions against risks that your Commercial General Liability coverage doesn’t include. Technology Professional Liability coverage, also referred to as Tech Errors and Omissions Insurance (E&O), is essential for companies using or “manufacturing” technology because it addresses a lack of protection in Commercial General Liability policies, which typically do not cover claims from third-party’s for financial harm associated with services provided or technology solutions used.

Who needs Tech Errors and Omissions Insurance Coverage?

Tech Errors & Omissions Insurance is not only for technology industry businesses which have obvious technology-related risks. Most companies today use technology in some part of providing a service or product and need to take the necessary precautions. To ensure your company is covering all bases, a full risk management assessment is needed.

What does Tech Errors and Omissions Insurance cover?

Tech errors and omissions insurance manages risks, resulting from providing a product or service to a third party for a fee, that are not covered by a Commercial General Liability policy. Specifically, Tech errors and omissions insurance protects your business in the event that a third party suffers a financial loss due to your product or service not performing as it was intended or expected, including the event of an error or omission committed by your company. Tech errors and omissions insurance policies also cover defence costs in the event of litigation.

Tech Errors and Omissions Insurance  coverage is intended to  apply in the following situations:

• A mistake was made and an error in the code of a website or program your company produced isn’t found before it is implemented. A third party depends on this product or service to operate its business and its operations are stalled due to the error, causing them a financial loss.
• A part your company produces and installed in a piece of equipment. After a short amount of time, the component simply stops working, causing the equipment to fail to work, but otherwise not damaging anything or hurting anyone. The third party that relies on this equipment for its business has to stop operations and suffers a financial loss.
• An employee of your company recommends that a client make an adjustment to its network. The client follows the advice and its network crashes as a result, causing a time and financial loss for its operations.

In all of these cases, Commercial General Liability coverage would not cover a claim or any costs of litigation because of the presence of an error and the lack of resulting physical damage to the third party’s property or person. It should be noted that tech errors and omissions insurance usually exclude product recall, but some will accept damages for loss of use of a failed product. They also generally exclude non-financial losses and intentional or dishonest acts.