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How the United Glitch Could Trigger an IT Professional Liability Lawsuit

How the United Glitch Could Trigger an IT Professional Liability Lawsuit

Thursday, July 23, 2015/Categories: Errors and Omissions / Professional Liability Insurance, IT Consulting

When thousands of travelers showed up at airports for business and vacation travel on July 8, they got a rude awakening. All of United's 800 flights were grounded because of a computer outage. The outage, lasting two hours, began when a faulty router causing connectivity issues shut down some of the airline's scheduling apps.

Reuters explains that these outages have become more common with airlines because they've switched from proprietary scheduling systems to less expensive cloud-connected systems. But network connectivity issues can mess up their scheduling – and potentially ground 800 flights.

Even as technology improves and grows inexpensive, new problems might crop up in unpredictable ways for IT consultants. Cloud connectivity issues could create problems your clients aren't used to dealing with – and these problems can snowball until you're hit with a costly lawsuit.

Why United's Outage Could Mean More than Outrage

The first thing to understand about United's outage is that it's about more than just flights and angry passengers; it's about money. United potentially lost millions on that fateful Wednesday because of:

  • Damage to its brand.
  • IT repairs.
  • PR and marketing efforts to limit the damage.
  • Loss of customers and future sales.
  • Compensation or discounts paid out to delayed customers.
  • Extra customer service costs to handle complaints.

To make matters worse, sometimes an IT glitch can hit companies at the wrong time (not that there's ever a good time). United has recently been under fire from its investors (see Seeking Alpha's analysis) because it hasn't been expanding as quickly as its competitors. And the company's stock price has stagnated.

Why does that matter? If your client is struggling to make ends meet, an outage might be more likely to lead to a lawsuit.

Bad timing can make matters worse for IT consultants. Say that a tech problem coincides with a busy shopping season, causing your client to lose a major payday. When problems add up, your client can take out their frustration by filing a professional liability lawsuit against your company. IT consultants are seeing increasing lawsuit risks for data security and tech problems.

With that in mind, let's look at how glitches could lead to legal problems for you.

Errors and Omissions Insurance for Tech Outages

Glitches, bugs, compatibility problems, data loss, and slowdowns –you get the point. These tech problems could strike your client's business, cause outages, and leave you with legal bills if a client sues.

Because of the costs enumerated above, you could be sued for much more than your consulting fees. Small errors can trigger big losses for your clients. Think back to United's outage: a faulty router led to 800 airplanes being grounded.

The disproportionately high cost and impact of IT issues is part of the reason why many clients require tech contractors to have Technology Errors and Omissions Insurance (check your contracts to see if you're required to have this insurance).

If you're sued for an outage or IT issue, E&O Insurance (also called Professional Liability Insurance) may cover your legal bills, paying for…

  • Attorney fees.
  • Settlement costs or damages.
  • Judgments.

Many clients know how much is at stake with your work and will require this coverage to give them some financial security. Your insurance may help them cover the disproportionately high cost of outages, bugs, and breaches.

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