Cutting Risk on the Cutting Edge:
Top Professional Liability Risks for Small IT Businesses

Whether you work as a software developer, IT trainer, or independent consultant, your business will have what the insurance industry calls "professional liabilities." What are professional liabilities?

Think of it this way:

  • All businesses are responsible for delivering good work to their customers.
  • IT companies are the same.
  • You're responsible for delivering high-quality, secure, and effective technology services to clients.

What happens if a client thinks you haven't done this? To be blunt, you could be sued. And you know firsthand that some clients are never satisfied with your work. Tech professionals need to be extra careful to avoid common professional liabilities to mitigate their risks.

5 Professional Liabilities for IT Professionals

These aren't the only professional liabilities IT professionals may encounter, but the five risks we've identified are good place to start. Any IT business should have a plan to limit their exposure to:

  1. Missed deadlines. Sometimes there's nothing you can do to prevent missing a deadline. It happens. But if it's coming, make sure to tell your clients ahead of time. This can prevent greater damage if your clients were expecting to use your IT for a project and now have to scuttle their plans. For big projects, consider breaking them down into smaller milestones to make deadlines easier. (Lawsuits over missed deadlines may be covered under Professional Liability Insurance).
  2. Miscommunication with clients. Yes, something as simple as a miscommunication can lead to lawsuits. Double check with clients about what they want and periodically show them your progress. Clients may assume that a single piece of IT will solve all their problems, so make sure you're clear about the scope of your work. Check out "The Technology X Factor: Client Communication" for more tips.
  3. Client data breaches. Unfortunately, you can be sued if a client's technology is breached. Even small security incidents (with no compromised data) can be extremely costly. Data security is too complicated to go into great detail here. But suffice it to say that it's a major risk that all IT professionals have to get serious about now. See "How You Can Get Sued after a Data Breach."
  4. Insufficient testing of programs / software. A recent Acunetix study reveals 4 out of 5 web apps have medium security vulnerability. IT consultants and developers need to be proactive about testing programs or hiring security subcontractors to ensure your work and your client's IT is secure.
  5. Technology knowledge gap. As an IT professional, you know there's a "knowledge gap" between you and your clients. That's why clients hire you – you're an expert. Often, they're not. Because of this, you may have to deal with miscommunications and greater lawsuit risks if clients aren't sure they know what they want or what they're getting. Read "5 Common IT Behaviors that Can Trigger E&O Lawsuits" to help reduce a client's risky IT habits.

Browse through "Risk Management Checklist: How to Protect Your IT Company" for more ways to thwart your professional liabilities.

Do You Need Professional Liability Insurance for Your IT Business?

IT professional have to deal with client risks on a daily basis – is there insurance for that? Yes; to a certain extent, Professional Liability Insurance (also called Errors and Omissions Insurance) may cover lawsuit costs when clients sue you over problems with your technology.

Much the same way that doctors have Malpractice Insurance, IT consultants can get Professional Liability Insurance. If a client sues you for missing a deadline, botching their data security, or miscommunicating, your insurance can help cover the legal bills.

As always, you shouldn't rely purely on your insurance. In addition to strong insurance protection, IT professionals need to have a risk management strategy that reduces the likelihood of lawsuits. You can find more strategies to reduce your professional liability in Cutting Risk on the Cutting Edge

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