E&O Further Reading
Technology E&O Insurance vs. Data Breach Insurance

Cyber liability differs for IT businesses and non-IT businesses – and that means your insurance coverage will be different as well. Often, an IT consultant has technology Errors and Omissions Insurance to help cover data breach lawsuits, while a retailer will want to invest in Data Breach Insurance (aka Cyber Liability Insurance). Why the different coverage? Let's take a look.

Why Data Breaches Are Different for IT Companies (Hint: Third-Party Cyber Liability)

Why Data Breaches Are Different for IT Companies (Hint: Third-Party Cyber Liability)

When a retailer like Target is a hacked, the company has to shell out millions of dollars to clean up the breach, paying for:

  • Data breach investigations.
  • Credit monitoring for customers.
  • Notification expenses.

Data Breach Insurance can cover those costs. As an IT company, you have a different risk exposure.

Say you're the typical IT consultant. You don't keep much proprietary data on your laptop. The data you're worried about protecting is your client's. If a breach happens to a client, you won't have to pay to clean up the breach. Instead, you could have to pay for a lawsuit if a client sues you for recommending or installing IT that failed to protect the company's data.

That E&O risk is called "third-party cyber liability." It's the risk that clients (i.e., third parties) can sue you for a data breach that happened to them. And that type of lawsuit can be covered with a technology Errors and Omissions policy with third-party cyber liability coverage. We'll go into more detail below, but you can also check out "Understanding Third-Party Cyber Liability" for more on your data breach lawsuit risk.

The Difference Between IT E&O Insurance and Cyber Liability Insurance

The Difference Between IT E&O Insurance and Cyber Liability Insurance

As you've probably gleaned, many IT companies have E&O Insurance (rather than Data Breach Insurance) because their data breach risks have mostly to do with client lawsuits. That said, it's helpful to look at how these two policies work side by side:

  • Data Breach Insurance can pay for the cost to respond to a breach that's occurred to your own company. This includes coverage for:
  •  Investigation.
  •  Notification.
  •  Crisis management.
  •  Credit monitoring.
  • PR counseling.
  • Other direct "first party" costs.
  • Technology E&O Insurance can pay for lawsuits when a client sues you over a data breach on their network. This includes coverage for your…
    • Attorney fees.
    • Court costs.
    • Settlements or judgments.
    • Miscellaneous lawsuit expenses.

Of course, E&O Insurance covers other technology-related lawsuits, like disputes about the scope of a project, delays, or the quality of the work you've delivered. See the “Further Reading” section for more details.

Do IT Companies Need Data Breach Insurance?

Do IT Companies Need Data Breach Insurance?

Data Breach Insurance covers first party costs of a data breach – the cost of a breach at your own company. While the typical IT contractor might not have a large first-party risk exposure, there are some tech companies that may.

Web hosts, cloud companies, and other IT companies that have client data on their network may want financial protection in case malware exposes this data or another tech problem leads to a breach. For them, Data Breach Insurance may make a lot of sense.

For smaller businesses and tech contractors, third-party cyber liability coverage in E&O may provide financial protection that makes more sense given their predominately third-party risks.

Grab-n-Go Information

IT Contracts eBook
Get It in Writing: The IT Professional's Guide to Essential Contracts
Browse eBook
Sample certificates
See a sample Certificate of Liability Insurance, the proof of coverage you need for most contracts.
View Sample
Sample Quotes & Cost Estimates
See what insurance really costs: actual quotes by policy & specialty.
Get Estimates
Ask A Question
Submit your questions about construction insurance and get answers from our experts.
Read Answers