E&O Further Reading
Who Has E&O Liability When Software Breaks?

You may have heard that software developers aren't liable for the security of their products – that's sort of true. Essentially, we're living in a time when software creators have avoided liability…

  • With end-user agreements absolving them of responsibility for problems.
  • By emphasizing fast innovation over secure improvement.

ThreatPost reports that that time could be ending soon. The story notes that at Black Hat USA 2015, Jeff Moss, founder of the conference, argued the inevitability of software product liability and mandates by governments. If software developers remain free of liability, who takes the blame when a software program or tech product fails?

Plenty of Liability to Go Around

Plenty of Liability to Go Around

Software developers can often escape liability – but that lawsuit risk merely gets shifted to other parties, namely IT consultants and tech contractors who help their clients find the right IT solutions.

In other words, if you install or recommend a product to a client, you can be sued when that product breaks, while the developer may get off scot-free.

Seems unfair, doesn't it? That's what a lot of industry people wonder as well. It was the topic of Moss's speech at Black Hat. TechCrunch notes Moss said it's not a level playing field. His theory contends that developers need to be liable in order for security to be prioritized.

As we covered in "Software Liability in the Age of 'Flying Data Centers,'" the share of liability is spreading as faulty technology finds its way into not just computers, but also cars, home products, planes, and even guns. An outage can grind the travel industry to a halt (see "How the United Glitch Could Trigger an IT Professional Liability Lawsuit"). The risks are numerous and only growing with the rise of Internet-enabled devices.

3 Things to Know about Software Liability and E&O Risks

3 Things to Know about Software Liability and E&O Risks

So far we've seen that software developers may be able to avoid some liability, but there's plenty of lawsuit risk to go around the tech community. Here are three things you need to know about your risk:

  1. Never assume you don't have liability. You can be sued any time a client thinks you've made a professional mistake or error, so don't assume the law protects you. Lawsuits are expensive, and even if the claim is meritless, you could end up paying thousands just to have a lawyer review the case.
  2. There's a lot of uncertainty in IT liability, and uncertainty is bad. Every few weeks, a courtroom in one part of the country makes a ruling that differs from a ruling in another part of the country (we document this craziness on our blog). Lawsuits are unpredictable in the tech world because the laws aren't clear about who is responsible for IT problems. Technology often develops faster than the law can react. That uncertainty means more unpredictability and more risk.
  3. Small businesses are at risk. When it comes to lawsuits, size matters. Small businesses don't necessarily have the resources to fight big businesses that excessive funds on a top-notch legal team. This size mismatch can lead to devastating costs for small businesses and IT consultants that can't afford to pay to defend themselves from a costly lawsuit.
What Lawsuits Does Technology Errors and Omissions Cover?

What Lawsuits Does Technology Errors and Omissions Cover?

Fortunately, Technology Errors and Omissions Insurance can work for IT consultants much the same way that malpractice insurance works for doctors. When a patient claims a doctor has messed up, Malpractice Insurance can cover the legal bill. When a client claims you didn't fulfill your professional obligations as a tech professional, IT E&O Insurance may cover your lawsuit costs (e.g., attorney fees, court expenses, etc.).

This policy may offer coverage for lawsuits over:

  • Missed deadlines.
  • Third-party cyber liability (i.e., a client data breach or security incident).
  • Latency issues.
  • Compatibility problems.
  • Scope disputes.

Ninety-five percent of Insureon's IT clients come to us looking for this coverage, and many of your clients may require you to have it. Be sure to check your client contracts for E&O requirements.

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