Top E&O Claims for IT Consultants

Here are five risk management solutions to deploy today to help reduce your risk of IT lawsuits.

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If you are an IT professional, you protect data and your clients. But despite your best efforts, inevitably there are issues that may arise and result in an errors and omissions (E&O) lawsuit. For example, a client gets upset and points the finger at you for their IT issues.

Let's take a quick look at potential causes for an E&O claim and a few methods you can use to reduce your potential risk.

Who is at risk for technology errors and omissions claims?

Technology companies are -- rightly or wrongly -- at constant risk of lawsuits and disputes over their work. In an increasingly litigious, technology -advanced and cyber-connected world, an IT business could find itself facing an expensive lawsuit for a number of reasons, everything from data breaches to not up-to-date business protocols. For example, you might be blamed for cyberattacks, even if an attack is the result of your client's negligence.

Whether you're involved in technology products, technology services, telecommunications, e-commerce,or any other professional services in the tech sector, there are many potential scenarios that could put your company at risk.

What kind of lawsuits are covered by tech E&O insurance?

Errors and omissions policies, also known as professional liability insurance, vary in terms of liability and omissions coverage. Policies that now include cyber insurance are called technology errors and omissions insurance, or tech E&O. You might also see this coverage called tech professional liability insurance.

Below are some of the more common E&O claims that your technology errors and omissions policy may cover:

1. Clients' data breaches

Security incidents and data breaches may cause your clients to file a lawsuit. Clients may cite improper network configuration, a bad software recommendation or other issues.

2. Breach of contract (missed deadline)

Breach of contract most likely happens when you miss a deadline, e.g., as a result of an unreliable contractor, a computer virus, a supply chain disruption, or any other issue.

3. Breach of warranty

If a client accuses you of making false claims about your product or services, you could be facing a breach of warranty claim. This can happen whether your promise was included as part of a written contract, or even just orally stated.

4. Misrepresentation

If your company makes a false statement to secure a contract, the client could sue you for a claim of misrepresentation. For example, if you offered a quote for IT services but failed to disclose any additional fees that you might charge during the contract, the client could sue.

5. Negligence

Lawsuits involving negligence are typically caused by poor planning or management that results in errors. If you fail to use reasonable care and make a mistake, a client could sue you if it damages their business.

See also: How to Avoid Major E&O Claims

6. Scope creep

Disputes over the scope of a project are common. A client might think the agreed-upon quote includes X, Y and Z, while you think it's only supposed to deliver X. Clients might also add requirements during the course of a project that affect the overall scope and expectations. Make sure your contract clearly outlines what your work does and does not include to avoid larger issues down the line.

7. Employee mistakes

It might seem unfair, but even if you don't have any employees, one of your client's employees could make a mistake, such as clicking on a phishing email or changing a security setting that exposes them to hackers. A client might sue you over any problems that result from this situation, even if you're not at fault.

8. Copyright infringement

If a software company accuses you of stealing some of the code from one of its products, you and your clients could face a lawsuit -- even if you included the code by accident.

Many errors and omissions issues can be avoided by improving client communication and employee training. Here are five risk management solutions to deploy today to help reduce your risk of IT lawsuits:

See also: Does Generative AI Kill Process Outsourcing?

1. Improve email communication

Be timely, responsive and to the point in client communication. Avoid overuse of jargon or technical terms.

2. Test for security

Ensure that security testing for your work is standard practice and be able to track your testing efforts.

3. Overcommunicate and educate

You are the tech expert, not your clients. Clearly convey the scope of your work, what it includes and what it does not, to avoid any gray areas.

4. Use client contracts

Handshake and oral agreements are not sufficient. Use client contracts and amend in writing, with client approval, if changes arise.

5. Explore a formal training program

Knowledge transfers to new employees are not foolproof. Consider a documented, formal training program that includes standard practices related to data security, work expectations and client communication.

In today's technology-advanced and overly litigious world, it's critical to routinely check with your insurance company about your E&O coverage to make sure you're aware of the exclusions and limitations within your policy. Continuous coverage is crucial, because E&O is a claims-made policy that must be active when you file a claim.

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