Setting Up Insurance for Your Technology Company

Executive Insurance and Financial Services - 2011-03-11
When setting up an insurance policy for your technology company it is important to understand that General Liability and Errors & Omissions Insurance are not the same. Misunderstanding this could prove to be extremely costly in the event of a claim. Here is an overview of both General Liability and Errors & Omissions Insurance.   It will explain the differences and point out why it is important for your technology company to have both types of protection.
General Liability
A General Liability policy primarily covers bodily injury and property damage arising from your products, services and operations.
                        Examples of General Liability Claims:
1)      Bodily Injury Claim: A visitor to your office trips over an exposed wire and breaks a leg.
2)      Products Liability Claim: Your product short circuits and causes fire damage to a building.
Although technology businesses need General Liability protection, this does not cover every type of liability exposure.
                        What General Liability Does NOT Cover:
1)      Intangible Property: If your business is found responsible to a third party for the loss or corruption of their data.
2)      Economic Harm: Economic harm caused to a third party arising from your products or services.
3)      Professional Services: You may have no coverage for bodily injury or property damage arising from your technology products (software, programming, etc.) or services (data processing, communication services, etc.)
Errors & Omissions Insurance (E&O)
E&O Policies are designed to cover:
1)      Liability associated with pure economic loss arising from a third party’s use of a technology company’s goods, products or services.
2)      Damages to a third party arising from loss, damage or corruption of intangible property, such as data, and loss of use of tangible property that is not physically injured arising from your defective product or work.
How Technology E&O Coverage Differs from General Liability:
  • A General Liability policy can apply to a claim that is brought many years, sometimes decades after the policy expires.   This can be done as long as the injury is alleged to have occurred during the policy period.
  • An E&O policy is typically sold on a claims-made basis. This means that the coverage applies only for claims that are made during the policy term for wrongful acts that were committed on or after the policy’s retroactive date (typically the date the claims-made coverage was originally put in place) and before the policy’s expiration. 
You Should Buy BOTH General Liability and E&O Insurance from the same company. This helps ensure that there are no unintended gaps in coverage between the two policies.   It also eliminates the issue of coverage disputes between carriers if a claim triggers both policies.  
At E.I.F.S we know that insurance is not your business.   While we encourage you to understand the basic differences between General Liability and E&O Insurance, it is important to discuss your coverage needs with an insurance professional who has experience working with technology companies. EIFS will be happy to discuss your insurance needs with you and find the best coverage for your company.
For more information call us at (631)563-8433 or e-mail us.

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Executive Insurance & Financial Services