4 coverages to look for in IT E&O policies

Legal costs can make up 50% of a claim

Information technology (IT) professionals face several types of liability exposures. Therefore, securing the proper insurance to meet their needs is of the utmost importance. Experience shows that legal costs can generate up to 50% of the overall claim costs.

Professional liability policies are written on a claims-made basis. This means that the policy will respond to claims or incidents made or occurring during the policy period. In other words, the policy must be in force to report a claim or an incident.

Below are some key coverage features that should be included in an IT E&O policy.

1) Professional Liability: The IT E&O policy should extend professional liability coverage to include IT and non-IT related services. No two businesses are alike. IT companies may provide services that are non-IT related such as marketing services, call centre operations or general business consulting. By having the broad definition of Professional Liability, this eliminates the need to purchase multiple policies.

2) Products Liability: An IT E&O policy should include products liability coverage for the manufacturing, development or distribution of technology products such as computer or telecommunications hardware or software product, or related electronic product that is created, manufactured or developed for others or distributed licensed, leased or sold to others including software updates, service packs and other maintenance releases.

3) Computer Network Security: Ensure that computer network security coverage is included for the failure to prevent unauthorized access to computer systems that result in the destruction, deletion or corruption of electronic data on computer systems, theft of data from computer systems or denial of service attacks against Internet sites or computers.

4) Multimedia and Advertising: Finally, confirm that multimedia and advertising coverage for the rendering of media activities includes cover for defamation, libel slander, products disparagement, invasion of privacy, misappropriation of any name or likeness, trade secret or ideas, plagiarism, piracy, infringement of copyright, trade dress, domain name, title, slogan, and negligence regarding the content of any media communication.

Anne Coppens is the president of Creechurch International Underwriters.

The above is an abbreviated version of an article from the February 2011 issue of Canadian Insurance Top Broker magazine. To read the full article, click here.

A TC Media site,
Business Solutions

TC Media

Transcontinental Media G.P
1110 René-Lévesque Bldv W.
Montréal, QC H3B 4X9
(514) 392-9000