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Tinder Security Breach Highlights E&O Exposure for IT Contractors

Tinder Security Breach Highlights E&O Exposure for IT Contractors

Errors and Omissions cases can set IT businesses and contractors back thousands if they don't have adequate insurance in place. Find out how Tinder's recent data breach opened the door to massive liability.

Friday, January 10, 2014/Categories: consultant-liability

Have you heard of Tinder? It's a date-finding app for young professionals (many have observed that it brings the capabilities of Grinder to a wider market). Tinder takes a new spin on the idea that "love is always just around the corner" by using location-based information to connect its single users. Users have the option to "pass right," (that is, make a connection) if they're interested, or "pass left" (that is, move on) if they're not.

To appeal to today's privacy-conscious mobile consumers, Tinder also shields users' identities by displaying only pictures and first names. Their exact location and Facebook IDs are untrackable.

At least, they're supposed to be. But on Tuesday, digital news source Quartz reported that Tinder had a security flaw that allowed potential hackers to uncover identifying information. At least two web-savvy users contacted Tinder to alert the company about the security issue, but there is no way to know if anyone else accessed sensitive data.

As a small-business owner, you probably think, "Tinder's a huge company. This has nothing to do with me."

Wrong.

For one, Tinder only has 11 employees. For another, data breaches are on the rise. So, yes, this could happen to you - especially if your small tech or IT firm is growing. A ComputerWorld survey conducted in 2011 found that 90 percent of businesses had been hacked in the last year. And as more companies expand their technological utilities, that number is only likely to grow.

As of Wednesday morning, Tinder had not disclosed the breach to its customers. This course of action suggests that Tinder's executives see data breaches as just another growing pains for young companies. But here at TechInsurance, we want to stress the fact that data breaches are a big deal, and can turn a red-hot company into a pile of ashes, especially if they don't have the resources to do damage control.

The good news? You can prevent a total flameout with the right kind of Data Breach Insurance (aka Cyber Liability Insurance).

Protect Your Growing Business with Errors & Omissions Insurance

Disclaimer: we don't know who at Tinder was responsible for the code that allowed sensitive information to be leaked. But we know enough to see that this is an excellent opportunity to illustrate some of the very real liability exposures IT contractors face.

Let's imagine Tinder hired an independent contractor to write the code for their new Android app on a tight deadline - and let's say that independent contractor was you. But now, after the privacy gap is revealed, Tinder sues you for negligence. They say you provided shoddy work.

Without Errors and Omissions coverage, you're toast. Legal fees can top tens of thousands of dollars even before a court decides on a judgment (or you come to a settlement). And taking time off to handle the case means you aren't bringing in revenue by serving your clients.

When you have E & O coverage in place, however, you can avoid paying for your legal costs out of pocket. A typical Errors and Omissions policy pays for…

  • Legal defense fees (including attorney bills).
  • Court-ordered compensations.
  • Lost income.
  • Other expenses that arise as you defend yourself.

But make sure you maintain your policy. Since E&O coverage works on a "claims-made" basis, your benefits will only kick in if your policy is in place both when the work was completed and when the suit is filed.

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