As a small-business owner in the technology sector, you've got more tasks than available time, so it's easy to put off non-essential tasks like staying abreast of the latest trends in Errors & Omissions lawsuits. But knowing the risks tech firms most often face can help you manage your risk better and avoid unnecessary claims scenarios.
Get yourself up to speed and keep client lawsuits at bay with this overview of what's "hot" in the world of technology E&O claims.
Data Breach Lawsuits
Technology companies are often literally driven by data. Every time you obtain data for a client project, the potential for a data breach lawsuit exists.
When personal information is compromised, affected consumers frequently respond by filing a class-action lawsuit. If you're the contracted IT vendor or computer consultant at the time of the breach, it's likely you'll find yourself entangled in costly litigation with your client.
Why? Because many prominent corporate attorneys advise their clients to take legal action against technology vendors if and when something goes wrong.
In fact, it's become common practice for contract language to specify that technology vendors are required to guarantee financial compensation in the event of a data breach. (For a better idea of standard contract language, check out our free sample legal contracts.) Without an Errors and Omissions Insurance policy in place, you firm most likely won't be able to secure contracts with top corporations and institutions.
Even if you do manage to land the contract without an E&O policy, a costly data breach lawsuit could quickly cripple or even bankrupt your small business. The cost of litigation - and even mediation, with its lower price tag - can quickly exceed your incoming revenue stream.
Top Five Most Frequent Legal Errors & Omissions Claims
Beyond the data breach danger lies a whole host of additional liability exposure risk. Just about everything evolves at a rapid pace in the technology sector, but when it comes to legal matters, a few contract law classics dominate courtrooms across America.
Here's a quick look at the not-so-fabulous five. Time and again, these same claims are cited in lawsuits filed against small IT, computer consulting, and technology companies. If you are faced with litigation, one of the following will likely be the reason why:
- Breach of Warranty: You promise something to a consumer or client in a warranty, and for one reason or another, you're unable to keep that promise.
- Breach of Contract: A detail within a written or verbal contract is agreed upon, and then one party doesn't meet its obligation.
- Fraud: One party intentionally lies to or deceives another for financial or personal gain.
- Negligence: One party fails to use reasonable care, which results in damage or harm to a person or entity.
- Misrepresentation: One party makes a false statement or claim in order to entice another person or party into agreeing to the terms of a contract.
Protecting Yourself against Common Liability Claims
If you find yourself named as defendant, any one of these can quickly throw your whole organization into a tailspin. Litigation and lawsuits interrupt your business, damage your reputation, and take an enormous financial toll. Errors and Omissions Insurance can instill confidence in potential clients, protect you from costly litigation, and give you peace of mind. (Learn more about Errors & Omissions Insurance in the article "6 Common Myths about Errors and Omissions Insurance.")
Writtten by Brenna Lemieux - check her out at Google+ or Twitter