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Common Errors and Omissions Exposures for Technology Businesses

When you write code or install programs, you probably rely on your experience to help anticipate and avoid potential problems. That’s an important skill for most professions, but for a small technology business owner, it becomes downright critical.

Your ability to protect your business from problems that lead to lawsuits can mean the difference between a short-term venture and a financially stable enterprise. However, identifying exposures and preventing loss may be new terrain. Let's take a look at some common Errors and Omissions exposures – including breached contracts, copyright infringement, miscommunication, and data breaches – so you can manage your risks.

Breached Contracts

Documentation is a vital step in minimizing your E&O exposure (learn more about that in “5 Ways Technology Consultants Can Manage Their E&O Risk”). But contracts don’t do all the risk management for you. If anything, they hold you to a higher standard, especially when it comes to deadlines.

Risk management tip: Communicate project changes with your client and update your contract to reflect those changes. That can be tough when you need to deliver bad news, but a heads up about a missed deadline may spare you from a breach of contract lawsuit.

Misuse of Copyrighted Material

If you use someone's proprietary code without permission, it can turn into a major headache. Unfortunately, it’s also very easy to do. Imagine, for example, the material a client might give you to complete a project, such as…

  • Images from the web.
  • Sections of code.
  • Examples of a competitor’s application.  

Any of these can be copyrighted. If you haven’t determined what’s fair use, you may inadvertently use protected material and not even realize it.

Now think about it from another angle. You hire a subcontractor to write code, but you don’t establish in your contract who owns that code. If you reuse what the subcontractor wrote, you may find yourself in a legal quagmire.

Risk management tip: Always check permissions for the material you use, even when your client gives it to you, and make sure anyone working for you does the same. Make sure your contracts establish ownership of code written for your business, too.

Miscommunication about the End Product

Clients are sometimes too ambitious with their technology plans. They want an app with all the bells and whistles or they think their new software should be implemented by end of day.

Though you may be able to talk them down to more realistic expectations, they may never totally let go of their original vision. When they don’t get what they think they signed up for, the result may be a lawsuit for you.

Risk management tip: Detail the scope of the project in your contract and specify what the end product will do. You may also want to create a customer acceptance document to use at various stages of the project. That way you have evidence that they were aware of your progress and approved the direction.

Data Breach

Few words strike as much terror in the heart of a business owner as the words “data breach,” and for good reason. Data breaches are expensive.

If you’re responsible for securing a client's database of personally identifiable information, they may turn to you to recoup their losses when a breach happens.

Risk management tip: Make sure your client follows data security best practices, such as…

  • Using complex passwords.
  • Encrypting data.
  • Updating antivirus software.
  • Installing patches to all programs.

These tips can help you minimize your E&O exposures, but you can still be sued. To cover your bases, apply for technology Errors and Omissions coverage today.